Sunday, December 4, 2011

Has Europe been saved?

What a week it was indeed, seems like everything is back to normal, right? We saw all of the broader market in the green: SP500 +7.4%, Nasdaq +7.6%, Russell +10.4% Oil +3.3%, Gold +3.7%, Copper +9.1%. The Volatility index saw a huge drop -20.2%. Year to date we are still in the red, but not by much: SP500 -1.1%, Nasdaq -1.0%, Russell -6.2%.

To me, for the fed to intervene like this and basically stimulate the world, what does this say about the stability of the global monetary system? Clearly something was going wrong and something was bound to SNAP any second. From the close the previous Friday to this Friday at the open in the AM, we saw a 100pt S&P rally, we saw this before in the beginning of October, which that rally lasted 3 weeks. Then again, we did sell off pretty hard last week, so on a fundamental/technical basis, we were due for a correction up.

As we saw Friday, unemployment is still weak, anyone who reads the headline will get all high and jittery, but the reason we dropped .4% off the unemployment rate was due to discouraged workers leaving trying to find a job, 300,000+ of them infact. Do you think that is a good thing? It seemed that this news was almost ignored due to the fed intervention earlier on, and by Friday, the buying programs were out of juice.

Above the S&P 3 week chart, I have 1,260 as short-term resistance now. We could not break above that barrier on Fri morning before we slowly chugged down 20 handles to close the day flat. We need a 3-4 day hold above this level to be long, then 1,289 would be the next level, seen at the end of October. As Evan McDaniel said (@sellputs) “Interventions and headlines regarding the Fed or hand of God like tactics can nullify tech analysis on smaller time frames” With that said, watch out and position correctly.

This past week I lost about a $100 on a pretty stupid trade on my part. I really don’t know what I was thinking when I bought $FTWR after it dropped from $1.00 to .30 about 2 weeks ago. I have lost 50% of my position this week, did not read into it that much to see just how bad off this thing is. I will sell my position on the open Monday and learn from my mistake.

Above $FTWR huge downturn this week.

This week going to highlight a few names to trade off from earnings reports. First is Dollar General. Looking at their internals, they continue to do very well, with a q/q increase in revenue and profit by 10%. Notice also how they have been compared to the broader market in terms of outperformance. Since the downturn in August, they are up roughly 30%, this could be due to the number of people still unemployed who need cheap items. Dollar stores will continue to do well in a weak economy. At the close on Friday, they are a little over a dollar off of their all-time highs that were seen last week. I’m sure there has been some buying into the report, nevertheless I have a buy on it, and would expect a selloff from the report, that would be when you get in. The last report has the stock sell off about 8%, since then it has rallied 15%. They do not pay a dividend, but would not be surprised if they instated one soon.

Above Dollar General, notice the tight range it has held the last 2 months compared to large gyrations in broader market. The report will be coming out Monday.

Next name on my list is National Beverage Corporation $FIZZ. This is also another name that will be reporting Monday and quite an interesting one infact. They are the makers of Shasta and Faygo products. I remember years ago my grandfather a huge fan of Faygo, he probably drank a 2 liter a day, was eager to find out the maker of the product and assumed they were doing well, and they are. Between the beginning of this yr and June, they have managed to almost double their income from 7.4M to 13.4M. with a p/e of 18 it is a bit on the expensive sign, but an incentive long term is their special dividend with started in 2009. It has increased from $1.35 to $2.30 in 2010, I expect them to pay out more from the great year they have had, up over 20% and trading near all-time highs.

Above $FIZZ I anticipate a slight selloff in the name, but I would buy, company looks very strong, and as stated above, large yearly dividend helps.

Last one is one I first reported to here on their prior report, AutoZone. This name is another good one for long-term growth. A good percentage of the time, it tends to selloff a good amount, usually 5-10%, then run it right back up to all time highs. This year, they have more than doubled their income from 148M to 301M, the do-it-yourself auto repair still looks to be the space to be in, as people do not have enough $$ or do not want to spend to buy a new or used car and will squeeze as much out of the one that they have using these products. The only thing concerning is the large price of the shares. To make the company more attractive to invest in, In my opinion they need to do a 10x split do lower price to 30ish bucks.

Above AZO showing the continued move up

My thoughts this week are that we will see some profit taking from the huge run up we saw last week, we need to hold a key 1,200 this whole week to continue the bullish momentum, break below and in for more trouble. After this week, we usually see the low volume melt-up prior to Christmas and after, so beware of that any of you who short (probably already know this).

That is all for this week, will for sure not be posting next week, final exams are here ugh, but home in 11 Days could not be more excited. I’ll keep you all updated as much as I can via twitter (@peter_eller10) on any moves I make this week. Good luck to everyone.

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