Go With The Momentum Part I

Headlines in a Yahoo! Finance article on http://finance.yahoo.com/ stated that sluggish Economic Data and Financial woes were the reason the markets dramatically decline today. The DIJA itself was down (-1.06%) ending the trading at 12503.82. I just wanted to say that this is simply not accurate. Now, the financials are definitely one of the reasons the market was down today, notably the downgrades by Standard and Poors of behemoths like Lehman Brothers, Morgan Stanley, and Merril Lynch. The ISM numbers for the month of May were actually higher than estimates predicted, which was a very good thing! Now don't get me wrong, the numbers weren't great and technically they were in a range signaling a steady contraction but they were only off .04 from the comportable index value of 50. for manfacturing activity. The real story of the day was the positive export numbers reflected in the ISM numbers, which has consistently came many companies poised to take advantage in profitability and real GDP growth out of the negative territory for the past consecutive quarters. The obvious reason for this trend is clearly the weak U.S. dollar and what also brings me to a interesting mutual fund called the Fidelity Export and Multinational Fund ticker (FEXPX). Currently the mutual fund is down -4.74% YTD, however the list of its top 10 holdings provides a nice list of companies well positioned to do just what the doctor ordered. This post is Part I of III where we will talk about this very topic and follow these top ten holdings to see if there is any favorable trading opportunities in them. This list is as good as any and we are going to follow them for awhile to see if they turn out to be winners. One thing you have to do when trading is you have to develop your own list of stocks you follow whatever system you decide to use but just don't let it be a stock the financial media is recommending. We're going to go with these.

The Beginning of the Week is in Full Swing

Today is June 2nd and it is now 1:50 AM in the morning and also the morning the ISM manufacturing survey will open up as the first piece of economic data for the month. The reason this data is so important is it provides information from purchasing managers on manufacturing activity from the previous month and thus provides clues to whether the economy is healthy or teetering on depression. In light of last week's GDP numbers, which were revised upward to 0.9%, a positive ISM reading at 50 or slightly higher will really give this market the ability it needs to get over the hump. You should expect relatively flat trading until these numbers are published.

GDP Revisions

A Week Full of Economic Numbers

There're some key economic data coming out this week that warrants some mentioning and will definitely have impact on traders and investors this week. For all of those who think trading on economic news is hubris just ask our friends who didn't heed the Producer Price Index numbers or the Fed minutes last week. The DJIA closed 12601.19-227.49( -1.8%) off this news and higher oil prices last Wednesday. Ignoring these numbers last week cost a lot of heartache. So to prepare for this week we first focus on the important numbers Wednesday, the Durable goods orders which reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. It is a real good indicator for forecasting short term economic growth and is published monthly ahead of Factory Orders a week later. The consensus is Durable goods will be down -1.1%, so expect these numbers to have a big impact. Next on the weekly agenda is the preliminary 1 Qtr GDP numbers being released Thursday). The consensus is that the preliminary numbers will show 1.0% growth increase keeping us away from the technical definition of a recession. However, the Federal Resevere last week lowered its expectations for the economy because of the housing downturn,credit crunch, and rising fuel prices. So, it is hard to say how the investing community will react to this data. I would be looking at shorting the market with ETF's like Proshares products that offer over 32 different shorting opportunities. These our the most important things coming out this week and there implications can be severe. So watch out!!!

Oil Speculator

The price of oil has been on a unfettered journey hitting unbelievable heights and psychological barriers along the way. I was just reading a piece published in the WSJ on Thursday, November 8, 2007 titled, " Why $100 Oil Can't Float". The article gave ten reasons, deeply grounded in supply and demand fundamentals on why oil wouldn't sustain this point if it came about. The main argument was based on the 4.2 billion barrels world reserves above ground at the end of June(2007) according to U.S. Energy Information Administration. However, even after all this good analysis the price of oil settled over $100 on January 1, 2008. The momentum came from hard to forecast variables like supply disruptions in Mexico, geopolitical trouble in Nigeria, speculation on further rate cuts by the Fed, and a decrease in reserves domestically. All of these reasons and in addition to speculators looking for any reason to reassert there propensity to push oil and other commodities higher was more than enough of a catalyst to get the job done. And, today the price of oil continued its rein, closing above a new high of $127. All of this suspense begs the question, when will the price of oil descend? The first step to answering this question is to agree on what is really causing oil's ascent. I firmly believe that most of the increases in the price of oil isn't based primarily on demand in China or India, but rather mere speculative investing through new innovative finanical products like index funds that makes it easier to participate in the commodity and future markets like never before. Some events that may trigger a more reasonable price for a barrel of oil is a cease in interest rate cuts by the Fed, a substantial decline in driving this summer by Americans on vacation, or a noticeable increase in the EIA's Petroleum status inventory reports, or a Global slow down. Any of these four events can trigger a run for the border from oil and other commodities. I think one or a combination of these events will occur a lot sooner than Goldman Sachs prediction of $200 barrell oil will occur. If your bearish on the price of oil there are two ways you can play this strategy. One is Proshares Ultra Short Oil and Gas ETF DUG and another is Deutsche Bank Double Short Commodities ETN DEE. Both, are down signficantly because of the price of oil and both will directly benefit if the price of oil begins to fall.

Visa Buy Entry

Visa, stock ticker (V) had a nice day the past 3 trading sessions but is heavily in the over bought range. You can see the retracement on Visa every time it broke past the upper bollinger band. I expect V to sell off over the next few tradings sessions ceteris paribas (all things considered equal) and see a more favorable buy point. Currently as of 11:54 est (V) is trading at 82.72 down -3.14%.