Monday, December 3, 2012

Is it Time to Dump Microsoft?

During the past two years, software developers in Redmond, Wash., have been fine-tuning the millions of lines of code that comprise Windows 8, the latest version of Microsoft's (Nasdaq: MSFT) ubiquitous software operating system. It's been an ambitious task, as Microsoft has developed various flavors optimized for the proliferating number of computing devices. There's even a version for smartphones and tablet computers.

Judging from surveys in the tech community, the major software push has been a success. The various flavors of Windows 8 have been quite stable, when compared to previous versions, and offer an impressive array of features.

Trouble is, Windows isn't being judged against preceding iterations. It's being judged against very impressive software platforms being offered by Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) and others. As a result, the bean counters at Microsoft can no longer simply sit back and count the cash coming in from the regular Windows upgrade cycle it once enjoyed during the 1990s. In fact, there may not be much of an upgrade cycle at all -- at least according to short sellers.

Since early November, concerns have been growing that lofty expectations for Windows 8 won't be met. Short sellers have taken note: The short interest rose 11% to 110 million shares in just the two weeks ended Nov. 15 (data were released Nov. 27). It's worth noting that on Nov. 13, two days before the data were compiled, Steven Sinofsky, president of the Windows division, was let go. It's unusual to see such a high level departure just weeks into a major new product launch.

It's pretty hard to overstate the importance of the Windows franchise to Microsoft. Apple and Google have copied the company's business model by developing an operating platform that can host a wide range of ancillary services. If Windows loses market share -- and mind share -- then that bodes ill for the company's other divisions.  (more)

Special Dividend Makes This Already Attractive Stock a Screaming 'Buy'

Wouldn't it be nice this holiday season if the stores paid you cash, instead of you forking over all your hard-earned money? Traders who buy Costco (NASDAQ: COST) can turn this fantasy into reality.

That's because the company has just announced it's paying shareholders a special dividend of $7 per share on top of its regular scheduled $0.275 quarterly cash payout. Special dividends are one-time, irregular distributions. Because they're infrequent, they are often far larger than scheduled quarterly dividend payments. Costco's dividend is payable on Dec. 18 to holders of record on Dec. 10.

Many publically traded U.S. companies are declaring special dividends as the likelihood of government-imposed U.S. dividend tax increases draws closer. A dividend paid on or before Dec. 31, 2012, will be taxed at the standard 15% rate. Depending on the fiscal cliff negotiations and your personal income tax bracket, the dividend tax rate after that could be as high as 43.4%.

Costco is currently one of 77 firms paying a special dividend this quarter. And while this special dividend is subtracted from the stock price, share prices often recover quickly after dividends are paid. What makes Costco even more interesting as a trade is the company's outstanding technical and fundamental outlook.

Acclaimed as one of the world's most successful retailers, Costco has amassed a huge cash reserve of $3.5 billion. This reserve has been built on consistently strong same-store sales growth. Between August and November, same-store sales increased at least 6% each month.

From a technical perspective, COST shines.

COST Chart

Shares of the big-box retailer have been in a major uptrend for the past two-and-a-half years. Since hitting a low of $51.96 in June 2010, the stock has nearly doubled. Shares are currently trading at the $104 mark.  (more)

Gold, Silver and Miners in Stage 1 Accumulation Mode

We don’t hear much about gold and silver anymore on the news. This time last year you could not go 5 minutes without a TV or radio station talking about them.  Why is this? Simple really, precious metals have been building a Stage 1 Basing Pattern for the last 12 months. This boring sideways trading range is how the market gets most of those long holders out of an investment before it starts another move up. The saying is “If the market doesn’t shake you out, it will wait you out”.
We all know time in money so the above statement makes a lot of sense doesn’t it? Instead of having your money sitting in an investment that has clearly displayed a large sideways range with month and possibly years before any significant breakout will occur, why would you want their money in it doing nothing? There are other opportunities which you could be putting your money into that could generate more gains until the precious metals sector sets up with a high probability trading pattern.
The good news is that gold, silver and precious metal miner stocks are forming a very large Stage 1 Accumulation pattern on the weekly chart. This points to a multi month rally in prices if they breakout above our resistance levels.

Gold & Gold Miner Stocks Weekly Analysis:

The chart below shows a lot of analysis and to the untrained eye this may look messy and confusing, so take your time to review it. In short, what I am showing are sideways price patterns using the previous highs and lows for support and resistance levels. The analysis shows the shift in prices from bearish (down), to Neutral (sideways). The exciting part about this pattern is that a new bull market should emerge if my analysis is correct. Now, I’m not talking about 5 -10% move here, I’m talking about a multi month and possibly a yearlong rally in precious metals that could allow some individuals to retire early if played properly…
A break above our red dotted resistance lines should trigger aggressive buying in gold miners along with physical gold bullion.
Gold Miners ETFs
In the past month I have been giving out some of my Stage 1 trading ideas which have generated some decent gains for those who follow along. All but one have generated gains with FSLR 12.5%, FB 12%, RIMM 54%, AAPL 5%, TLT 2.5%, XLU 1.5%, and KOL down -5.2%. Keep in mind that you can follow my trading charts live for free and get some of my stock and ETF trading ideas here:

Silver & Silver Miner Stocks Weekly Analysis:

This chart of silver and silver miner stocks (SIL), shows a very similar pattern to that of its big shiny sister (Yellow Gold). Silver carries a lot more risk because of its industrial usage. Also this commodity is thinly traded and can move very quickly on a daily basis compared to gold. Because of these quick price movements it has attracted a lot of speculative money which also has increased the volatility. More often than not silver will move 2-3 times more on a percentage bases than that of yellow gold.
Silver Miners ETFs

Battle of the Miner ETFs Weekly Performance:

This chart compares three precious metals miner ETFS (GDX – Gold Miners, SIL – Silver Miners, NUGT 3x Leveraged Gold Miners).
Silver miners have held up the best because the herd saw how big the move was a year ago and are front running the next potential rally. But, depending on how you read the charts and sentiment it may be pointing to the dormant gold miners for a bigger than expected rally. But debating which one will breakout and run the most is a conversation/debate of its own and even I can argue both sides. The safe play is that even if gold miners (GDX & GDXJ) underperform  the silver miners (SIL), the NUGT which is 3x leveraged gold miners should be the same if not outperform silver miners.
Precious Metals Mining Stocks

Precious Metals & Miners Trading Conclusion:

In short, I favor trading the miners over physical bullion simply because the charts show much more profit potential than if one was to buy the bullion exchange traded funds GLD and SLV.

Sinking US Net Worth, Soaring US Debt

from Daily
Behold a new damage assessment from the credit crisis: The net worth of the median American household plunged 47% from 2007-2010.
So concludes a study by New York University’s Edward Wolff. ‘The debt of the middle class exploded from 1983 to 2007,’ he writes, ‘already creating a very fragile middle class in the United States… [T]heir position deteriorated even more over the “Great Recession”.’
Remarkably, if you throw out housing, the picture is even worse: Median nonhome net worth dived 59% between 2007-2010 and is indeed substantially lower than it was in 1962 – which is as far back as Wolff dared to look.
In Washington, Wolff’s study is prompting a thorough re-examination of policies that larded down the middle class with so much debt over the decades.
Read More @

Chart of the Day - Phillips 66 (PSX)

The "Chart of the Day" is Phillips 66 (PSX), which showed up on Wednesday's Barchart "All-Time High" list. Phillips 66 on Wednesday posted a new all-time high of $51.27 and closed +1.88%. TrendSpotter has been long since Nov 29 at $49.06. In recent news on the stock, Phillips 66 on Oct 31 reported Q3 adjusted EPS of $2.97, far above the consensus of $2.35. Deutsche Bank on Nov 9 downgraded Phillips 66 to Hold from Buy with a $50 target due to valuation and concerns about weather. Phillips 66, with a market cap of $31 billion, is a downstream energy company.


Dreamworks Animation SKG, Inc. (NASDAQ: DWA)

DreamWorks Animation SKG, Inc. engages in the development, production, and exploitation of animated films and associated characters worldwide. It offers animated feature films and characters primarily for the theatrical, home entertainment, television, merchandising, and licensing markets. The company also provides television specials and series, live entertainment properties, online virtual worlds, and related consumer products. It has approximately 23 animated feature films, including Shrek the Third, Shrek 2, and Madagascar. The company has strategic alliances with McDonald's, Hewlett-Packard, and Intel. DreamWorks Animation SKG, Inc. was founded in 1985 and is headquartered in Glendale, California.

Please take a look at the 1-year chart of DWA (DreamWorks Animation SKG, Inc.) below with my added notations:
1-year chart of DWA (DreamWorks Animation SKG, Inc.)
The trades here are pretty simple. DWA has been holding a very important level of support at $17 (blue) for almost the entire year. No matter what the market has or has not done over that period of time, DWA has not broken below that $17 support level. The stock approaching $17 should provide a bounce higher. However, if the overall market were to sell-off, DWA would most likely break that support and move lower from there.

David Morgan (The Eventual Rush to Silver)

US Weekly Economic Calendar

THIS WEEK'S U.S. economic reports
time (et) report period Actual forecast previous
9 am Markit PMI  Nov.   52.4 52.4 
10 am  ISM Nov.   51.7 51.7 
10 am  Construction spending Oct.    0.5%  0.6% 
TBA  Motor vehicle sales  Nov.   14.8 mln  14.2 mln 
  None scheduled         
8:15 am  ADP employment Nov.   120,000 158,000 
8:30 am  Productivity 3Q
2.8%  1.9%
10 am  ISM nonmanufacturing index Nov.   53.0 54.2
10 am  Factory orders  Oct.   -0.1% 4.8%
8:30 am  Weekly jobless claims  12-1
380,000 393,000
8:30 am  Nonfarm payrolls Nov.
80,000  171,000
8:30 am Unemployment rate Nov.   7.9%  7.9% 
9:55 am  UMich consumer sentiment Dec.    82.0  82.7
3 pm  Consumer credit Oct.   $12.5 bln $11.4 bln