Wednesday, November 21, 2012

Green Light to Buy Google

Google (NASDAQ:GOOG) — The world’s largest Internet company has had its rating increased by Standard & Poor’s to “investment grade” due to expectations of a stronger operating performance.
The stock fell sharply in October following a Q3 earnings miss. But there are recent indications that its core business of online search and mobile and display advertising will continue to have healthy long-term growth. And the company is noted for its exceptional liquidity and minimal financial risk profile.
Earnings estimates are for $39.82 per share in 2012 and $46.39 in 2013. Analysts have a mean price target of $800 within the next 12 months.
Google fell almost 18% from its October high before reversing on Friday from its 200-day moving average at $639. The reversal was accompanied by a buy signal from our internal indicator, the Collins-Bollinger Reversal (CBR), and its MACD also flashed a buy signal. Buy GOOG at $670 or less for a trade to its 50-day moving average at $710.
Trade of the Day – Google's (NASDAQ:GOOG)

Chart of the Day - Cabot Oil & Gas (COG)

The "Chart of the Day" is Cabot Oil & Gas (COG), which showed up on Monday's Barchart "All-Time High" and "Gap Up" lists. Cabot on Monday posted a new all-time high of $49.89 and closed +2.33%. Monday's close was towards the lower end of the day's range, which means that the stock may need to fill yesterday's gap and correct a bit lower before potentially regaining strength. TrendSpotter has been long since Oct 26 at $47.46. In recent news on the stock, Cabot on Oct 25 reported Q3 ex-items EPS of 21 cents, well above the consensus of 14 cents. Cabot Oil & Gas, with a market cap of $10 billion, is an independent oil and gas company engaged in the exploration, development, acquisition and exploitation of oil and gas properties located in four areas of the United States: the onshore Texas and Louisiana Gulf Coast; the Rocky Mountains; Appalachia; and the Mid-Continent or Anadarko Basin.


Foreign Buying of US Assets Declines – on Optimism About Europe!

Bloomberg reports that foreign buying of US assets has dropped dramatically because confidence that the euro area’s debt crisis can be brought under control has grown of all things:
International purchases of U.S. financial assets plunged 96 percent in September as confidence grew that Europe was beginning to solve its debt crisis and investors sold Treasuries following the Federal Reserve’s quantitative easing announcement.
Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.
The Federal Open Market Committee said Sept. 13 that it would undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets improve substantially.
“QE3 certainly played its role in basically encouraging people to take risk and to some extent to short the dollar,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said. “The risk appetite was pretty strong overall, there were better places to park your money than the dollar,” and “there was a big rise in optimism regarding the euro zone.”
(emphasis added)
As we have pointed out in an earlier missive, there is actually still fairly little reason to be optimistic about Europe at this juncture, even though the sovereign debt markets have calmed down for the moment. Market participants have altogether way too much confidence in policymakers and their magic wands. This faith will eventually be put to a big test, and that includes the still widely held and utterly misguided idea that the West’s economic problems can be solved by central banks printing gobs of money.

Smart Balance, Inc. (NASDAQ: SMBL)

Smart Balance, Inc., a consumer food products company, engages in the marketing of functional food products primarily in the United States and Canada. It provides buttery spreads, sticks and sprays, fat-free milk, 1% lowfat milk, lactose-free milk, peanut butter products, cooking oil and cooking sprays, light mayonnaise dressing, microwave popcorns, and various recipes under the Smart Balance name. The company also offers various buttery spreads, sticks, soymilks, nut butters, and vegan mayo dressings under the Earth Balance name; and spread products under the Bestlife name. In addition, it manufactures and markets a range of shelf stable and frozen gluten-free products, including snack foods, frozen baked goods, frozen entrees, and baking mixes under the Glutino and Gluten-Free Pantry brands; and various fresh breads under the Genius brand name. The company markets its products through supermarket chains and food wholesalers, sales representatives, and independent food and beverage distributors.

To analyze Smart's stock for potential trading opportunities, please take a look at the 1-year chart of SMBL (Smart Balance, Inc.) below with my added notations:
1-year chart of SMBL (Smart Balance, Inc.)
SMBL had an amazing run-up from May until it's peak in October. The stock went from a low of $5 to an ultimate high of $13 for a total of a 160% gain. Unfortunately, it appears that run may be over. The stock created a key level at $11 that was resistance (red) in July and support (green) thereafter. After breaking the $11 support, the stock has already retested that level as resistance last week.

Illinois Tool Works Inc. (NYSE: ITW)

llinois Tool Works Inc. manufactures various industrial products and equipment worldwide. Its Transportation segment offers plastic and metal components, fasteners, and assemblies; fluids and polymers; fillers and putties; polyester coatings, and patch and repair products. The companys Power Systems & Electronics segment provides arc welding equipment; metal arc welding consumables and related accessories; metal solder materials; equipment and services for microelectronics assembly; electronic components and component packaging. Its Industrial Packaging segment offers steel and plastic strapping and related tools and equipment; plastic stretch film and related equipment; paper and plastic products that protect goods in transit; and metal jacketing and insulation products.

The companys Food Equipment segment provides warewashing, cooking, refrigeration, and food processing equipment; and kitchen exhaust, ventilation, and pollution control systems; and food equipment service, maintenance, and repair. Its Construction Products segment offers anchors, fasteners, and related tools; metal plate truss components, and related equipment and software; and packaged hardware and other products for retail. The companys Polymers & Fluids segment provides adhesives; chemical fluids; epoxy and resin-based coating products; and hand wipes and cleaners. Its Decorative Surfaces segment offers laminate for furniture, office and retail space, and countertops; and laminate worktops.

To review Illinois' stock, please take a look at the 1-year chart of ITW (Illinois Tool Works, Inc.) below with my added notations:
1-year chart of ITW (Illinois Tool Works, Inc.)
Back in March, April and May ITW created a key resistance level at $58 (navy). That resistance level was a 52-week high breakout when the stock shot higher in mid-August. That breakout was a sign that the stock should be moving higher, which the stock did do. Now that ITW is pulling back, the old $58 resistance should provide support for the stock as it has already done on (4) separate occasions.

Chinese Stocks Now Showing Revenue Growth Renewal

Large-cap, blue chip stocks are going down in value on the stock market, and it’s unclear how long the current downtrend will last. The stock market is due for a technical rebound, but every time there is some positive news (like earnings) for the stock market to trade off, some other event hits investor sentiment (like recent events in the Middle East). This is a tough stock market to make money in, that’s for sure.
There’s been a lot of chatter lately about a rebound in the Chinese economy, and if you believe China will accelerate its GDP growth next year, there’s a lot of ways to bet on it. Of course, the Chinese stock market has been in the doldrums for years. The country specifically engineered a slowing of its economy in order to contain a frothy real estate market. With all the carnage among U.S.-listed Chinese stocks, the pickings are plentiful.
One U.S.-listed Chinese stock that recently reported a strong turnaround in its revenues was E-House (China) Holdings Limited. (NYSE/EJ). Speculators in Chinese stocks will likely already be familiar with this business.
The company is a major real estate services business in China, with agents in some 230 cities. E-House provides all kinds of real estate services, including primary and secondary brokerage, as well as data collection and consulting within the industry. The company’s third-quarter revenues grew 25% to $136.6 million on the back of a 35% gain in total floor area of new properties sold. The company’s stock price recently hit an all-time low of $3.37 a share; it has no debt and almost half its share price in cash. E-House’s stock chart is featured below:
ej stock market chart
Chart courtesy of
To describe the trading action among a large number of U.S.-listed Chinese stocks as carnage is an understatement. All kinds of Chinese stocks are trading at or near their 52-week and all-time lows. It’s a stock market sector that in my view is ripe for a turnaround.
But, it goes without saying, you have to be extremely careful speculating in Chinese stocks, because for the most part, institutional investors have left the sector, and this means a lack of price action. Renren Inc. (NYSE/RENN) is a U.S.-listed Chinese stock that just reported a third-quarter revenue gain of 47% to $50.4 million. The stock is still trading right around its all-time low.
With so many Chinese stocks hitting new lows on the U.S. stock market, I think risk-capital speculators should be putting a number of these companies on their radar screens. The sector doesn’t seem quite ready to turn just yet, but next year is a real possibility.


The BRENT CRUDE/WTI CRUDE RATIO is set to drop as brent is expected to be weaker than WTI crude...the premium currently at 25.7 per cent should drop to around 18 per cent in the first instance. The daily chart of the ratio shows how it was turned back by the upper parallel channel line just above 1.275 and that it has now just nicked its minor uptrend suggesting that it should go lower...the support provided by the lower channel line and the 200 day moving average is at +-1.180...if this level should be violated the ratio will go a lot lower. The InvesTRAC model shows that the short term indicator has started to fall from overbought 100 with the forecast showing a rally around November 27 and a low sometime late January. WTI Crude has improved from 0 to +2 on the Global Seven
There is an obvious fundamental reason why the Europeans are benchmarket to Brent and pay a much higher price than US consumers and whilst the short term outlook is for the Brent ppremium to narrow, I will have to look at the monthly data to see what the long term outlook is.

SEC Rocked By Lurid Sex-and-Corruption Lawsuit / By Matt Taibbi / November 19, 3:10 PM ET
Move over, adulterous generals. It might be time to make way for a new sexual rats’nest – at America’s top financial police agency, the SEC.
In a salacious 77-page complaint that reads like Penthouse Forum meets The Insider meets the Keystone Kops, one David Weber, the former chief investigator for the SEC Inspector General’s office, accuses the SEC of retaliating against Weber for coming forward as a whistleblower. According to this lawsuit, Weber was made a target of intramural intrigues at the agency (which has a history of such retaliation) after he came forward with concerns that his bosses may have been spending more time copulating than they were investigating the SEC.
Weber vs. the SEC: The Full Complaint
Weber claims that in recent years, while the SEC Inspector General’s office has been attempting to investigate the agency’s seemingly-negligent responses in such matters as the Bernie Madoff case and the less-well-known (but nearly as disturbing) Stanford Financial Ponzi scandal, two of the IG office’s senior officials – former Inspector General David Kotz and his successor, Noelle Maloney – were sleeping together.
Weber also claims that Kotz was also having an affair with a lawyer representing a key group of Stanford victims, a Dr. Gaytri Kachroo. Where the story gets really strange is where Weber claims that Maloney last year refused to meet with Kachroo as part of the Stanford investigation. By then, Kotz had stepped down as SEC IG and Maloney had replaced him as Acting IG. The complaint describes Weber confronting Maloney over the issue, asking why she wouldn’t meet with the lawyer representing a key group of Stanford victims.