– Stock Market Companion – Current Holdings –

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

(AS of 15:00 EST on Wednesday, December 7, 2011)

Market	Price (Today’s Close)	Unit of Measure	Today’s Direction
SP-500	1,211.82	Index	Down = -13.91 points
DOW-30	11,823.48	Index	Down = -131.46 points
NASDAQ	2,539.31	Index	Down = -39.96 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 –

Fear in the equities and financial markets is increasing today.  Here’s a short list of what market participants are afraid of –

• Total collapse of the European financial system involving with the euro.
• Further downgrades of European sovereign debt – Today the concern was that France was going to be downgraded.
• Austerity measures required to improve European sovereign nation balance sheets and lower their borrowing costs may cause a severe recession in 2012 and beyond.
• Inability of Europe to solve its problems on its own.
• Depth of recession in 2012.
• Diminishing corporate profits in 2012 as global economy cools further.

When fear like this begins to emerge, what we see is an immediate move into U.S. dollars (cash) – functioning as a world currency – from riskier investments involving equities of all kinds.  As the U.S. dollar rises strongly in value, the price of gold and other U.S. dollar denominated commodities fall.  Today the price of gold fell precipitously (-5.59%) or the equivalent of $93/once was shed in today’s trading alone.  The price of crude oil also fell -5% today or approx. -$5/barrel.

During these kinds of pullbacks, the best thing as an equities investor to do is to –

• Have already dramatically reduced equities exposure as we did on November 9th, after the Greece fiasco on October 31st and increasing uncertainty surrounding Italy’s solvency / cost of borrowing.
• Continue building a watchlist of excellent companies with very good earnings and growth catalysts ahead (notice that we have begun focusing on Boeing and Nike – which are large cap growth stories, as well as small-cap stories like Mitek, Dex One, and others).
• Observe how your watchlist stocks are performing relative to the overall market.  Some questions to ask yourself about the stocks that you like is –
  • Are they falling hard with the overall market, or are they simply falling a little, on low volume?
  • Are you seeing subtle signs of accumulation at key support areas like the 50 and 200 day moving averages?
  • What are some previous lows that represent key support and how are the stocks performing when they get to these areas?
  • Are they quietly holding up in a narrow range of congestion (like Boeing or Gentiva are)

What is keeping the markets from absolutely tanking so far on this dire news that we are seeing regarding Europe is –

• The excellent quality of earnings across the board at U.S. corporations.
• Coordinated efforts led by the U.S. Federal Reserve to make U.S. dollars available to European financial institutions.

A shift however could begin to take place where large market participants begin to re-assess earnings in light of a global recession.

We are seeing this type of down-shifting behavior in the steady bleeding (stock price weakness) of good U.S. company stocks like Alcoa (AA $8.94) and Ford Motor Co. (F $10.15).

Here are two news pieces worthy of your time –

• China begins to beef-up their own sovereign funds.
• Germany and Europe … trouble brewing.

– Story-Stock Investing –

Market participants are removing their money from the market.  We did so over a month ago now, on November 9th.  O.K.  It feels like the market needs to really make a move down to shake out some lose hands and start fresh – like it did on October 4th.  But those October 4th lows are yet a long way away.

Consider that the S&P 500 ETF (SPY) October lows of 107.43.  Today the SPY closed at 121.74 on medium volume.  The October lows are still a -11% move away from today’s close.  That’s a long way, and shows you how robust the rally was from the October 4th lows through to the October 27th highs.  That was a +20% move in the SPY over a little more than 3 weeks!

What we have is –

• The broader market, represented by the S&P 500 – moving back down into its lateral range – defined since early August.
• Market leaders like – Apple, Inc.; IBM; Boeing, Nike – all are pulling back from highs.
• Raw and processed material stocks like Freeport McMoran, U.S. Steel, Alcoa … moving lower.
• Consumer discretionary stocks like Ford, moving lower.
• U.S. financial stocks going nowhere, beside inching down from already terribly low levels.

While we are in a holding pattern due to the terrible condition of the background market, let’s look a little closer at Boeing’s (BA $69.94) SMC Monthly Chart.  We’ve posted this chart below.  Please click on it to expand it.  It will launch in a separate browser tab and it will be easy to read our notes.

In summary about Boeing –

• The price today of approx. $70 is the same price for the stock from over 11 years ago!
• The stock did make a +330% move from 2003 lows to 2007 highs = Validating our SMC understanding of correct stock market investing.
• The stock was subject to the overall moves of the market and did not make its strong run until the market found its bottom in 2003.

– Benchmarks “At a Glance” –

 

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