Morning Coffee with TradingMarkets

  • February 6, 2008
  • David Penn

Good Morning!

Stocks Suffer Biggeset Drop in Two Years… McCain Takes Lead in Super Tuesday… Clinton, Obama in Virtual Tie… Productivity, Labor Costs Data Due Today… Volvo Profits Miss Estimates… Time Warner Profts Plunge… Banks Lend Record Amount to BHP for Hostile Rio Tinto Bid… Initial Jobless Claims, Pending Home Sales Due Tomorrow… Toll Brothers Suffers Seventh Consecutive Revenue Drop… Disney, JSD Uniphase Higher in Pre-Market Trading.

Asian stocks down… European stocks up… Greenbacks moving higher against the Euro, British Pound… And the futures are trending higher in the hour before the bell.

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TradingMarkets 5 Business Stories You Need to Know

Overbought Markets Tumble as Recession Fears Resurface – Wall Street Journal

Word of weakness in the service sector fed fears that the much anticipated recession is even more likely to arrive in the U.S. this year. The Dow Jones Industrials were off by more than 370 points as news spread of the Institute for Supply Management’s index of nonmanufacturing business activity falling to a six-year low. Our TradingMarkets Indicators have been flashing red for days as the number of stocks that had moved too far, too fast grew larger and larger. Find out whether stocks are still extended or ready to bounce through our TradingMarkets Stock Indicators.

CIGNA Reports 13% Earnings Boost – Bloomberg

Increased memberships in employee-sponsored health plans helped Cigna realize significant fourth quarter profit growth to the tune of 13%.
Strong earnings per share were also made possible by the company’s $1.2 billion in buybacks in 2007. Our PowerRatings cast Cigna as an average investment opportunity right now, in an industry with a number of better options. Learn which four stocks in Cigna’s industry group stand a beter chance of being higher than the average stock in a year’s time at PowerRatings.net.

Traders Dig Dollars – DailyFX

Currency strategist Kathy Lien remains on the dollar bull beat, observing that economic weakness is actually encouraging currency traders to seek the relative safe haven of greenbacks–particularly in exchange for yen. More signs of economic weakness have validated the Fed’s decision to lower the Fed funds rate, according to Lien, and the potential for dollar strength in the near-term is all the more interesting given the likelihood of still lower rates to come.

Sara Lee Posts Profit Gain – Reuters

A weaker dollar and new products helped Sara Lee post a profit in the second quarter. The company reported earnings per share of 25 cents compared to a loss of 8 cents a share a year ago. Sara Lee is a high PowerRating stock in an industry, Processed and Packaged Goods, that also has a very high PowerRating. Find out what four other stocks are as likely as Sara Lee to be higher than the average stock one year from now at PowerRatings.net.

Read About Tomorrow’s Crash, Today – Harpers

Venture capitalist Eric Janszen describes and argues against “bubble economies” and the downside of debt inflation in a cover story for Harper’s magazine, echoing the sentiments and concerns of economists such as Joseph Stiglitz. Janszen looks ahead to try and determine what bubble will be created as a result of dealing with the currently deflating bubble in mortgage finance.

For more stories as they happen, go to our Breaking News section.

TradingMarkets 7 Stocks You Need to Know for Today

Here are 7 stocks for traders for today from TradingMarkets.com:

For a list of today’s highest PowerRating stocks, click here.

TradingMarkets 5 Top PowerRatings Stocks for Today

Company
 Symbol PowerRatings
Randgold Resources GOLD 9
ABAXIS ABAX 9
Waste Industries USA WWIN 8
Rigel Pharmaceuticals RIGL 8
Invitrogen IVGN 8

View More Stocks

TradingMarkets Tracking the Wizards

Would You Buy This Stock? – The Kirk Report

Charles Kirk, author of the The Kirk Reports provides a window into your trading mind. Can you tell when your bias is affecting your judgement? A simple price chart puzzle gives you a quick opportunity on where your heart–if not your head–is right now.

Top Traders Pull $10-15 Million in 2006 – Marketwatch

Investment banks paid traders in asset-backed securities and commercial mortgage-backed securities $10-15 million in an effort to keep top talent from migrating to hedge funds. According to Trader Monthly magazine/Options Group survey, record trading profits were matched by record bonus payouts, which succeeded in luring a number of highly sought-after traders back to investment banks.

Technician’s Take: Bear Market Awaits – Barron’s

Barron’s technical analyst, Michael Kahn, says a bear market is all but inevitable, regardless of how deep the Fed cuts its rate. According to Kahn, the phenomenon of support becoming resistance, downwardly sloping trendlines and moving averages curling lower are among the technical factors conspiring against this market.

View Portfolios of Prominent Investors

TradingMarkets Playbook

The selling we had warned about has arrived, as the markets react strongly to increasingly overbought conditions. Among the reasons for concern, as we have been mentioning here for the past few days, has been the high number of low Short Term PowerRatings stocks in our TradingMarkets Stock Indicators. When we see so many stocks that have RSI values above 98, are up 10% over the past five days, or are experiencing five or more consecutive higher highs, we know we are looking at a market that has moved too far, too fast. This is just one of the ways that our TradingMarkets Stock Indicators can help traders get an objective read on the market.

So far it appears as if the selling has done its just, as the number of low Short Term PowerRating stocks has fallen dramatically as of this morning. While that does not necessarily mean that the coast is clear, it does mean that the overbought condition that was creating a sort of ceiling over the market, has begun to subside. The reaction on the part of buyers to any selling today will help let is know whether or not a test of the November 2007 lows is in order.

David Penn is Senior Editor at TradingMarkets.com.

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