January 6th, 2015

Forget Oil, Go Lithium

GigafactoryOil prices has tumbled more than 50% since the beginning of last summer so many investment advisers are recommending today that investments be made in the energy sector, arguing that the stocks have fallen so that many represent the best bargains in many years.

If you had been able to predict the oil price rout in July and sold short, you would have discovered that not all energy-related stocks and ETFs acted uniformly. Some actually went up (EEP up 12.49%, VLO up 1.68%) while others dropped anywhere from -5% to
-70%. For example, CVX decline -16.81%, COP declined -19.33, OIL -49.48, RIG -56.39 and CRK -73.99.

If you believe that oil prices can’t go much lower and will soon rebound then it would seem logical that buying an oil-related stock is a “sure thing”. But how does one select among the more than 300 energy stocks of all sizes, dividends, volatility, growth.

Oil Prices

Should you select those that performed the “best” over the past 4-5 months under the assumption that they will perform best in the future. Or, conversely, should you buy those that performed the worst because they could possibly bounce back the most. If you’re looking to put money to work, though a better strategy than catching one of 300 “falling knives” might be to look someplace totally different, someplace that will be “driving the future” rather than the energy that has “driven the past” (no pun intended).

Rather than betting on a recovery in oil prices, why not take out a stake instead in the industry making possible electric transportation – lithium, one of the most valuable natural resources of the new electronic world thanks to its unique and extremely valuable characteristics:

Lithium

As described in a recent Mauldin Economics report:

  • Lithium has such a low density that it floats on water and can be cut with a butter knife. When mixed with aluminum and magnesium, it forms lightweight alloys that produce some the highest strength-to-weight ratios of all metals.
  • Lithium tolerates heat better than any other solid element, melting at 357°F.
  • Lithium batteries offer the best weight-to-energy ratio, making lithium batteries ideal for any application where weight is an issue, such as portable electronics.
  • That same high energy density and low weight characteristic makes lithium batteries the best choice for electric/hybrid vehicles due to car gas mileage. A car’s biggest enemy is weight.
  • Lithium has a very high electrochemical potential, meaning that it has excellent energy storage capacity.

The lithium market is dominated by only three publicly-owned producers:

  1. Chemical & Mining Company of Chile (SQM);
  2. FMC Corp. (FMC);
  3. Rockwood Holdings (ROC)

Lithium Industry

In addition to its excellent dividend yield and relatively low (as compared to the pure-play ROC) price-earnings ratio, the SQM chart is most volatile and shows promise to bounce off the bottom of the horizontal channel it’s formed since late 2013 and attempt to cross above the upper boundary at 33, a 40% move.

SQM - 20150105

Tesla has just completed a gigafactory that exceeds all comparisons in the belief that the lithium-ion battery will be the power source for many more battery powered cars, drones, toys and power grid storage.  I’m hoping that SQM will benefit from that future.

October 16th, 2012

KOL and UNG: the First Chapter

I’m not breaking any new headlines here but the Fed has flooded the economy with a huge amount of liquidity.  To this point about the only thing I focused on with regard to all that money sloshing around is to wonder when it might come in to the stock market.  Consequently, I missed the surprising new boom that’s emerged in housing and most related industries like lumber,construction equipment and tools and home related retail.

But sooner or later all that newly created money should begin to show up in commodity prices (other than precious metals), inflation statistics and, finally, in interest rates.  We may have gotten a peek at that future this morning when the government reported that industrial production rose 0.4% in September while capacity utilization inched ahead from 78.0% to 78.3% and copper rose 0.5% on the commodity exchange.  It may be time to take a look at a couple commodity ETFs.

  • UNG (Natural Gas): I swore off of natural gas having been burned by it (no pun intended) several times over the past few years as I bought mistakenly believing that the commodity just couldn’t drop any further in price only to have been proven wrong.  Perhaps it might be one of the instances again:What a huge destruction of value!  If you had put $1000 into UNG when it first became available and held on for the duration, you would have been left with a measly $54.80.  There’s not much hope in recouping all that money any time soon but, if you want to put $1000 in UNG today, you could have a fairly good chance of perhaps doubling it.  For the first time in many years, UNG is in the process of forming a reversal bottom pattern.  The 50-dma has crossed above both the 100- and 200-dma’s and the 100-dma has also crossed above the 200-dma.  Volume has picked up significantly due to many bottom fishers who are now betting on that bottom taking place.  There still are many skeptics out there so if a reversal is truly in the making then it will probably go through many stages and stretch out for years.  Along the way, there will be several constructive trading opportunities …. a long-term buy-and-hold approach could be frustrating.
  • KOL (coal): Coal is the bad boy of the energy complex but, with the possibility of a Romney victory, may gain some new found respect in the effort to become energy independent.Like the case of UNG, KOL is in the early phases of a clear-cut reversal pattern.  The upside opportunities may not be as significant as UNG (because the previous decline wasn’t as severe) but, as a more mature industry, they may be more certain.

Of course,one can play the natural gas and coal producers instead of the ETFs and there always are the precious metals (GLD, SLV, GDX) and their producers.  Clearly, this is a long-term unfolding story that we’ll continue to follow.

August 7th, 2012

Will the Stock Market Deliver Another Gusher?

I came across an old post of May 2008 that may be of interest today (can’t believe that’s nearly four years ago!  It is old but it’s worth reread it now in its entirety).  In Don’t Fight the Tape – Rev. 2.0 (), I wrote:

Prof. Benjamin F. King (University of Chicago, 1962) who discovered that “50% of a stock’s price movement can be attributed to the overall movement in the market, 30% to the movement in its sector and only 20% on its own.” If the market’s going down, there’s a good chance your stock will too…. Bubbles are fun while they continue; it’s when they burst that it really hurts ….. for the rest of the tape we’re in a bear market and, therefore, the oil stock bubble will end badly.

The members of several Industry Groups including homebuilders, financials, semiconductor fertilizer and for-profit education tend to move in unison through various market life cycle phases.  Oil & Gas related stocks imploded shortly after that post.  While it’s true that the whole market caved in with the onset of the Financial Crisis Crash; the Oil & Gas stocks looked sufficiently vulnerable enough to demand write about.  The stocks listed in that blog declined from June 24, 2008, the date of that blog, as follows:

  • TNP: -87% to January 3, 2012
  • CRT: -71% to February 25, 2009
  • SJT: 73% to July 20, 2009
  • NFX: -66% to November 26, 2008
  • NGS: -73% to March 11, 2009
  • MSB: – 80% to March 4, 2009
  • SGY: -95% to March 4, 2009

That was then and now it appears we may be embarking on the beginning of another of those long-term Industry Group cyclical moves during which many Oil & Gas stocks look as if which they may be at the end of the correction begun in 2008 and about to embark on a multi-year move to significantly higher levels.  It could take weeks or months for breakouts and there probably will be pullbacks along the way but once launched, the results will be very satisfying.  Examples include (click on symbols for charts):

Scrolling through the charts is an excellent exercise in looking for similarities and differences among them.  Note that these are 4-day bars in 11-year charts. It’s going to take a quite some time for the patterns to deliver on their promises so there’s no rush out and buy them today.  If I’m correct then there will be plenty of time to climb on board before their stock prices appreciate beyond reach.

I’ve already purchased some of these and will plan to add more as I rotate out of some other Industry Groups.  The only reason for taking a bite out of these now is because the beginning of a move is often the most profitable when measure in 1) percentage gains and 2) dividend yield locks.

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October 21st, 2009

Fuel for the Cold Winter Months

I’ve written here recently about the oil & gas complex as possibly the last group to breakout of long-term reversal patterns (see “Mysterious Happenings in the Oil Patch“). Cousins of the group that might be particularly interesting since we’re approaching the winter heating months are the fuels used to heat our homes and workplaces: UNG (Natural Gas ETF) and UHN (Heating Oil ETF). What do these charts look like; I’m including OIL (Oil ETF) for comparison purposes (click on charts to enlarge):

  • UNG: Due to what many say is over-production and the unavailability of storage capacity for the excess, natural gas prices have tumbled. But the price of UNG has fallen even more than the underlying commodity due to short sellers. Prices have begun to firm (note the small cup-and-handle formation that began in August) and there’s a possibility of a short squeeze as sellers start to cover which could drive the price back up to the first resistance trendline at 18.

  • UHN: If you live anywhere other than the sunbelt and use heating oil and haven’t locked in your rate for the winter, then you might want to consider buying a winter’s worth of this ligthly traded ETF (so if you do trade it, use only limit orders). It’s hard finding a more perfectly formed ascending triangle reversal pattern. The characteristic of this pattern is that it very clearly depicts how buyers come in to the stock and overwhelm the sellers at higher and higher levels. They run out of steam at the resistance level but, the theory is, at some point in the near future as the bottom trend line continues to approach that resistance, a breakthrough will occur.

  • OIL: Not surprisingly, OIL has a pattern similar to UHN. If one breaks out, the likelihood is that the other will too. The interesting thing about OIL is that many drillers, service, refiners and marketing firms have clearly formed reversal head-and-shoulders, double-bottom and, yes, ascending triangle, patterns and are ready to breakout when the big money is ready to come in from the sidelines.

So whichever of the Oil & Gas participants interests you the most (yes, don’t forget the large integrated international firms like COP, XOM and CVX) putting some money to work in this sector is prudent.

September 20th, 2009

New Place to Mine for Winners

It seems as if it were longer but only two months ago I described stock picking then being as easy as “shooting fish in a barrel” since many stocks had formed classic bottom reversal patterns. I even included a spreadsheet of 135 stocks, labeled “stocks on the move” because they met certain specific criteria (click on article above for the criteria); they looked like horses at the starting gate waiting for the bell.

Fortunately, this time I did take my own advice and did buy some for my portfolio because as a group, the stocks have increased 16.7% to their highs during the period and 13.2% to last Friday’s close. Of the 135, only 5 declined, 5o increased less than the S&P 500 but 85 went up more (click here for the updated recap). The biggest winners, if you were lucky enough to have picked them were:

What’s upsetting and distressing is that only 5 of the 135 are on the Stocks on the Move scan today. As a matter of fact, the scan produced only those 5 stocks. So even though the Index continues to move higher, it’s more and more difficult finding stocks that look attractive at this point.

So what is one supposed to do now? Should I swap out my big winners (if you were lucky enough to have bought WYNN, you’d over 60% to Friday) and put the money elsewhere? If I have some cash waiting on the sidelines, is this a good time to buy and, if so, where should I put it?

Good questions and, unfortunately, the answer isn’t so good. I’m having a hard time finding stocks where the future reward currently exceeds the attendant risk. But when I do find them, they seem to concentrate in the familiar commodity-based Industry Groups of Energy (see “Mysterious Happenings in the Oil Patch (Stocks)“), Metals, Steels, Coal and Precious Metals.

Does it have something to do with the continued weakness of the $US? Probably, since many were expecting the dollar to rebound when it touched a level that seems to have been support since the early ’90’s. It didn’t hold and the dollar continues sliding to the levels it hit in early-mid 2008:

There’s a lot of debate around which is best for the US today, a strong or a weak dollar. We’ll let other duck that out. What I’ve thought for quite some time is that about the only way out of our huge debt position in the hands of other countries is to devalue our way out. What that means is inflation, higher interest rates and higher commodity prices (when expressed in terms of $US). Having said that, some of the stocks (ETFs) where the expected rewards and risks might still be in balance include:

  • OIL
  • REA
  • XME
  • PTM
  • X
  • CENX (or AA)

Plus, of course, the precious metals complex including: SLV, GLD, UGL, DGL, GDX plus the wide range of miners.

September 13th, 2009

Mysterious Happenings in the Oil Patch (Stocks)

The NYTimes, no charting haven but sometimes interesting none the less, happened to have an article that should be of interest to all who wonder how long this terrific market will continue (and if you’re reading this blog but aren’t interested then you’re in the wrong place). In the article, entitled “Around the World, Stock Markets Fell and Rose, Together“, Floyd Norris reports:

The United States stock market has just completed its best six months since 1933. From March 9 to Sept. 9, the Standard & Poor’s 500-stock index leaped by 53 percent……..Amazingly, however, the American stock market was one of the least volatile markets in the world in the last year. It was among the best markets when it was plunging, and among the worst when it was soaring. Over all, it ranked near the bottom among international markets……

If history is a guide, the strong recovery may be an indication that better prices are still ahead. Since World War II, there have been eight periods before the current market when the S.& P. 500 managed to rise at least 30 percent over a half-year period — in 1963, 1971, 1975, 1980, 1982-83, 1991, 1997 and 1999. A year later, the index had made further gains in seven of them. The exception was 1980, when the economy went into a double-dip recession and dashed the hopes of investors who had bet on a continued rise in stock prices.

I confirmed these results when I wanted to test the importance of all the conversation concerning how awful September and October are historically and, by inference, predicted to be this year, too. What I discovered, however, was that markets closed higher on December 31 than they did on August 31 in 34 out of 47 years since since 1962. The worst 4 month periods of the 14 that had a lower year-end close were 2008 and 2000, both years in which the market had already been declining prior to August 31. The third worst was 1987 due to the Crash that October. The average gain for the 31 up years was for the 4 months was 6.9%. Exclude the 3 crash years, the decline for the remaining 11 years was a non-staggering -3.8%. So the prospects for the next 4 months based on the past 47 years’ statistics is for a strong finish to year-end. (statistics available in spreadsheet form by clicking here)

If you’re not in stocks now or have some new money to invest, what should you buy? Banking stocks as a group are up 119% since March 9, Insurance stocks are up an average 86% and Computer Hardware stocks are up an average 82%. If the big money herd has sideline money left to put to work then are they going to buy these stocks or will they put their money to work on some industries that haven’t been bid up so much already. My guess is that a good chunk of the money will be put into energy stocks which as a group are up 54%.

Specifically, many oil& gas stocks have formed the same reversal patterns (head+shoulders, ascending triangles, etc.), with breakouts highly likely. Some names include (click on symbols for the charts):

  • SD (SandRidge)
  • HLX ((Helix)
  • HERO (Hercules)
  • CRZO (Carrizo)
  • KWK (Quicksilver)
  • PVA (Penn Virginia
  • SM (St. Mary)
  • PXP (Plains Exploration)
  • COG (Cabot)
  • CHK (Chesapeake)
  • APA (Apache)
  • CEP (Constellation)

This is by no means an exhaustive list, it may not even include some of the best stocks and some of these chart patterns may actually fail. But the list could go on and on because there are so many great looking charts for you to scan through to find the one(s) you like best (in full disclosure, I already own the first two on the list).

There’s something going on in the oil patch that’s contrary to what you read or hear from the TV Talking Heads (e.g., huge inventories, price pressures). The charts tell a different story as I see it. They tell a story of slow accumulation and breakouts galore coming as we approach year-end. If you missed out on the low priced financials in March and the energy stocks last year now’s your opportunity again.

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There was another article in today’s NYTimes I’d like to bring to your attention, entitled “At Your Fingers, an Oxford Don“. The article extols the benefits of one-to-one tutoring:

“21st-century technology carries the potential to nudge mainstream education back toward the 16th-century vision of one-to-one tutoring.

The Internet, high-speed networks, powerful and lighter computers, and clever software for video, collaboration and simulations on the Web all help. Equally important is a maturing understanding of how to use wisely the new digital tools in education. The goal, proponents say, is to open the door to more engaged, interactive and personalized learning.”

The article goes on to say that “one-to-one tutoring is the learning method proven time and again to sharply improve a student’s measured performance. A good human tutor can deliver a ‘home run'”. If you’re looking for better stock market results, now you too can get tutoring to improve your chart reading skills. For more information, click here.

May 8th, 2009

What Do The Charts Say About OIL and USO

Take a look at the Oil and its corresponding etf’s, OIL or USO, to see what a “bottom” of “base” looks like and how it evolves. I last wrote about these ETF’s on February 14 in “OIL, USO, DBO: Are they Broken?” when I wrote:

“Looking at the comparison charts above, I wouldn’t be surprised to see a 100-200% increase in the OIL, USO or DBO etf’s over the next 12 months for convergence with the stocks in the oil complex.”

I’m more convinced that convergence is happening. I know it seems like a generation ago but if you think back to last summer you’d remember that we were stressing about gas prices at the pump. Oil was selling north of $145/barrel and pump prices were around $4.50/gallon. In March, 2008, analysts at Goldman Sachs, presumably with the firms blessing, was forecasting that prices could reach “in the not-too-distant future“. All the discussion revolved around whether the high prices resulted from the new booming demand of the BRIC countries or from hedge funds and speculators continually driving prices ever higher.

So much has changed since then. As the financial crises started to unfold, oil prices began to fall and just before Christmas it touched $30, off 80% from the peak:

In the above chart, the blue line (on left scale) is the price of oil and the red line (on right scale) is the price of the OIL etn. As the price rose last year, the ETN tended to over reach but came back in line as the price fell. Since the beginning of this year, the price of oil has increased while the ETN has lagged.

The divergence has been explained as being due to “contango“. “Contango” results from a step slop in futures contracts and describes a strategy of buying the underlying commodity at the current spot price and delivering it in the future at the higher futures price. The low current price resulted from the worldwide economic slowdown and financial crises and the higher futures prices results from an expectation that economic conditions will soon improve.

[One other fact worth noting is that OIL is an ETN while USO is an ETF; the difference is that an ETN is subject to the full faith and credit of its issuer, Barclays Bank while an ETF is subject to the risk of a separate trust. Both move in synch with OIL priced approximately 50% of a barrel of oil and USO at 75%.]

If economic financial conditions, in fact, do improve around the world, the price of oil may again start to increase. Furthermore, the incongruity between the oil and its related etf and etn will narrow or close in which case a bottom in the OIL etn will look like this:

The chart above includes the Price Volume distribution bars on the right indicating the shares traded at each price (and the bars at the bottom the shares traded each day with red marking down days and green up days). Note that, as the market started regaining its footing after March 9, much of the volume was from shares moving into stronger hands after previous holders dumped theirs in February. It’s interesting that there was relatively little trading above $22-23 (as contrasted with the volume below that level).

I like to converting this price information into trendlines and moving averages:

What you see here are that the near-term moving averages (60- and 90-day) are starting to turn up and cross, the resistance trendline at 21 (corresponding to the top of all the trading activity visible on the previous chart), another potential resistance trendline at about 27.50 (relating to the trading activity early in December). Above that, if the ETN crosses its 180-day and 300-day moving averages, there’s little resistance.

Clearly, this is all speculative and totally dependent on oil’s futures prices. While none of us want to have to start paying $3.50-4.50 at the pump again, given the way these charts look to be evolving (and consistent with the belief that higher inflation and further erosion in the value of the $US might be coming), OIL or USO might be something you look at for your portfolio.

March 18th, 2009

Round 6 in the Oil Patch

Cramer held one of his mock contests tonight between Technical (TA)and Fundamental (FA) Analysis. In the TA corner this time was SII (Smith Industries) and he placed RIG (Transocean) in the FA corner. Now I get very excited when someone stages one of these “boxing matches”.

It reminds me of one he held on January 14, when he staged a match around the question of whether COP (ConocoPhillips) was then a good buy at 51.20. He claimed that “technicians are willing to give up on COP too easily when there are so many bullish reasons to like the stock” but fundamental analysis says that “COP is even more of a buy if it drops” to the support level technical analysts were looking at. Today, COP closed at 37.60, down 27% in 9 short weeks. Cramer got his wish for COP to be a better buy and those who followed his recommendation suffered a whopping loss!

Tonight, back in the oil patch, Cramer said that even though TA people like SII, he preferred RIG and backed up his choice with what he claimed were strong fundamental reasons. His technician at theStreet.com, on the other hand, gave a more compelling OBV (On-Balance-Volume) track as the explanation for his choice of SII.

Regular readers are familiar with one of my favorite sayings (when it comes to the stock market, that is) that “50% of a stock’s price movement is attributable to the total market, 30% to the sector and only 20% to the stock itself.” I wanted to see the real story in this contest. How different were the charts of SII and RIG? More importantly, did other stocks in the Oil Industry Groups have similar charts?

What becomes clear when you scan these charts is that they’re being driven by common underlying economic forces since all their charts look nearly identical. As a matter of fact, these charts don’t look too dissimilar from many of the charts I shared with you in the Google Spreadsheet in yesterday’s Prospecting for Stocks with Potential). See if you can see the similarities:

I could go on and on but you get the picture I’m sure. Something fundamental is going on in the Oil patch (or at least with the stocks of these companies) as many of the stocks are on the verge of bumping up against similar resistance trendlines.

Furthermore, all these stocks and thousands more are wrapped up in the overall market’s general base-building process. In the same way that I warned readers to stay in cash since February, 2008, I began writing that the market was in a base-building process October 20.

We knew it would take some time due to the depth and steepness of the Crash. But I believe that after 5 months, we’re now about 60-70% of the way finished, in Round 6 of this match. We’re going to start seeing more and more stocks cross above their moving averages, break above critical resistance trendlines and begin making new upward trends. But the whole process could still all collapse into an even greater economic crises so caution is still needed.

While RIG may look better than SII to Cramer, I’d like to call it a draw at least for this round. I’ll just wait for the final decision until a few more rounds in this match.

January 14th, 2009

Cramer and COP

As a chartist, I can’t help but feel violated and incensed when I hear (and read) Cramer do his “technical vs. fundamental … which is better” shtick. It’s a set-up and blatant lame attempt to put charts and technical analysis down (don’t believe that he’s trying to teach technical analysis).

For example, last night he presented a technical interpretation of ConocoPhillips (COP). He said he has,

“plenty of respect for technical analysis, too, especially since this approach seems to be driving the market right now [my emphasis added] …. thinks technicians are willing to give up on COP too easily when there are so many bullish reasons to like the stock. Technicians study charts showing past action to predict future performance. These charts say Conoco’s a buy at present levels – $51 – but below $48 the trade’s done and gone. Cramer, however, disagrees. The fundamentals show, he said, that COP is even more of a buy if it drops that low.”

Where should I begin? There’s so much to chew on – a spit out! I’d like to start by pointing out that I analyzed the charts of the three integrated oil companies (XOM, COP and CVX) last October 14 when I wrote: “…take a look at what’s happening to the some of the largest cash machines, the major integrated oil firms. Are they confirming we’ve reached the bottom or will the lower boundary of their channels going to be busted also (note these charts cover 23 years!).” Here’s the chart of COP I included in that post:

Cramer showed a short-term update of the COP chart:

Here are some of the errors in Cramer’s presentation:

  • Technical analysis doesn’t say the COP should be bought at today’s prices and sold if the price went to 48. Technical analysis says that there’s a potential for support at the long-term trendline at 42 and purchase after a bounce off that support would be ideal. If the price doesn’t decline here but instead moves up, that a break above the resistance level at 56 would be an excellent jumping in point (because the odds favor a quick continued further upside after that).
  • Technician and fundamentalist both agree that buying lower is better than buying higher and selling higher is better than selling lower. It’s really only a question of what signal to look for to indicate to you that the odds favor the stock going higher from the current level and less risk of its going lower. Fundamentalists (and Cramer) have no such signal. As he says, “if COP is a buy at 50 then it’s a buy at 48.” But would it also be a buy at 80 or 70? Or 45 and 35?
  • The odds are technicians might have sold COP as the market was in the midst of the bear market last summer when oil was above 135 and COP hit the top of that 24-year channel. It would have been a perfect time to sell and wait for it to go lower. But Cramer was out regularly touting COP at those high prices. For example, as the price of oil was skyrocketing, he wrote in his blog on July 1 when COP was 94, “last week Conoco (NYSE:COP) should have exploded, but it couldn’t because it is such a big part of the S&P. Chevron (NYSE:CVX) and Exxon (NYSE: XOM) are no different.” A few weeks later, on July 24, 2008 (COP was 81.79) on his Stop Trading segment he said “For the oil and gas sector, Occidental Petroleum (OXY) and ConocoPhillips (COP) are too cheap.”

I could go on and on citing similar examples. But the bottom line is that valuation is a transitory thing. One day, something might look cheap fundamentally and the next day look expensive. You may come up with the same value for the stock both time but the yardstick you use to measure is made of rubber. It stretchs and contracts. With fundamental analysis, there’s no standard against which to measure the yardstick itself.

Technical analysis reveals how all market participants value a stock (or the market) and how their collective valuations changes over time. Stock valuations are dynamic, not static; those valuations follow trends (momentum) and those valuations reflect being in demand or out of favor. Techncial analysis focuses on the trends (rather than the causes) and descern when those trends might change (based on when they had in the past).

As a footnote let me add that I wrote CNBC the following:

If you want to want to make a fair presentation of technical analysis launch a show which would be a spin-off of the Million Portfolio Challenge. Put a couple of real, true tech gurus (like Carter Worth or Louis Yamada) up against a couple of fundamental analysts and let them battle it out on the market, on industry sectors, on individual stocks. Each would talk in their own terms (technical talking momentum, charts, etc. and fundamental talking about sales growth, profit margins, fair value). Each show would cover several topics (perhaps on a viewer call up/email basis) and the teams would be allowed to invest a certain amount of their portfolio on each decision.

Part of each show would be a follow up on recommendations made several months ago. There would also be a running Portfolio balance (vs. a benchmark like the S&P 500 Index) to see which “team” (technical vs. fundamental) has the best on-going performance.

But please, muzzle Cramer from talking technical analysis.

October 15th, 2008

Redrawn "Line in the Sand"?

Today’s action surprised me! Didn’t think we’d see it go so far so soon making me need to reevaluate my views. I’ve had to redraw the “line in the sand” and to move it lower as the next and final support level:

If the market doesn’t hold over the next day or so then we’re looking at 750, or down another 18% from today’s close.

Conventional explanation for moves over the past 3-4 trading days is that both hedge funds and mutual funds are liquidating in order to fund redemptions and withdrawals (investors are about to see their October financial statements). The second explanation is that the impact of the credit crises is beginning to be felt in the real economy as evidenced by the slower retail sales reports.

Having said that, take a look at what’s happening to the some of the largest cash machines, the major integrated oil firms. Are they confirming having reached the bottom or the lower boundary of their channels also going to be busted (not these charts cover 23 years!):

  • XOM (Exxon Mobil)
  • COP (ConocoPhillips)
  • CVX (Chevron)

All three of these stocks have grown at the average rate of 10-11% per year.