This week ended with a long list of bad economic data.
BAD NEWS:
Consumer Confidence
Unemployment Claims
Housing Sales
Good News:
Approved Jobs Bill
Inflation is not a threat
Bernanke saved the market, reduced speculation
Interest rate is staying at unusually low level
Chicago PMI up, prediction for ISM to be up
As investors, we can see that the BAD NEWS outweigh the good news. The bad news show a weak economic recovery as the jobless issue is not addressed by the government well. As a result, consumer confidence was bad.
As for housing sales, it is a general trend that housing sales are weak during the December and January season as people do not usually buy houses during Winter. Most sales are done during Spring and Summer, so there’s no worries for this.
As for the good news, the Jobs Bill could create and save another 2 million jobs. The Chicago PMI and the various manufacturing indexes last week help us predict the ISM that will be released next monday. And the prediction is a positive ISM once more.
The week ended higher eventhough the bad news were really bad. It shows that the majority of investors are not swayed by these bad news which are lagging indicators. The see saw action this week proves that liquidity of stocks is really low as the market was so volatile while the volume was small.
Most probably, the big boys were bullying the small retail investors by burning them with margin calls and scooping up their shares at such low prices.
Next week, we need to see the ISM. A good reading of 58 would boost the markets to new highs.
This week good trades were Bank Of America Corp and all financials. Hedge funds are really keen in buying financials as seen by its remarkable rise, even though the housing recovery seems to threaten financials the most. This can be seen as a leading indicator. Hedge funds are betting on an economic recovery and they love to bet on banks that were the hardest hit.
Bad trades were Alcoa Inc, it broke the nice triangle pattern downwards, as a result, it dived to a low of $12.80. The big boys scoop up lots of Alcoa Inc in the past 2 days.
Alcoa Inc surprisingly underperformed the market on Wednesday. It was one of the only 2 DOW stocks that went down while the other Dow stocks were green.
Not surprisingly after that, 2 option plays were seen.
1: A strangle $12 - $13
2: A bullish call buying of July 15 contracts. 36000 contracts traded hands, and one block was 27000 contracts. Only one big investment bank could have done that. The derivative department will soon face regulation by the government is playing with Alcoa Inc.
There is something going on with Alcoa Inc that has resulted in this dirty Wall Street manipulation. (this is an unfounded conspiracy) Option market is the best place to check out this manipulation due to its lax regulation.
Casino stocks are trading at a tight range after releasing their bad earnings for their supposed strongest quarter as that is the holiday season. Start accumulating Casino stocks at this low price. They are going to be volatile soon.
Retail sector continues to shine even though consumer confidence index was low. MACYS M rose from 15.6 to 19, a remarkable rally despite this poor retail sentiment. The market is really acting strangely. Contrarians are playing this. When there is good news, stocks go down, when news is bad, stocks go up. Wierd wierd stuff.
I am adding Micron Technology into my Tech portfolio. I will talk about it in greater detail next week.
I am still holding Alcoa Inc AA, Bank Of America Corp BAC, Las Vegas Sands LVS.
I will continue to accumulate Alcoa Inc AA at this low level. I have cancelled my short recommendation on US Steel. The steel sector is too strong. Eventhough US Steel is slated to report poor earnings for this entire year, it is still a cheap stock compared to its peers, hence its price may even increase. It has a target price of $90 by analysts. I would just avoid this stock and play other commodities stocks such as FCX, AKS and AA.
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