Wednesday, September 26, 2012

Market Outlook: This 'Sure Thing' Indicator is Saying 'Buy, Buy, Buy'

Markets were little changed last week. Volatility has been increasing in the past several weeks after falling all summer. Low volatility eventually gives way to high volatility, a process that seems to be under way, so traders should be prepared for a sizable market move at any time.

Stocks Give a Long-Term Buy Signal
Stock prices were down slightly last week. SPDR S&P 500 (NYSE: SPY) lost 0.93%, while PowerShares QQQ (NASDAQ: QQQ), an ETF that tracks the 100 largest Nasdaq stocks, lost 0.04%.
QQQ closed last week with a relatively rare buy signal based on an indicator called KST. This is an indicator developed by Martin Pring, who said it offered a reliable market forecast based on the interaction of the stock market with the business cycle. He called it "Know Sure Thing" because he felt that it was the closest thing to a sure thing he knew of.

Three time frames for this indicator are shown in the chart below, using the parameters Pring offered in his 1985 book, Technical Analysis Explained. The medium and long-term indicators both crossed above their moving averages last week, while the short-term version has been bullish since July.
QQQ Chart
In the past, being long when all three KST indicators were above their moving average would have provided profitable signals for trading QQQ. Over the entire history of QQQ, 4 of 6 (66.7%) buy signals were accurate, delivering an annualized gain of 10.26% and having less than one-third the risk of a buy-and-hold strategy.  (more)

MUST READ: Is JP Morgan Shorting Paper Metals While Acquiring Massive Physical Stockpiles?

He is absolutely convinced that gold and silver are going MUCH, MUCH higher. He told me last week that with the Fed’s latest “open-ended” QE edict, “The dollar and bond market are done, finished and the bull market in gold is guaranteed!”
from Silver Doctors:
As silver investors are likely aware, leading silver analyst Ted Butler has openly speculated whether JP Morgan’s alleged massive short silver position is held on behalf a client such as the Federal Reserve (with the intent to prop up the dollar by suppressing gold and silver) or the Chinese government (with the intent of acquiring physical gold and silver bullion at a discount due to their massive paper short position on the futures market).
The Doc has long privately wondered whether the bullion banks’ PM short positions could actually be leveraging their own physical bullion accumulation by artificially suppressing the paper futures price.
These thoughts originate in our following of Jim Sinclair, who has always maintained that the bullion banks will be the one’s making the lion’s share of the profits in this great secular gold and silver bull market.   One thing the bullion banksters are not is dumb, and they can see the writing on the wall for the US dollar as well as any SD or ZH reader.
New commentary from a bullion insider who claims to have personally managed the movement of 27 million ounces of gold from HSBC’s vaults into JP Morgan’s seems to substantiate Sinclair’s claims.
Read More @ Silver Doctors

Make a Potential 30% or 100% on This Drilling Stock... Your Choice

Natural gas and oil driller Chesapeake Energy (NYSE: CHK) is setting up for a move higher. The stock has formed a base at $14, and a series of higher lows on a climb to the year-long technical pivot at $20 sets up a potential breakout run. The wedge pattern seen on the chart below gives us a target of $26, which is the 2012 high made in March.
CHK Chart
A move to $26 would give shareholders a 30% return, but there is a way you could double your money with a stock substitution strategy. Continued low volatility makes a call option purchase attractive for long-term positioning.
One major advantage of using long options rather than buying shares is putting up much less money to control 100 shares -- that's the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a daunting task. (more)

Get Your Fake Tungsten-Filled Gold Coins Here

In the aftermath of the recent stories about Tungsten-filled 10 ounce gold bars discovered in midtown Manhattan, there have been two broad sentiments expressed by the precious metals community: i) that this is as many have expected, and that of the physical inventory in circulation, much is fake (particularly that held in official hands, either via ETFs or in sovereign repositories which for various reasons still can not be publicly assayed) and ii) is the comfort that while it is relatively easy and cost-effective to use tungsten to falsify larger gold bars and bricks, those who own primarily gold coins are safe as for some reason, it is less economic, feasible or widespread to counterfeit smaller precious metal denominations. Sadly, while i) may be true, ii) is patently false. The proof comes courtesy of a firm called ChinaTungsten Online which proudly markets its broad "tungsten-alloy services" including, you guessed it, the gold plating of various tungsten formulations among them "gold" bricks, bars and, yes, coins. Oh did we mention a Chinese company openly advertizes its tungsten gold-plating and precious metals replication services, something which the tabloid media's CTRL-C/V majors openly mock as improbable conspiracy theory. Well, as they say, it is only conspiracy theory until it becomes conspiracy fact.  (more)

A Crashing Sector, Gold & The Fiscal Cliff

from KingWorldNews:
The Godfather of newsletter writers, Richard Russell, had a great deal to say about gold, the fiscal cliff, stocks, and a collapsing sector. Here is what Russell had in his latest report: “The US faces a one trillion dollar debt. How will the US get the money to pay off this frightening deficit? The Fed will buy mortgage-backed securities from the banks at the rate of $40 billion a month, thus re-liquifying the banks. The banks will then spend the money on Treasury bonds.”
“Thus, the Fed will accomplish a few things — the banks will be rendered more liquid, and the Dow and mortgage-backed securities will probably be lifted. But what happens when the banks are cleared of all their mortgage-backed securities? Maybe the Fed will buy straight mortgages, I don’t know, and I’m not sure that the Fed knows. Maybe the Fed just wants to sneak by the election, and later they’ll address the problems.
Meanwhile, the Fed will continue to talk up the economy. But I believe it’s the Transports that are telling us the real story regarding the US economy — and to put it politely, the Transport have been crashing. Question — could the real story about the US economy be that the US economy has been crashing too?
Russell continues @

Why Your Phone, Cable & Internet Bills Cost So Much

The U.S. has fallen behind much of the Western world when it comes to phone, cable and Internet service. Americans actually pay much more for inferior service compared to their global counterparts.
In his new book, The Fine Print: How Big Companies Use 'Plain English' to Rob You Blind, Pulitzer Prize-winning reporter David Cay Johnston highlights these astounding facts:
  • Americans pay four times as much as the French for an Internet triple-play package—phone, cable TV and Internet—at an average of $160 per month versus $38 per month.
  • The French get global free calling and worldwide live television. Their Internet is also 10 times faster at downloading information and 20 times faster uploading it.
  • America has gone from #1 in Internet speed (when we invented it) to 29th in the world and falling.
  • Bulgaria is among the countries with faster Internet service.
  • Americans pay 38 times as much as the Japanese for Internet data.
Since the mid-1970's when Ma Bell was cited as holding a monopoly over phone service, Americans have been told more competition would lower their phone bill. But the promise of lower prices has actually led to higher prices, says Johnston.  (more)

CERN has retreated to the bottom of its bull channel

Cerner Corp. (NASDAQ:CERN) — This leading supplier of health care information technology is in a powerful bull channel that began in November 2010.

We recommended the stock on Oct. 21, 2011, at about $66, with a target of $75. It made it to over $78 in March, and then ran to a high of over $84 after crushing analysts’ Q1 estimates. Then, on May 21, it was recommended to buy the stock on a pullback to $75, and it ran to over $88.

On July 9, I said, “Now CERN has turned from the top of its bull channel, so try to buy it on a pullback at around $80. Our target is still at $95. Note the high volatility of this stock, which can be an advantage to the trader and long-term buyer. But don’t chase this stock. Let it come to you.”
The current opinion of analysts has not changed, and neither has mine. CERN has retreated to the bottom of its bull channel and it is time to buy. Note the buy signal from its MACD. The target remains $95.
Trade of the Day – Cerner Corp. (NASDAQ:CERN)

3 Small Caps That Could Deliver Big Gains by Year-End

The Russell 2000 Index has been showing some strength lately as investors are beginning to take more risk with their portfolio allocations. At the end of last week, more than 80% of the companies in the small-cap index were trading above their respective 50-day moving average, an improvement from 56% of the index trading above their 50-day trendlines two weeks ago.

The improving breadth of the "risk on" trade (i.e., investors taking more risks by buying small-cap stocks) is an indication that the last quarter of the year is likely to finish strong for stocks. With that in mind, we thought it would be valuable to look at some stocks that are likely to lead the small-cap universe higher through the rest of the year.

To do this, we scoured the Russell 2000 Index companies for stocks that are trading above their 50-day moving averages and trending higher. In addition, we added criteria to find companies with a higher chance of analyst upgrades and short interest squeezes, both of which would help to boost prices.

The table below displays the top 10 small-cap companies that are in a position to lead the Russell 2000, and the rest of the market, higher.
Small-Cap Stocks
Let's take a look at a couple that stand out to us.

First, the homebuilders on the list. Both KB Homes (NYSE: KBH) and Ryland Group (NYSE: RYL) are members of the residential construction sector, a group of stocks that has grabbed a bid as of late.  (more)

Stock On the Brink of a Technical Breakout That Could Return 60%-Plus

This stock has a history of making big moves.
Between January and April, shares rose about 30%, from a low near $343, to a high above $440.

But in July, after the company reported lower-than-expected same-store-sales, shares swung down equally as far, plummeting nearly $100 in a day! The stock dropped from an intraday high of $404.59 on July 19, to an intraday low at $307.20 on July 20 -- a 24% loss is less than 24 hours.

Even though the stock has a history of wild turns, shares haven't moved significantly since that catastrophic July day. As a result, it is currently at a bargain price -- and looks to be at a profitable entry point.

Shares of the burrito mega-chain, Chipotle Mexican Grill (NYSE: CMG), appear to be approaching significant historical resistance near $346. If the stock can definitively surpass this resistance point, it could bullishly move on to complete a large basing pattern. In this case, no significant overhead resistance would be in sight and the stock could surge much further, potentially reaching a new all-time new high, for potential 62% gains.

Helping drive this optimistic growth outlook is the company's aggressive expansion plans. In the first two quarters of 2012, over 150 new restaurants were opened in the United States. And in the future, the company plans to more than double its storefront presence, from around 1,000 current locations to 2,100. Additionally, the fresh food chain recently opened three stores in London and its first location in Paris. As people worldwide develop a taste for Chipotle's quality burritos, overall company sales should continue to rise.

Stock on the Brink of a Technical Breakout
The technical outlook is certainly bullish.
CMG Chart
From mid-2010 to June 2012, shares were on a major uptrend. In early 2012, as the stock broke from important resistance near $348, shares catapulted higher on an accelerated uptrend. They eventually climbed to an all-time high of $442.40. However, unable to maintain this momentum, the stock tumbled down to the $387 level and became capped by resistance near $420.  (more)