Big Rally Big Fall
11/08/2004
Well, well. As I mentioned last week, before the US results, 'if we do get an unequivocal Bush victory we will almost certainly see a sharp move up.
The point is, for those who trade options or 'OCO' (one cancels other where if the price moves up you go long (see the jargon buster at the end of this column) and if it moves down you go short), this week is ideal. I am a reactive not a predictive trader. I wait for the price to move in a particular direction before I make my move.'
So there we are, we got the rally. But as I said on each of my three ITN appearances last week - it's oil that is on the market's mind. And earnings are not a driving force. So those earnings statistics again:
'US earnings 79 percent of S&P 500 companies have reported earnings. Operating profit is up 14 percent from the same period a year ago, below the 31 percent gain shown in the second quarter and the first quarter's 27 percent.
More importantly, a total of 64 percent of earnings have come in above expectations, 16 percent have matched and 20 percent have missed according to Thomson research. Companies are beating estimates by 2.9 percent, in line with the long-term average of 3 percent. The company's negative-to-positive ratio stands at 1.6 for the fourth quarter, meaning there have been 1.6 negative pre-announcements for every positive one. The long term average is 1.8.
The bottom line: don't look at earnings to be the driving force for the market.'
Presently, if you want to trade the Dow, then follow the oil price, if it falls, stocks will rise. If it rises then vice versa. The problem is, this coupling will not last.
I am speaking on Wednesday 10th November in Leeds about my latest stock ideas (circa 6pm) - if you would like details then drop me an email with your postal address to alpesh@tradermind.com. Equally, if you would like a free multi-media CDROM on 'Investing Better' posted to you please do the same. So what is my take on oil (Light Crude for Dec delivery)?
Uptrend clearly broken of course. Downtrend in short term in place. Oversold in the short-term suggesting further downward moves. Anyway, without a move above $52.5 in the next week, the downtrend is intact. The weekly chart supports this view and suggests as low as $43 in 2 months time.
Value-Growth
On my value growth criteria which are based on stocks meeting revenue and profit growth and good value based on criteria such as price earnings growth, the following names come up. Remember they are for a 6 month outlook: Severfield-Rowen - this is new to the list and has had a good rally. Others are from last week still on here: Findel, DTZ and Hitachi.
Crazy Small Stock
These are high risk volatile stocks which could move sharply higher or move sharply lower in my view, but will almost certainly not stand still. Names on the radar include Macfarlane Group, Chieftain Group, Caldwell Investments, Bede, Teather & Greenwood.
Spreadbetters
Spreadbetters and futures traders often look at hard and soft commodities. Here's my quick take on the action for the week ahead:
- Copper: up
- $/£: up
- Crude Oil: down
- Dow: Up
- Gold: Mixed to Up
- FTSE 100: Mixed to Up
- Soyabean Oil: Mixed
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