-Executive Summary-

• Higher Again!  Those who shorted this market with the hopes of profiting from a significant re-trace in the market after a 2 year and 5 month rally needed to take their profits by June 24th to maximize their gains.  We took our profits on our May 1st short in the silver market quickly.  Right now the market has almost entirely erased the weakness shown from May 1st through June 24th.
• The “ADP Employment Report” + other catalysts pushed the markets higher today.  See more below.
• OCZ Technology (Ticker: OCZ $9.66) provided lots of exciting news in their earnings conference call, yesterday in the late afternoon.  They are participating in an exciting growth environment and have focused their resources accordingly.  We unpack the details below and are interested in purchasing shares.  Perhaps tomorrow.  We will see how the broader market opens and what the Non-Farm Payroll Report brings tomorrow.
• For those with the time, the “OCZ” earnings conference call (audio only) is very interesting.  Please see the link below.
• Our holdings in RIMM and NOK perked-up today.  A move above $30.20 or so in RIMM and a move above $6.60/share in NOK may have us ADD-TO our holdings.
• We did not get lured into purchasing ZAGG, Inc. on its over-extended chart – although we were tempted.  The stock has pulled-back sharply, touching $11.44 today.  “ONTY” also needs to build a base from which we can – with reasonable safety – gauge an entry.
• Former SMC holding Amarin PLC. (AMRN) received an upgrade today.  We are attentive.
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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 –

– 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 Trends –

*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

Please click on the chart to view it in a larger size.

– Today’s Highlights –

The broader market has exploded higher today ABOVE important resistance at 1344-1345 on the S&P 500.  By doing so, recent and significant market weakness from May 1st to June 24th has been essentially eliminated.  There are some short-sellers who without question successfully shorted the market beginning in mid-February and then again at the beginning of May, but many short sellers who were justifiably looking for more weakness and a significant retracement of the almost 2.5 year rally in the market – have once again been thrown under the bus.   Short-sellers who didn’t “cover” their positions by June 24th have rapidly seen their profits cut-down.  Today’s move in the market has further reduced their profits down to almost zero.  When these same short-sellers factor in the opportunity cost of not picking up at least some “long-side” exposure at recent market lows, disappointment really sets in.  Many short sellers however simply emotionally cannot invest on the long side in the market, so they don’t even think about opportunities lost from not investing in stocks that may go “up”.  We’ll leave that story to another day.

Pushing the market higher today was several things –

1. An employment report issued today by “ADP” (a private, payroll solutions provider) shows strong job growth.  This took some of the concern for tomorrow’s U.S. Bureau of Labor Non-Farm Payroll Report away and caused investors to get on-board the market – ahead of tomorrow’s pre-market release of the Non-Farm Payroll Report.
2. The European Central Bank (ECB) initiated another 0.5% increase in lending rates in Europe.  Steps like these help increase confidence in the markets and causes equities markets to respond favorably to what normally could be considered a “negative” by many who remember that equities (stocks) more often than not respond negatively to interest rate increases.  However on the front end of an interest rate increase cycle, equities can very well continue to increase in value, in step with modest interest rate hikes.  Given the fact that interest rates are still basically near zero, modest rate increases are not going to negatively impact the equities markets.
3. Thoughts that the U.S. congress and President Obama may actually be able to achieve a budget plan that involves cuts in entitlement programs and perhaps eventually succeeds at putting the U.S. on better financial footing.

– Story-Stock Investing –

1. OCZ presented their earnings and an excellent overview of their business transformation in their earnings conference call.  For those who are using our Stock Market Companion 15Minute Market Update as an online teaching tool for their family and themselves, this conference call covers many of the aspects of business, business finance, marketing, and sales.  Quite frankly, we don’t think that there is a better tool for explaining the nuts and bolts of real business than conference calls like this one.  Click here for the link and follow the instructions given.  It is an audio only conference call which has been recorded.  There is an excellent question and answer session after the presentation of business and earnings headlines from management.
2. We have attended many conference calls, but this one really spells out the details clearly AND the number of analysts who asked questions during the question and answer session was quite unusual.  There are many analysts “kicking the tires” of this one.
3. Here’s the story in a nutshell – OCZ is transforming from a more commodity nature DRAM memory manufacturer into a solid state (SSD) hard drive manufacturer.  SSD’s are a much higher margin product and are in demand due to the explosive growth of servers and other computing tools in the data server environment.  “Cloud computing” is the driving force here.  SSD’s are an important piece of the puzzle – providing fast recovery of stored data, in a robust design without moving parts.  OCZ is successfully going after enterprise level and data storage customers, away from 3rd party DRAM business.

Key points that stand out from the conference call –

• +115% year over year revenue growth.
• Revenue this quarter = $73.8 mil.
• +418% year over year SSD revenue growth, now equalling $69.1 Million
• SSD’s were 94% of revenue this quarter vs. 39% in q1 2011.
• 7^th straight quarter of SSD growth.
• 20% GAAP Gross Margins.
• Enterprise and OEM focus.
• Doubling manufacturing capacity for SSD’s.
• Increasing R&D + Hiring Key Individuals.
• Expanding customer base… No longer have +10% or greater customers.
• Successful capital raising in April allows for significant investment in the SSD business without raising debt.

Here’s what we like about the company and stock –

• Recent, successful capital raise at $8.50/share.
• Little debt.
• Approx. 51 million shares outstanding.  (May not represent shares issued for recent capital raise).
• Percent of shares sold short = approx. 28%.
• Company is “almost” profitable with very high revenue growth percentages.
• Gross margins are excellent and increasing.
• Competitive advantage achieved by adding software with hardware for data center use.
• Company growth, in a growth, niche market that has certain hurdles to participation.
• Focused, young management.
• Careful, yet as transparent as possible in the earnings conference call.

We will add OCZ Technology Group to our SMC Watchlist and may purchase the shares soon.

• 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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