Undecided Market

Market sentiment

Booming M&A news moved the market to the upside, however the pressure of Wednesday's FOMC meeting regarding interest rate tempered the enthusiasm. On Thursday the ECB (European Central Bank) and the BoE (Bank of England) will announce the interest rates for the Euro and the Pound, respectively, adding in to the general anxiety. Will the market grow for much longer? Maybe we have a couple of interesting weeks left, but June will probably settle in a downside tone. We'll wait and see, but my view toward further bull fuel is somewhat reserved.

The DJIA tested the 13,300 level today. The market is still not closed, but I'm not seeing it pass the day's (and all-time for the mater) high. At least not today. However it's still well into positive ground (+36), in relation to this Monday's the opening value. The DJIA had a remarkable winning streak lately, ending on the positive for 26 days out of 29. An 80-year old record winning streak is in sight.

The commodities crude oil and gold are seeing an interesting decoupling as of late. Usually the price evolution of these two commodities is linked, but lately we have seen the crude oil go down and the gold go up. A weak dollar moved gold prices to all time highs, as investors "flee for safety", selling weak dollar and buying gold to hedge their investments.

Stocks I've traded

As you may probably know, the highly anticipated movie "Spiderman 3" hit the cinemas on Friday, earning an impressive box-office: $820 million worldwide. The company that owns the Spiderman franchise (together with X-men or the Incredible Hulk, along with other 5000 characters) is Marvell Enterprises (MVL). An interesting read I've found, explaining MVL's business model and why a high box office won't save the stock made me add it to my portfolio today. I have shorted the stock on $29.90, and bought it back at $29.60, adding in a 30$ profit. I trade in lots of 100 stocks, so a 1c price difference yields me a 1$ profit. For now. A higher buying power would allow me to buy 2,3 or 10 lots at a time, yielding higher profits but also potential higher losses.

Another stock in focus for me today was Agnico Eagle Mines (AEM). Gold price rose today, and so did the Philadelphia Exchange (Phlx) Gold Silver Index ($XAU). I've bought the stock at $36.03 and locked in profits at $36.55.

The biggest gainer I had in my porftolio today was, to my suprise, was Wendy's Restaurants (WEN). Unfortunately I have not followed the stock in much detail today, and made a late entry and early exit, locking in only a 30$ profit. As you can see in the chart, it could have yielded me a $300+ profit, should I have been more careful.

U.S. Stocks expected to rise.

As some of you may know, I'm working as a stock trader for a U.S. based hedge-fund. Having gathered experience to some extent in the field (been at it since December 2006), I will start keeping track of my daily activities and trading ideas in this blog.

All entries will be in English, and I will try to add new ones every weekend (Expect them Sunday evening / early Mondays, just to stay on the safe side).

I will try to cover a large range of topics, from technical analysis to stock picking to trading techniques, news trading and general tips. Bear with me, it will be an interesing ride for both you, the readers and me alike.

To whom are these entries targeted at? Mostly beggining investors / active traders, with an interest in equity markets and especially NYSE (the New York Stock Exchange). People interested in the general U.S. business/ political climate should find interesting info as well. Should you encounter a term or slang you are not familiar with, I encourage you to check the glossary on www.investopedia.com , an excellent site for the beginning investor.

So check this site for updates every Sunday evening / Monday morning or even better, bookmark it! As always I expect your feedback by e-mail to liviupreda@gmail.com.

Week of 7.04-11.04.2007

U.S. Stocks expected to rise.

Macroeconomic state:

The week will start of with bland indicators: Consumer Credit on Monday (est.: 4.2B) and Wholesale Inventories on Tuesday (est. : 0.4%), both expected to deliver good news regarding the overall economic condition.

The real market moving potential however is attributed to the Interest Rate Statement on Wednesday (8:15pm CET) . Expectations that the Federal Reserve (The „Fed”) will leave interest rates unchanged, together with better-than-expected corporate earnings and sizzling M&A (mergers & acquisitions) news are fueling the market growth.

The week will carry on with important economic indicators, such as the U.S. Trade Balance (est. : -60.0B) on Thursday and the PPI (Producer Price Index est .: 0.6%) and Core PPI (PPI excluding Food and Energy items) on Friday.

The Labor Department on Friday, May the 4th said job growth April slowed to 88,000, its weakest level in four years.

Earnings state:

While the bulk of important companies have already released their quarterly earnings reports for Q1 2007, we still have many left: 35 companies of the S&P 500 index are due to report. Among them being Cisco Systems Inc. (CSCO), Viacom Inc. (VIA) and Alcatel-Lucent (ALU).

Two components of the Dow Jones Industrial Average (DJIA) – which includes 30 bellwether stocks from various U.S. industry sectors: American International Group (AIG) and Walt Disney Co. (DIS).

Hot news:

The story that took the markets by storm on Friday, especially the NASDAQ and NYSE traded tech stocks was the rumor (later discarded however) that giant Microsoft Corp. (MSFT) was in talks with Yahoo Inc. (YHOO) regarding a possible takeover. That sent Yahoo stocks soaring under heavy trading volume (almost 246 Million). It would later be revealed, by one of Wall Street Journal’s most respected writers, that a joint-venture between the two would be a more plausible option.

In other news, Uranium futures contracts will begin trading on the NYMEX (NY Mercantile Exchange) starting Monday. This is a big step for uranium miners like Cameco (CCJ) – which saw a sharp rise late Friday this week, and enriched uranium (EU) businesses like Usec Inc. (USU) alike.



What I’m trading:

Last week I have been focusing mainly on apparel retailers. Aeropostale Inc. (ARO), Ann Taylor Stores (ANN), Liz Clairborne Inc. (LIZ) and Jones Apparel Inc. (JNY) all found a spot in my stock ticker and portfolio. This was mainly due to disappointing Q1 earnings reports, especially from LIZ, coupled with discouraging 2007 forecasts and a rise in oil prices. However the downside trend reversed dramatically on Wednesday, when an unexpectedly bullish Factory Orders number (3.1% vs 1.8% est. vs 1.4% prev.) took the market by surprise and generated a strong upward momentum. Thursday and Friday have seen some heavy profit taking, in all sectors more or less, after the Wednesday rally. I’ve been mostly short on these stocks and keeping my bearish view on them.

Other interesting moves could have been seen in the Energy, Gas and Oil sector, with stocks like Anadarko Petroleum (APC) or Peabody Energy Corp. (BTU) seeing heavy gains, followed by a swift plunge in the second half of the day, as a 1.5$ drop in crude oil price per barrel, combined with profit taking after a very successful week for the sector kicked in.

Stocks in focus for Monday will be Fluor (FLR), McKesson (MCK) and American Tower(AMT), all reporting in that day. Main focus for the week will be the Communication/ Telecomm sector. The uranium market is also interesting to keep an eye on, with stocks like Cameco Inc. (CCJ) and Usec Inc. (USU) prone to a nice trending day.

The market is prone to even new record DJIA and S&P 500 highs, however traders and investors alike are expected to be treading water until the Interest Rate Statement on Wednesday, and be reluctant as the market generally is to new highs, especially with S&P 500’s sharp rise in April, not leaving room for much rise into uncharted territory in May. Not to forget the old market adage „Sell in May and go away”, which basically means a slow summer as market players ease their positions on stocks and a sell off / sluggish momentum sets in.

Thank you for reading, please send any feedback you have either in a private message or by e-mail at liviupreda@gmail.com .

Till next week I wish you all the best,

Liviu Preda