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The only new BLOG from the
past one was posted on PhotoChannel (OTC BB: PNWIF): This stock
gave some ground in this past week's sell off, and now there's only one
left that has held up through the pre summer sell off- eFoodSafety (OTC
BB: EFSF). I didn't think the pre summer months would be as difficult
as last year, and they haven't been so far. Most of our offerings are still
well above last August lows, but have given back substantial ground from
the January/February highs. We're resetting the bar. This is a very seasonal
pre-summer event, and seems to happen every year. It's almost time to go
bargain hunting.
I believe I am going to have the
first in a series of new ideas out for your consideration post-close on
Monday. Be sure to check your inbox if you would like to read about a company
with a unique solution to a widespread problem.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at editor@otcjournal.com.
To use the BLOG, simply go
to the home page at www.otcjournal.com
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current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.
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The Market:
Where To From Here? |
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The market got flushed down the toilet
this week as interest rates on the 10yr eclipsed the 5% mark, and the stock
market freaked out. The cleverly named "Goldilocks Economy", where all
things are beautiful, got a little ugly.
Here's the problem- the economy is
doing too well. Go figure. GDP growth has been about 2%, and inflation
has been about 2.5%. Manufacturing numbers suggested the economy is heating
up, and GDP could eclipse inflation.
Sounds pretty good to me. However,
the stock market didn't like it. Why- because bonds sold off as the market
is beginning to believe the FED could end up raising interest rates.
When bonds sell off, interest rates
go up. When interest rates go up, money flows from stocks to bonds, as
they get cheaper and yields climb. In the long term, a stronger economy
is good for stocks. However, the interest rate fears led to a major drubbing
in most of the indexes.
I believe the market has been looking
for a reason to sell off. After all, it has been going pretty much straight
up since last August, and fund managers were just looking for an excuse
to lock in profits out in front of a decent correction.
Here's a look at the chart and what
we might expect. This is a pretty short term look- only going back to the
March low after the mid February correction. The NASDAQ Comp was full steam
ahead in this time frame, but unfortunately left the microcaps behind.
I believe it was simply a seasonal issue- micros rarely trade well out
in front of the summer months.
After gaining more than 300 points
in 2.5 months, this index was entitled to blow off a little steam. I don't
believe it's over yet. I believe this market will sell off at least to
the 38.2% retracement line of 2514. If that number gives way, 2444 will
be the next threshold of support, and the one that really needs to hold
if the March leg was for real.
The market will now focus it's attention
squarely on economic reports that could effect the bond market until we
get into Q2 earnings releases in Mid July. Good economic numbers will be
bad for stocks in the near term. Go figure.
If we can hang in there around 5%
on the 10yr, this bull market should continue raging on. If we head toward
5.5%, watch out below. However, when the market refocuses on earnings in
July, interest might take a back burner temporarily.
I'm pleased to see the market sell
off. As far as I am concerned, the faster and the harder the better. The
micros have already corrected, and larger caps are following. Nothing ever
goes up in a straight line. The quicker we get this over with, the better.
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HyperDynamics
(AMEX: HDY): Some Comments |
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HDY is one of the few stocks
I have seen rip to the upside of late, and a few subscribers have asked
for my comments. For those of you who have followed this one over the years,
you know I decided to stop covering in early April as there had been nothing
going on for many months, and there really wasn't anything to cover.
HDY claims to have the rights
to drill in a large off-shore concession off the coast of the West African
nation of the Republic of Guinea. Two years ago the company came out with
some rather compelling seismic studies to suggest there could be some rather
vast deep water hydrocarbons in the region, and the stock was very much
in play.
When HDY applied for permits
to drill some test wells, the Minister of Mines denied their application.
Of late, Reuters has been giving the company a little bit of a beating,
more or less stating the unstable Guinea government was backing out of
their deal.
As it stands today, HDY is
waiting for the Guinea Parliament to make their contract a law, and thereby
confirming everyone is on the same page. In the interim, the company has
publicly stated it is seeking a major oil exploration company as a development
partner, and believes it still holds the legal right to drill.
This past week HDY was the
subject of some favorable commentary out of Jim Cramer's TheStreet.com.
It got the stock rocketing up the charts once again for the time being.
Here are the negatives as I see it.
They haven't actually gotten a drilling permit from the Guinea government.
They have substantial convertible debt. This is the third business this
company has engaged in with the same management team, and the other two
were complete failures. The used to be a business systems company, and
then they were an internet colocation facility.
As far as Cramer goes- let's look
at our history with Cramer. Long term readers will recall Global ePoint
(GEPT), which I suggested at $3. Cramer recommended it at $4, it ran to
$7, and I said to sell it. Today, it is about $.40. Remember Dexcom (DXCM)?
I recommended it at $16.50. Cramer said to buy it at $21. It ran to $26,
and I said sell. Today, it is $6.50.
I would like nothing better than
to see HDY get its drilling permits and a major partner. If you
feel the stock is in play and you really want to own it, the 61.8% retracement
at $2.44 would be a good level.
My view on it hasn't changed. If
they get the go ahead to drill a hole, I am back in. If they don't, I would
rather be on the sidelines. Sure, we might give up a couple of points in
the early going by being on the sidelines if the news comes up, but if
they pull it off this has $10 potential hands down. After two years of
not delivering, I'm still prepared to wait. If you want to take the risk,
I hope it works out. You'll make more money than me, but I will still be
in on it.
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