- The Stock Market Companion -

15Minute Market Update

May 18, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

For a brief moment this morning, the broader market was POSITIVE.   This positive tone, just as on previous days, didn’t last.   As we have mentioned before, Bear Market Behavior often involves buyers stepping up and purchasing shares at perceived discount prices (real discount prices relative to recent past higher prices) in the morning, and then – when no follow-through buying occurs in the afternoon, and instead – existing shareholders begin unloading more shares at slightly better prices than the previous afternoon,  the early morning buyers sell their shares in disgust – pushing prices further lower as selling volume increases.

Bull market behavior on the other hand is like this -

In the morning hours of trading, shareholders sell on multi-day strength in share price, pressuring share prices down.  Buyers – eager to buy on pull-backs in price – step up in the late afternoon hours and purchase shares at lower prices than recently available, driving shares higher in price into the close.

Yesterday, we came to this final decision about today’s Facebook, Inc. (FB $38.23) initial public offering (IPO) – “It is a bullish EVENT – which MAY act as a catalyst to halt selling and cause a strong SPIKE HIGHER in the markets”.   Here’s why (we’ll cover the details below in our S.I.M.P.L.E. Stock Investing Method) -

• The IPO was “over-subscribed”, meaning – there was more demand for the shares than shares available.
• Because of the strong DEMAND, the pricing for the IPO was at the high end of and already upwardly revised price range for the shares.
• The markets were ready for a reprieve of selling, after pulling back over 30% of the total rally appreciation from the October 4th lows, over the last 1.5 months.
• The markets are falling for several reasons, one of which is the FEAR of an event (restructuring of the euro and uncertain consequences of that event) that may or may not finally happen.
• Individual stocks like Alcoa and Ford are at multi-month lows, and at strong multi-month support levels.
• Sometimes, just a spark of buying is enough to throw strong fear into short sellers and cause a short-covering bounce of strong proportions, with quick-footed buyers pressing the short-sellers by hitting the “ask” price with large orders.  Short-sellers are investors who have borrowed shares and sold them high, with the intentions of purchasing them back at lower prices – for a strong profit.

So, what was the result?  The FB IPO was an EVENT for sure, and shares of individual stocks DID move HIGHER in the mid-morning in anticipation of it.  For instance, Apple, Inc. (AAPL $530) shares DID move up in price by over $14/share = 2.7 %!  But shares again met strong selling pressure as it became quickly evident that Facebook shares were not going to advance in price today and act as a catalyst for the overall market.  In fact, Facebook shares were sold hard all day, dropping  15% from its spike highs of $45/share at its opening.  The FB shares closed at approx. $38/share.

Today’s weakness is caused by the usual suspects -

• Fear of the uncharted waters surrounding the POSSIBLE disassembly of a major, modern currency (euro).
• Fear of the recession that has engulfed Europe spreading around the globe.
• Forward looking financial indicators in the US (major US corporation CEO’s declaring weakness and economic uncertainty ahead; Philadelphia Federal Reserve economic survey results yesterday were unexpectedly weak) turning negative.  Earnings at US corporations are going to be negatively impacted.

Please note that volume today on the S&P 500 ETF (SPY) spiked to highs not seen since last November.  FEAR is entering the market now.

- S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

This morning, an investor was telling me briefly that she wanted to buy shares of Facebook (FB $38) TODAY.  I could tell that when I mentioned that FB was probably NOT a buy today that the caller was surprised.  I went on to quickly explain that initial public offerings (IPO’s) are to be handled with EXTREME CAUTION.  Here’s why -

• IPO underwriters have become very skilled at determining the maximum price that the market is prepared to pay for shares of a company being “floated” onto the market.  Based on current earnings, the shares are often “priced to perfection” – which maximizes the amount of money the company is able to raise for ownership rights AND maximizes the fees that the underwriter is able to earn.  Any perceived failure in the newly listed company’s ability to deliver on earnings is met with intense selling.  A good example of this is the Groupon IPO from November 2011.  The shares spiked to over $31/share on the day of the IPO and over the last six months have sold down to $10/share.
• On “hot sector” companies like Facebook (Sector = Internet social media), the privileged few who had the opportunity to purchase the IPO at listing prices have ample opportunity to make a lot of money on the day of the IPO by selling their shares to the hungry public buyers.   Buying shares of an IPO on the day of the IPO is often like arriving late to a party and seeing more people leaving than arriving.
• If the U.S. or global economy is entering a recession, almost all stocks will be negatively impacted in price.
• For the “possibly privileged” (“possibly” because not every IPO is oversubscribed and hot.  Some drop like a rock at the open and NEVER return to the subscription price that the solicited investor paid for the shares BEFORE the IPO) investor, if the IPO is strong on the first day the decision at hand is best summarized as ” a bird in the hand vs. 2 in the bush… “  When given that opportunity, it’s proven best to take your profits on the IPO day.  You can always buy the shares back at another time if the shares prove able to support the IPO pricing structure.
• As mentioned, some IPO shares drop at the open and over a short period achieve a fraction of the value that they were given at the listed price.   So, if you are ever solicited by a brokerage company about the opportunity to buy pre-IPO shares, BEWARE.  A good example of this is the company DEX-One (DEXO $0.75).  The shares launched at $30/share on the IPO day and within the first 6 months had sunk to $5/share.  The shares are now valued at less than a buck.

We’ll talk more about Facebook (FB $38) in the weeks ahead!  Maybe an opportunity will emerge from which we can gauge our risk more accurately and move forward with an investment.  Not today, however.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 16, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

Bear market behavior is characterized by  - Buying in the mornings and selling in the afternoon into the close.  Here’s why -

After multiple days of broad-based selling, lower share prices attract opportunistic buyers who hope that more buyers will begin purchasing shares at perceived discount levels.  When buyers do not materialize by the afternoon, the early morning buyers begin seeking to sell their positions when more buyers DO NOT show-up and instead they see share prices begin to fall further as shareholders who were hoping for slightly better prices (than those offered the previous day) begin selling their shares.

Today’s market was further negatively impacted by -

• Increased concerns of fund withdrawals from Greek banks.
• European Central Bank president Mr. Draghi apparently stating that the ECB won’t keep Greece in the Euro at all costs.
• Disappointing U.S. retailer performance at J.C. Penney and Abercrombie and Fitch.

There was GOOD news hiding in the “wings” of today’s markets =

• New housing starts in the U.S. continue their UPTREND.
•  Mortgage applications = strongly higher than last week.  +9.2% over last week.
• U.S. capacity utilization for April was +79.2%

- S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Hedge fund managers (funds with over $100 million in assets) must declare their holdings to the U.S. Securities and Exchange Commission within 45 days of each end of quarter.

Today we learned that (courtesy of Briefing.com) -

• Berkshire Hathaway disclosed a NEW 10 million share position in General Motors.  Value = approx. $256 million.
• Appaloosa disclosed a NEW investment in Ford Motor Co. of 2.7 million shares and GM of 2.2 million shares.

SMC Notes … Industrial production was POSITIVELY impacted by INCREASED motor vehicle production.

Bridgewater is the largest hedge fund manager in the world.  Please click here for a summary of their company.

Bridgewater has been  purchasing shares of Hewlett Packard (HPQ) over the recent 2 quarters.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 14, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

The stock market is all about forward earnings.  Period.  A stock’s price is nothing more than the current value of future estimated earnings…   Stocks fluctuate – often considerably – as estimates of future earnings change.

Why do estimates of future earnings vary or change?

• Leadership changes at companies.
• Product life cycle realities.  Products mature and customer demand stabilizes or wanes (earnings flatten or begin to decline).
• Competition heats up and demand for a company’s product is siphoned-off by competitors (think early Apple days and Microsoft).
• Company’s miss the next generational development for their products (think Kodak or Nokia).
• Products become obsolete.
• Technology becomes obsolete.
• Government regulation impacts market (sometimes positively; mostly negatively)
• Business cycle enters recessionary period (demand drops as customers stop spending)
• Fear of future recession or shocks to financial system cause customers to stop spending and take on a “wait and see” attitude.
• Monetary policy encourages or discourages investment.
• The market gets all “abuzz” about some new technology or development that has people making bold estimates on earnings that may never materialize, but that drive stocks up to some crazy heights.
• etc…
  

As stock market investors who time our entries in individual stocks and the market in general, these variations in expectations for future earnings is our “bread-and-butter”.  When you get a new story “right” an investment can grow very significantly.    What we teach at Stock Market Companion is that people need to have the correct “distance” to the market.  In other words – you don’t want to be -

1. so close to the market that each and every twitch in the stock price makes you wonder whether to buy or sell.  This has you miss out on intermediate and long term trends in earnings expansion stories at companies.  It’s also an uncomfortable place to “dwell”.   You do not want to be thinking about stock prices all the time.
2. so detached from the market that you come to believe that you cannot engage it successfully and that it’s either better to ignore the market altogether or let some one else manage your money entirely – who is not as concerned about the growth and protection of your gains – as you are.  (We encourage participation with mutual funds and with money managers.  Just make sure that you stay abreast of the market and know what is going on.)

You want to be -

1. Close enough to the market to see new trends forming and early changes taking place in the economy and at individual companies that allow you to participate in NEW GROWTH,  TURN-AROUND, or other interesting stories unfolding in the marketplace.
2. Far enough away from the market that you don’t get overly focused on the  daily gyrations of the marketplace.

Last week we exited the market entirely.  Why?  Because -

1. The political developments in Europe involving Greece being able or unable to remain in the European Monetary Union (EMU) and the immediate uncertainty and disappointment surrounding France’s new socialist president has everyone questioning what is going to happen next.
2. The “U.S. Jobs Report” (Non-Farm Payroll Report from the Department of Labor) for April has us a bit on edge as to what is going to happen near term with the U.S. economy.
3. Stock prices of leading stocks were beginning to fade; Some quite strongly (Fossil (FOSL) lost almost 40% in one day, following disappointing earnings related to – you guessed it – earnings from Europe.)

Today the market continued its downward trajectory as -

1. Germany’s Chancellor Merkel’s party lost an important election in Germany’s most populous region.  The big question = How will France’s shift toward left-leaning policy impact the economic development in Europe and will policy change toward Greece and other rim European nations in financial trouble precipitate a restructuring in the euro, thereby causing short term instability in the financial markets?
2. Greece has been unable to put together a government that honors commitments established this past October to the institutions that are lending it money.  The Greek government is basically shut-out of the bond market and may soon no longer qualify for the lines of credit that it is receiving from institutional lenders.

Into the markets close today, Greece’s government was saying that outflows of capital may destabilize the country’s banks.  Market participants began selling strongly into the close.

- S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

We like how Arena Pharmaceuticals held onto its mid $6 range after Friday’s gap HIGHER on FDA panel approval and therefore possible FDA full approval of its Lorcaserin “weight-loss” drug.  (Appetite suppressor).  (ARNA $6.61)

Shares in Nokia continue to probe NEW LOWS.  Nokia CEO Mr. Stephen Elop is fighting for his life and may yet come up with a winning formula for Nokia?  He’s been at the helm of the company now for approx. 1.5 years. (NOK $3.05)

We reported last week that Asian markets are paying a premium for aluminum contracts …”Aluminum buyers in Japan, Asia’s largest importer, may pay a record fee to producers after China boosted purchases and global smelters cut output.

Premiums for the three months starting in July may climb more than $30 from fees this quarter between $115 and $127 a metric ton over the London Metal Exchange cash price, four executives, representing smelters and buyers, said before pricing talks this month. The highest fee since Japanese buyers began purchasing most requirements through long-term contracts in 1996 was $125 to $130 for the first quarter of 2010, they said, declining to be identified as negotiations are private.

Premiums are poised to surge as demand is expanding in Japan, led by the auto and construction industries, because of rebuilding from last year’s earthquake and tsunami. Buyers inChina, the biggest consumer, boosted imports as they took advantage of international prices that were below domestic levels. Alcoa Inc. (AA), the largest U.S. producer, cut 12 percent of capacity in January and Chief Executive Officer said last month the reductions “may not be the end. (Bloomberg)” ”  We are watchful about the share price of Alcoa as it dropped again below $9/share.  (AA $8.92)

Groupon (GRPN  $13.79) shot higher tonight after the markets closed when the company announced an unexpected profit.  In the late fall, at Stock Market Companion we shared frequently about the then upcoming GRPN initial public offering and the importance of price discovery and the difficulties associated with Groupon’s business model.  The shares soared above $30 on the first day of trading and then proceeded to sink over the last 6.5 months to approx. $10/share this last week.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 11, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

One definition of the German term “Schadenfreude” is finding satisfaction in the discomfort or in the unpleasant turn of events of another person.

The markets were in a bit of a turmoil today as news was released this morning that J.P. Morgan-Chase (JPM $36.79)  reported a $2 billion trading loss from a failed hedging strategy.   Jamie Dimon is the CEO at JPM and he has been a very outspoken critic of the Volcker rule reform, which – among other things – limit the trading that banks can do.

Whenever you become an outspoken critic of something, you place yourself immediately at risk of attracting attention when something goes wrong in the camp that you are defending.  That’s what has happened today for JPM and JPM’s CEO Dimon.  There are many in the political and financial world who are finding satisfaction in Mr. Dimon’s discomfort.

On a bit more weakness and then stabilization in the JPM share price, we may consider a purchase of the shares.  JPM is an excellent bank.  Our close banking friend in Tacoma reminds us however that there is striking difference between the style of New York based banks and their brethren outside of Manhattan.  The New York based banks have a much bigger hand in trading activities and today we are seeing that orientation work to JPM’s disadvantage.

The broader market as measured by the S&P 500 ETF the (SPY $135.61) is bouncing right at “support” of the $135 line.  Yesterday’s market behavior in light of Cisco System’s (CSCO $16.50) and today’s behavior on the revelation of JPM’s $2 billion problem is demonstrating that the market wants to at least bounce a little.  Both of these events were pretty strong hits against the market, yet yesterday and today, the markets have found support at mid-morning and attracted buyers.

In spite of Cisco’s disappointing economic forecast and today’s trouble at JPM, the market is attracting some buyers.  We’re watchful.

Europe – and more specifically – Greece’s ability to form a government that honors its most recent commitments to the European Monetary Union, is a unknown at this time.

Earlier this week, it appeared to us that the market is simply waiting for the next “shoe to drop” before it heads a bit more south (down).  We’ll see  There may be a bounce ahead.

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

This morning, the company Arena Pharmaceuticals (ARNA $6.35) received FDA “Panel” recommendation by a vote of 18 in favor to 4 against – that the FDA approve the company’s drug called Lorcaserin to assist in weight loss by reducing appetite.  One and a half years ago, Stock Market Companion members enjoyed strong gains in ARNA as the stock entered into the FDA approval process.  We sold on strength BEFORE the FDA Panel decision, taking our profits.  The FDA Panel at that time requested more safety evidence and more testing – so the shares immediately dropped from over $7/share down to $1.50/share.  The shares are – today -  over +50% higher on this favorable FDA Panel review and have received BUY ratings from at least one brokerage company.  We are alert for more opportunity ahead with this stock, but are interested in seeing some form of lateral consolidation built before we engage the stock.  Please see this Successful Investing Video on ARNA.

While I was in Oklahoma last week, some people asked me about beaten down Chesapeake Energy company (CHK $14.80).  I looked at the chart and called it a “wait and see”.   Yesterday, the shares appeared to be putting in some form of bottom, but today in the late afternoon there were further allegations of impropriety against the company – this time related to off-balance sheet debt!  Please see this Successful Investing Video on Chesapeake Energy.

Yesterday after the close, Nvidia Corporation (NVDA $13.21) came out with favorable earnings and the stock gapped up higher this morning, and sold off throughout the day.  We cover this also in the above video for Chesapeake Energy.  NVDA has received a broker upgrade to approx $20/ share in price.  That would be a +51% return.  We’ll have to see how the shares develop.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 9, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

Today, the U.S. equities markets again opened lower than the previous day’s close and were able to attract some buyers in the early afternoon – allowing the markets to close HIGHER than their opening levels, but still below the close of each previous day.

Technically, the broader market is at very significant support and could well bounce a bit higher off these levels.  We cover this market overview in our 5 short videos for today.  Working against the market however, is the earnings report presented by Cisco Systems, Inc. (CSCO $18.78) after the close today.  The Cisco that we are talking about here is the internet infrastructure tech-giant, NOT the SYSCO that you see on trucks in your area representing the food service company.  Cisco BEAT 3rd quarter earnings estimates – but MORE IMPORTANTLY – guided LOWER for the next quarters ahead.  This news is poison for any stock and subsequently, CSCO shares are off -8% in light, after-hours trading.

Even though the market is at key support, the market WILL BE IMPACTED by Cisco’s public declaration of uncertainty in the upcoming quarters and lower growth.

Please click here for a good review of earnings and the outlook provided by Cisco’s CEO John Chambers (Reuters).

Meanwhile – Globally – all eyes are on Greece and wondering if Greece can pull together a government that supports their previous government’s commitment to budget cutting and – critically – agreements with the International Monetary Fund and others for maintaining their bond payments.  Remember, Greece “folded” on previous bond commitments in the form of a re-finance that left existing bond-holders with approx. -75% in losses.  This bond “re-financing” was completed last fall and was the largest that the world has ever seen – without complete default.

With a public nurtured for over a decade on excessive government expenditures that supported comfortable early retirement packages, budget cutting measures have been political suicide in Greece.  In a world away in England – Prime Minister Cameron has built his government on policies that reduce government expenditures by approx. 40%!

In the U.S., we awoke today to the idea that a prison inmate in West Virginia carried 41% of the democratic primary vote in that state yesterday.  The U.S. presidential election is now in near full-swing.

At Stock Market Companion, we are going to preserve our cash until clear opportunities arise.  We look at some opportunities for risk-tolerant, nimble investors in our 5th video today.

Fiscally – in the U.S. – our hope lies in the emergence of political leaders who have the guts to steer the kind of course that Mr. Cameron in England is steering today.

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Here are 5 short videos that provide you with -

• A broad, monthly view of the markets that give you a QUICK understanding of how the U.S. equities markets have performed since 1995.SMC Successful Investing Video 1
  
  SMC Successful Investing Video 2 

   

   

   

• A look at the current market conditions
  
  SMC Successful Investing Video 3
  
• Individual stocks that have been terribly destroyed in value over the last weeks and months
  
  SMC Successful Investing Video 4
  
• Individual stocks that may offer VERY nimble investors an opportunity.
  
  SMC Successful Investing Video 5

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 7, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	ZAGG, Inc.	ZAGG	Holding	2/28/2012	-2%
2	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-11%
3	EBAY	EBAY	Holding	3/14/2012	+8%
5	Linked-In	LNKD	Holding	3/26/2012	+9%
6	Molycorp	MCP	Stopped Out Today	3/29/2012	-23%
7	Alcoa	AA	Holding	4/11/2012	-7%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

At Stock Market Companion, we believe at this time that the U.S. economy is continuing to very modestly expand and that select corporations deserve close attention for investment.

At the same time, however -

1. Europe continues to confound the marketplace due to political upheaval associated with the consequences of overspending and the difficulties of a rigid monetary system that does not allow restructuring to take place in “rim” countries. 

2. France’s incumbent president Mr. Sarkozy is OUT.  So are his policies associated with budget austerity and quite possibly – open market policies.  Protectionism and more economic stimulus may be the next step in France.  This does NOT necessarily mean something negative for the equities (stock) markets.  IF – however – France begins to balk at the support given to Greece and other rim European countries that have significant sovereign debt troubles, and the European Monetary Union must restructure, there will be increased, significant volatility in the equities market. 

3. At the height of the European monetary crisis last year, OUT-GOING Mr. Sarkozy and German Chancellor Mrs. Merkel made a BOLD move.  They chose to take the next natural step forward in European unity = income tax integration between Germany and France.  This was huge.  That move may now be in jeopardy.  IN-COMING French President Mr. Hollande may be the first step in the restructuring of the European Monetary Union.  This MAY add-to increased uncertainty and volatility in the equities markets. 

4. Russian President, Mr. Putin is back IN for another 6 years.  He is SAYING that he wants increased, strategic discussions with the U.S.  We’ll see what this means over time. What is definitely true is that he does not want to be looked at as weak toward the U.S.  Events here will likely put the markets on edge a bit.
   

One thing is certain – stocks will fluctuate AND opportunities will present themselves.

There may be at least ONE important similarity that we can draw between the U.S. and France in terms of election outcomes -  Incumbency may be a LIABILITY in this economic and political climate.

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Recently, we have correctly timed our entries on Apple, Ebay, Linked-In, and Zagg.  Unfortunately, we have been handed our hat in investments of Ford and Molycorp.  Alcoa is looking weak, but we like the story there quite a bit.  We like the story unfolding at Ford and Molycorp too, but we have allowed our lower level stops to take us out of the investment.

At Stock Market Companion, one of the many strategies that we follow is the hiring of key leaders at corporations that are trying to re-create themselves.  This is the “P” in our S.I.M.P.L.E. Stock Investing Method.  “P” stands for Person or Product that is acting as a catalyst for change at the company that we are considering investing in. We believe that these companies, among others, have hired excellent leaders to prepare for the future -

J.C. Penney (JCP $33.58)

Wet Seal, Inc (WTSLA $3.95)

Nokia (NOK $3.21)

We will be looking for appropriate entries in these companies, when the market shows that it is more suitable for investing – OR – when we see a gap-down reversal formation from which we can gauge our risk.  Right now, the market is putting a steady strain on many individual company share prices.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 4, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings – (from Monday, April 30th)

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	ZAGG, Inc.	ZAGG	Holding	2/28/2012	+7%
2	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-12%
3	EBAY	EBAY	Holding	3/14/2012	+6%
4	Ford Motor Co.	F	Stopped Out Today.	3/15/2012	-17%
5	Linked-In	LNKD	Holding	3/26/2012	+15%
6	Molycorp	MCP	Holding	3/29/2012	-20%
7	Alcoa	AA	Holding	4/11/2012	-6%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

Today’s U.S. Non-Farm Payrolls (Jobs Report) Report drove STRONG  institutional selling across all U.S. equities markets today.   Here’s the link to this important Jobs Report – directly from the U.S. Department of Labor.

Here is what we know now …

• Whereas the European economic condition is recessionary, we believe that the economy in the U.S. is still expanding (although extremely modestly).
• The most recent Federal Reserve Beige Book Report demonstrated that the 12 Federal Reserve districts in the U.S. were recently still showing growth.
• The Jobs Report is an important indicator of economic condition, and although the results showed LESS JOB GROWTH than expected (hoped for), the truth of the matter is that there were still jobs added to the economy.
• The Federal Reserve appears ready to act with more bond purchasing to drive down the long end of the bond curve and stimulate capital investment.
• This is an extremely important election year and President Obama is going to fight hard to at least give the impression that he is doing all that he can to stimulate the economy.  Perceptions and reality are of course key ingredients to the upcoming elections this Fall.
• Our S.I.M.P.L.E. Stock Investing Method works, but our choices in metals (Molycorp, Alcoa) and Ford – have been quite poorly timed.  Our choices for eBay, ZAGG and Linked-In have been good ones.
• The broader U.S. equities market is showing OMINOUS signs of further weakness ahead.  We are very cautious.
  

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Metal and materials processing companies like Molycorp and Alcoa have had a very difficult time.  Molycorp more so than Alcoa.  Our choice of Ford Motor Co., has also – in spite of Ford’s decade long record of sales in February – been a headache.

Offsetting this malaise are our strong investments in eBay and Linked-In.

At this point, we are considering damage control.  Our stop in Ford kicked-in at $10.75 after a steep fall-off at the open.  So we are OUT of Ford.

Our stop on Molycorp stands at $25.80.  We may proactively sell our Alcoa shares on Monday, although we are very interested in the medium term perspective this year on the possibilities of an increase in aluminum prices – IF the 7% demand forecasts hold and IF smelting capacity continues to be removed by the major Aluminum producers.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

May 2, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings – (from Monday, April 30th)

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	ZAGG, Inc.	ZAGG	Holding	2/28/2012	+17%
2	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-12%
3	EBAY	EBAY	Holding	3/14/2012	+10%
4	Ford Motor Co.	F	Holding	3/15/2012	-13%
5	Linked-In	LNKD	Holding	3/26/2012	+6%
6	Molycorp	MCP	Holding	3/29/2012	-19%
7	Alcoa	AA	Holding	4/11/2012	-3%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

With the positive momentum from early this year clearly GONE from the markets, we are left with some chop and considerable uncertainty.   Today’s market behavior reflected these concerns -

1. Today’s ADP Payrolls Report disappointed and points to possible disappointment on Friday when the Bureau of Labor reports its Non-Farm Payrolls Report (“Jobs Report) for April.  It may be that expectations for another strong jobs report will NOT be met.
2. The European Purchasing Manager’s Index for April showed further WEAKNESS.  This caused the U.S. dollar to surge against the euro and and commodity related stocks – like Alcoa – to sink a bit.  Just to maintain par, commodity based stocks will sink if the U.S. dollar increases.  The opposite is also true … If the dollar shows weakness, commodity based stocks will often surge higher.

After hours today, large and small companies continued to report earnings…  Please see below a few comments about former SMC holding Mitek Systems Inc. (MITK $5.78).

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Former SMC holding Mitek Systems, Inc (MITK $5.78) reported earnings after the markets closed this afternoon and the results are terrible! This afternoon, management reported a -58% change in year over year revenue growth!   The company reported only $1.19 million for the quarter in sales verses expectations from analysts of $4.14 million.  That’s awful.

Remember that shares in Mitek imploded last month when we all learned suddenly that the company was being sued by its largest customer – USAA Bank -  for patent infringement and fraudulent activity!  The shares had reached up toward $13/share and plunged on this news.  Today, prior to their earnings release, the shares were quoted at $5.78/share.  Tonight, after these terrible results, the shares are quoted approx. -40% lower.

This is a perfect example of how quickly a micro-cap company can fall out of favor and be completely shunned by the investment community.  We had strong  = approx. +40% returns on this one until the day that the allegations became public on the company.  When we sold, our position turned out to be a -12% loss, because we had “added-to” our position at recent highs – which drove UP our break-even price on our overall share count.  Although this was a real disappointment, we sold our shares immediately because we didn’t know how badly the shares would be impacted by institutional investors caught by surprise by the allegations against the company.  With the total number of shares outstanding on the company being only approx. 27 million, we were very concerned that the share price could RAPIDLY deteriorate as sellers all pressed for the exits.  This is what has happened over the last month AND now tonight after the close.

Mitek is refuting the allegations and providing their own side of the story.  If Mitek can win this case, the shares could run again.  Their technology and the application of being able to offer bank customers a means of depositing checks from anywhere is a compelling story.  At this time however, we are not interested in the shares.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

April 30, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	ZAGG, Inc.	ZAGG	Holding	2/28/2012	+17%
2	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-12%
3	EBAY	EBAY	Holding	3/14/2012	+10%
4	Ford Motor Co.	F	Holding	3/15/2012	-13%
5	Linked-In	LNKD	Holding	3/26/2012	+6%
6	Molycorp	MCP	Holding	3/29/2012	-19%
7	Alcoa	AA	Holding	4/11/2012	-3%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

The broader market, which we measure using the S&P 500 Exchange Traded Fund (ETF) – ticker “SPY” = is currently quietly sitting ABOVE its 50 day moving average.

Today’s volume for the broader market was low.  As we have mentioned over the last few weeks, the MOMENTUM from the first quarter has dried up for the markets.

There were some items of interest today, with Microsoft spending approx. $1.7 billion for a 17.6% stake in a company that Microsoft is forming with Barnes and Noble booksellers  (BKS $20.75).  If we use a simple ratio to solve for the remaining 82.4%, the remaining 82.4% owned by BKS is valued at $1.4 billion.

Now, let’s go see at Finance.yahoo how many shares have been issued at BKS and other items of interest…

• If we take BKS total shares outstanding of approx. 50 million shares and divide that into $1.4 billion, then each BKS share is valued at $28 (not including the existing BKS business)!
• BKS jumped over 90% in value today and closed at approx. $20.75
• BKS shares are 67% sold short – which is one reason why the shares jumped so high today.  The short sellers (short sellers borrow shares to sell HIGH, hoping to buy them back at a lower price) had to cover their positions quickly this morning.
• It may be that BKS still may move to the UPSIDE, due to this “line-in-the-sand” value of $28/share for BKS’s ownership in this “Newco” formed with Microsoft.
• The $28/share does NOT include yet any value for the existing Barnes and Noble business, which DOES have value, although their balance sheet is loaded with questionable big ticket items like $524 million in goodwill (which may never materialize), $566 million in intangible assets (where and what are these assets?)…
  When you look at the quality of Barnes and Noble’s balance sheet, you can see why 67% of the shares are sold short.   To the short sellers surprise, the game changed however today, and they may have to cover – and push the shares of Barnes and Noble’s HIGHER in the process!

For those interested in more information, please read this article on the Microsoft / Barnes and Noble alliance (Reuters).

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Stock Market Companion holding ZAGG, Inc. (ZAGG) continued to move higher today.

Please see our comments about the Barnes and Noble / Microsoft alliance and “Newco” formed today for ideas.

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.

- The Stock Market Companion -

15Minute Market Update

April 27, 2012

—— Stock Market Investing since the 1980′s ——

Published 3 Days / Week
Monday, Wednesday, Friday
Monthly Subscription $49.95

Today's SMC Watchlist

-Executive Summary-

- Stock Market Companion – Current Holdings -

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	ZAGG, Inc.	ZAGG	Holding	2/28/2012	+10%
2	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-12%
3	EBAY	EBAY	Holding	3/14/2012	+9%
4	Ford Motor Co.	F	Holding	3/15/2012	-11%
5	Linked-In	LNKD	Holding	3/26/2012	+10%
6	Molycorp	MCP	Holding	3/29/2012	-17%
7	Alcoa	AA	Holding	4/11/2012	-2%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

- Market Trends -

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

- Market Perspectives -

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) -

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

- Today’s Highlights -

– S.I.M.P.L.E. Stock Investing Method tm -

- (Where each investment begins with a Story and ends with Earnings) -

S.I.M.P.L.E. Stock Investing is built upon these core concepts -

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Institutional Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

- Benchmarks “At a Glance” -

-Data Source : Financial Visualizations Inc.