Saturday, June 13, 2009

Market Summary for the week and a look ahead

The stock market hype was high again this week. many comments about how things were looking better, but the actual data showed we stood still this week. The spin masters were out in full force as economic data was released earlier in the week and there was no shortage of spin. Here are some examples. Consumer Confidence numbers released this week came in at 69.0 versus last month at 68.7 but to hear the headlines you would think the Consumer is doing a lot better. First of all the data increase is not statistically significant of a real move up. Secondly, when they announced Retail sales up 0.5% for May, many put the 2 pieces of data together like Larry Kudlow of CNBC and said Consumers are Buying again! The truth is the reason that Retail sales were up was due to increased purchase of Energy as Energy costs, especially Oil and Gasoline, have soared again recently. Anyone filling their cars knows this. Actual sales of things like Electronics, Furniture and Appliances, so called discretionary spending, was down in May!

Consequently, the stock market did not really advance for the week as the chart of the Dow above shows. In fact there is much to be concerned with looking at that chart. Notice the Dow over the 2 past weeks is higher than the previous period for this one month chart. Also notice the Volume on the lower section has decreased significantly as the red line shows average volume for the previous month. When price goes up and volume declines it is a sure Bearish sign.

I am still holding my TZA shares which are Shorts of the Small Cap. I also purchased 10,000 shares of Capstone, symbol CPST, for $1.15/share yesterday. I plan to add to my position in these shares going forward. The maker of mini Turbine engines successfully completed a test by Ford in the UK in their Ford S-Max 7 passenger car. This engine is 50% less weight than a standard engine, which increases both the miles per gallons achieved and also reduces significantly emissions and harmful Carbon dioxide in the environment. If you wish to see a 42 second video clip on the car click on this Capstone link.

Now looking ahead what does that mean for the market? Well we are going into Options Expiration week. Not only will this be an expiration of Options for the Month but also the Quarter, Most likely Triple Witching Options expiration will happen on Friday, June 19th. I expect increased volatility this coming week. Currently the VIX Index, a measure of volatility, closed Friday at 28.15 and I expect this number to go up during the upcoming week. The Put to Call ratio for all Options closed at 0.86, however the Index only Put to Call ratio is at 1.27 as of Friday's close. I do believe we will see a leg down to retest the lows as I have said many times in the face of a market that just goes up or stays flat, as it did this past week. I just believe that reality of the economic conditions are eventually going to set back in to the markets and a selloff is inevitable. Having said that, the market could break through resistance this week and we could end higher. But I do not believe we will go above the previous range of 9,300 on the Dow.

My Beacon Power shares, symbol BCON, did well this week, closing Friday at $1.02/share. back on March 4th, this stock was at $0.34/share. This is a gain of 200% from there. This stock should rise to well over $2-$3/share in the coming year, as they get entrenched in building out their manufacturing capabilities for the Grid. If you would like to see a short video clip on their Flywheel technology and facility click on this Beacon Power link. When you go to their site be sure to click on each of the orange/gold rectangular boxes for each of the short video clips. It's well worth your time and the company is a good investment for any who believe in Green Technology and President Obama's Energy initiatives.

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