t 6/30
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The Spear Report
Professional Edition for 06/30/2009
Vol. 6 Number 122
Best Quarter in Several Generations
COMPANIES MENTIONED TODAY
Symbol Company Name PWR #Recs Close$
AAPL Apple Inc 30.5 4 141.97
ANAD Anadigics Corp 0.0 2 3.92
ANR Alpha Natrl RES 22.75 3 26.75
BIDU Baidu.com ADR 29.25 4 298.18
CGA Corus Group PLC 6.75 2 8.50
CHS Chicos FAS Inc 4.5 2 9.51
HGRD Health Grades 4.0 2 4.17
IAG Iamgold Corp 7.5 2 10.30
RGLD Royal Gold Inc -0.75 2 42.97
TBT Not in Consensus NA NA 50.65
TIVO Tivo Inc 1.25 2 10.58
T AT&T Corp 18.25 3 25.22
MODEL PORTFOLIO
Todays Trades
Sym Action Limit Trigger Stop Stop Type Current
Current Holdings
Sym Ent Date Dir** Entry Current Perf % Stop Stop Type
ANR 05/15/09 L 26.86 26.75 -0.4 NA Intra-day
Notes: coal play
TBT 06/01/09 L 54.38 50.65 -6.9 NA Intra-day
Notes: Inverse leveraged T-bill yield
CGA 06/05/09 L 8.05 8.50 5.6 NA Intra-day
Notes: China Green Agriculture
TROW 06/23/09 SS 39.12 41.86 -7 42.35 Intra-day
Notes: Leading Financial
EV 06/23/09 SS 25.54 26.93 -5.4 27.75 Intra-day
Notes: leading financial
BEN 06/23/09 SS 69.25 72.06 -4.1 73.60 Intra-day
Notes: Leading Financial
RIMM 06/26/09 SS 69.12 69.64 -0.8 72.75 Intra-day
Notes: Selling Short now
HGRD 06/29/09 L 4.40 4.17 -5.2 4.00 Intra-day
Notes: small cap health info
CHS 06/29/09 SS 9.15 9.51 -3.9 10.05 Intra-day
Notes: overbought retailer
ANAD 06/29/09 L 3.97 3.92 -1.3 3.70 Intra-day
Notes: nice dip
IAG 06/29/09 SS 10.65 10.30 3.3 10.75 Intra-day
Notes: Going short now
TIVO 06/29/09 L 11.00 10.58 -3.8 10.25 Intra-day
Notes: Nice dip
RGLD 06/29/09 SS 42.96 42.97 0 46.25 Intra-day
Notes: Going short now
**Direction: L = Long, SS = Short Sale **
TRADE NOTES
OVERVIEW: On Monday the Dow added 90 points, in line with our
expectations for a mild uplift. Under the surface, however, things
were somewhat choppy. We may get some selling pressure coming
in this afternoon, as we are anticipating a down draft in early July.
OPEN POSITIONS:
Gold was flat on Monday. (IAG) moved a couple of percent in our favor while
(RGLD) popped a bit from an oversold condition.
(ANR) paused.
(CGA) added another 2%.
Our remaining financial shorts were mostly flat.
(TBT) closed again at its 200-day sma, which should provide
support.
Among our new buys and shorts, results for the day were choppy.
Health Grades (HGRD) dropped 5% and is now in a better buying
position, but we want it to hold above $4. (CHS) rallied after its big
down day on Friday providing an excellent intraday short entry that I
noted on the spearfinance blog. (ANAD) was flat, while (TIVO)
rewound from Friday’s bullish indications. Bad TIVO.
NEW BUYS/SHORT SALES:
None.
WATCH LIST:
We present our Watch List stocks as potential trade ideas for
aggressive traders who wish to do more research on the stocks.
POTENTIAL WATCHLIST SHORTS:
AT&T (T). The stock has vastly underperformed its peers on this
rally off the March lows and has $60 billion in debt.
POTENTIAL WATCH LIST LONGS:
Manitowoc (MTW), which makes agricultural machinery. The
Semiconductor ETF (SMH). Apple (AAPL) and Bidu (BIDU).
COMMENTARY
Wall Street should be in a good mood today as it closes the books on
one of the best quarters in three generations. Keep in mind, however,
that celebrations on the Street never last long.
The end of quarter window dressing party is likely to disband over the
next few days. If sellers do arrive, as we expect, be sure you respect
your stops. Our best guess is that after posting one of the best
quarters ever,
July will be a down month due to funds taking profits. We are not expecting a crash, just some ordinary profit taking, but
markets tend to fall faster than they rise so be prepared for some
bumps.
As we clarified in SpearChat yesterday, however, an expectation for
a down month in July does not mean we have become bearish or
changed longer term forecasts. Rather, we think a summer dip will be
buyable,
but it may also be confusing, as we expect some sector
rotation. Precisely which sectors will lead a presumptive final rally
leg is quite uncertain at this time.
In the bigger picture, we noted in SpearChat yesterday that Robert
Prechter, the Elliott Wave guru, is predicting Dow 400 as an eventual
downside target. The forecast in based on the cyclical nature of
booms and busts on a macro scale. Prechter, whom we consider one of our "stopped clock" forecasters,
believes the U.S. has
entered a bearish super-cycle.
The concept of grand cycles is nothing new and one does not have to
believe in E-waves to understand it or profit from it. Demographers and cultural
historians such as Neil Howe have identified 80-90 year super-cycles
in the U.S..
Howe believes we are starting a particularly volatile sub-
cycle that will bring the same level of social and economic upheaval
as the Great Depression, the Civil War and the Revolutionary War
period. Of course, if it comes, it won't look like any of those; it will be
unique. There will be casualties, but also tremendous opportunities. It
can be viewed as a process of creative destruction.Howe expects
this phase of the super-cycle to take 20 years to play out and to get
much more intense before it gets better. But it won't be all bad.
Howe expects that like the post-WWII period, there will be a strong
movement toward trans-national cooperation and regulation, rather
than the unbridled cowboy entrepreneurism of the Boomers-gone-
wild. Although it will be an age of economic Austerity, it will foster
interdependence, strengthen familial ties and jumpstart a new
localism. The push toward rapid innovation fueled by venture
capitalists will be replaced by the widespread implementation of
existing technologies that create benefits for society as a whole, not
just for special interests.
Planning will trump risk taking, saving will trump spending,
governments will have larger roles to play, taxes will increase on the
rich and entitlement programs will be adjusted to exclude the wealthy
in the interest of social fairness. In the U.S., which has written many
exclusions into the fine print of the social contract, there will be a
Great Leveling.
Don't forget, however, that parts of the world will not be in the same
sub-cycle. That's where things will get really interesting. The hyper-
entrepreneurial phase that the West has completed is just starting in
some regions of the world and with globalized financial markets, we
can trade it.
For example, Carlyle Group has raised $1 billion from pension funds
and financial institutions for a new fund targeting fast-growing
companies in China and India. The fund, which is twice as large as
previous Carlyle Asian growth funds, is a bet on the resilience of
Asia in the face of chronic problems in the West. Carlyle's
investment team is seeking companies that have remained unscathed
by the global trade crisis because they address domestic markets. The
typical company in Carlyle's Asian Growth fund is growing 20-50%
annually. We expect them to be looking at companies such as
American Dairy
(ADY), China Green Agriculture
(CGA) and
VanceInfo
(VIT). MARKET CALLS
The Dow is in a well-defined trading range from the May lows to the
200-day ema (red line). The venerable index could oscillate in this
range for a few more weeks or even a month or two before
reinstating a trend. Our presumption is that the trend will be up.
MARKET DIRECTION
For those Pro subscribers trading Index proxies (ETFs, futures,
Rydex) the following information may be useful. Just to clarify, our
market direction indicators are trend followers, not predictors.
SML- S&P SmallCap600; MDY= S&P MidCap 400 tracking stock;
SPY= S&P 500 tracking stock; QQQQ= Nasdaq 100 tracking stock.
(+) or (-) signifies a change in status today.
Short-term Market Direction:
S&P 500: Up
Intermediate-term Market Direction:
S&P 500: Up
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