– The Stock Market Companion –

15Minute Market Update

November 16, 2011

—— Stock Market Investing since the 1980’s ——

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-Executive Summary-

  • Markets closed DOWN – rather sharply as selling increased in the afternoon.  Europe continues to be the epicenter of trouble.  See below.
  • DOW (-1.58%); S&P500 (-1.66%); NASDAQ (-1.73%)
  • Bear market behavior is often represented with buying in the morning, by hopeful investors and SELLING in the afternoon by seasoned investment institutions.
  • Market Overview = Today was another distribution day.  Not good.  This is the 5th one for the SPY (S&P 500 ETF) since the beginning of this rally.  The market is in a confirmed uptrend since the October 4th pivot point that we identified at its inception and profited from. We mentioned on Wednesday that the market has had 4 distribution days since the market pivot bottom on October 4th.  Four such distribution day’s within a defined uptrend, within 3 or 4 weeks would normally mark the end to the rally.  The market currently rests JUST ABOVE the lateral consolidation from August – October.   Click here for today’s SMC S&P 500 (ETF) chart.
  • US super-committee for debt reduction needs to come through.  Timing.  Friends, our government needs to get this one right.
  • We entered an investment yesterday in Gentiva Health (GTIV $5.95) and sent out an SMC Intra-Day Alert.  Please see our detailed rationale + SMC chart below (click for chart).
  • Believe it or not, home builder sentiment hit a 1 + 1/2 year high in November, but the index released today is still in the “basement”.  Anything above zero is an improvement, isn’t it?
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– Stock Market Companion – Current Holdings –

Nr. Co. Ticker Action Entry Date Current Gain (Loss)
1 Gentiva Health GTIV Holding 11/15/2011

GTIV, below $6.20 and above $5.10 we believe is in a buying range.  If the market falls off the planet some time soon due to a credit freeze-up in Europe, GTIV will sink too.  On this as well as all our other ideas, please see our disclaimer below.
 

 

 

 

 

– 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 1,236.91 Index DOWN = -20.90 points
DOW-30 11,905.59 Index DOWN = -190.57 points
NASDAQ 2,639.61 Index DOWN  = -46.59 points

– Market Trends –

Trend

SP-500

DJ-30

NASDAQ
Short Term Down Down Down
Intermediate Flat Flat Flat
Long Term 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) –

SMC SP-500 ETF Daily Chart

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



– Today’s Highlights –

It’s not that we are seeing lots of sellers…yet.

Selling DID accelerate into the close as news spread that U.S. banks may have big trouble if the European financial picture takes a turn for the worse.

After the last round of intense negotiations in Europe concerning Greece’s debt load, which led to an outcome that the markets could understand, complete chaos erupted the next week when the Greek prime minister through the doors open for a nationwide referendum on the negotiated settlement.

Since that day, the markets have simply NOT recovered.

In many cases, earnings are excellent.  Stock values are low.  But there are currently few buyers.  Warren Buffett announced that he has been a buyer of shares of IBM and the stock SOLD-OFF with sellers selling the news.

On October 4th and 5th, we joined with other buyers willing to step-up and make purchases on extreme weakness.  Volume was very strong at that time and our returns were excellent in the weeks following that event.  But the valve of money and institutional interest in the markets has been turned off.  The sidelines are crowded with cash as investors wait-out the current extreme uncertainty regarding Europe and our own U.S. super-committee outcome on debt reduction.

Hopes for a year-end rally are diminishing – for the moment – as the news out of Europe becomes increasingly murky.

 

– Story-Stock Investing –

 

Here is our SMC daily chart of Gentiva Health, Inc (GTIV $5.95).  We purchased shares in this company yesterday.  If you please click on the chart, it will open in a separate tab on your browser.  You can then zoom in and see it much more clearly.

Here are some observations about GTIV that has us very interested in these shares –

  • On November 7-8, the CEO, CFO, 3 vice presidents, and 2 directors purchased a total of approx. 292,000 shares at prices ranging from $3.75 – $4.60  (worth approx. $1.2 million).  (Insider buying after a disastrous 6 months for the company shares)
  • The company still makes money.  It is not a loss-making operation.
  • The company provides home health services and hospice care as well as skilled nursing and therapy services.
  • The company’s presented earnings on November 3rd that showed that for fiscal year 2011, the company will earn between $1.50-1.70/share, on revenues of $1.78-$1.82 billion.  At $6/share, the stock is selling at a price / earnings ratio of approx. 4.0.    There is room for the stock to double or triple on a low p/e of 4.  The company was able to increase revenues +18% year over year.  The stock could also simply sink back down and bump along the bottom until investors get the courage to invest in the market again.  Sentiment can change quickly, as we saw and profited from in October.
  • The shares have declined from  approx. $27/share in April down to $3.13 on October 5th.  That’s an -88% drop in the value of the shares.  At our purchase price of $5.85, the shares are down -78% from that value in April.
  • The decline in shares was precipitated by 2 things – 1. A large acquisition that the company made that brought about significant debt. 2. Uncertainty concerning the final outcome of the U.S. governments reductions in re-imbursement rates for the type of patient care that GTIV provides.
  • The government reductions in re-imbursement rates was apparently much LESS than feared.  The acquisition appears to be much better understood at the moment.
  • When you look at the vertical volume bars at the bottom of the chart, you will see many large, green columns.  These signify accumulation of the shares at these low prices.
  • The push higher in the share price on November 9th, taking the shares back above $5/share was the first STEP in what may be a new Uptrend in the shares.
  • Notice on the 3 consecutive trading days after November 5th, that the shares simply consolidated the large move from November 9th and didn’t give up much, if any ground in price.
  • Then came a downgrade to the company two days ago on November 14th.  The stock sank a bit in the morning, but recovered in the afternoon.  When a company’s shares do NOT give up ground on a downgrade, that is a good sign – particularly on such a beaten down stock.  It say’s “for the moment, there are few sellers”.  Consider this a test that the stock passed with flying colors.  So far so good.
  • Yesterday’s second step higher on high volume represents the confirmation day of the November 9th move higher.  A confirmation day, within 7 to 4 days of the first UP move is an excellent sign of investor interest and validates (for the moment) the current UPtrend that is in its early stages.
  • Notice how nice and tight the price pattern is developing in this stair stepping pattern.  This is the kind of price behavior that we really like as stock investors.
  • We have a very easy to define location to place our protective stop down at around $4.30/share.  If the shares violate the low of the November 9th move higher, we don’t want to be on board the shares.
  • It appears that the shares have been oversold due to the overall weakness in the markets, amplified by points 1 and 2 listed above.



– Benchmarks “At a Glance” –

 

US Dollar

1.3454 USD = 1 Euro

USD / EUR

Dollar = UP strongly

Gold

$1,774.30

Ounce

Gold = Flat

Oil

$101.75

Barrel (West Texas Crude)

Oil = Up Significantly

30 Yr. Fixed Mortgage

4.04%

Percent

Flat

10 Yr. Bond Yield

1.99%

Percent

Flat

1 Yr. CD

1.16

Percent

Flat

–Data Source : Financial Visualizations Inc.

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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.  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.

  • 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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