PRINTABLE OTA Lessons from the Pros 07/19/05: Greenspan's Last Words (Literally)

Greenspan's Last Words (Literally)
For the Trading Week Beginning July 18, 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.

Hedging Your Bets With Matt Davio: S&P History Lesson

Today the S&P 500 closed at a new 4-year high. So how does the current S&P 500 rally rank? To answer this question and to provide some perspective, all major S&P 500 rallies of the last 73 years are plotted on today's chart. So what does this chart show? Several things... Over the past 73 years, the S&P 500 has begun a major rally 20 times or once every 3.6 years on average. Second, most major rallies (90%) resulted in a gain of less than 150% and lasted less than 1000 trading days (4 years). With the S&P 500 up 57.8% as of today, the current rally would be classified as relatively long in duration but slightly weak in magnitude. Stay tuned...

The VIX again closed Friday at a new low, below 10.5 on the index. Amazing how little fear there is out there in the market. It is rosy everywhere you look and inflation is non-existent – if you believe the government.

However, I do wish Uncle Sam would notice the increases my family has seen in energy, real estate, education, and healthcare, all of which have exploded in the past 5 years. How any person could not feel these rising in costs is beyond my reasoning, and with real wages flat to declining, I must admit, my sense of worry is higher than normal. I just call it like I see it, and I don't see a pretty picture for the long term of this fiscal nation.

Navarro's Broad Market Outlook: Sitting Tight

It's hard to deny the semi-strength of this market as the S&P hits a four-year high. Yet when I turn to review the IBD 100, I can't help but pause when I see that housing and construction-related stocks have grabbed almost half of the top 20 spots – and Google is sitting at the top of the heap. Bubbles (or at least froth) do not a strong foundation for growth make.
So let's hear what Mr. Greenspan has to say to Congress this week about our future. It will literally be his last words on Capitol Hill as Chairman and in a week slow on data, it will be the main event. (On the data front, housing starts and the Index of Leading Indicators are about the only excitement for the week – all the more reason why Greenspan's mutterings will rule the day.)

Portfolio Musings: Penny Ante Stuff

Opened small positions in a bunch of pennies. Those worth mentioning include: ARTX, NTOP, PDYN, TRPH, TMTA, with the last two being the solidest technically.

Sitting on GERN, ASTM, SVA – long term plays while old pal CPTCQ.OB broke back over three bucks. After doubling up last week on IBIS, I had to cut it back in half to avoid a loss. Hate to turn a winner into a loser. VION had another nice week.

CHIR continues to disappoint – more news from the company about its limited ability to provide flu vaccines dragged it down. Glad my leaps go out to 07 over two flu seasons….

My two losers ARDI and ZILA continue to base. Methinks this is the week for me to double down on ARDI in preparation for earnings call coming up. One thing I will do is look carefully at the earnings of SIRF on July 26, two days before ARDI. A good SIRF report may augur well for ARDI as they travel in similar circles.

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.