– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Freeport McMoran	FCX	Sold on 10/25	10/5/2011	+22% Final.
2	Ford Motor Co.	F	Holding	10/5/2011	+18%
3	Alcoa, Inc.	AA	Holding	10/24/2011	+11%
4	US Steel, Inc.	X	Purchased Today	10/28/2011	+11%

– Story-Stock Investing –

Over the last 24 hours we sent out these two SMC Intra-Day Alerts –

This morning =

Dear Subscriber-Friend,

The stock market has advanced a long way, very quickly.  But many stocks have also dropped a long, long way down from their February 17th high’s., despite posting excellent earnings.  Fear of the US economy re-entering a recession combined with repeated failures of European leadership to get a handle on their sovereign debt issues was causing the market real trouble.

With the understanding that this market is NOT going to go straight back up without some healthy “backing and filling”, we have proceeded this morning to purchase shares of US Steel Corporation (Ticker: X $25.50) on its move above $25.20 this morning on its strong, upside reversal pattern that it put in yesterday and the company’s good earnings (but cautious outlook for the 4th quarter) that they reported this week on October 25th.

We would add to our position up to $26.60 and look for ways to purchase the stock on weakness or volatility between $25.20 and $26.60 in the day’s ahead, if that is possible.  Our stop is at $22.40 for now.

Each investor is on their own.  We are simply commenting on our own actions in the market place.  Please see our disclaimer below.

Your – Stock Market Companion

Yesterday afternoon =

Dear Subscriber-Friend,

The markets have exploded higher this morning on very encouraging news out of Europe that European leaders have agreed to a plan to solve their sovereign debt troubles.  Greece has been the poster-child of the difficulties that several European nations face – Their government debt levels are very high, yet they must continue to borrow in order to meet current expenses.  Because of their high debt load and declines in their economies, the bond markets are charging them a big premium to sell their bonds.  For a time, some of the countries have not been able to sell bonds at all or at a very limited amount.

We’ll go into more of the detail in tomorrow’s 15Minute Market Update concerning the solution that has been decided upon.  So far their plan looks O.K., but there are still significant details to work out.  In any case, the current plan removes the immediate FEAR of a Greece default and corresponding unknowns concerning what then would happen to the European financial system.

The removal of this FEAR has caused stock markets around the world today to jump HIGHER in value.

Here are some observations –

• Sellers hit the market hard at the gap up open to take profits on investments made over the past 3 weeks.
• Investors have stepped-up to purchase shares in a wide range of companies today, after the sell-off in the first 1+1/2 hours.
• Some leading stocks like Apple, Inc. have not enjoyed very much participation in today’s rally.  There have been sellers stepping in and taking profits at each intra-day high for Apple, and there have been few new investors stepping up to buy shares.  We think that developments in Thailand and the flood waters there and how this may impact component deliveries is causing hesitation amond institutional investors.
• Basic material stocks – like Alcoa and Freeport McMoran have enjoyed very significant gains today as investors can now focus on the fact that the economy in the US is apparently not currently recessionary and the edge is off the U.S. dollar.
• Companies that have recently reported strong earnings and raised expectations for future earnings, like Caterpillar, Inc.,  have enjoyed big moves today.
• Banks and other financial institutions have participated STRONGLY in today’s rally.  Bank of America looks much better here.

Today may mark a pivotal turn of events for the entire market, much like at the beginning of last year when Quantitative Easing II was announced at the end of August.  We would like to put more capital to work now in the market and will be looking for opportunities to add-more to our Alcoa investment or other basic materials suppliers like U.S. Steel and broaden our investments to include banks and other companies (like Cirrus Semiconductors) which have experienced strong insider purchases recently.  We will also be looking at new trends developing – such as improvements over the current Lasik surgery – where individual companies are perhaps really going to grow. The Make My Trip company in India also has our attention. We also like the shares of companies like Caterpillar and Nike, but do not want to simply blindly purchase the shares today after such a strong up-move.
We have the benefit of having engaged this rally at the earliest possible moment with an appropriate amount of capital and now can look for new ideas, without being rushed.

For those who feel that they must make a purchase today, we like the reversal pattern in US Steel (X).  A move from here (approx. $25) to $30 within a measured period of time is certainly a possibility.  That would be a +20% move alone.  Please see our disclaimer below.
Your – Stock Market Companion

OK.  Among many, many other stocks yesterday, we had our sights on US Steel with it’s strong UPSIDE move yesterday after the day before performing MISERABLY following their earnings announcement.  The stock was priced at $24.77 on October 24th.  The company announced earnings on October 25th in the AM before the markets opened, and the shares fell hard all that day and into Wednesday, landing as low as $21.67/share.  Then yesterday, the shares moved UP strongly with the rest of the market, presenting a high probability, upside reversal pattern off those recent, mid-week lows.  The graphic representation of the price pattern was striking, so we identified it yesterday afternoon to you in our SMC Alert.  The shares were again just below the $25/share multi-week resistance level that the shares had failed to cross on 4 occasions.

This morning, the shares were fluttering around this same level and dropped a bit to $24.50.  By 10:00 am the shares were back at the $25 area, but the background market was not showing any strength.  Independent of the background market, the shares continued to pick-up some interest and began moving to $25.20, where we engaged the stock and immediately created our SMC Intra-Day Alert.   What happened next was simply dramatic as the shares JUMPED to $25.50 and then on to $26.50 and beyond.  Within 1 hour, the shares had galloped up to $27.00.  This afternoon has brought on another approx. $1/share advance in the price – with the stock closing at $27.86.

Shares in US Steel advanced +11.8% today alone.  Our target of $30 that we mentioned in yesterday’s alert is now easily within reach for the stock.   There is no company specific news that we are aware of that moved this stock higher.  In fact, the latest media-level article on the company came out of Pittsburgh and is negative.  Moves like today in US Steel, following a terrible response to positive earnings, demonstrates how the first move or reaction to news by the market is not always indicative of the next overall direction of the shares.  In this case, the favorable news out of Europe AND real, positive earnings at the company of $0.72/share, AND multi-year lows for the shares sure helped to bring about an explosive reversal in the stock price.  On a pull-back to the low $27’s or a lateral consolidation here may be a starting point for share ownership, for investors not yet on board.  Even a purchase at $28, with a stop at $24.90 would be a -11% loss if triggered, and with a possible $35/share target in the shares offers a favorable risk/reward ratio of 3:7 which is reasonable.

The last downtrend leg of the shares of X brought the shares from $46.80 down to $21.40.  A logical 50% retracement of this last “leg” would bring the shares to approx. $34.11.  That would be another +21% move from today’s closing price, and with a stock that can move like US Steel can, it is entirely reasonable (but not guaranteed, of course).

Other stock observations –

Freeport McMoran (FCX $42.82) received a downgrade today.  Downgrades may not have any impact until the surge in buying has run its course.

Netflix (NFLX $84.14) received two downgrades today.  Once is from Oppenheimer, which states something to the effect of “… after painstaking research, analyzing subscriber patterns … etc ” they give the stock a target of $100/share, down from $160 or so.  Another is a target of $50/share.   Nice and clear as mud.  Nonetheless, our “squeeze” idea has played out for those interested in such moves with the stock UP about $3.5/share (+4.4%) from our last comment.  Frankly, we were expecting a bit stronger run up in the shares, once buying started taking place.  That hasn’t happened.  It happened instead over at US Steel.

Apple, Inc. (AAPL $404.95) shares haven’t budged much with the recent recovery in the market.  Volume has diminished in the shares.  That’s not a good sign.  Today, Samsung displaced Apple as the smart phone sales leader.  Here’s an article on the subject from Reuters.

10 year US bond yields are gradually increasing, indicating selling of US Treasuries and an increased appetite for stocks – which we have witnessed over the past weeks.

– Benchmarks “At a Glance” –

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