– The Stock Market Companion –

15Minute Market Update

September 12, 2012

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

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-Executive Summary-

• Markets continue to show a positive BIAS (“bias” is a underlying directional sentiment) but have NOT yet following through on last week’s powerful up move.  S&P 500 (+0.15%); DOW (+0.06%); NASDAQ (+.16%) 
  

   

• Market Overview = Germany’s high court ruled TODAY that Germany CAN participate in broad European bail-out funding.  Market participants were waiting on this decision.  There was a lot at risk – short term – for the markets.  An opposing ruling that established that Germany COULD NOT participate in such funding would have taken some of the favorable tone out of the markets – at least, short term – due to increase uncertainty of how Europe would resolve broad sovereign debt problems.  We are cautious as we balance the realities of a slowing global economy, uncertainty with the U.S. elections, and efforts in Europe to stabilize their sovereign debt problems.  At Stock Market Companion, we are willing to consider purchasing stocks at this junction in the economy.  We are hunting for new stories of companies with excellent leadership and products / services that have not yet already moved too far away from logical levels for “stops”, which allow us to manage our risk.
  

• 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

• Last Friday’s disappointing “jobs report” (August “Non-Farm” Payroll Report) is causing some market participants to continue to hope that the U.S. Federal Reserve – with its “Employment Mandate” – will find a way to further stimulate the economy and thereby increase asset prices (read: stock prices).  Others, like us, are trying to carefully weigh weak global economic indicators with specific company earnings performance and new trends.  Please click here for the Employment Situation – August 2012 – presented by the U.S. Bureau of Labor.
  

  
  Please observe this measure of total unemployed- buried in the Bureau of Labor’s report – which measures more than 14% (but still an improvement over last year).  This measure is known as “U6”.  This is an eye opener.  There are over 6.5 million Americans who would like to be working, and are not.
  

  
  

• Last week on Wednesday, September 5th we initiated an investment in Facebook shares (FB $20.60) at Stock Market Companion at $18.71/share.  Previously – on August 21st, we posted 6 videos that described the various aspects and reasons for our interest in Facebook at the then current prices and what we were looking for the shares to “do” (rise and demonstrate a daily CLOSE above approx. $20/share) – BEFORE we would invest in the shares.  This key requirement of rising and closing above $20/share was NOT fulfilled, and we therefore remained on the “sidelines” – away from any SMC investment.
  

  The shares aggressively dropped some more, but then found some tentative “footing” at approx. $17.40 and we “saw” that the scale was shifting in favor of an investment as the “short sellers” (short sellers are those who have borrowed the shares and sold them at market prices and hope to re-purchase them at lower prices and capture a profit) – had perhaps “over-reached” their position.  The shares had possibly become “oversold” and ripe for a bounce.  We initiated our investment as mentioned above and reported this in an Intra-Day Alert, as well as in our 15Minute Market Update.
  

  Yesterday we sent an Status Report on our FB Investment along with two additional Successful Investing Videos.  Today, our cumulative gains on our investment are now approx. +10% and the shares have NOW crossed above the $20 threshold requirement that we mentioned above.  We reported yesterday that – as of mid-August – over 18% of the FB shares were sold short and that a powerful “short-squeeze” could unfold if the shares begin moving above $20/share.  (A short squeeze occurs when short sellers begin becoming fearful that they will lose their gains or lose money with the shares INCREASING in price, and begin “buying back” their shares to close their positions and begin forcing the share price aggressively HIGHER due to their own demand for the shares!).
  

   

  For investors not yet invested in Facebook shares, there is still PERHAPS opportunity to purchase the shares between $20 and $20.80, with a stop below yesterday’s lows of $18.85.  Our target on our investment is somewhere between $25 and $30/share, and we may keep some shares “ON” even longer term. 

• Last Thursday, we identified these company stocks that we like – and each moved strongly higher on Friday.  Today they have pulled-back some –
  

  AK Steel (AKS $5.37) – Manufactures flat rolled steel and specialty steel products.  Almost every week over the last few months we have caught wind of the company raising prices on steel.Ford Motor Co.
  

  (F $9.91) – Ford and other domestic car companies demonstrated yesterday that year to date car and truck sales are STRONG.  Pressuring the automaker has been concerns up the road, with a slowing global economy.  Today the shares confirmed their current uptrend.Alcoa (AA $8.76) – Every SMC member knows that we believe that Alcoa is under-valued.  But we have not profited this year from this thinking.  The technical developments in the share price look pretty good here.

  Bank of Ireland (IRE $5.54) – More risk tolerant investors may find this idea interesting, acknowledging the possibly favorable implications of the European Central Banks decision for this destroyed bank.

  Facebook (FB $19.96) – For all the reasons that we have been reporting over the last 3 weeks.

  Bank of America (BAC $8.35) – This is a much better looking chart and conditions for the U.S. bank have improved.

• Last week we adjusted our SMC Trend Table to reflect Thursday’s powerful move, but have only taken the “DOWN” element away from the short term trend.  We need to see a bit more follow-through before we can call a short term UP TREND in place.
  

• 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.