PRINTABLE OTA Lessons from the Pros 07/11/05: Stiff Upper Lip

Stiff Upper Lip
For the Trading Week Beginning July 11, 2005

David W. Aloyan is a Technical Analyst providing analysis of the markets and securities. Dr. Peter Navarro is a business professor at the Univ. of California-Irvine. He holds a Ph.D. in economics from Harvard, and is the author of "If It's Raining in Brazil, Buy Starbucks." and When the Market Moves, Will You Be Ready? Mr. Aloyan and Dr. Navarro are the founders and managing members of Platinum Capital Management, the general partner of the Macrowave Investor Hedge Fund. Dr. Navarro has also created an excellent Cd in conjunction with Online Trading Academy, covering his Macrowave topics in an easy to use multimedia format.

Navarro's Broad Market Outlook: Sitting Tight

Gotta love those stiff, upper lip Brits! They've endured the Nazis and the Irish Republican Army and bad food for so long that nothing fazes them. Hey, if those bombs had gone off in New York or D.C., it would have been mass hysteria – at least among the media and politicians. So if bombs can't shake this market what can? Higher interest rates? Nope. Higher oil prices? Nope. Fundamentalist extremists consolidating power in Iran? Nope? While maybe a little dose of inflationary pressures next week when the CPI and PPI come out towards the end of the week. That might ruffle some feathers. At this point, I have no real interest in trading the market trend – there just isn't any. Instead, I'll speculate on a few story stocks and get ready to short the broad market in September and housing stocks at some point...

Portfolio Musings

One of my last week's picks, IBIS, made a nice little move so I doubled up. Technicals remain good. The other pick, VION, looks solid and hope to do the same this week or next. Of my two stem cell stocks, GERN and ASTM, GERN made a nice little move too. It seems like a very solid stock technically but will face a hurdle breaking through 9 and then the big 10. ASTM continues to be under accumulation. Both seem like good long term holds. My oil play MPET, which had dropped me into the red, had a nice bump up on a news peg of an oil well in Australia and I got the heck out unscathed. The "Mo-Mo" players got this one and I want no part of it. Bird flu play SVA pulled back after a nice little move but is climbing back towards 3 bucks. My other bird flu play CHIR has been killing me as it tanked right after I got into some 2007 leaps. It rallied this week nicely, however, on forecasts of a huge demand for vaccines. My two losers ARDI and ZILA are basing and a big earnings call on July 28 is coming for ARDI. I doubled down on ZILA – don't usually do that but I love this stupid stock. May soon do the same for ARDI.

Hedging Your Bets With Matt Davio: Volatility Rising

Earnings season should begin solidly next week. I think this could be the first brush of increased volatility, although I expect fairly decent earnings from most players. This could set us up for a run to SPX 1250-60 by the Fall. Still, we remain stuck in the same market range we have been in now for over 9 months.

BROAD MARKET MUSINGS

Kind of strange how the SPX tested the May highs of 1170 pre-market, never looked back, and closed all the way over 1201 on Thursday.
I still see limited upside to 1260 on the SPX which is a short 40 pts or about 3% away from Friday's closing of 1216.
I also think the low volatility can not continue forever. The smart trade is to buy premium -- although it has not been the smart trade the past few years.
CNBC's Mad Money and its mad host continue to act like we have never seen better days in the markets. This is anecdotal info, but nonetheless, it is important information for me as Cramer is often a good contrarian indicator.

SECTOR MUSINGS

The HGX, homebuilding index, closed at a new all time high on Friday. Bubble or not, the trend is still higher and interest rates are staying low, so why fight the "homies". I wouldn't own em, but I sure wouldn't short em here.
RTH the retail holders continue higher in this last 2 year rally holding firm on Friday's closing.
BKX, the banking index, is holding its tight range. It has been locked into 95-100.
The TNX, the 10 year Treasury note closed @ 41.09, showing potential of a near term breakout over 41.52 closing price.
Lots of things breaking out or nearing breaking out, should lead to an interesting 2nd quarter earnings season. Looking forward to next week!!

DISCLAIMER: This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future performance.