-Executive Summary-

• Divergent!  The DOW (DJ-30) closed marginally higher, while the NASDAQ closed lower.
• General Motors Corp. received a broker upgrade today and has outperformed our SMC Ford Motor Co. holding over the past 6 days.  There are some assessments being made that somehow GM will be less impacted by parts shortages resulting from the tragedy in Japan than other automakers.  We’ll see.
• Stock Market Companion SHORT holding of silver – using the Proshares Ultra-Short “ZSL” product – performed strongly today.  We took the lion’s share of our profits and left a “runner” on.  See more below.
• The U.S. factory orders report for March was very strong at +3%.  As the economy begins to show such strength, the Federal Reserve will be inclined to tighten monetary policy.  More below.  Before that point arrives, those who have been buying precious metals will want to capture their profits and head to the sidelines, or short the metals as we did yesterday.
• Here is a video interview of a father and son using the Stock Market Companion successfully together – as a teaching and investing tool.
  

– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Nexxus Lighting	NEXS	Miniscule Holding	3/18/2011	-25%
2	Dell Inc.	DELL	Holding	3/21/2011	+5%
3	Ford Motor Co.	F	Holding	4/1/2011	-3%
4	Cisco Systems, Inc.	CSCO	Holding	4/25/2011	+3%
5	Proshares Ultra-Short Silver ETF	ZSL	Purchased Today	5/2/2011	+17%

If the above “Current Holdings” table is empty it means that we are not holding ANY stocks at this time and that we are therefore 100% in cash.

– Markets “At a Glance” –

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

Market	Price (Today’s Close)	Unit of Measure	Today’s Direction
SP-500	1,356.62	Index	Down = -4.60 points
DOW-30	12,807.51	Index	Flat = +0.15 points
NASDAQ	2,841.62	Index	Down =-22.46 points
NASDAQ 100	2,392.80	Index	Down = -11.44 points

– Market Trends –

Trend	SP-500	DJ-30	NASDAQ	NASDAQ 100
Short Term	Flat	Flat	*Down*	*Down*
Intermediate	UP	UP	UP	UP
Long Term	Lateral	Lateral	Lateral	Lateral

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) –

1. SMC SP-500 ETF Daily Chart (Click to open helpful chart in a separate browser window).

– Today’s Highlights –

Weak overseas markets last night and this early morning, combined with yesterday’s lack of enthusiasm here in U.S. markets – in spite of the very good news related Osama bin Laden – were reflected on today’s open.  The broader market (SP-500) opened negative on yesterday’s close, recovered a bit on the excellent +3% U.S. factory orders for March, and then sold-off further as the commotion in the silver and energy market bled into the rest of the market.

The big news today involved the U.S. futures markets increasing their margin requirements for trading silver futures.  Here is an example of what futures traders received from their brokerages concerning margin requirements –

To NYMEX,NYSELIFFE traders:
Tue May 3 04:38:47 2011 EST

In light of the recent extreme volatility on the silver contracts, the
various exchanges that trade silver derivatives are expected to increase
margin requirements on these contracts. As the increase is anticipated
to be approximately 20%, we will be requiring an additional 25% cushion
of margin on top of the exchange-mandated maintenance margin
requirement. We anticipate this change will become effective as early as
12pm EST on 3 May 11.

For example, for the SI futures on NYMEX, as the expected NYMEX-mandated
margin requirement will be US$12,000 for each contract, we will be
requiring US$15,000 maintenance margin for each contract.

To anticipate the sudden increase in these margin requirements, our
initial margin requirements on the affected contracts were raised to
180% of current maintenance margin levels. The aim of this preemptive
change is to avoid adverse impact from the expected maintenance margin
increase. Thank you for your understanding.

Futures traders who could not meet these new margin requirements – by bringing in more cash into their accounts, were forced to liquidate their positions.  This caused the enormous volume in silver trading today.

Until we are shown otherwise, it appears that the sudden change in margin requirements for futures traders was initiated by the future markets  in order to cool off the speculative trading taking place in silver.  Remember, we calculated together yesterday that at $50/ounce, silver had advanced +194% since last August.  Silver never quite reached the $50/ounce mark, but came close.  The efforts to cool off the speculation on silver worked, with the metal falling -15% in value from last Thursday’s close.   We’ll talk more about this below.

If you are thinking right now something like this, “Hey, this is like changing the rules right in the middle of the game!” – you are thinking just as we are at the Stock Market Companion.   We believe that this kind of action is wrong and destroys the quality of our market.

Let’s go back now and talk a bit about today’s excellent U.S. factory orders report from March. Click here for the details in an excellent report from Reuters. Contributing to today’s sell-off in metals and energy was this favorable factory orders report.  The more the economy shows that it is beginning to function normally, the closer we are to the Federal Reserve removing their very accommodative monetary policy.  Today’s factory orders report, combined with last week’s very transparent Federal Reserve press conference, combined with news leaked today that there was perhaps stronger viewpoints presented at the last Federal Reserve Open Market Committee meeting in favor of tightening monetary policy was all that was needed to cause investors to begin closing out their U.S. dollar short holdings today.  Increasing the underlying U.S. dollar value causes commodities priced in U.S. dollars to decrease in value – simply to stay on par with the current market price.

What we have is a very strong multi-month decrease in the value of the U.S. dollar that is ready for a bounce higher.  In anticipation of this bounce higher, energy and precious metal commodities and stocks were sold-off today and yesterday.  The increasing margin requirements placed on silver by the various exchanges, exacerbated silver’s move to the downside – which we at the Stock Market Companion thankfully were able to take strong advantage of.

– Story-Stock Investing –

Yesterday we wrote, “Last week we reported at length how Federal Reserve Chairman Ben Bernanke shook things up with a very transparent view of the markets from the Federal Reserve’s point of view.   Many SMC subscribers share differing views of the role, function, and need for a U.S. Central Bank.  That said, we believe that Mr. Bernanke’s open comments could spell at least a pause in the endless advance of precious metals as the buzz of runaway inflation is – for the time being – perhaps reduced.  This may be what we are seeing in the precious metal space today.  As such, we are willing to step out and pick up the Proshares Ultra-Short Silver ETF which moves higher by a factor of 2x, when the price of the metal falls.  This ETF will also plummet the same 2x factor when the price of silver rises.  Such an investment tool is useful when attempting to take advantage of possibly unsustainable  vertical moves in a commodity or market.  There are many such Pro-shares Ultra-Short ETF’s for various markets or commodities.  Of course there valid concerns about how such instruments move over an intermediate period of time and how they are not able to maintain an exact 2x performance.  But for short / intermediate time frames, these instruments are suitable for our purposes.”

Our plan worked quicker than we expected today as silver dropped to approx. $40.46/ounce from yesterday’s close near $44/ounce.  This type of aggressive selling is unsustainable – but can remain unsustainable for longer than most expect.  Prudence caused us to cover the majority of our short at approx. $17.55/share this afternoon as the selling accelerated and volume reached extremes.  We transmitted this SMC Intra-Day Alert and some subscribers informed us in the course of this afternoon that they were able to exit their “ZSL” at around $17.90/share for at least +15% returns – in a day.  Thank you for the encouraging calls and email.

Dear Subscriber-Friend –

Good afternoon.  At the Stock Market Companion we’ve proceeded to take the lion’s share of our profits on the Proshares Ultra-Short Silver ETF – Ticker: “ZSL” at $17.55/share and put our stop on the remainder at $16.50/share.  More later.

We’ve left a “runner” on (Runner = a small position of the overall total) to see if we can catch a little more profit if the move continues in our favor.  If silver bounces strongly, we may have a chance to re-initiate our short using the ZSL.  If it again sells off hard, we may consider a long position using the “AGQ” or the “DBS” Proshares funds.  These could be extremely short term positions, if we initiate them.

For subscribers initiating such positions, it is wise to keep an eye on them and take your profits at your discretion without waiting for our own signal of our exits.

Meanwhile, U.S. Treasuries have been catching a bid (which means going up in price) thereby pushing down yields.  As the yield on the 10 year treasuries decrease, so too do 30 year fixed mortgage rates.  Today the 30 year fixed mortgage rate is approx. 4.69%!

At the Stock Market Companion we do not and cannot give individual investment advice. According to the State of Washington RCW 21.20.005 the Stock Market Companion is not a Registered Financial Advisor and we do not render any advice on the basis of the specific investment situation of a particular individual. This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should our Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  Please seek the council of a broker or other licensed investment professional for accurate pricing and concerning the suitability of all investments that you may be considering. Disclosure : You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

– Stock Market Companion – Performance –

Please click on this chart to see the Stock Market Companion 15MinuteStocks stock performance versus the SP-500.  It will open in a separate browser window.
* Gains (losses) do not include brokerage fees.   Our returns are very strong … BUT …  WE have to remind everyone just like all other financial sites in America – Past Performance is No Guarantee of Future Returns.  Unlike others however, our objective is to teach you to be able to make these types of strong returns On Your Own.

All of the investments – stocks, entries, and exits are listed on our Stock Market Companion Watchlist at the bottom of the spreadsheet, in the section labelled Former Holdings.

– Benchmarks “At a Glance” –

US Dollar	1.4826 USD = 1 Euro	USD / EUR	Dollar = bouncing around lows.
Gold	$1,536.90	Ounce	Gold = Down a bit.
Oil	$110.92	Barrel (West Texas Crude)	Oil = Down
30 Yr. Fixed Mortgage	4.69%	Percent	Flat
10 Yr. Bond Yield	3.25	Percent	Down
1 Yr. CD	1.16	Percent	Flat

Data Source : Financial Visualizations Inc.

Signing-Off for Today,

Your -Stock Market Companion

** Stock Market Companion Disclaimer **

The Stock Market Companion (SMC) Market Update and Watchlist are published documents to subscribers that show how we (SMC) are viewing the markets and what we are watching, investing in or selling today.  This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should this Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

Furthermore, the Stock Market Companion, Inc. is a content provider and publisher and not a registered broker-dealer or licensed investment professional.  Our intent is to publish very accurate market information for an audience of subscribers (1000+ subscribers).  By accessing the Stock Market Companion website and/or using the Stock Market Companion products and services such as this Market Update and accompanying Watchlist, you understand and agree that the material provided in the Stock Market Companion products and services is for informational and educational purposes only, and that no mention of a particular security in a Stock Market Companion product or service constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.  To the extent any of the information contained in any Stock Market Companion product or service may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.  Before selling or buying any stock or other investment you should consult with a qualified broker or other financial professional to verify pricing information and to solicit advice as to the appropriateness of a given transaction or investment.