– The Stock Market Companion –

15Minute Market Update

September 4, 2012

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

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-Executive Summary-

• Markets were weak this morning, but recovered SOME into the close…and were DIVERGENT  S&P 500 (-.12%); DOW (-.42%); NASDAQ (+.26%)  (“Divergent” in this case means that the major market components in the US behaved “out-of-step” with one another.  The NASDAQ closed POSITIVE, the S&P 500 FLAT, and the DOW closed NEGATIVE).
  

   

• Market Overview = An intermediate TOP on the market is “IN’ until further notice.  The date of this top is 8/21/2012.  This means that the broader U.S. market is in a lateral consolidation – or – in the early phases of a defined DOWNTREND .  While recent announcements by the U.S. Federal Reserve that they are considering possible significant stimulus TRUMPS classic technical analysis (perhaps momentarily), the Gap-UP DOWNSIDE Reversal in the market on 8/21/2012 stands-out like a RED FLAG.  We have to wait and see what the market is going to do.  All eyes are on the FED.  Please see below.  At Stock Market Companion, we will position ourselves to capitalize on predictable, market opportunities related to the Federal Reserve’s plans.

• Please click here to view today’s Stock Market Companion Daily Chart of the S&P 500 ETF (SPY) – Our Roadmap for Successfully Investing in the U.S. Domestic Stock Markets

• The BIG NEWS last week on Friday was Federal Reserve Chairman Ben Bernanke’s speech in Jackson Hole, Wyoming.  In summary, he spoke about the absolute significance of our weak labor market and the Federal Reserve’s commitment to improve it, through traditional and non-traditional monetary policy efforts.  He acknowledged the importance of the decisions made so far by the Federal Reserve since 2009, but also mentioned that the costs of non-traditional monetary policy – while difficult to apply and measure – must be weighed very carefully BEFORE making any decisions.  He also made clear the limits of monetary policy – that it CANNOT offset the lack of broader and more balance economic policies, or offset the fiscal and financial risks that our country faces. Mr. Bernanke did not commit to any further quantitative easing, but DID emphasize the importance of improving our stagnant labor market.   

  Here is a link directly to Mr. Bernanke’s speech today, at the U.S. Federal Reserve Website.
  

   

   

• We have increased our coverage of Facebook (FB $18.05) recently, as the shares have dropped precipitously from IPO high’s of $45/share, down into the $17/share range today.  Pressure is “ON” lately – largely due to concerns about the LARGE number of shares that become available for sale as “Lock-Out” periods expire.  (Individuals who were able to purchase or who were granted shares of Facebook before the Initial Public Offering, must wait until lock out periods expire, before they can sell their shares on the open market).  Articles like this are NOT helping the share price either… (USA Today)
  

  On 8/20 the share price looked primed for an UPSIDE reversal, and a close in the daily share price above $20/share would have – from a technical trading standpoint – confirmed the reversal and high probability of an increase in share value.  Several brokerages have recently given FB shares price targets of approx. $27/share.  Continued concerns, however, of large blocks of shares becoming available for sale and being liquidated by those shareholders are putting STEADY DOWNWARD PRESSURE on the FB shares.

  At Stock Market Companion, we think that we are getting into the realm of the irrational now with these shares, and this MAY be an unusual buying opportunity for FB shares.  For those investors interested in this type of investment, it may prove to be wise to begin building positions in FB shares here in the mid-to-high teens.

  On 8/21, we made 6 short Successful Investing Videos – which give what we hope is a good perspective on this kind of investment.  We will be watching carefully this week for more signs of “buying” in the shares.

  Please click on the Summary Video (Video #6), below.

  Facebook Successful Investing Video #6 (Summary Video)

  From last week… “The shares of Facebook (FB $19.15) look a little less agreeable.  Over the last week or so, the action in Facebook shares has demonstrated characteristics of a GAP-DOWN UPSIDE reversal, after losing 57% of their value since the MAY IPO (Initial Public Offering).  While the market was pressing south, the shares of Facebook (FB  $19.43) have been showing some modest strength.  Buying FB at less than half the price of it’s recent May IPO price of $42.50 is possibly a strong idea.  A move in the share price ABOVE $20/share would get us officially “in” for Stock Market Companion.”

  Again… from last week… “Our “observation” status and willingness to WAIT for a push above $20/share, before entry was validated today.”  Please click here for a Successful Investing Video reviewing today’s action in Facebook shares.

   

• There is a REASON why the FED is considering more stimulus.   We all know that the FED is focused on their employment mandate, which means that stubborn HIGH unemployment in the U.S. is causing the FED to consider action.  But additionally, there are very dark clouds on the horizon… in August, Japan announced a 25% drop in exports to Europe!  That’s a massive measure of weakness.  Please see this summary article for more details. (Reuters)  This is the worst trade deficit for Japan for any July since 1979.
  
• At Stock Market Companion, we remain focused on our S.I.M.P.L.E. Stock investments that offer us a clear “story” which includes expanding earnings and a catalyst for change that we can understand.  This year, the “pickings” have been pretty thin – but we have been successful identifying eBay, Mitek, Apple, 3-D Systems, Arena Pharma, Hovnanian this year – which have moved very significantly – although some for only a brief period of time. We have also made mistakes – particularly in the basic materials sector with Alcoa, and in the manufacturing sector with Ford.  Active trading without a clear understanding of catalyst and expanding earnings is a failed proposition.