– The Stock Market Companion –
15Minute Market Update
June 1, 2011
—— Stock Market Investing since the 1980’s ——
Published all Market Days
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-Executive Summary-
- Today the markets experienced a significant sell-off event. The market fell, and then fell more. See below.
- Under normal conditions, we would expect the market to continue DOWN over the next days or weeks. A first downside target would be 129.5 on the “SPY” (S&P 500 ETF). This market however has proven to be very resilient. We’ll see. We sent out an SMC Intra-Day Alert today, ratcheting UP our stops on each of our holdings to well above break-even in the case of HPQ and AMRN. We increased our stops in order to capture modest gains on these stocks, while giving the market an outside chance of recovering from this very weak posture. Our CSCO holdings are small and we increased our stop on that one too. See the details, below.
- We review FuelCell Energy, Inc. (FCEL) below. This stock can really move if investors get behind it. We’ll see if yesterday’s big order from South Korea can act as a turning point for the Co. and bring real share appreciation. Our buy point would be approx. $1.90/share.
- Automotive sales figures were released today for May. Sales are weakening. We may be able to buy Ford Motor Co. at a strong discount in the weeks ahead? See below.
– Stock Market Companion – Current Holdings –
| Nr. | Co. | Ticker | Action | Entry Date | Current Gain (Loss) |
| 1 | Cisco Systems,Inc. | CSCO | Holding (Reduced size) | 5-10-2011 | -9% |
| 2 | Amarin Corp. PLC | AMRN | HOLDING | 5-19-2011 | +6% |
| 3 | Hewlett Packard Co. | HPQ | Holding | 5/26/2011 | +1%
|
– 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 |
1,314.55 |
Index |
Down = -30.65 points |
DOW-30 |
12,290.14 |
Index |
Down = -279.65 points |
NASDAQ |
2,769.19 |
Index |
Down =-66.11 points |
NASDAQ 100 |
2,322.48 |
Index |
Down = -50.06 points |
– Market Trends –
Trend |
SP-500 |
DJ-30 |
NASDAQ |
NASDAQ 100 |
Short Term |
Down |
Down |
Down |
Down |
Intermediate |
Flat |
Flat |
Flat |
Flat |
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 –
Today the market was unable to put a brave face on this difficult news =
- ADP National Employment Report for April to May. In this period of time, total employment increased +38,000. There was an expectation that payrolls would have increased by +171,000, so this +38,000 payroll increase was a major disappointment. At this stage in any other post WWII recovery, job growth would be healthy. Not this time. Click here for more detail from ADP.
- The Institute for Supply Chain Management released its manufacturing index for May, showing the index dropping from 60.4 to 53.5 from April to May. This is the second month in a row showing sharp decline in manufacturing.
Concerning these the results, Automotive News writes…”GM, the largest U.S. automaker, is struggling to sell down truck inventory that climbed to more than 111 days of supply at the end of April because its Chevrolet Silverado and GMC Sierra models are competing against recently updated Ford pickups.”
“GM has a long-term problem until they’re able to update those vehicles, because right now the Ford product is so much more attractive. For now, GM has to respond with incentives.” (Bold type from us at the SMC).
“While total sales may have dropped, Ford’s deliveries per selling day may have increased from May 2010. Barclays Capital estimates Ford daily sales rate, excluding year-earlier purchases of its Volvo brand, may rise 10 percent, while Credit Suisse Group AG predicts a 16 percent gain on that basis.”
—-
What is clear is that the equities (stock) market has been struggling to retain its positive composure as item after item over the last 30 days or so has revealed a weakening in the economy. The Philly Fed, the Chicago Fed, the weekly jobless claims numbers (released on Thursday’s for the previous week), Goldman Sach’s review of the economy in China, supply chain consequences related to the earthquake and subsequent tsunami in Japan, existing home sales, Case/Shiller home price indicator, ISM Index, today’s ADP report, and others are all pointing to WEAKNESS in the economy.
The U.S. economy is tremendously diverse, but cars and housing do make up a significant piece of the picture. Consider as well that in recent years, it has been government hiring and employment that has taken up the slack, and we are now entering into a period of a dose of reality there too. Even without possible (hopefully) upcoming cuts in government spending, the existing cuts achieved recently – although minuscule compared to the overall U.S. current budget deficit – were the largest achieved for generations. Friends, as a nation – from a government expenditure basis – we have been living on “credit” for a long time. Necessary readjustments in government spending is also going to rattle the markets.
The starting point for recessions are always clearly seen in the “rear-view” mirror. One definition of a recession is 2 quarters of negative GDP growth. We are perhaps not in a recession yet. It would not take much contraction at current GDP levels enter into a second recession soon. Even a slowdown will be enough to cause this market to sell-off further.
Today, Australia released its GDP figures for the 1st quarter and indicated a -1.2% contraction.
– Story-Stock Investing –
Imagine that you are the managing director of a major medical facility. You have purchased back-up power generation equipment in the case of broad grid failure. With natural gas as cheap and readily available as it is, you chose natural gas as the fuel source. Fuelcell Energy, Inc. (Ticker: FCEL) manufactures such equipment in complete systems for hospitals, prisons, and remote facilities that require power.
Yesterday FCEL announced a$129 million order from South Korea’s steelmaker – Posco, Inc. for such equipment. Posco is ordering 70 megawatts of producing equipment – which is the equivalent of more than a year’s production for FCEL. This is a big deal. The stock shot-UP from $1.46/share to $1.90/share (+30%). Here are some details –
For the last 3 years, FCEL has lost a lot of money. Consider this operating income overview –
2010: $-54.3 million
2009: $-66.3 million
2008: -92.8 million
FCEL doesn’t have much debt, but at the above cash burn rate their Total Current Assets look like this –
2010: $102.2 million
2009: $119.7 million
2008: $118 million
With the above operating income, you would expect earnings to look terrible. They do. They are negative for as far back as we an see. BUT they have improved from -0.30/share per quarter to -0.10/share – and revenues increased last quarter vs. the same quarter a year ago by +92%!.
The shares were valued on the market from $5.22/share in 2003 to as high as $20/share in 2004 and then bounced around in a negative trend back down to $5.22/share in August of 2008 and then plunged south with the rest of the market in 2008 and early 2008. Instead of recovering with the rest of the market, the shares have fallen further from $2.67 to roughly a buck a share in 201o – reflecting the terrible operating income results that we presented above.
Because the company does not carry much debt, a stock like this can turn around pretty quickly if something significant changes. PERHAPS these points are indicating change at the company and are enough to attract institutional investor interest (recent volume may be indicating so) –
1. Negative quarterly earnings have improved significantly – from -0.3 to -0.10.
2. Revenue may be on the UPSWING. Yesterday’s order from South Korea is a great catalyst for possible share price appreciation.
Yesterday the stock closed at $1.90/share. Today the stock sold off with the rest of the market to $1.77/share. A move back towards $1.90/share may get us on board with an investment. This stock can really move if investors get behind it. Sometimes simply the spectre of change or hope for more change is enough to drive a stock like this much higher.
Please click here to see our SMC WEEKLY Chart on FCEL.
Today, we sent out this SMC Intra-Day Alert –
Dear Subscriber-Friend –
The market is taking a strong blow today, and – in contrast to other similar events recently – there have been precious few investors willing to step up and make purchases. It is as if a very heavy, wet blanket has been thrown onto a small fire, which was already struggling.
We are preparing to clear the decks of all stocks – including CSCO. We like HPQ, and we like AMRN and we have profited modestly on each of them. CSCO is a longer term story that may require more patience than we wish to give at this time.
We may get a chance to purchase excellent stocks at a strong discount in the months ahead, or maybe the market is simply going to offer up a fair amount of up and down turbulence until it is clearer how several key events (Fed reducing QEII, U.S. Government raising debt ceiling – or not…) are going to be resolved. Either way, we are going to be ready to take the modest profits that we have and head to the sidelines and wait to see how this market responds to the headwinds that appear to be building.
Because the market may bounce (we don’t want to sell and then watch the market and our stocks bounce higher), we are increasing our stops on each of these three stocks as follows –
- HPQ. Our stop goes to $36.60/share.
- AMRN. Our stop goes to $18.47/share
- CSCO. Our stop is placed at $16.35
We wish it was easier, but it isn’t right now. We will of course continue to place investments on stocks as they emerge – even in this difficult environment. The set-ups will need to be good – like AMRN and HPQ and ZSL have been recently.
What we are doing right now is responding to a market that is acting very heavy. Our experience tells us that the probability for lower prices ahead has increased markedly. We are still simply talking probability and not certainty.
For your protection and our own, we would like to remind everyone that this is not an investment recommendation for any particular individual. We cannot possibly know the risk tolerance and investment suitability of such investments for any particular subscriber. Successful investors know their own objectives, purposes, and risks associated with any investment – whether in real estate, stocks, or other investments. Each investor is on their own.
We are simply reporting the SMC actions in the market place.
Your – Stock Market Companion
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 counsel 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 15Minute Market Update 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 |
1.4330 USD = 1 Euro |
USD / EUR |
Dollar = UP a bit |
Gold |
$1,543.20 |
Ounce |
Gold = UP |
Oil |
$99.74 |
Barrel (West Texas Crude) |
Oil = Down |
30 Yr. Fixed Mortgage |
4.69% |
Percent |
Flat |
10 Yr. Bond Yield |
2.966 |
Percent |
Lower again for today, at lows for the year. |
1 Yr. CD |
1.16 |
Percent |
Flat |
Data Source : Financial Visualizations Inc.
Please help us by sending your valuable feedback to – Support@stockmarketcompanion.com
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.
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