-Executive Summary-

• The markets were AGAIN divergent today, just as yesterday revealing further weakness in the technology sector while the broader market (S&P 500) and the DOW (DJ-30) held POSITIVE.
• Research in Motion (Ticker: RIMM $27.75) reported earnings last night that were a major disappointment.  We go through the details below.  The company received 2 broker upgrades going into earnings.  The stock then lost -21.45% from yesterday’s close into today! We go through our steps in handling our brief investment in the stock this last week – AND WHY, below.
• Crude oil continued to descend today, reflecting a drop in value of the U.S. dollar – BUT also  concern of future demand as the global economy slows down.
• The S&P 500 is finding support at its 200 day exponential moving average.  If the broader market doesn’t find strength here and begins to sink further, the next near point of support is the low it plumbed during the recent nuclear crisis in Japan.  If it fails that point, then the intermediate term trend will be DOWN.
  
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• 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)

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	1,271.50	Index	UP = +3.86 points
DOW-30	12,004.16	Index	UP= +42.84 points
NASDAQ	2,616.48	Index	DOWN = -7.22 points
NASDAQ 100	2,192.96	Index	DOWN = -6.97 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 –

This week we have mentioned that the  broader market has reached the area of its 200 day exponential moving average.  It is this fact – and the absence of an immediate catalyst inducing further fear – that is causing the market to pause and bounce a bit.  Helping out today is –

1. Another turn in the Greek sovereign debt crisis –  a new finance minister in Greece (of course, this isn’t going to solve the problem).
2. Surprise favorable leading indicator measures for May.
3. Many individual stocks have already lost a fair amount of value.  The losses didn’t start just on May 2nd when the broader market (S&P 500) peaked.  Instead, many stocks peaked on or within a day on each side of 2/17/2011. Consider –

– Story-Stock Investing –

1. Identified the potential opportunity and established a 5%-10% target.
2. Identified the reasons for the opportunity (oversold stock, earnings still reasonable / good, high volume – positive day for the stock – while the background market was attempting to stabilize…)
3. Established a very small investment amount – in alignment with the risk of the environment.
4. Established the maximum price we would pay.
5. Purchased the shares.
6. Set our stop, JUST BELOW the recent low and just below a “round number”.  The round number in this case was $36/share.  Round numbers are often broken and once the “stops have been run”  the shares are free then to move higher.

O.K.  There was method to our madness.  We did it and on Monday our stop was NOT TRIGGERED (was missed by a penny!) and the stock began to work HIGHER.  We have experienced countless situations where we have captured nice gains from such a situation.   Unfortunately the stock – after gapping higher the next day, experienced MORE SELLING and finally triggered our stop.  We were OUT!

Last night after the market closed, Research in Motion reported earnings that disappointed.  Click here for RIMM’s press release detailing earnings… and earnings expectations.

Here’s the outlook that crushed the stock –

Q2 and Full Year 2012 Outlook:
Revenue for the second quarter of fiscal 2012 ending August 27, 2011 is expected to be in the range of
$4.2-$4.8 billion.  Gross margin percentage for the second quarter is expected to be approximately 39%.
Earnings per share for the second quarter are expected to be $0.75-$1.05 diluted, excluding any one-time
charges.  Earnings per share for the full year fiscal 2012 are now expected to be between $5.25-$6.00
diluted, excluding any one-time charges or share repurchases.

This doesn’t sound so bad, until you factor in that Wall Street was expecting $7.50/share for the year.   As recent as the end of April, RIMM was predicting $7.50/share.  Now, no one really knows if they will be able to hold the new forecast.  It is this uncertainty of future earnings, combined with the CERTAINTY of market-share reduction that is putting pressure on the stock.  If RIMM can hold $5/share, at $27.75/share, the company’s shares are selling at a P/E of 5.55.  They also have $2.9 billion in cash.  With NO DEBT and 521 million shares out, this cash adds another $5.56/share.   $27.75-$5.56 = $22.19/share / $5.25 in earnings results in a real, forward P/E of 4.22!

The forward P/E of 4.22 is what is driving some financial firms to UPGRADE the stock a day ago.  Today, the market would have none of it.  The uncertainty of forward market share and real earnings is simply too great for the stock to carry at the moment.

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	1.4302 USD = 1 Euro	USD / EUR	Dollar = Down
Gold	$1,539.10	Ounce	Gold = FLAT
Oil	$92.91	Barrel (West Texas Crude)	Oil = DOWN
30 Yr. Fixed Mortgage	4.69%	Percent	Flat
10 Yr. Bond Yield	2.95	Percent	Flat
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

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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.

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