– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Gentiva Health	GTIV	Holding	11/15/2011	+25%
2	Boeing, Co.	BA	Holding	12/22/2011	-0.5%
3	DEX-One Corp.	DEXO	Holding	12/29/2011	+35%
4	Alcoa, Inc.	AA	Holding	1/3/2012	+/-0%

– 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	1,277.81	Index	Flat = -3.25 points
DOW-30	12,359.92	Index	Down = -55.78 points
NASDAQ	2,674.22	Index	Flat = +4.36 points

 

– Market Trends –

 

Trend	SP-500	DJ-30	NASDAQ
Short Term	Flat / UP	Flat / UP	Flat / UP
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 see a bigger, easy to read chart on a separate browser tab window).

 

– Today’s Highlights –

The number 1 highlight today – separate from individual stock stories – is the IMPROVEMENT in U.S. Non-Farm Payrolls reported today for December 2011.

Please click here for this important U.S. Department of Labor Press Release today regarding labor. It is a good read and provides a wealth of information.

Here’s what is important for us as investors from this Non-Farm Payroll Report –

You can see on the left chart on the front page of the above mentioned press release that the unemployment rate is trending DOWN.  This is very good.  Sure, some of this is statistics “hocus pocus”, but the TREND IS DOWN in unemployment.  This is one of the major reasons why the stock market is moving HIGHER over the last 3 weeks = hope for / and achieved improvements in the overall employment picture.

Does this mean that times aren’t terribly hard for many Americans who can’t find work?  No.   Does this mean that the quality of jobs offered to Americans is improving?  No.  For equity investors (stock investors) this chart says that the employment situation is IMPROVING and with these improvements will come an improvement in discretionary income, which will bolster our consumption based economy.

When the employment situation is sloping in the opposite direction than it is now, meaning that the employment situation is looking grim and perhaps will be worse in 6 months, stocks have a lot of head-wind and won’t go very far from a broad perspective.  Of course there are almost always some individual stocks that may be of interest or sudden opportunities, but overall the markets struggle hard in an environment that is shedding jobs and the turning point is somewhere in the distance, up ahead.

So, if you are wondering why stocks are going up right now, click on the above US Department of Labor link and look at the left hand chart on the front page, see the declining unemployment rate AND –

1. Remember that corporate earnings are also very strong right now, but stock prices have been held back for a year due to all kinds of reasons.
2. Our economy is not in a recession (Europe is)
3. There are few alternatives than stocks where you can possibly grow your money.

 

 

– Story-Stock Investing –

 

Let’s start with Dex-One (DEXO) Corporation.  We are UP approx. +35% on this one in a little more than a week’s time.  We sent out this SMC Intra-Day Alert today about DEXO –

 

Dear Subscriber-Friend,

SMC Holding Dex-One Corporation (Ticker: DEXO $2.45) has moved very strongly HIGHER since our purchase on December 29th.  Our published entry is $1.667/share.  At this moment now on January 6th, 1/2 hour into today’s market, the shares are priced at $2.41/share.  That’s a +44% gain in a little over a week.  Why are the shares bolting so strongly higher?

Because –

1. The company revealed in November that their projected free cash flow in 2012 is going to be very strong.
2. They have worked hard to clean up their balance sheet.
3. New management since 2010 is getting their business plan into gear.  This always takes time.
4. Investors are encouraged that the debt that the company carries is not so heavy, when free cash flow is strong.
5. The company appears able to transition from a print ad company to a digital ad company, WITHOUT going through bankruptcy first.
6. Investors are seeing early signs of very strong share accumulation in a beaten down company, thought to be headed for bankruptcy and do not want to miss a possibly very strong recovery.

We will explain more about the above items in you SMC 15Minute Market Update today.

In 2009 and 2010, it was wise for investors to allow oversold stocks that were recovering lots of room to move higher.  In other words, quickly taking sudden, strong profits and moving stops in close was a mistake at that time.  Consider that Avis/Budget Rental car company (Ticker: CAR) was selling for approx. $1/share in 2009 and returned to approx. $14/share in 2010.  A modest $5k investment grew to $70,000 during that time.  This was all due to the financial crisis and uncertainty if travel levels would remain decent and if companies could access capital to continue to operate efficiently.  Some could others couldn’t.  It was wise to be able to differentiate this early – which we did with Alcoa, Ford Motor Co. and YRC Worldwide +…  We made a lot of money in 2009 and 2010.  Our published returns for 2010 alone were over +40%.  To set appropriate expectations, we tell folks that those returns were way out of the ordinary and may never appear again.

In 2011, it was often a mistake NOT to take profits quickly.  We learned this the hard way on several occasions last year.  SMC subscribers who took their profits quickly on our ideas and who did NOT wait for a signal for us to sell our shares did very well last year. In many cases we were handed small returns and some losses. (Our overall SMC returns last year on published entries and exits = +6%)

It’s now early 2012, and at SMC we have prudently invested in this possibly deeply oversold Dexo-Corporation. Here’s what SMC is doing –

1. Anticipating that this stock is going to go HIGHER still, with fits and starts.  In our minds-eye we have the CROX daily chart as a reference point.
2. Advancing our stop to approx. $1.77 to give this stock lots of room to breathe.

The most important point is our overall expectation related to the story of the turn around nature of this company and the understanding that the share price was very recently pricing in BANKRUPTCY.

A lot of companies have been unsuccessful in transition from print to the digital world.  Look at the recent news about pending bankruptcy at Eastman Kodak (EK), and the horrible decade+ long destruction of shareholder value at EK.  Those EK shareholders who did not know how to read stock charts and did not understand the nature of the quarterly news that EK was putting out, and who were looking backwards at EK’s strengths in the 1960’s – 1980’s, and in denial of how the global digital world was changing have lost fortunes.  Yes, family and mutual fund fortunes have been lost related to EK.

As recent as 2001, EK shares sold for $50/share.  As recent as 2005, the shares sold for $35/share.  Today you can buy and sell them all day long for 39 cents/share.  We cut out a Businessweek short paragraph early last year that mentioned that a famous fund company who had purchased boat loads of shares of EK at $28 was finally selling their shares in the low single digits.  Today, they can take some bitter consolation that they bit the bullet when there was at least some value left in the shares.

We DO NOT know if Dex-One Corporation is out of the woods yet.  Yesterday’s move above $2/share on comparatively very high volume for the shares is a good sign.  We are willing to give this one room to wiggle and bounce around as it attempts to move higher.  We hope that we are not making the same mistake that we made in 2011 with stocks like Bank of America.  We will know soon enough.

Each investor is on their own.  We are simply communicating our position in the market place.  For more details, please see our disclaimer below.

Your – Stock Market Companion

We want to explain more about DEXO, but we will do so another time.

We want to give you a more in-depth understanding of our investment in Dex-One Corporation and have made this video.  If you click on the “Play” icon and then immediately right click on the chart and select “Show All”, you should see a nice, clear  screen image of our chart* and be able to listen to our short SMC info-presentation.  Be sure to turn on your computer speakers and adjust the volume to make it comfortable.  You can use your right-click commands to replay or end the playing and move on.

*Chart courtesy of Worden Brothers.  Screen capture software courtesy of TechSmith.

– Benchmarks “At a Glance” –

 

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