– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Mitek, Inc.	MITK	Holding	1/12/2012	+31%
2	EBAY, Inc.	EBAY	Holding	2/1/2012	+7%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*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 broader market – as measured by the U.S. S&P 500 –  has moved ABOVE highs posted last July and is now in very close proximity to the May 2, 2011 gap-up highs – which represent both the highs for last year and the highest point for the market since the market began its decent in October of 2007, culminating in the “wash-out” March 2009 lows.

What we have participated in at Stock Market Companion is a robust recovery off the 2009 lows.

At Stock Market Companion, we use the S&P 500 ETF (SPY = SPDRs) because we can readily have volume information across multiple charting platforms – which is helpful for our membership who use excellent,  free, web-based charting platforms like Bigcharts.com, Financial Visualizations, and others.  Volume information is essential, because volume puts individual price movement into perspective and allows us to see the degree of institutional participation at key support and resistance areas on the chart.

The broader market has advanced steadily off the October 4, 2011 lows and is now +27.5% higher as measured by the lows of 107.43 tagged on October 4th and yesterday’s intra-day highs of 137.05.  The market has been strong – particularly after renewed buying interest emerged on December 20th.

Since our special email alert to members on the evening of October 4th, notifying of a possibly strong and positive reversal for the markets in the works and concrete individual stock investment ideas for participating in the rally, we have identified these clear reasons for the strength in the markets –

• U.S. corporate earnings are overall strong
• The markets were valuing equities (stocks) at a strong discount to average prices (based on price/earnings)
• The U.S. economy is continuing to expand, although at very slow pace.  The closest measures that we have – which we can use as forward-looking indicators – have been showing expansion.
• A key forward indicator – for example – is the trend in weekly new unemployment claims (this data is released each Thursday for the previous week).  These absolute claim numbers have been dropping more or less steadily over the last 3 months.
  
• New jobs created – as reported in the U.S. Department of Labor Non-Farm Payrolls have been increasing.
• The Federal Reserve has taken unusual steps at increasing the transparency of their monetary policy and have declared low interest rates as far as into 2014.  While this is a validation of our economy not growing very rapidly, this type of monetary stimulus is favorable for equities (stock) appreciation.
• There has been a concerted effort by European, Asian, and North American central banks to increase liquidity in Europe in the face of almost certain default by Greece.  These measures have reduced (but not eliminated, by any means) the fears – and more importantly, the affects – that a default in Greece could have on the financial markets worldwide.  Each month buys a little time for banks in Europe to participate in unusual central bank programs designed to help them raise cash.  Many of the banks that would have needed to access the financial markets for funds in 2012 have “filled their tanks” at central bank counters and not in the traditional financial markets.
• The markets themselves were so resilient last year in the face of calamities presented by the Arab Uprising, earthquake and subsequent nuclear meltdown in Japan, and the mark-down in the quality of U.S. government bonds to AA+, that many (like us) were anticipating a move higher in the markets.

The markets however are not static as market participants continually looking forward for signs of change ahead.  Over the last two weeks there has been an increase in uncertainty related to Iran as the developed world attempts to confront its nuclear ambitions with certain embargoes.   Oil prices have surged approx. 10% in a short period of time.  Each increase in the price of oil puts pressure on gross domestic product growth related to consumption as discretionary money that would have been used for other purchases are directed to cover increases in fuel costs at the gasoline pump.

Today we also had the measures out of China that indicated a continuation in the contraction cycle in manufacturing.  This means that the developed world (particularly Europe) is ordering less from China – the world’s manufacturing center.  Here’s a useful article from Bloomberg on China’s manufacturing numbers presented by HSBC.

We also had measures on existing home sales in the U.S. for January that were a  disappointment.   While existing home sales INCREASED in January, the disappointment lay in the DOWNWARD revision in December’s numbers.  Here are some useful facts –

• Existing home sales DID increase again in January (Good)
• Unsold, listed homes for sale (what we call “inventory”) decreased again AND is 20.6% less than last year (Very Good)
• Inventory represents approx. 6.1 month supply.  That’s good.  As inventory drops, new homes will need to be built and employment in the housing trades will increase.
• 30 year, fixed rate mortgage rate was a record low of 3.92% in January (Great for home buyers)
• Distressed home sales = 35% of all sales in January  (22% foreclosures; 13 % short sales)
• 33% of National Association Realtor members experienced contract failures (due mostly to appraisals coming in below the negotiated price).

Here’s the housing report, direct from the National Association of Realtor’s.

– S.I.M.P.L.E. Stock Investing Method tm –

– (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 = Please click on this SMC Successful Investing Video to see what the broader market is telling us and a close look at Cell Therapeutics and what we are looking for there.  Here is the video link.

From Friday –

Today in our Executive Summary, we mentioned that Seattle-based, Cell Therapeutics (CTIC $1.35)  jumped approx. +25% in value as the European Advisory Council for their FDA-like organization recommended the CTIC drug for patients with late stage Non-Hodgkin’s Lymphoma = a terrible and aggressive cancer.

Let’s quickly apply our S.I.M.P.L.E. investing model to this one –  Please click on these three – SHORT – 5 minute Successful Investing Video segments for this useful analysis and to see what we are looking for next!

• CTIC Video I
• CTIC Video II
• CTIC Video III

– Benchmarks “At a Glance” –