Some Food For Thought
With Friday‘s
Employment Report coming out stronger than expected, we would have
thought markets would be ready to run. However, if one were to take a
closer look at factors which affect the markets such as the CRB Index,
which has been in a steep decline and the decline in M2 money supply,
it’s not exactly a
bullish sign.
Yes, the natural tendency is
that when commodity prices decrease stock prices should increase is
true, by combining the analysis with the money supply velocity slowing
it indicates people are less likely to have their money "change
hands" (which is what the M2 number indicates).
Take a look at the US Dollar
futures, the index has been showing some weakness which is not good
because a falling dollar is bearish for stocks, however it is not to
say that a rising stock market (which we do not have) can still ascend
with a weak dollar, ideally we want to see the markets rising and the
dollar rise. Just some food for thought.
Mid Atlantic Medical
Services (MME)
broke out of a multi-week base yesterday. The stock is exhibiting a
nice 67% 5 year growth rate. Earnings have been increasing on yearly
basis, as well as a quarterly basis. The HMO is due to report
earnings sometime next week.
Microsemi (MSCC)
is moving higher on its 2+ month base. The semiconductor manufacturer
has shown an increase in earnings (43%, 182%, 68% and 43%). MSCC
has low debt of 6% and is not overly owned by institutions. On a daily
chart,
MSCC looks like it has formed a mini double bottom.
Looking at Downey Financial
(DSL),
notice how the Relative Strength line made a new high on a weekly
basis
and
the Williams Acc/Dis indicator broke out before price also. This is a
good sign that the stock has been under accumulation.
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.
Have
a great weekend!
Greg