AHM crushed, down 90%

This event is spreading like a wind aided California wild fire. The repercussions will be felt like last weeks Countrywide Mortgage earnings report. Brace yourself. That said, as the financial sector transitions into nuclear winter...and the market takes some hits...think of the big picture asset allocation decision: Let's assume a million dollar base and how to invest in the current market environment:

1) Are you going to allocate a significant portion to fixed income?
2) What percentage will you allocate to real estate?

3) Assuming 1&2 are toxic, you are left with some combo of cash (money market or T-Bills), equities (non finance and real estate exposure), and commodities. You could certainly allocate to rare art, classic automobiles, stamps, and a host of other alternative type stuff, but that's not relevant when we are talking about big giant swaths of capital as it moves across the globe.

4) ultimately, a bid is in place for the "stock market": because most other asset classes are bunk. That's my conclusion. Therefore, you can panic out of stocks, but you have to ask yourself, where are you going to put the proceeds?

LULU !!!

Priced last week and first trade was Friday - in the midst of the carnage - and boy, did she soar! $18 US was IPO price (recall - they are a Canadian shop with aggressive US expansion plans), and today trades over $30. Click here for the release. Watch it closely and add on weakness. This is one hot stock....see my previous post here

What next? Record Short Interest

Last week I mentioned record short interest as a reason this market will find a bid. Click here for the record short interest stats from the Nasdaq, courtesy of Reuters. With the VIX exploding higher last week, I would hazard a guess that if you were short right now, and the market having pulled back 5% or so in one week, you'd be looking to cover and lock your gains. Therefore, on top of the put/call ratios and advance/decline information, one might argue there are plenty of reasons for a nice rally. Bubblevision also flips to the bearish bent, and they can arrange guest after guest offering negative views. Therefore, what usually works is to fade the noise, and back up the truck. Good luck.

Sentiment

Today's CBOE's put/call ratio indicated a low of 1.18, and a high of 1.33. Yesterday, the total CBOE put/call ratio of all stocks and indices was 1.53. These are extremely high readings.

I also saw a tout for Lawrence McMillan (option guru) as he cited an unusual occurrence, where the market had two days of 90% down stocks in the past week. There have been only 3 other 90% down days in the past 11 years apparently. In addition, there has been recent record high short interest data coming from some of the exchanges, and Bubblevision's "Breaking News" coverage of the DJIA down 100 points or more is drawing lots of attention and is always cause for people to do harmful things to their portfolios. In fact, the VIX is also Exhibit A for high fear levels and modest panic.

The key is to maintain your discipline, focus on the process, and stay committed to doing those smart things that got you to this point in the first place. We will assess the situation again this weekend and on Monday morning, with the plan to search for signs of full panic & retreat, while seeking an intraday reversal on heavy volume and a upside surge. The market will probably then have to digest the initial thrust higher, perhaps with a re-test to the lows over the resulting few days, and then a sustained push higher would be imminent. Let's watch and wait! Good luck.

Maintain Your Edge!

When Bubblevision tells you the DOW is off 411 points (and the worst day since Sept 17, 2001 !!), your first instinct is to panic, lose your wits, and immediately log on to your online brokerage account. You are tempted to sell first and ask questions later. You cease to follow your initial intentions and formal plans for long term wealth creation and haphazardly send sell orders for many of your stocks and etfs. Don't do it. Stay calm. Take a few deep breaths. Go take a walk around the block. Recall, many investors blew out of shares this past February and never got back in, and subsequently missed substantial gains. The same scenario could play out again in the next few weeks. Beware of follow thru selling tomorrow morning, and then watch to see if there is a significant rally off the morning lows. We are looking for the one day reversal after a blow off, large volume, capitulation type event.

Gold Bugs Index Set up in the Kill Zone

Ok, we are presently experiencing fireworks and excitement across the investing landscape. Global markets are skidding, and there are few places to hide. A $12 billion debt offering from Chrysler has been scuttled, and reverberations are rippling across Wall Street. The 10 year treasury is presently yielding 4.90%...anyone notice?! The S&P 500 broke below its 50 day average again. We've been here before, so will this pullback be met with another round of buying? The story since 2002 has been to buy the dips. As for the break in the gold shares, the Gold Bugs Index (HUI) appears to be smack dab in the middle of its Bollinger Band, and we've drawn down to the 20 day moving average as well. If you are seeking to exploit a move in a strong sector, this would be the time to buy. Lastly, the HUI made a powerful move from 320 to 370 (50 points), so if you think there is one more day of downside ahead, you might get the opp to buy in at the 345 level, which is a pullback of 25 points off the recent high - which equates to 50% of the magnitude of the recent move. Good luck.

Uranium Shares Hammered

The Uranium complex has been selling off recently, and missives from Dines can't even stop the bleeding. CCJ collapsed below its 200 day average on heavy volume today. Here is an interesting article about Cameco, uranium prices, and other thoughts regarding the state of the business. I never get a sense of objectivity when reading pieces such as this, and it doesn't help me determine if the price of U is ready to collapse or not. Plus the Dines folks have been able to support their stocks in the past, but I haven't seen any signs of buying of late, and I gotta believe many could be in danger of falling out of their long term up trends. I wonder if this trade is crowded, and the U-bugs have fallen in love with their story? The game of chicken with the Utilities is close to a turning point, and who will win?

Energy Service Stocks Bid Higher!

M&A activity in the energy sector today is driving the OSX to new highs. Transocean Inc. (RIG), the world's largest offshore drilling contractor, and rival GlobalSantaFe Corp. (GSF) plan to merge. The combined company will have a market value in excess of $50 billion.

More ETFs for Profit Pleasure

We've made bank recently on International ETFs such as Australia, Brazil, Canada, China, Germany, & South Korea, to name a few. So let's add a few more to the stable. We've got a bond market sizzling today, coming way back under 5% on the 10 year treasury yield, and with the Dow down over 125 points, it's time to step in and scoop up the bargains. We'll spotlight Taiwan (EWT) and India (INP). Good luck.

XAU Blasting Off - Are you Onboard?

Gold shares continue to romp higher, and we are fast approaching all time highs. Today's chart and relative strength readings show a slight overbought condition. Have your powder ready if you haven't made an allocation to gold shares yet, and buy any weakness. One significant indicator in our favor here? Bubblevision, not one peep about the XAU so far this week - I haven't heard one commentator or so-called analyst mention gold shares...little if any chit chat on hype-tv. That doesn't mean bloggers such as myself haven't taken notice of what's hot to trot, but it is an extremely powerful underpinning if the herd hasn't been clued in yet. Once bubblevision gets on board, we can expect the additional bid on the shares and perhaps the ultimate breakout. GDX is the ETF to play the miners, and my analysis of their holdings and a break down vis a vis IBD's ranking system suggests core holdings of ABX, AEM, and BVN if you want to play some straight equities. To be clear, those three have high IBD rankings. Others near the top of the list, depending on the day, are PAAS, RNO, & HL. (GDX - the three largest positions are ABX (Barrick Gold) at 14%, NEM (Newmont) and GG (Gold Corp) - are close to 10%) The thesis is to buy the leaders, and the IBD methodology would lead you to them. Good luck.

Continued Success for Nintendo

Nintendo's name keeps popping up on the radar screen. They've had tremendous success with the Wii, but also have solid hits with their Gamecube and DS Systems. The shares trade on the Pink Sheets in the US - under the symbol NTDOY. Nintendo finds themselves amongst the top ten highest market cap stocks that trade in Japan, recently surpassing Sony (SNE) in market cap.

Apparently educators in Japan are creating a stir as they are suggesting certain educational games for young children to play as they seek unique ways to foster learning in school children. Click here to review a report about Nintendo in Money & Markets and why teachers in Japan love the DS Game System.

Last week, Nintendo was the buzz at the E3 Summit in Los Angeles, having debuted additional new games for the Wii. Some of the new games even promise to make you healthy - very cool!

Forbes spotlighted Nintendo's financial success in a article here.

iShares Japan (EWJ), a $13 billion ETF, has over 1% of its assets in Nintendo, and it is the 12th largest holding in this particular ETF. All in all, Nintendo is a compelling story, now isn't it?

Surprise Moves the Market

From the Wall Street Journal today: What Could Topple Bulls' "Wall of Worry"?....these types of articles can be found in print (newspaper and magazines), on the internet, or in discussion at the local coffee shop....just about anywhere and everywhere on land or sea...we get the litany of "worries" for the stock market. This is not a new phenomenon - year in and year out, we'll have to contend with and face the uncertainty of investing in intangibles. Today's list includes: High risk investments (subprime mortgages), global growth rates, inflation, the weak US dollar, and liquidity. Heck, I could type the same list 10 years from now and it will probably be the same worries then as now! I'm surprised they didn't have a few paragraphs about political instability, global terrorism, high oil prices, etc etc...The question that I think should be asked is: by how much have these "worries" been priced in by the market? On the face of it, none of these items will cause the market to roll over tomorrow...what WILL cause the market to change direction in a meaningful way (up or down) is when there is new information, or new surprises, for the investor to digest. The stock market in and of itself is a pretty good discounter of known information..sure, there are inefficiencies that can be exploited from time to time, but overall, millions and millions of investors making millions and millions of buy and sell decisions each day certainly brings a large amount of efficiencies to stock prices. Warren Buffett once said, "In the short run, the market's a voting machine and sometimes people vote very unintelligently. In the long run, it's a weighing machine and the weight of business and how it does is what affects values over time." That makes sense to me, and that is also why I don't get too pre-occupied with the latest headline about the dollar, oil, sub prime mortgages, etc etc...The key is to find and exploit existing trends, stocks on the move, and securities in favor, and finally, to maintain some risk management and stop loss discipline just in case you are wrong (or new information (aka surprise) causes your position to go the other way!!!) Good luck.

Wanna own Tech??, then buy EMC!

Cramer is right on this one. He featured it last night. Click here for his post. Trading Goddess is on board too. (Note, Trading Goddess is a very popular site, but PG-13 rated)....

What's the fuss about EMC - it's all about VMware. EMC is going to spin this out and it will be the most popular IPO of the summer. Cramer thinks the road show for the VMware IPO will generate a ton of buzz for EMC, and he's probably right. The stock is breaking out, and tech is hot, so why not buy some shares? Good luck.

Fireworks in the Gold/Silver Shares

The XAU Index is vaulting higher today. She is entering a fascinating area. Anything above 150 and we are in rarefied air. These levels have been reached three times in the past 20 years...There are various technical reasons to be long precious metals, but add the bonus of a weak dollar, world wide political instability, emerging China and India, massive petro dollars floating around, M&A activity in the space, and last but not least - a quasi defensive position if the general equity market falls apart. The money has to go somewhere, and GOLD is a safe haven!!

Dollar Hitting Lows & Gold Shares Percolating

Gold prices seem to be firming as the dollar continues to decline. Seeking a pure play gold stock basket brought me to GDX - the Market Vectors Gold Miners ETF. In addition, the top holding at 14% of assets in this particular ETF is ABX - Barrick Gold. I plotted the chart of ABX and immediately was drawn to the Golden Cross that was just put in. A GC (Golden Cross) is a powerful sign that higher prices may be imminent.

Energy Hormone! - DKA

Wisdom Tree's International Energy Sector ETF (DKA) has a beautiful looking chart. They own a basket of 57 oil and gas issues throughout the world. Click here to see the recent holdings.

If you think the price of oil can sustain itself in the $70 range, this ETF may continue to do well.

The Technology Spider - XLK

One headline today was about the Nasdaq trading at 6 year highs. Too bad those who have bought and held the Nasdaq are still about 50% under water from the early 2000 peak. That's all water under the bridge, as we are focused on the here and now.

WIN - What's Important Now - a special phrase coined by Lou Holtz has us checking the action in the XLK shares. See the chart above - XLK is breaking out and in a nice uptrend. Click here to learn more about this ETF. This is one simple and concise way to play the buoyant tech sector.

Totally Geeked for this Movie - Transformers & GM

Click here for a report on the new Transformers movie and how it might positively impact General Motors (GM). The common stock of GM has been on a tear of late, and it recently marked a Golden Cross. This is usually a bullish sign and one where investors might want to sit up and take notice...just like how your ten your old child is geeked about the movie opening in theaters today.

The Fidelity Select Automotive Fund (FSAVX) has 7% of its assets in GM. It's other large holding are Johnson Controls (JCI - 17%), Harley Davidson (HOG - 15%), and Ford (F - 9%). Click here for a Morningstar snapshot of the fund.

An Object in Motion Stays in Motion

I read one analyst today mentioning how his favorite sectors for Q3 are materials and energy - and I think, reading between the lines, that his thesis was primarily technical in nature, calling for continued strength in these leading sectors. He was making a case for holding the names that have worked best all year (and last), and why sell now? Who am I to argue. The OIH graph today is encouraging. We've made a nice move off the middle Bollinger band, and today's volume was better than the previous day. I'll take it. The price of oil edged over $72 momentarily today, before backing off slightly at the close, so maybe the case for the energy names is spot on. Let's see if new highs are imminent!