June 2010

June 2010

*A wild roller coaster ride eventually took the markets down for poor showing 1^st half of 2010.

*If you think Greece is in bad financial shape, the US is actually in worse

*”Look ma, no hands” with Microsoft’s new Kinect for Xbox 360, or “Look ma, no glasses”, got Nintendo’s 3DS.

Figure 1

The market threw out a couple curve balls this month in the way two failed Follow-thru and two failed Correction signals (Figure 1). These signals came quickly which, in my personal studies, are failure prone. It was market volatility and short term profit taking which made June choppy and unpredictable. There was no sign of long term support from institutional buyers. This speaks to the uncertainty about the market. GLD (SPDR gold trust ETF) continued to be the bright spot of the portfolio this month as it climbed toward a all time record high. Technically, the indices have breached support and should be headed lower; BUT in this market, it could throw another head fake up as it did throughout June.

With all the news focused on Greece and the rest of the PIGS, it’s really the US in worst shape, according to Scotia Capital (Figure 2). The markets have given the US more “wiggle room” to bring in fiscal austerity. But that does not seem to be in Geithner game plan, as stated in a letter during June’s G20 conference.

Figure 2

In response, the G-20 as it writes up their position in a three-page communiqué:

Conclusion: the U.S. still doesn't get it. The rest of the world seems to be facing up to the source of the fiscal problems (other than public unions). The U.S. is in an incredibly huge dilemma. The debt levels of the European Union pale in comparison to those of the U.S. Will the New Normal be imposed on the U.S. by the rest of the world? Where does this end? Disaster or just a modest life and economy for the future by countries living within their means? The second might seem pretty nice if it follows the former!

This year’s E3 Conference may have been one of the best ever with revolutionary product introductions from each of the bigs: MSFT (Microsoft Corp), SNE (Sony Corp), and NTDOY.PK (Nintendo Co LTD ADR). Sony introduced their “Wii” controller, called Move (http://www.youtube.com/watch?v=s9ybHddDMgM). It does improve on the Wii with the addition of a camera to read body movements. The Playstation will also offer 3D gaming with through a software upgrade. Expect Wii and Xbox 360 to follow with their own 3D upgrades. Speaking of 3D, the 3DS handheld from Nintendo was introduced for portable 3D gaming without the glasses! (http://www.youtube.com/watch?v=pWYgM1RGixM&feature=related) . From Microsoft comes Kinect for Xbox 360, a high def 3D camera to detect precise body movements. In other words, your body becomes a controller. Perhaps the best way to understand this is to see this: http://www.youtube.com/watch?v=iH5d35qVirs&feature=related). With these products generating hardware upgrades and new software sales cycles, keep a watch on GME (Gamestop) at about $21-$22. GME (Gamestop) is the Street’s pure play when it comes to gaming, but be aware, as the market continues to throw out curve balls, individual stocks will follow suit.

Going out on a limb, my may be that the most important feature of the AAPL (Apple Corp) iphone 4 is Facetime, or video conferencing. While it technology has been around for over 30 years, it has yet to be easy and convenient. Initially, it will only be available on WiFi, but as Apple makes this viral, it may become the killer app and reason users will upgrade to 4G. They are off to a great start, check out this touching video http://www.viddler.com/explore/engadget/videos/1503/.

May 2010 Report

May 2010

Many are beginning to doubt how much impact $1 Trillion will have on saving Greece and the other PIIGS. The market response to the bailout was a broad sell off of 3.7% on the NASDAQ and 3.9% on the NYSE. This day also signalled the beginning of a market downtrend. Positions in GLD (SPDR gold trust ETF), PSQ (Proshares Inverse QQQ), SH (SPDR Short S&P500), and SEF (Proshares Short Financials) have benefited from the worst May since 1940.

Market Analysis: Downtrend since 5/4 continues

May 4th signaled a correction in the markets and positions were initiated in GLD (SPDR gold trust ETF), PSQ (Proshares Inverse QQQ), SH (SPDR Short S&P500), and SEF (Proshares Short Financials). These shorts have since benefited from the worst May since1940, and have lifted the portfolio to over 5% for the month.  The market has yet to show any signs of strength. May 27 could have marked a turnaround day with the NASDAQ up 3.7% and the NYSE up 3.9%, but this action came on below average volume, a sign that institutions continue to be reluctant to put money in the market. The major indices have been finding support at the 200 day moving average, an inflection point which could either see a continuation lower or a reversal into higher ground.

The Economy: $1 Trillion isn't worth what it used to be' at least for PIIGS

A $1 Trillion isn't worth what it used to be. This is evidenced with the widespread, 3% sell off response to the Eurozone's approval of the Greece bailout. The world is beginning to understand that it might not be enough. Even with the anticipated cuts in Greece, there would seem to be a cultural bias preventing changes to be implemented.  The financial overseers have no real plan to solve the problem and the stop-gaps only put out a small fire.  It very well may be a problem of insolvency rather than liquidity. Today, Greece is only the tip of a very large iceberg. Portugal, Spain, Italy and Ireland together owe $3.9 trillion in short- and medium-term debts, an amount larger than their combined GDP, estimated last year at $3.3 trillion. The problem directly hits US tax payers, as we are "required" to contribute 17% of the IMF's funding, or $48.6 billion to cover the debts of nations who spend more than they make.

A Vaccine for Cancer: Space age medicine finds its way back to Earth
Recently, an episode of Star Trek: Enterprise aired, called "Terra Nova". One of the inhabits of a lost colony of humans was diagnosed with lung cancer, which had spread to her lymphatic system. The good news is that she was cured...in one day! A vaccine was synthesized from her DNA to attack her specific cancer, kind of like a tailor made suit. More good news, this technology has recently been FDA approved. Provenge from DNDN (Dendreon Corp) is the first FDA approved cancer vaccine for prostate cancer. It will not cure cancer, but will prolong life in late stage cancers. The stock popped up 25% on over 3 times normal volume on April 29th and has since fallen back to it's 50 day moving average. Should a market rally resume, this is one to keep on your watchlist.