– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Alcoa, Inc.	AA	Holding	1/3/2012	+4%
2	Dendreon, Inc.	DNDN	Holding	1/11/2012	-1%
3	Mitek, Inc.	MITK	Holding	1/12/2012	+2%
4	EBAY, Inc.	EBAY	Purchased Today	2/1/2012	-1%
5	Cree, Inc.	CREE	Holding	1/18/2012	+10%
6	Apple, Inc.	AAPL	Holding	1/30/2012	+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.)

 

Market	Price (Today’s Close)	Unit of Measure	Today’s Direction
SP-500	1,324.09	Index	UP = +11.68 points
DOW-30	12,716.46	Index	UP  = +83.55 points
NASDAQ	2,848.27	Index	UP  = +34.43 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 –

Broader perspectives are important now.   In 2011, the markets were confronted with –

1. The first significant Arab uprising in 2 generations, with consequences which could have significantly impacted the world economy due to oil supply disruptions.
2. Tsunami and nuclear meltdown in the world’s fourth largest economy = Japan.
3. The end of the U.S. Federal Reserve’s QE II program.
4. Downgrade of the U.S. debt rating to AA+
5. Continuous uncertainty facing the European Monetary Union.
6. Slowing economic growth in Europe
7. Unimpressive economic growth in the USA.

… Yet U.S. equities (stock) markets closed FLAT for the year last year.  Our broader market road map at Stock Market Companion – the S&P 500 ETF (SPY) closed at the end of December 2010 at 125.75 and at the end of December 2011 at 125.50.  Essentially UNCHANGED.   When you consider all of what happened last year – which we listed in points 1-7 (above), and the fact that the broader market closed even for the year, it shows us that investors are WILLING to hold onto their investments AND put money to work when the markets are weak.

2012 has begun with a strong UP thrust in the broader market in January.  The S&P 500 ETF (SPY) is UP approx. 5.5% for the month of January alone.  That’s a very strong gain and is NOT sustainable.  The market is NOT going to go up +60 – 80% this year, but we are expectant that there are some individual stock stories that will emerge that we won’t want to miss!

In the absence of any earth-shaking geo-political (a stand-off with Iran comes to mind) or natural disaster, we need to now give stocks in this market room to breathe and to prove their earnings numbers and – for those which have the numbers and growth catalysts to attract institutional investor interest – to begin to gradually move higher.

At this moment in time, we are seeing more of a tolerance for risk and underlying strength in the equities (stock) markets than we have been since November 2009 – April 2010. (Just wait, now that we have made this bold proclamation, something will blow-up tomorrow!).   We are not saying that the economy is good, we simply see an underlying demand and an appetite for risk that we haven’t seen in a while.  Companies have – to a large degree – right-sized their businesses and made necessary adjustments to the current economy.

 

– S.I.M.P.L.E.  Stock Investingtm –

– (Where each investment begins with a Story and ends with Earnings) –

S.I.M.P.L.E. Stock Investing is built upon these core concepts –

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

 

Today we sent out this Stock Market Companion Intra-Day Alert highlighting our SMC purchase of Ebay, Inc shares (Ebay $32.20)

Dear Subscriber-Friend,

We are careful and opportunistic investors.  We follow a strict investment routine defined by our S.I.M.P.L.E. investing model and therefore we watch the broader market like a hawk for signs of strength as well as deterioration or exhaustion.

Yesterday we trimmed holdings in two stocks that we felt a bit uncomfortable with at the moment – we didn’t like having 8 holdings on the market with the release of somewhat disappointing economic indicators – which we covered in detail yesterday.  Please see your SMC Alert email from yesterday for your review of these points.

Today however is a new day.  The market appears to be shrugging off the immediate implications of the economic indicators released yesterday and pushing higher in its uptrend.  This is fine, but we aren’t going to let the day-to-day gyrations in the market over-influence our activities.  We know that the market has been moving steadily higher from the October 4th – when we sent out our special alert notifying you of a possible key reversal day in the works and when we began to invest heavily in the market – resulting in very strong returns.  We’ve now had 4 months of rally, so we are a bit cautious as to how the market is going to handle this uptrend going forward in the face of weakening near term economic indicators.

Nonetheless, shares of Ebay are pressing HIGHER today out of a nice approx. two week tight consolidation following a gap higher from their recent January 18th quarterly earnings announcment that was simply excellent.  On January 18th, Ebay posted their best quarterly earnings in over 2 years at $0.60/share and +35.5% year over year quarterly earnings expansion*!   Ebay’s earnings and revenue appear to be expanding.

We are particularly interested in Ebay’s story.  The old Ebay story was their presence as the leading ecommerce site for residential and business people trying to sell things on the web using Ebay’s auction format.  The new story involves Ebay’s ownership of Paypal and the idea that Paypal may really have a growth spurt ahead as people begin using their smart phones for retail shopping, connected with their Paypal account AND AVOID using Visa and Mastercard.  Retailers would love to lower their transaction fees associated with Visa and Mastercard … and would certainly embrace Paypal.  We’ll have to see.

We purchased shares of Ebay at $32.37 and we are placing our stop at $29.75 to give this one room to move around some, and places our stop just below the January 18th lows for day – the day Ebay presented these very good earnings.

Please click here for your 5 minute SMC Successful Investing Video that covers useful details about Ebay and how we are viewing Ebay this morning.

Please remember that we are not recommending Ebay as an investment for any individual.  We obviously cannot know the investment suitability and risk tolerance of each member.  Each investor is on their own.  Please see our disclaimer below.

Your – Stock Market Companion

 

– Benchmarks “At a Glance” –

 

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