Political and Market Outlook for week of February 2nd, 2009

I have taken a look at the charts and I still believe a few things about it. First, I don't see us breaking below the lows of the market. That is important because every other view is based up that one. Secondly, we have been in a relatively tight range for 12 consecutive days (7,850 and 8,450) and that it is at the bottom of the larger range of between 7,300 and 9,300 on the Dow. Thirdly we are setting up a "W" pattern on all 3 major Indexes. This would suggest to me we are in for a rally to go back up to the higher end of the range of the Dow (8,500-9,300) soon. Much of the earnings announcements are now in with almost 1/2 of the earnings announced. There are still 149 companies yet to report.

So here is my strategy. First regarding ETF's, in hindsight, it might have been a good move to take the profit on those two I have, SSO and TNA at the top, but I didn't so I missed a round trip profit and the time for a profit will be delayed. Some of you may have already sold them and taken a profit and I say good for you. No excuses here. Having said that, if the market goes down any lower I will add to my positions, especially TNA, as I wanted more shares when I recommended it but trying to manage cash flow in tax deferred accounts can be difficult when you can't just write a check when you want. So my plan is to add more shares on any pullback. I would also like to add to my Ford shares as well as Apple shares on pullbacks.

This week we will know if we are forming the second leg of the "W" pattern and whether I have read this market correctly.

On a pure political note, rumors are spreading that President Obama may offer Commerce Secretary to New Hampshire's Republican Senator Judd Gregg. This has been confirmed by Gregg. The fascinating part of this story as it is explained is that President Obama wants to have a BiPartisan Cabinet and that would help by having Gregg. However, if he does that, the Democratic Governor of New Hampshire most likely will pick a Democrat to fill the Senate seat guaranteeing the Democrats a 60 vote filibuster proof majority in the senate. Does that sound like a bipartisan move to you? Don't misunderstand me, I like the idea, but it is not bipartisan. It is very partisan.

Market Update: ETF Ultra Pro shares SSO and TNA

I wanted to update my readers on my two recommended ETF Ultra Pro shares, SSO and TNA. Both are now up and profitable at this moment. SSO in pre-market is up to $23.93 and that would be 11% gain since I purchased the shares on January 21st. TNA in pre-market is up to $26.67 for a 14% gain since my purchase. I do not plan to sell at this times as it appears the markets are preparing for a rise.

At the end of last week I thought we were heading lower and said so in my post. It appears, even with the really bad news of layoffs on Monday, that the market was able to hold here. When I look at the charts for the Dow, S&P500 and the Nasdaq, these indexes held a very tight range and weathered the bad news better than certainly I had expected. This has set up a possible significant rally which many, including Art Cashin of UBS, have said on CNBC is possible from here. By holding both TNA and SSO you should benefit a more significant gain that what already has materialized.

A quick, cheap investment right now could be Ford Motor company, symbol F. The current price of Ford is $2.03/share. This stock could easily gain 10-15% and more on any significant market move. There has been 12 consecutive days of Distribution of Ford shares and we are due for a change.

Also, Apple, Inc., symbol AAPL, is up to $92.70 in pre-market and as you know I recommended these shares back on January 7th at $86.50/share and again after the Steve Jobs health scare at $78/share. If you bought the shares when I first did at $86.50, you have made a paper gain of 7% and if you purchased shares at $78/share you are almost 19% on paper. I will stay with this stock and will not sell these shares.

UPDATE: 7:30am PST

It looks as though there is a reason for the market's optimism. It is because there are stories out that the Obama Administration is considering taking the troubled assets off the books of the Banks and have "Good banks" and "Bad banks". This rumor has spurred the market rise and indicates Wall Streets approval of the idea. Additionally today it is expected that President Obama's much heralded Stimulus package will win House approval today. This all making for 4 days in a row of an up market.

Stocks to watch in the coming week

Another look back of the trade of the ETF Ultra Shorts, SDS and TZA, shows the day to sell it was Wednesday, as yesterday both stocks did not reach the Wednesday's highs nor my sell price. Yesterday, SDS reached a high of $86.18 and I had sold my shares at $86.65 and TZA reached a high yesterday of $66.88 and my sell price Wednesday was $67.24.

I am holding and accumulating shares of TNA as they drop and the same with SSO. I did not venture in for a day trade of TZA nor SDS.

I continue with my recommendation of Apple, symbol APPL. I am watching Ford Motor, symbol F, as it has dropped now to $1.80/share. I believe this stock will drop further and there will be a buying opportunity again at lower prices. I would stay away from GM as I see this stock dropping significantly more from the $3.49/share price. Given its current condition and even with a bailout, the chance to fail, this stock is overvalued and investors need to be wary. Ford is the better to invest in for the long term.

I had told a number of close friends and relatives that MGM Mirage, symbol MGM, was going to drop when it recently was at $14/share and I said it would have been a good one to short as I saw the price dropping below $10/share. Well this week it dropped as low as $8.80 once again. Reports I get from Vegas is that rooms are a plenty and gaming is not attracting the usual wealthy groups of Asians once a significant revenue stream for the Casinos. The next big event to try to draw crowds is the Super Bowl. Early estimates of group size may disappoint, resulting in another check on revenue for the Casinos.

Apple UPDATE #2 re Earnings

First the headlines: "Apple Inc's quarterly profit beat expectations on strong iPod and Mac computer sales, and the company gave an outlook that cheered investors, sending its shares up 9.5 percent on Wednesday. Apple said its net profit in the fiscal first quarter ended December 27 rose to $1.61 billion, or $1.78 a share, from $1.58 billion, or $1.76 a share, a year ago. Analysts were expecting a per-share profit of $1.40, according to Reuters estimates. Revenue rose 5.8 percent to $10.2 billion, beating the $9.74 billion average Wall Street estimate. Shares in After hours are at $90.70/share. Here's the complete news release.

So I still have my shares and did not sell them even though many were scared about the news of Steve Jobs taking a leave of absence for 5 months. The stock got hammered and I even posted an apology, as I had recommended the stock at $85/share. When I issued the apology, it was in reaction to the stock dropping to the $78.20, a 52 week low on Steve Jobs news. However, my recommendation still stands and the stock is still a buy here at $90.70 in my view.

Apple UPDATE re Steve Jobs

Steve Jobs, Apple CEO announced after the close that he is taking a medical leave till June, while dealing with the hormone imbalance issue he cited in earlier press releases, during the Mac World Conference. He said it turns out that it was more complicated a problem than earlier reported and he will use the time to deal with it, but will stay involved in Apple on strategic issues for the next 5 months.

Sorry I didn't see this coming and had recommended the stock at $85-$86/share. In after hours the stock has slumped on the news to $79. I still believe the company is a good investment but we need to digest the news and the timing of the current market drop. Sorry on this one and hope you didn't jump in with both feet as I had advised only a 1/3 investment of the shares you were thinking of purchasing. I will watch the action over the next few days to see the fallout and let you know what I am doing with the stock. I may add more or I may sell. Can't say at this moment.

I know we all wish Steve Jobs the best and for a speedy recovery.

Pre-market outlook Jan. 14 2009: Retail Sales numbers are terrible!

Today's pre-market is focused on Retail Sales and how to get the consumer to go out and shop again. Retail experts on CNBC thought it was a significant change in the psychology of Americans that needed to change and while many don't want to shop, retailers needed to think of creative ways to get them into the stores again by inventing new and better products that made people feel good about themselves, the experts thought. Actual Sales numbers were worse than expected at down 2.7% and terrible. December year on year Import prices are lowest drop on record at 4.0%

I hate to tell them this but shopping is the last thing on their minds. Survival is at the top of their list and takes precedent over anything else. In pre-market all 3 indexes are down and you can expect the day should be down as well. Yesterday's action was a failed attempt to turn the week around by Bulls, but clearly the Bears are in charge this week. In pre-market Apple, symbol AAPL, is down over another $1 to $86.65 and is we are close to a price where buying should start ($86.25). I would put in an order today for 1/3 of the shares you want to own and if the price drops down to go below $86/share I would put in another order $85.50 and wait to purchase any remaining shares until the market is at the lows. Apple is in the retail business so that is why they are getting hit today but they have a following that will capture more market share over time as people turn away from PC's and embrace their computers as they continue to invent new products and applications for their iPhone and iPods.

Keep your ETF Ultra Shorts SDS and TZA as they will continue to gain momentum this week and next.

One month from today is Valentine's Day so don't forget your sweetheart.

UPDATE: 8:00am PST.
Dow dropped as much as 300 points and all 3 indexes are doing poorly. ETF Ultra Short SDS is now up to $80.30 or 5% and TZA is up to $59.70 or 12% so far today. Keep holding them and do not sell as there are more gains to be had on these 2 over the next week or so.

I also took my own advice and bought more Apple shares at $85.80/share a few minutes ago.

Jan. 12th market closing action

Well the market closed down on all 3 indexes today as predicted. The Dow was down 125 closing at 8473 for the day. SDS did gain, closing at $75.35 and TZA closed at $55.50 today. Both were healthy gains from the close Friday. Remember, I still believe they were worth buying today as they are still going to go up as the market goes down.

Apple stock, symbol AAPL, dropped to a low of $87.55 and closed at $88.66/share. I expect tomorrow to also be down as earnings start to be reported. Alcoa reported an unexpected loss of $1.2 Billion for the quarter, reporting after the bell today. It has lost 68% of its stock value in the past year and they expect continuing decline in Aluminum prices. Alcoa is a Dow component. There is a real concern they may not be able to continue paying its dividends.

What to add to your portfolio on a market pullback?

I bought Apple Computer a few weeks ago, symbol AAPL, at $86.50 and the stock rose in anticipation of Mac World, to about $93 but has pulled back to $90/share on Friday. If the market drops again, as I anticipate it will, I would recommend either buying the stock or adding to your current position. I am looking to buy more shares anywhere around $86 or lower, if possible.

Hold on to the ETF Ultra Short of the S&P500, symbol SDS and TZA, the ETF Ultra Short of Small Caps. These shares should start to rise with a market pullback. SDS closed Friday at $71.95 and TZA closed at $51.25 and is up in pre-market futures this evening.

UPDATE: Jan. 12 5:00am PST

3 Month Libor rates are now at a new recent low of 1.16%. Hard to believe with numbers as low as this that there is still tight credit, but the fact still remains, either credit is tight or people aren't wanting to borrow and no amount of available funds is going to change that, until investors psychology turns from fear to greed.

European markets are also down in pre-market.