Daily Wrap-up - The Dow Jones Industrial Average Recoups Most of Yesterday's Drop

The day ends with a mild gain as the Dow Jones Industrial Average (DJIA) recoups 62 of the 81 points lost yesterday. A look to the intraday chart shows a modest rally following the release of the Fed minutes but that run quickly ran out of steam and the Dow drifted back to pre-release levels. Earlier we saw that the Nasdaq Composite (COMP) and Russell 2000 (RUT) were leading the broad market indices and that held into the close. The COMP gained over 1% while the Russell 2000 (RUT) gained close to 2%.

The sector action maintained an upside bias with bonds ending as the only real decliner. A few groups, such as biotech, drugs, and oil, mulled around breakeven while the rest of the pack was higher. Brokers, oil services and semiconductors were the strongest groups.

For the most part, my overall views are the unchanged. Yesterday I looked at the daily charts of the broad market indices and noted the short-term uptrends. The relatively quiet upside action today leaves the trends intact. And that is where I will pick up in the morning. Have a nice evening...

Chart Courtesy of Thomson Financial

Click here for symbol descriptions

Charts Courtesy of Thomson Financial

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A Look Into TASER International Inc (TASR)

1/6/2009 2:20 PM

Earlier today I noticed that TASER International Inc (TASR) popped up on my scan for stocks showing unusually heavy volume and I made a note to myself to come back and revisit it to see how the sentiment profile was shaping up. Unfortunately, I don't see much that looks like a good catalyst.

For the longest time, I have associated TASER with heavy short interest. As a contrarian, that interests me as the shares sold short represent potential buying demand.

However, as the graph to the right shows, there has been a steady decrease in short selling. According to data collected by our Quantified Analysis group, 9% of the stock's float is now sold short. I usually use 10% as my rule of thumb for judging high and low. At this point there is still a decent amount of short interest out there but it doesn't offer the potential it once did.

The steady covering is also somewhat perplexing when you look at the weekly chart below.

Chart Courtesy of Thomson Financial

The stock has staged a couple of bounces but has yet to break the grasp of the downtrend. In other words, this covering has been met with ample selling pressure. Looking to the daily chart highlights the more recent action.

Chart Courtesy of Thomson Financial

Here we see the last rally attempt that ended last fall. During that run I offered some upbeat comments on the stock. The shares were overbought and I said I was looking for a pullback. However, the stock showed no sign at holding near support levels as the overall market was in free fall mode.

As it stands now, TASER is once again showing a short-term overbought condition as it has put in a sharp bounce from its November lows. That rally from the lows is impressive but the daily chart shows little in way of a trend at this point. There is still a bit of short interest that could be covered and add buying demand but there is little in the way of skepticism from analysts or option traders. As such, I am finding it hard to make a compelling contrarian case for the stock here.

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Midday Market Check - A Quiet Day?

1/6/2009 12:06 PM

We head into the second half of the session with what appears, at first glance, to be a sleepy day on our hands. The Dow Jones Industrial Average (DJIA) popped to a quick gain this morning but that has faded to a lull as the Dow bounces along the breakeven line. The Nasdaq Composite (COMP) and Russell 2000 (RUT) are a little lively though as each gains around 1%.

Drilling down into the sector action shows even more lively action. The Oil Service HOLDRS (OIH) has taken the lead as it gains nearly 5%. This continues the strength we saw yesterday. The Semiconductor HOLDRS (SMH) and Broker/Dealer Index (XBD) are also relatively strong. Bonds and gold are the weakest areas.

Chart Courtesy of Thomson Financial

Click here for symbol descriptions

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Option Skews - Intel Corp, Apple Inc, Visa Inc, Dendreon Corp, Chesapeake Energy Corp, Rambus Inc, Energy Conversion Devices Inc

1/6/2009 8:58 AM

Companies seeing a skew towards puts in the previous session: Intel Corp. (INTC), State Street (STT), Sunoco (SUN), Newmont Mining (NEM), Martek Biosciences (MATK), Dell Inc (DELL), Deere & Co (DE), Best Buy Co. (BBY), Energy Conversion Devices, Inc (ENER), Eastman Kodak (EK), Juniper Networks (JNPR), Caterpillar (CAT), NVIDIA Corp. (NVDA), Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Wynn Resorts Limited (WYNN), Coca-Cola (KO), Johnson & Johnson (JNJ), Arch Coal (ACI), Cemex Sa De Cv A Ads (CX), F5 Networks (FFIV), Kohl's Corp. (KSS), Wells Fargo & Co (WFC), J.C. Penney Holding (JCP), SunTrust Banks (STI) .

Companies seeing a skew towards calls in the previous session: Apple Inc (AAPL), General Motors Corp (GM), Rohm and Haas (ROH), General Electric (GE), Chesapeake Energy Corp (CHK), Alcoa (AA), Genentech Inc (DNA), Bank of America (BAC), SPDR Gold Trust (GLD), Yahoo! (YHOO), JA Solar Holdings Co., Ltd. (JASO), Ford Motor Co (F), Bristol-Myers Squibb (BMY), Rambus Inc (RMBS), Schlumberger N.V. (SLB), SanDisk Corp. (SNDK), JDS Uniphase (JDSU), Pfizer (PFE), ChevronTexaco (CVX), Dow Chemical (DOW), Goldcorp Incorporated (GG), Visa Inc. (V), Verizon Communications (VZ), Trina Solar Limited (TSL), Dendreon Corp (DNDN) .

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective

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Stocks Advancing Amid Heavy Short Interest - American Capital Ltd, Micron Technology Inc, Advanced Micro Devices Inc

1/6/2009 8:02 AM

As discussed here, I have resurrected a scan that focuses on companies that are heavily shorted. The purpose is to find stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below and more information on short interest is here.

Companies included in today's scan are: American Capital Ltd (ACAS), FirstFed Financial Corp (FED), Zale Corp. (ZLC), Las Vegas Sands Corp. (LVS), ArthroCare Corp (ARTC), Micron Technology Inc (MU), Boyd Gaming Corp (BYD), Palm Harbor Homes (PHHM), Dillard's (DDS), Media General (MEG), Hanmi Financial (HAFC), CBL & Associates Properties (CBL), La-Z-Boy Incorporated (LZB), Barnes & Noble (BKS), Clean Energy Fuels Corp. (CLNE), Cheniere Energy (LNG), Advanced Micro Devices Inc (AMD), Brunswick (BC), YRC Worldwide Inc (YRCW), Meritage (MTH), Lennar Corp. (LEN), DryShips Inc. (DRYS), Wynn Resorts Limited (WYNN), McMoRan Exploration (MMR), Forest Oil (FST) .

Methodology - the query scans my database of companies which has some basic filters to eliminate penny stocks and those that don't trade frequently. The table above lists stocks that have at least 10 percent of their float sold short and then shows the top gainers from the previous trading day. This can be a useful tool for finding situations where stocks with heavy short interest have begun to move.

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Stocks Showing Unusually Heavy Volume - Fortress Investment Group LLC, VisionChina Media Inc, Netease.com Inc

1/6/2009 7:42 AM

Here are the results for today's unusual stock volume scan. The scan looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.

Companies included in today's scan are: Fortress Investment Group LLC (FIG), VisionChina Media Inc (VISN), Netease.com Inc (NTES), Akeena Solar Inc (AKNS), Regency Energy Partners LP (RGNC), FirstFed Financial (FED), Teradyne (TER), Endo Pharmaceuticals (ENDP), GT Solar International Inc (SOLR), American Capital Ltd (ACAS), ReneSola Ltd (SOL), Las Vegas Sands Corp. (LVS), Boyd Gaming Corp (BYD), Ultrapetrol (Bahamas) Limited (ULTR), Biovail Corp (BVF), Aeropostale Inc (ARO), IntercontinentalExchange, Inc. (ICE), Solarfun Power Holdings Co., Ltd. (SOLF), Wynn Resorts Limited (WYNN), Canadian Solar Inc. (CSIQ), Nordic American Tanker Shipping (NAT), Cephalon Inc (CEPH), Clean Energy Fuels Corp. (CLNE), Yingli Green Energy Hold Co Ltd (YGE), TASER International Inc (TASR).

These are the top stocks from today's scan, which has some basic filters to eliminate penny stocks and those that don't trade frequently. A description of the column headings is below.

• Move Previous Day - yesterday's percent return.
• Volume Increase - looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.
• Close - yesterday's closing price.
• Total Ratings - number of analysts who track the stock, according to Zacks.
• Buy Percent - percent of the analysts who rate the stock as a "buy". I use this to help gauge sentiment and potential buying demand. If everyone already loves a stock, that means a steady stream of new money will need to enter the stock to fuel a rally.

Note - sentiment data is current as of the previous trading day...

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Futures on the Dow Jones Industrial Average Suggest a 75-Point Gain at the Open

1/6/2009 7:23 AM

Good morning everyone - welcome to Tuesday. We start the day with stock futures showing a bounce after yesterday's mixed performance. The S&Ps are nearly 9 points above fair value. Futures on the Dow Jones Industrial Average (DJIA) are currently indicating an opening jump of 75 points, which would more or less recoup yesterday's drop. Gold is down 14.40.

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Daily Wrap-up - The Dow Jones Industrial Average Bounces from 140-Point Loss But Still Closes Lower

1/5/2009 5:33 PM

The day ends with the Dow Jones Industrial Average (DJIA) off its lows but still down 80 points. By mid-afternoon, it looked as if the day might take on a positive bias as an afternoon rally allowed the Dow to kiss the breakeven line. However, that was followed by a round of selling that pushed the average to a new low for the session. A 60-point bounce left us our final close. Overall, it was a somewhat quiet day as the S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) closed near breakeven.

The midday check of the action showed a choppy sector picture and that held into the close. A number of moves appear to have offered an offsetting effect for the broad market indices. In broad strokes, we had weakness in gold stocks and financials while energy stocks and housing were strong.

My earlier post touched on my overall thoughts. There was little in the afternoon that changed from that post so that is where I will pick up in the morning. Have a nice evening...

Chart Courtesy of Thomson Financial

Click here for symbol descriptions

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Stocks On the Move - Canadian Solar Inc, SunPower Corp, EMCORE Corp, Clean Energy Fuels Corp and Solarfun Power Holdings Co Ltd

1/5/2009 3:03 PM

One of the things I am watching here is what groups see money flows. As I have discussed in recent commentaries, the new trading year creates an opportunity for a psychological break which may bring new energy to the tape. With that in mind, I want to pay close attention to what groups are showing signs of life.

As I look over my market monitor I see that alternative energy stocks are perking up today. Comverge Inc (COMV), Solarfun Power Holdings Co Ltd (SOLF), Clean Energy Fuels Corp (CLNE), SunPower Corp (SPWRA), Canadian Solar Inc (CSIQ), and EMCORE Corp (EMKR) are all showing gains of 9% and 15%. Two stocks singled out this morning for heavy volume on Friday, GT Solar International Inc (SOLR) and Akeena Solar Inc (AKNS), are up more than 20%. To put today's moves into perspective I grabbed the charts below.

Charts Courtesy of Thomson Financial

The first interesting point that stands out is that the bounces aren't coming from an oversold condition. In fact, most of the short-term Relative Strength Index (RSI) readings were at mid-range readings before the move and are some are now near overbought territory.

Another interesting point, that goes along with the one above, is that it looks like the severe downtrends have let up. These charts go back 60 days and I would describe the action here as sideways and choppy. While that might not sound like a ringing endorsement, that is an improvement to what we had last year.

Said another way, I think the point here is that the technical environment might be changing. The steady downtrends have been replaced by basing periods. After big declines, it is common for stocks to enter a phase of sideways trading. Those periods are typically measured in months or longer. Nimble traders can likely find opportunities on both sides as the stocks bounce in a range. The challenge here is how the stocks react to the overbought readings. A characteristic of range-bound stocks is that they tend to drop when they hit overbought readings. A continuation of the advance here would therefore signal very strong buying demand and suggest we that perhaps we aren't seeing the "typical" basing period action.

As I watch this battle play out, I will checking the sentiment profile and offering additional comments.

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Midday Market Check - A Modest Pullback for the Dow Jones Industrial Average

1/5/2009 12:57 PM

We head into the second half of the session with a small pullback on our hands as the Dow Jones Industrial Average (DJIA) drops 76 points. However, the Dow is the weakest of the broad market indices as the S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) show much milder percentage drops.

A look to the sector action suggests a somewhat quiet day, at least in the top half of the graph. We have divergent moves in commodity corner though. The energy complex is up while gold and the Amex Gold Bugs Index (HUI) are lower. The SPDR Homebuilders (XHB) and Regional Bank HOLDRS (RKH) are also moving in opposite directions. The overall mixed nature of the day may be providing some offsetting action at the broad market level.

The new trading year brings a chance for us to take a step back and reflect. In order to help frame out my near-term views on the market, I took a few minutes to recreate the daily charts of the broad market indices. As they stand now, I see two important characteristics. The first is the short-term uptrend highlight by the red trendline. The second is the late-November low, highlighted by the grey zone.

In other words, the indices have tried to put in a low and are currently bouncing from that. Trendlines, such as the ones below that are drawn from low to low, aren't a perfect tool, but they do give you a way to easily gauge the momentum of a trend. If we do see a breakdown in the near-term trend, the recent lows would be the level to watch. However, for now, the wind is still at the market's back.

Chart Courtesy of Thomson Financial

Click here for symbol descriptions

Charts Courtesy of Thomson Financial

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Examining Las Vegas Sands Corp, Boyd Gaming Corp, and Wynn Resorts Limited

1/5/2009 11:43 AM

One of today's scans highlighted some activity in Las Vegas Sands Corp. (LVS). The stock was up roughly 20% on Friday and it looks like the buying is continuing today as the shares gain 17%. Digging into the action shows that fellow gambling stocks, Boyd Gaming Corp (BYD), and Wynn Resorts Limited (WYNN), are also on the move. Here is a look at the recent action.

Las Vegas Sands Corp

Wynn Resorts Limited

Boyd Gaming Corp

Price Charts Courtesy of Thomson Financial

Here we have the intraday charts for the last 5 days. Based on this, it appears that the buying is part of a near-term trend. Of course, these stocks have been hit hard in the last year. Shares of LVS have lost more than 90% over the last 52 weeks. Boyd Gaming gain held up only slightly better with a loss of 83% while Wynn Resorts dropped 55%. That may help to explain the apathy seen in the analyst ratings data.

A point highlighted in the scan post this morning is that Las Vegas Sands Corp is heavily shorted. That distinction also applies to both Boyd Gaming and Wynn Resorts. According to data collected by our Quantified Analysis group, 17% of BYD's float is sold short, 24% of LVS's float is sold short, and 32% of WYNN's float is sold short.

Given the precipitous drop seen in the past year, it is obvious that the short sellers were on the mark. However, at some point I wonder whether they will look to roll out of those positions as they look to other sectors. That could add near-term buying demand. Meanwhile, I would view analyst ratings as something that will take longer to play out. In other words, I wouldn't expect to see a rush of upgrades. However, this data is worth pointing out as something to keep in mind down the road. If these companies can find their footing and begin to show signs of a turnaround, analysts could eventually look to offer upgrades.

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The! Biggest! News! of! the! Day! - Not Apple Inc, Amazon.com Inc, JA Solar Holdings Co Ltd, Biogen Idec Inc or MasterCard Inc

1/5/2009 9:58 AM

Here are some of the contenders for today's biggest...news...of...the...day...

• The announcement that a hormone imbalance has caused Steve Jobs' much discussed weight loss...shares of Apple Inc (AAPL) are up 3%...
• An upgrade for Amazon.com Inc (AMZN)...[note - I offered some thoughts on AMZN and analyst ratings last week...]
• The move by New York Times Co (NYT) to put ads on its front page...
• An article that says Wall Street strategists "are even more bullish than a year ago..."
• Expectations for a loss in Treasuries...
• The drop in gold...
• A new CFO for JA Solar Holdings Co Ltd (JASO) as well as a deal with Solar Power Inc (SOPW)...
• A downgrade for Biogen Idec Inc.(BIIB)...
• An acquisition for MasterCard Inc (MA)...
• A report that says Sony Corp (SNE) "may announce drastic cost cuts..."
• A management shakeup at Borders Group Inc (BGP) as the company replaces its CEO...
• Speculation that Exxon Mobil Corp (XOM) may be looking to make a big acquisition...
• A report that says Pfizer Inc (PFE) may be looking at acquisitions...
• Optimism on Seagate Technology (STX), Hewlett-Packard Co (HPQ), ConocoPhillips (COP), and Swift Energy Co (SFY)...
• A look into Archer Daniels Midland Co (ADM)...
• Expectations for a light turnout for the Las Vegas Consumer Electronics Show...
• A look into lagging sin stocks...

While those are all stories worth watching, I think it is obviously clear that the biggest news is this set of stories -

• Thousands of Shoes Dumped on Miami Expressway - "...not sure where the shoes came from. There were no signs of a crash, and no one stopped to claim them..." [courtesy of Colleen]
• Mexican warlock predicts US troops on border - "...erroneously predicted last year that oil prices would be stable and that Cuba's Fidel Castro and singer Britney Spears would die. This year, he says Spears will continue to triumph..."
• Vegas beer pong competition gets (almost) serious - "...a $50,000 prize on the line...This is about a sport, it's about a competition..."

So...we start the year off with a mysterious shoe dumping, predictions of a US invasion of Mexico and the "sport" of beer pong. Looks like it is going to be an interesting year...

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Stocks Advancing Amid Heavy Short Interest - DryShips Inc, SanDisk Corp, Las Vegas Sands Corp, Genco Shipping & Trading Limited

1/5/2009 8:17 AM

As discussed here, I have resurrected a scan that focuses on companies that are heavily shorted. The purpose is to find stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below and more information on short interest is here.

Companies included in today's scan are: Media General (MEG), BlueLinx Holdings Inc. (BXC), Liz Claiborne (LIZ), ArthroCare Corp (ARTC), Frontier Financial (FTBK), Zale Corp. (ZLC), Las Vegas Sands Corp. (LVS), Hutchison Telecom Int (HTCH), Century Aluminum (CENX), DryShips Inc. (DRYS), Developers Diversified Realty (DDR), YRC Worldwide Inc (YRCW), Starwood Hotels & Resorts (HOT), iStar Financial (SFI), SanDisk Corp. (SNDK), Saks Incorporated (SKS), Martha Stewart Living Omnimedia (MSO), Genco Shipping & Trading Limited (GNK), General Motors Corp (GM), Theravance, Inc. (THRX), Cooper Companies (COO), Southern Copper Corp (PCU), American Capital Ltd (ACAS), Hansen Medical, Inc. (HNSN), General Cable (BGC).

Methodology - the query scans my database of companies which has some basic filters to eliminate penny stocks and those that don't trade frequently. The table above lists stocks that have at least 10 percent of their float sold short and then shows the top gainers from the previous trading day. This can be a useful tool for finding situations where stocks with heavy short interest have begun to move.

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Stocks Showing Unusually Heavy Volume - GT Solar International Inc, Akeena Solar Inc, Ambac Financial Group Inc, Stillwater Mining Co

1/5/2009 7:56 AM

Here are the results for today's unusual stock volume scan. The scan looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.

Companies included in today's scan are: Flagstar Bancorp (FBC), Starwood Hotels & Resorts (HOT), Robbins & Myers (RBN), Energy Transfer Equity, L.P. (ETE), GT Solar International Inc (SOLR), Emageon Inc. (EMAG), ORBCOMM Inc. (ORBC), Basic Energy Services, Inc. (BAS), 02Micro International (OIIM), C&D Technologies (CHP), Universal Compression (UCO), Emulex Corp. (ELX), Aluminum Corp of China (ACH), Mellanox Technologies, Ltd. (MLNX), Varian Semiconductor Equipment (VSEA), Liz Claiborne (LIZ), ArthroCare Corp (ARTC), Blue Nile Inc (NILE), DSP Group (DSPG), HDFC Bank (HDB), VisionChina Media Inc (VISN), ADVANTA (ADVNB), Stillwater Mining Co (SWC), Akeena Solar Inc (AKNS), Ambac Financial Group Inc (ABK).

These are the top stocks from today's scan, which has some basic filters to eliminate penny stocks and those that don't trade frequently. A description of the column headings is below.

• Move Previous Day - yesterday's percent return.
• Volume Increase - looks at the previous day's volume and compares it to the recent average volume. It then sorts the stocks based on those that showed the biggest increase (the "unusual" part) in volume.
• Close - yesterday's closing price.
• Total Ratings - number of analysts who track the stock, according to Zacks.
• Buy Percent - percent of the analysts who rate the stock as a "buy". I use this to help gauge sentiment and potential buying demand. If everyone already loves a stock, that means a steady stream of new money will need to enter the stock to fuel a rally.

Note - sentiment data is current as of the previous trading day...

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Stock Futures Suggest a Slight Downside Bias, Gold Shows Moderate Weakness

1/5/2009 7:46 AM

Good morning everyone - welcome to the beginning of a new trading week. We start the day with stock futures showing a slight downside bias. The S&Ps are 4 points below fair value. Gold, however, is on the move as it drops 26.10, nearly 3%.

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