Monthly Archives: March 2008

Market Testing Resistance Levels

27
Mar 08
What is a breakout level? When a market sets a top, then declines and sets a bottom, and then rallies up to the prior top, it is testing the resistance level. This is the point where I don’t try to predict what will happen next, but let the market tell me what to do. If it can close decisively above that prior top, that is a breakout. If not, it has failed the test and will head back down to test support at the most recent low. It is absolutely normal for the market to test these resistance and support...

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SiRF Technology Pre-Announces a Shortfall

25
Mar 08
Before the opening this morning, SiRF Technology (SIRF) pre-announced a shortfall in revenue and earnings for the March quarter. There has been a sharp slowdown in consumer electronics spending in the U.S. and Europe since the holidays, and slower growth in Asia since the Chinese New Year. The slowdown has caused some inventory backup in the distribution channel, and SIRF is feeling the brunt of these forces right now. The weakness in consumer electronics has been focused in the standalone or handheld personal navigation devices (like those made by Garman, TomTom and others), but has also spread to the automotive...

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“The Financial Crisis is Over,” or is it?

20
Mar 08
The financial crisis is over. I’m usually pretty critical of Wall Street research but a tip of my hat to Richard Bove, the financial sector analyst at Punk, Ziegel, who put out a report this morning titled, The Financial Crisis is Over. “There will be more negative developments,” he said, “but they will be meaningless.” Exactly right! As I said in the last Flash Alert, the Bear Stearns rescue was the poster child for this downturn, just as Penn Central and Chrysler were in the past. Sure, there will be more banks on the edge (Washington Mutual and Citigroup come...

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Ben, Again

18
Mar 08
After decent earnings news from Lehman Brothers and Goldman Sachs, the Dow Jones Industrial Average was up 300 points in afternoon trading, while the S&P 500 was trading solidly around 1315, up 40 points on the day. The futures market was pricing in a 100% chance of a full percentage point cut in the Fed funds rate at 2:14 p.m. this afternoon. Never one to miss an opportunity to disappoint, the Bernanke Fed cut rates by “only” 75 basis points. Now, that is a whopping cut–just not as whopping as the insiders wanted to see. And that means one more...

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Market Probably Bottoming Now

18
Mar 08
Today is an important day for the markets for a number of reasons and I’m writing to you this morning to make sure that you are prepared for what may lie ahead. As I’ve been advising you, the 1270 level on the S&P 500 is a key support area on the monthly market charts. Last week this level was successfully tested on Monday, Tuesday, Thursday and Friday. Yesterday was the most severe test yet as the market swung all the way down to 1256.98 during the day, but managed to close above the support line at 1276.80. The fact that...

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Memories Are Made Of This

13
Mar 08
Growing-up, some of my younger years were spent on a dairy farm near Colora, Maryland. During the snowy winters, my Dad, my two-years-younger brother and I would pass the time by playinFg Monopoly. After a couple of hours, Dad usually owned most of the good properties, I was struggling to stay in the game, and my brother would land on the Boardwalk square with four hotels and be unable to pay. With him broke and out of the game, it would just be Dad and me — the outcome was inevitable. Dad would look thoughtfully at the board, then at...

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Was I Wrong, Or What?

12
Mar 08
Following Monday’s Flash Alert about the 50% potential for a Crash, the market made a dramatic turnaround yesterday. Actually, it was the biggest one-day gain in the Dow Jones Industrials since 2002. So was I wrong? Maybe, but it could be “Or What” until we see the dust settle and the S&P 500 stay above 1326. In Monday’s Flash Alert, I wrote: “So maybe I am the one getting shaken out this time, just before the delayed rally begins. But that’s not the way to bet until the market itself tells us it wants to reverse and go up.” So,...

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Bernanke/Paulson Crash Potential up to 50% Probability

10
Mar 08
Friday was a bad day in the stock market, and while some of the blame falls on the weak employment report, sinking dollar and high oil prices, here’s the real reason why the market tumbled: Suppose you are the Secretary of the Treasury. A serious credit crisis has been going on for months, with locked-up credit markets, multibillion dollar write-offs at banks, busted hedge funds, bankruptcies of public mortgage companies and the whole nine yards. An inept Fed Chairman has been behind the curve the whole way in trying to stop the downward spiral. Now high-quality firms like Thornburg Mortgage,...

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Crash Potential up to 15% to 25% Probability

07
Mar 08
I try not to be an alarmist about these things, but once again world stock markets have worked themselves into a situation where there is potential for a Crash in the next few days. The converse of the headline above is that there is a 75% to 85% chance that there won’t be a Crash. But we can’t bury our head in the sand about the possibility of a Crash. So today let’s look quickly at the set-up, what has to happen to avoid a Crash, what the roadmap will be if a Crash is imminent, and what you can...

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Listen to the Market

06
Mar 08
Are we in a recession? Are we in a bear market? The honest answer is: “Maybe, or maybe not.” December-quarter GDP growth was slow at 0.6%, and the best guess for the March quarter is another stall at +0.4%. But as long as a plus sign stays in front of the growth number, it’s hard to argue that we are in a recession, let alone the serious drop that some commentators are talking up (including a few using the “D” word — depression). Of course, the numbers could be revised later, but when you see results like today’s retail sales...

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