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November 1, 2010

Market Outlook - Closer to the Meltdown, Here’s What it Will Take

Filed under: — MicroCapPress Editor @ 12:27 am

Well, technically, it was a winning week - the S&P 500 gained 0.18 points (0.001%) over the past five trading days. While a gain is a gain is a gain, it’s clear there’s something amiss here. Perhaps it’s just a holding pattern for the election. Or, perhaps the tank really is out of gas.

Visually, the clues are mounting up. We already have a bearish MACD cross, and we’ve seen several high-volume selloffs (relative to the buying daily buying volume) over the last two weeks. And even with just a look at the S&P’s daily bars, we’ve obviously eased up on pushing the upper Bollinger band higher. Moreover, the 20-day moving average line (blue) at 1171 is getting more and more within striking distance as a support line.

That being said, the CBOE Volatility Index, or VIX, is the next big clue as to the market’s true direction. It has inched above the 20-day moving average line, though it’s strangely been finding a ceiling at a former floor…. at 21.50; former support lines that become ceilings tend to be very, very tough ceilings to crack. Ergo, when and if 21.50 is broken as resistance, that should pretty much jump-start the market’s short-term demise.

Such a move would likely coincide with a move under the SPX’s 20-day moving average line, so we have a lot of things to look for in the way of pullback warnings.

Until it happens, assume nothing. The midterm voting results may buy another week for the bulls; it may even spur another round of this already-overdone rally.

Register for the free Micro Cap Press newsletter today, and add this kind of analysis to your trading arsenal tomorrow. 

Sector Race Gets Up-Ended, While Style/Cap Race Lead Widens

Filed under: — MicroCapPress Editor @ 12:20 am

It was quite a change of fortune last week on the sector front. Gold stocks, which had been hugging the bottom for a few weeks, made their way to the top of the pile over the past five sessions. As tempting as it would be to jump on the hot spot that’s got such a great track record anyway, you should know the reasons gold stocks had done so well up until about a month ago (the U.S. dollar and inflation worries, mostly) have NOT rematerialized. Last week’s pop was more hype than fundamentals.

On the other end of the spectrum were transportation stocks, losing -1.13%….. another major reversal of fortune.

Sector Rank

All that being said, the most reliable bull trends are playing out in the basic materials, consumer discretionary, and consumer staples sectors. That wasn’t clear with last week’s numbers alone, but we’re seeing that shape up for the last three weeks or so on the sector comparison chart.

Sector Comparison

On the market cap and style side, size didn’t seem to matter much last week, but style has continued to make a stunning difference in terms of results. Mid caps do have a decisive edge in the bigger picture, while small caps seem to falling by the wayside now.
Style/Cap Rank

That being said, the growth/value contest is no contest as at all. It hasn’t been in a long, long time. You can somewhat feel this on the ranking table above, but the actual percentage comparison below really drives the point home….. growth is whipping value.

And again, here we can see the incredible strength of mid caps, and the lagging (relative) nature of small caps right now.
Style/Cap Comparison

Subscribe to the free Micro Cap Press newsletter today, and start staying abreast of these trends today. You’re either leading the charge, or chasing it. MCP readers lead it. 

Earnings So Far…Utilities and Industrials Rock, Plus Earnings Calendar

Filed under: — MicroCapPress Editor @ 12:06 am

We’re about halfway through earnings season, and so far so good. About 75% of reporting companies have topped earnings estimates, while 84% have beat last year’s operating earnings figures.

The most earnings ‘beat’ successes have come - ironically - from the utilities sector, which was supposed to be a poor performer for Q3. The consumer discretionary sector and industrials sector have easily topped estimates as well.

On the weak end of the earnings scale so far has been energy stocks; less than half have beat earnings estimates, while ‘only’ 72% have topped year-over-year results for the third quarter (which is actually on the low side of the scale). Take a look at the scoreboard as of the 26th of October, with about 40% of companies reporting.
Earnings ‘Beats’ by Sector

Here are the major earnings unveilings slated for this week.

Earnings Calendar

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October 31, 2010

Two Weeks’ Worth of Economic Data, in Less Than 500 Words and Three Pictures

Filed under: — MicroCapPress Editor @ 11:31 pm

Real estate data dominated last week’s economic updates, and overall, things were positive on that front. Existing homes sold at an annual rate of 4.53 million… much better than expected, and much better than last month’s sales. New home sales were up to an annual rate of 307K. Home prices went up too, anywhere from 0.5% to 1.7% (depending on the yardstick).

Real Estate Report Card

On the confidence front, the Conference Board’s measure went up to 50.2 (+1.7) for October, while the Michigan Sentiment Index sank to 67.7 (-0.2).

Consumer Confidence, vs. S&P 500


And on the employment front, continuing claims as well as new claims both fell to near new multi-year lows of 4.356M and 434K, respectively.

While the encouraging unemployment claims levels were well-touted, the media didn’t really give enough credit where it was due. The chart below might do that job, however. Though both were technically still in a downtrend from last year’s peaks, the progress had been stagnant for weeks. While there are still too many newcomers and returners to the job market to create real net growth in payrolls, the new claims level is indeed working its way towards respectability. Take a look.

New/Initial Unemployment Claims Versus the S&P 500

Here’s all the data for last week.

Economic Calendar, Last Week

The coming week will be even busier than last week. Personal spending and personal incomes, along with construction spending, will be unveiled on Monday, letting us know just how confident consumers are.

On Wednesday, look for a decent (+1.7%) improvement in factory orders to offset the -0.8% dip in last month’s durable orders (ex-transport…. orders were up 3.2% with transportation in the mix). That said, we’ll get more detailed and timelier reports on car sales with Wednesday’s October-auto-sales figures.

Friday will be a big day as well, mostly stemming from updates on the unemployment battle. We’re looking for (net) private payroll additions of 60K - pretty much in line with last month’s 64K - though that won’t likely be enough to push the unemployment rate any lower than last month’s 9.6%. The average workweek and hourly earnings should also be flat.

Also on Friday, pending home sales for September are expected to be up by 2.5%, which is still positive but not as strong as the prior month’s growth of 4.3%. Yet, consumer credit is on pace for yet another contraction….. this one by -$4.0B.

Economic Calendar, This Week

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October 24, 2010

Economic Reality in Less Than 500 Words, Plus an Earnings Calendar

Filed under: — MicroCapPress Editor @ 10:47 pm

If we had to grade the economy based on last week’s news, we’d have to give it a C-.

Industrial production and capacity utilization both slipped. It wasn’t by a lot, and certainly doesn’t change the overall trend direction of that data. All big trends start as small trends though. That said, this set of data dies NOT yet merit a sounding of the alarm bell.

Nor does the building permit number; it fell from 571K to 539K in September, despite the increase in housing starts, from 608K to 610K. As we’ve mentioned before, this is the time of the year that those numbers start to sink anyway. The longer-term (multi-year) trend is still showing net improvement.

As for unemployment claims, both numbers fell, by a little. That continues to be tepidly good news, though each has been in a very mild downtrend for months anyway. Until new claims fall - and stay - under the 440K level (versus last week’s 452K), investors are apt to take even good news on this front with a grain of salt. Don’t be fooled though… there is a light at the end of this tunnel.

Here’s the whole data set.

Last Week’s Economic Numbers

As for the coming week, more is in store right off the bat, particularly for the real estate market.

Existing home sales for last month will be unveiled on Monday; look for a slight increase to 4.25 million. They should also have sold for a little higher price, according to the Case-Shiller Index - it’s expected to be up by 2.0% (versus the 3.2% increase in the prior months. The FHFA Home Price index will somewhat verify the Case-Shiller number on Wednesday, though keep in mind the FHFA price index is looking at August’s data. New home sales will be announced on Wednesday; the pros are looking for a slight improvement, to 295K. Mortgage application numbers will also be unveiled on Wednesday. Hopefully it will be stronger than last month’s 10.5% decline.

Needless to say, it’s going to be a wild week for real estate watchers.

At the same time, it will be an important week on the confidence front. The Conference Board’s consumer confidence figure will be out on Tuesday, and is currently expected to be slightly higher than last month’s tumble to 48.5. The Michigan Sentiment Index will follow that on Friday, which is expected to show an even more tepid improvement, to 68.0.

A  few other data nuggets will be posted as well, as seen above.

Earnings Calendar

Dizzy yet? Hold onto your hats, because this week’s earnings announcements are even more numerous than last week’s. After this week though, it should be easier to keep tabs on them all (though not leaps and bounds easier yet). Here’s what’s coming this week:

Earnings Calendar

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S&P 500’s Upsides and Downsides - In the Balance

Filed under: — MicroCapPress Editor @ 10:36 pm

One thing is undeniable - the bulls’ momentum. It’s what you can’t see under the surface that’s so troubling. Let’s just go through the pros and cons we’re seeing for the SPX, one at a time.

What’s Bullish:

  1. Remember the floor at 21.50 we mentioned the VIX needed to break under for the bulls to get traction? Yeah, well, not only has the VIX moved under it, it tested that floor as a ceiling last week, and was pushed down again.
  2. Momentum; seven winning weeks in the last eight. Enough said.
  3. This is the time of year when stocks tend to take off anyway, whether they’re “worth it” or not is largely irrelevant.

What’s Bearish:

  1. Despite the advance, not only has the bullish volume never been all that strong, it’s actually getting weaker.
  2. We’re now up 13.8% from the early September low. That’s not an unheard-of uninterrupted run, but it’s definitely up there. As such, stocks are well overbought and ripe for a pullback.
  3. A MACD crossunder. The fact that this one took shape at such an elevated level makes the risk that much greater.

As they say, the trend is your friend….. until it isn’t. As unbelievable as it may seem, the right move here is to side with the trend until it’s clear the bears are taking over. That should be as simple as a move under the 20-day moving average line, currently at 1162. The VIX getting above 21.50 will be an ancillary clue.

Bear in mind these are all daily chart perspectives though. The view changes when you zoom out to a weekly chart.

S&P 500

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Last Week’s Sector Performance: What Was Hot is Now Cold, & Vice Versa

Filed under: — MicroCapPress Editor @ 10:29 pm

From worst to best in one week flat. That’s the financial sector right now… on top of the pile this week after finding itself at the bottom last week. Given the group’s weak performance over the last several months though, this revival could last quite a while longer - especially now that we’re seeing some key earnings beats. And just for the record, the financial sector is also expected to show the biggest year-over-year improvement in income.

At the other end of the scale you’ll find gold… for the second week in a row. Is it a dollar-based move? Mostly, though even if it wasn’t, the fact that these stocks are the year-to-date winners still leaves them amazingly vulnerable right now.

As for other sectors, we’re seeing more rotation than not right now, meaning most of what was hot now isn’t, and vice versa.

Sector Rank, One Week

And just for some added perspective, here’s the percentage change comparison since the April 23rd peak. It’s here we can a see a few other important facts:

  • The consumer staples group is still churning along, slow and steady, but reliably.
  • Technology is also still walking upward at a reliable pace, though faster than the staples’ group (it had a deeper hole to climb out of).
  • Telecom is alarmingly overbought. It hasn’t been a problem yet, but it looms. (Bear in mind that the small caps and the wireless names in the bunch aren’t suffering the same problem as the large caps are, which make up the bulk of the performance you see here.)

Percent Change, since 4/23
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October 19, 2010

Breadth and Depth Trends Point the Market Lower

Filed under: — MicroCapPress Editor @ 10:49 pm

With all eyes looking at the broad market rather than individual stock trading ideas on Tuesday, we may as well do the same and focus on a chart worth sharing that may convince you Tuesday’s pullback isn’t just a little volatility - it’s a glimpse of the undertow. First things first though…. a little background on what you’re about to look at.

Though it’s difficult to quantify, the market generally drops hints as to its next direction; the hints usually show up on breadth (advancers versus decliners) and depth (volume) charts, IF you know what to look for. Fortunately, the chart of the S&P 500 and the NYSE’s breadth and depth data pretty well sums up the premise of what we want to know. Here’s what you’ll find, from top to bottom….

  • S&P 500 Index
  • NYSE Advancers Versus Decliners (we don’t care about comparing the pale histogram lines - we want to spot the ‘trend’ by comparing the darker moving average lines. Red is bearish, green is bullish.)
  • NYSE Depth, or a comparison of ‘Up’ Volume to ‘Down’ Volume (again, we don’t find much help in the daily data marked by the histogram - we want to follow the ‘trends’ marked by the darker moving averages of the daily data.  Red is bearish, green is bullish.)

It’s subtle, but do you see anything interesting about the SPX and related breadth/depth chart? Though the market has drifted higher for the last couple of weeks, the breadth and depth trend actually turned a little bearish as of the first of October; look for the point where they all changed direction.

S&P 500, with NYSE Breadth and Depth Trends

Though the same idea isn’t quite as clear-cut with the NASDAQ Composite, it’s still there. We’ve switched out the NYSE’s advancer/decliner data as well as the up volume/down volume data with the NASDAQ’s.

While the recovery following the late-September lull staved off bearish crosses of the breadth as well as the depth trend lines, none of those ‘trends’ ever really reversed course - the bears just took a break for a week or so. Though thanks to Tuesday’s action from the NASDAQ it seems as if the tide has turned bearish again, that tip-over actually started to take shape the day before…. particularly on the depth chart (which tends to be the more impact of the two).  Tuesday’s convergence just clinches the deal.

NASDAQ Composite, with NASDAQ Breadth and Depth Trends

To answer or address the next question, yes, the tide could turn bullish again. Far more often than not though, once these charts take on this shape, the market is usually too far gone to salvage right away - we’ll have to take a few lumps to work our way through it.

To some degree you can see this kind of follow-through on the parts of these charts that are visible.  The further back on the SPX or NASDAQ charts you go though, the more clear it becomes that you don’t want to fight these subtle hints; they end up being accurate most of the time.

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Sandbox Portfolio: More Exits - La Barge (LB) & SeaChange Intl. (SEAC)

Filed under: — MicroCapPress Editor @ 2:05 pm

Well, we knew it couldn’t last forever, and we had even started getting hints that a pullback was here. After today’s drubbing though, I think we can safely say the downside move has been kick-started. While I don’t expect a complete implosion for stocks, we’re due for a pullback big enough top merit the exit of some of our more vulnerable and more profitable names we’re currently holding in the sandbox portfolio.

In no particular order, we we’re going to bail out of…..

  • La Barge (LB) - It’s really not a bad stock or a bad company; we’re just not getting enough bang for our buck here, with no real upside catalyst in sight.
  • SeaChange Intl. (SEAC) - We gave it a chance, and it didn’t come through for us. We need to cut bait not just to cut our losses, but to move on to better ideas.

There are also a couple of names getting close to the chopping block. But, for a variety of reasons (mostly to recoup losses, but also because it’s not yet clear if they’re in trouble), we’re not ready to pull the plug on them yet. Those stocks on the bubble include:

  • Centurylink (CTL) - It’s stagnated around $40, though stagnant in this environment is a relative win.
  • Shenandaoh Telecom (SHEN) - We saw an outside-day reversal (bearish) after this stock started to struggle with the ceiling around $20 again
  • Triangle Capital (TCAP) - Another bearish outside day bar after a few stagnant days.
  • AXT Inc (AXTI) - This would be more of a profit-protection maneuver than anything else, a we have a big 32% profit to protect. Nevertheless, the bears are starting to hit AXTI a little harder.

And on a side note, boy am I glad we took our 46% profit on Westell Technologies (WSTL) back on October 7th. This stock took an 8% beating today, which would have cut our profit by about a third if we had hung onto it. And, considering more downside is probably on the way (if I’m reading things right), then WSTL could have been even less profitable.

In any case, here’s the current portfolio. The highlighted names are the ones to sell; they won’t be listed in the next update.

As for future trades, look for an updated watchlist soon. We don’t want to add anything new in this likely bearish environment. We’ll wait for a convincing bottom to be logged. Once it’s in, we’ll start picking the best setups from the impending watchlist.

Follow along (and profit) from the sandbox portfolio picks by subscribing to the free Micro Cap Pres newsletter today. You’ll get sector outlooks, market calls, trading ideas, economic research, and more.

Building Permits & Starts Split September, Still Getting Better Overall

Filed under: — MicroCapPress Editor @ 12:59 pm

Though inherently erratic, we can still make meaningful qualitative observations about last month’s housing permits and starts. Here’s a short but important one.

In a nutshell, we’re seeing progress. It’s ugly, but it’s progress. We still feel construction capacity is too great given demand, which bodes poorly for builders. But, there’s a light at the end of the tunnel.

One thing to bear in mind that the media glosses over (and the reason we plot several years’ worth of this data) is the cyclical nature of starts and permits. Yes, both are starting to trend lower now, even though total starts actually edged up a bit last month. Guess what though…. building activity always slows as we head out of fall and into the winter.

Take a step back and look at the bigger picture. While we’re still miles away from prior peak activity levels, construction activity is on the mend (even if it is a slow one).

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Capacity Utilization and Industrial Productivity Still Bullish, Despite the Hysterics

Filed under: — MicroCapPress Editor @ 11:49 am

It’s only Tuesday, and it’s already been a whirlwind week for economic data. More’s on the way though, so let’s work through Monday’s and Tuesday’s numbers to determine what they really mean, if anything (and the ‘if anything’ aspect is the tricky part of the equation, not to mention the one the media doesn’t like to acknowledge). From the top down…

Yes, capacity utilization as well as industrial production both fall last month. Given the strong correlation we’ve identified between these two data sets and the market’s longer-term trend, this should be a reason to sell…..right? Wrong. As we’ve said dozens of times this year already, it takes more than one month to start and stop a trend. If you made a trading decision every time a pierce of economic data seemed to change the course of the overall economy, you’d be a day trader.

Let’s just put this into the proper time perspective one data set at a time, beginning with capacity utilization.

Capacity Utilization

The nation’s capacity utilization fell to 74.7% last month, from 74.8% - the first decline in several months, but hardly a shot fired across the bow. Take a look at the long-term chart of the data (as compared to the S&P 500) below. You have to squint to see last month’s stumble, and bull markets have survived worse stumbles than that. The overall trend is still very much in bullish/buy mode.

Industrial Productivity

Note that we’re more interested in the industrial productivity index - which we’ve plotted below - than the month-to-month change you’ll hear discussed more frequently. We’ve found the index to show a strong correlation with bull and bear markets. As such, we can successfully use the data to make long-term buy/sell decisions. As with the capacity utilization chart, we’re still in the midst of a buy pattern here.

If you want this kind of level-headed, non-hysterical, rational look at economic data (which the mainstream media clearly can’t provide), sign up for the free Micro Cap Press newsletter today.

October 18, 2010

Earnings Calendar, for week of 10/17/10

Filed under: — MicroCapPress Editor @ 6:06 am

It’s here. Well, actually it was here a couple of weeks ago when Alcoa (AA) kicked things off, but it doesn’t start to get wild and wooly until now. What is it? Earnings season for the third quarter of 2010. There are too many to even mention here - all of this week’s big ones are listed below.

Earnings Calendar - 10/17/10

Sector Outlook: Financials Sagging, Tech Soars, But What’s in Store?

Filed under: — MicroCapPress Editor @ 6:03 am

Looking for  the hot spots and cold spots? Look no further - here they are, and they’re pretty decisive trends.
Sector Performance

Technology reclaimed the top slot last week with a 3.9% pop, though don’t forget that Google was the reason for the bulk of the gain. Still, even without Google, we saw the group lead the way. Transportation ran a close second - a trend that’s been quietly and persistently in place for months now, yet largely unnoticed.

On the other end of the spectrum you’ll find financial stocks - another turned that’s been on place for quite some time. Despite low valuations and likely the most number of ‘beats’ for earnings season, the financial sector still seems plagued.

Note, however, that we’re seeing quite a bit of rotation from most other groups (what was cold is now hot now, and what was hot is now cold).

Sector Rank

And just to put  this into a more visual perspective, here’s how the race is shaping up since  the April 23rd top.

Sector Performance

Industry Performance

Though tech blew everything else away last week as a sector, check out the winning industry…. fertilizer (and ag chemicals) - a nice turnaround. Also worth mentioning is the distributors group [lots of wholesalers, and tech-heavy], which has also been one of those quiet but reliable trends.

On the flipside, the long list of losers makes it clear the financial sector’s woes aren’t being driven by one group - lots of banking entities are getting whipped. Another of last week’s interesting soft spots were the consumer cyclical areas, like gaming and photography. Is that party finally over? Maybe, though just for the record, those two industries were in dire straits already.

Industry Rank

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Last Week’s Good Bad, and Ugly for the Economy - Plus, What’s on Tap This Week

Filed under: — MicroCapPress Editor @ 5:53 am

While stocks finished the week higher, it wasn’t because the economy was impressive; we saw far more negatives than positives. The market advanced largely because the economic snapshot was so weak, the Fed voiced (again) a willingness and desire to stoke the economic engine.

As for what was wrong….

  • Unemployment claims: New claims were up to 462K from 449K; continuing claims fell from 4511K to 4399K, though bear in mind this number is a week behind the new claims data.
  • Inflation: While we’ve yet to see the deflation that was so alarming three months ago, the lack of inflation - given all the reasons it should be running rampant - is still troubling. The current inflation rate is running around 1.15%. Producer prices are rising a little more firmly though.
  • Trade balance: Despite a weaker dollar, the trade deficit actually went up, to -$46B.
  • Sentiment: Despite decent economic news and a record-breaking gain for the market in September, the Michigan Sentiment Index (prelim) sank from 68.2 to 67.9 this month.

On the other hand, we did see a couple of bright spots…

  • Manufacturing: The NY Fed’s ‘Empire’ Manufacturing Index jumped from 4.1 to 15.7, versus estimates of only 5.75.
  • Retail sales: With or without autos, consumers are still shelling out a few more shopping dollars. In this case, 0.4% more when excluding autos, or 0.6% more when adding autos to the mix.

Here’s the whole economic report card.

Economic Calendar

As for the coming week, less is in store, but what’s on tap is big.

We’ll get the ball rolling on Monday with two huge long-term indicators… capacity utilization, and industrial production. Both have been proven (and much more so than other economic data sets) to show great correlations with bull and bear markets. While neither can do much about the emotion-driven short-term trends, long-term investors should heed them both. The pros are looking for slight improvements from both.

Capacity Utilization, Industrial Productivity

The middle of the week is dominated by real estate news. The NAHB Housing Market Index is unveiled on Monday, while housing starts and building permits for September are unveiled on Tuesday; lower numbers are expected. On Wednesday, look for the MBA Mortgage Application count, bearing in mind that a huge number of them continue to be refis.

Thursday’s unemployment claims levels are expected to be roughly in line with their prior weeks’ numbers.

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Forecast: The Market Says One Thing, Depth Says Another

Filed under: — MicroCapPress Editor @ 5:41 am

The bulls had their way again last week - the second in a row, and the sixth of the last seven. It was a struggle though, with the only meaningful progress being made with Wednesday’s jump; even solid earnings news from Google couldn’t light a real fire.

So are the bulls finally at the end of the road, even if only temporarily? That’s the million dollar question, which we attack below. We’ll just preface our take with this…. what “is” and what “should be” can be two different things for quite some time.

At the risk of sounding like a broken record, the market continued to defy the odds last week and tack on another gain. For the S&P 500, that 11.04 point jump meant a 0.95% advance. The gain itself is a little misleading, however, for a couple of reasons.

First, though a gain is a gain is a gain, the momentum was fading to close out the week; even a big jump from GOOG was barely enough to keep the SPX in the black on Friday (and it’s still difficult to weed out expiration day’s effects versus the market’s organic movement).

The second problem? Though the SPX drifted upward as the week wore on, the market’s bearish depth (volume) really kicked into high gear later in the week, while the bullish depth faded. In neither case could it be said the depth trend had ‘turned’, but it’s getting close. Like we mentioned above, the undertow and the overt trend are starting to diverge, which isn’t bullish in this case.

As before though, until the uptrend clearly snaps - with a move under the 20-day average line currently at 1150 - it’s difficult to fight the tape. Be nimble here.

S&P 500

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October 14, 2010

How Microsoft Can Make a Dent in the Smartphone Market

Filed under: — MicroCapPress Editor @ 8:05 am

Undoubtedly by now you’re aware that Microsoft (MSFT) is taking another stab at the smartphone market, after falling behind - badly - to Apple’s (AAPL) iPhone and now, Google’s  (GOOG) Android [which is spreading faster than nearly anyone expected].

Of course, the world’s most common smartphone operating system, Symbian, never really went away either, and even Research in Motion’s (RIMM) BlackBerry devices - which have been dying a slow death - are still a more popular choice than any Windows-powered mobile device.

Point being, the competition is stiff, and there aren’t too many niches Microsoft can fill; the price niche (Android and Symbian), the ‘cool’ niche (iPhone), and even the business niche (BlackBerry) are all spoken for. Even the recent unveiling f the new Windows 7 Mobile platform - which is indeed a major improvement on the prior platform - is still being met with a lukewarm reception; analysts just don’t see Windows 7 smartphones making a real dent in terms of market share, which brings us to the focal point…

To be fair, this market share forecast was posted before Windows & Mobile was unveiled last week. Some, though not too many, technology forecasters have suggested that Microsoft could actually capture as much as 9% of the smartphone market by 2012, and admittedly, the 2014 projection of 3.9% below does seem a little too bad to be true.  Nevertheless, the point is still well taken. Take a look.

Simply put, Microsoft has a mountain to move, even of the raised market share forecast in the meantime are closer to how it’s really going to pan out.

On the other hand, making a dent in the smartphone arena isn’t impossible IF Microsoft handles things the right way, and sends the right message with its Windows 7 Mobile marketing.

The key for Microsoft will be to not compete head-on with the competition and be what they are. Rather, Microsoft needs to strongly differentiate itself and its phones if it wants to capture the hearts and minds of any new consumers.

For instance, there’s no need to even bother selling shoppers on the robustness of an ‘app’ store. Apple’s got a huge lead in that market, and it’s doubtful anybody will eve catch up.

There’s no need to try and compete when it comes to price either. Symbian’s popularity is strong primarily because it’s found on low-end devices; the two go hand-in-hand for a reason. The same goes for Google’s Android, which is ‘free’ (to phone manufacturers) in that it’s open-source technology, even if a small licensing fee for Android is required to use it. [Ironically, the Android licensing fee actually goes to Microsoft.]

So what does Microsoft actually ‘do’ with Windows 7 Mobile to make it successful? There are three keys that will really make the devices stand out to potential buyers:

1. Focus on Function: If you like lots of apps, and look at lots of pictures and videos, then the iPhone is the obvious choice. That’s not necessarily most smartphone users though. Some users just want their device to be a means of sending and receiving messages or taking and placing calls, and would prefer less distraction (and a faster in/out time). Windows 7 Mobile was designed with that in mind. Now the company just has to spread the word that their technology isn’t a mere indulgence.

2. Forget ‘Exclusive’: Though AT&T is the exclusive iPhone service provider now, that could change in the future. That exclusiveness has only been of benefit to AT&T though… and one has to wonder if it was worth it to Apple.

Microsoft would be well-advised to follow Android’s path and open its doors to lots of phones, and lots of carriers (which seems to be the direction things are pointed anyway.)

3. Focus on Business Users: Despite the BlackBerry being the ideal device for business users (its e-mail platform whips the competition), RIM’s devices are losing ground. The culprits are figured to be a combination of higher price, a lack of other fun features, and the general clunky size of the hand-helds. Though not voiced as often, one also has to assume BlackBerrys don’t “play well” enough with office software documents and ‘talk to’ home-office desktops to really make them the ideal business tool; poor handling of e-mail attachments was one of its earliest criticisms.

On the flipside, given that it’s a Windows 7 device, one has to assume that pretty much anything you can do with Microsoft Office on a PC or laptop you can do equally well on a Windows-powered mobile device. In fact, the functionality of Microsoft Exchange on Windows 7 has been on e of the few very, very bright spots with Microsoft’s latest debut.

Will Microsoft actually choose to drive in these lanes? It’s hard to say. The early promotion efforts so far haven’t suggested so. Rather, they seem to be pointed straight at Google’s Android (even though Microsoft held a mock funeral for the iPhone and the BlackBerry).  The first devices won’t be launched until early November though. Perhaps the message will change then.

Bottom line - it’s not a lost cause for Microsoft. It’s just a very narrow line to walk.Stop missing out on this kind of insight (that the mainstream media never provides). Subscribe to the free Mciro Cap Press newsletter today.

October 11, 2010

Sector Performance Turns Around - Winners & Losers Depend on Environment

Filed under: — MicroCapPress Editor @ 1:22 pm

If you look closely, you’ll see a significant turnaround from the relative performances we saw last week. Utilities and telecom - the two safe havens that were at the top of the pile last week when stocks sank into the red - are now at the bottom of the heap, along with gold. Conversely, materials and transportation blazed the bullish trail last week after struggling in the prior week.

What’s the underlying dynamic in play here? It’s the obvious one…. the bulls have their favorite hot spots, and the bears have theirs. Whether the market is strong or weak from here, look for each environment to continue favoring certain groups; we’ve seen this dynamic at work for months now.

Sector Ranking

That being said - and as usual - looking at this performance in a more visual way can really shed some light on where the acceleration (which is where you want to be) is unfolding. From that perspective, energy along with basic materials are lapping their peers. And, we can also see that telecom has every reason to struggle from here…. it’s overbought.

Everything else is still a bit of a question mark.

Sector Comparison

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Last Week’s Economic Round-Up, in Less Than 30 Seconds

Filed under: — MicroCapPress Editor @ 1:01 pm

If it were a student, we’d have to give the economy a ‘C’ for last week’s results.

On the upside, pending homes sales rolled in much higher than expected for August, up 4.3%. Initial unemployment claims as well as ongoing claims were both lower as well; each is close to reaching new multi-year lows. In fact, the unemployment rate managed to sink back to 9.6% last month, though that shouldn’t be a total shock. While total nonfarm payrolls fell, if you remove state-government layoffs from the equation, private payrolls actually advanced 64K. Wholesale inventories gained 0.08%, while the ISM Services index jumped to 53.2 (from 51.5).

On the downside, factory orders were off by 0.5% in August, and consumer credit was contracted by $3.3 billion… the seventh consecutive monthly contraction. Mortgage applications sank by 0.2%. Given how bad things could have been though, those ‘downsides’ are really pretty minimal.

Economic Calendar

As for the coming week, just as much is in store, though the bulk of the fireworks don’t start until Thursday. Unemployment claims (new as well as continuing) are expected to be flat when reported that day. And, producer prices (’input’ inflation) are forecasted to roll in at 0.2%… more tame than last month’s 0.4%, but still showing no signs of the previously expected deflation.

On Friday, consumer inflation is likely to come in up by 0.2% as well. Same story as PPI… less inflation, but nothing close to deflationary yet. Also on Friday - and perhaps more importantly - retail sales are expected to roll in with another solid 0.4% increase. The New York Fed/Empire Manufacturing Index, the Michigan Sentiment Index, and business inventories, are also all expected to be up for the prior month.

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October 10, 2010

Market Outlook - Both Scenarios are Ultimately Bullish, But Not Equally Healthy

Filed under: — MicroCapPress Editor @ 1:01 pm

Though caught between a rock and a hard place, it’s still ultimately a win-win scenario for the bulls. Let’s dissect both possibilities, using the S&P 500 as a guinea pig.

  • Bullish scenario #1 is, the market just keeps on rolling. As impossible as that seemed two weeks ago because the VIX wasn’t moving lower accordingly, it’s certainly possible now - the VIX finally pushed under that floor of 21.5 with Friday’s close of 20.71. And, it’s not like the S&P 500 has gotten itself dangerously overextended beyond the upper Bollinger band; this relatively modest pace may well be allowed to continue just because it doesn’t spook anyone.
  • Bullish scenario #2 is, the market does actually end up pulling back, but then ends up quickly finding support at any or all of the key moving average lines floating around 1150 or so.

Frankly, scenario #2 is the healthier one at this point, as it will ultimately mean more longevity for the bigger-picture uptrend [the reason the April/May pullback hurt so much was that the March/April advance was so rapid and almost completely unchallenged.] But, ’should’ and ‘is’ are two different things.

And speaking of the bigger picture, one of the chief criticisms of this rally since early July has been that its low volume meant it was doomed for failure. While it is true that the July salvo was made on tepid volume, the argument doesn’t hold water any longer. Total volume has been picking up since early September, with buying volume in particular on the rise. While that won’t stave off a near-term technical pullback, it does bode well for a strong finish to the year since participation is improving… something largely unexpected at this point.

For now, let’s just wait and see how the week starts out before assuming anything.

S&P 500

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October 8, 2010

Despite Stocks’ Jump Today, the Near-Term Situation is Still Bearish

Filed under: — MicroCapPress Editor @ 12:51 pm

Yes, the market is up today - quite nicely in fact. It doesn’t change the fact that the undertow is still bearish though. Some of this unsupported froth needs to be burnt off soon, one way or another. The easiest (and fastest) way to do so is with a pullback, though the sheer passage of time would also do the trick.

We’ll lay out our combo chart today…. all three timeframes. As we’ve said repeatedly, the long-term trend line remains bullish, and can survive this near-term volatility. In the short-term and intermediate-term though, the scenario is still a bearish one despite today’s advance.

We’ll focus in that intermediate-term indicator (blue) for today, but know the same premise applies to the short-term (red) indication.

In simplest terms, our tool is (1) still hovering at dangerously-low levels, and (2) is still pointed upward… suggesting the undertow has already turned bearish even if the overt market trend is still bullish. [For this set of indicators, up is bearish and down is bullish.] It’s a scenario much too similar to the one we saw in April where stocks were stunningly overbought, yet nobody believed it - until the 20% tumble came. Look at where the short-term and long-term overbought/oversold indicators are now in comparison to then.

In any case, we acknowledge the difficulty of holding on to bearish stance when the environment appears to remain bullish. Be patient though - the undertow will eventually win out.

To fully understand the chart you’re looking at above, click here for the theory and thesis.
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