To OTC Journal Members:
 

Santa Comes Early To the Markets

Santa got in his sleigh early this year and starting spreading the Holiday cheer. Technically, this has been a huge week. All the the major equity indexes are breaking out above downtrend lines that have plagued us since last March.

Make no mistake about it- technically this was the biggest week of 2004.

After this week's action I now believe we are going to have a strong year end rally which could take the NASDAQ to the 2150 to 2200 level and put us in the plus column for this otherwise snore of a year. Technicians and fund managers alike are all watching this breakout. Hedge fund managers who have been grinding sideways all year are now drooling over the potential for year end bonuses. Watch the money pile in to stocks over the next month.

This chart sends the message loud and clear. The NASDAQ is camped well above its 50 day moving average (blue line) and 200 day moving average (red line.) This indicates both a short and long term uptrend.

More importantly, the downtrend line which has plagued the market since April was pierced convincingly this past week on big volume. There was a major upside surprise in the October jobs report on Friday, far exceeding analysts' expectations. This added fuel to the rally. Jobs equals consumer spending equals a great 4th quarter in the retail sector. Since the consumer represents 70% of GDP, this is welcome news for the economy.

The market will not go straight up from here. There will be surges and pullbacks. However, fund managers will be looking at pullbacks as buying opportunities.

It was a perfect week for the bulls. Stocks up, the President re elected, job growth, oil down, and no major terrorism events during a week when the market was looking for a possible event. The perfect storm for the bulls.

Here's another chart. This could be the lynch pin in a major breakout rally. This is the chart of December oil futures. As you can see, the price is headed down towards the uptrend line.

Horizontal support resides at about $47. Are we setting up for a pattern of lower highs and lower lows? A break below $47 would probably lead to lower oil prices, and insure a continued rally in the markets. It won't happen without some volatility, but a couple of months without hurricanes, strikes, or terrorism against production could take us lower.

At long last, we might have some fun and make some real money this year.

There is still plenty to worry about. Just one example: If oil prices continue to drop, jobs grow, and the economy looks strong, then the market will have to wrestle with the specter of higher interest rates.

Next week we should have some earnings reports to review. I'm looking for market moving numbers from BPTR, NWAV, and VTSI. These companies are rocking. 
 

American Water Star (AMEX: AMW) Tries To Make A Big Comeback

Long suffering shareholders were given a lot to cheer about from American Water Star this past week. Mid week the company disclosed it had raised another $5 million in capital. The company issued convertible debt. They will pay prime plus 3% in interest, and the debt can convert into common stock at $.57 per share. The additional debt is not welcome, but the cash is and the terms are not too toxic for shareholders.

The follow up on Friday was considerably more exciting. On Friday morning, American Water Star announced Chairman Roger Mohlman intended to buy back 4 million shares of the company's common stock. His quote: "My decision was made in view of the company's common stock continuing to trade at a price level which I believe does not reflect the true long-term value of American Water Star." 

The market responded extremely favorably to this announcement. This guy is definitely putting his money where his mouth is. The stock notched its highest volume day since listing on the American Stock Exchange, and tried to break out to the upside.

In fact, as you can see from the chart, the stock butted up perfectly against its downtrend line. A convincing break above this downtrend line would signal a trend reversal for this battered equity.

The stock could be setting up for a turn around. It probably won't happen until we get the September quarterly earnings report behind us, but it looks as if the bad news has already been priced into the stock. We should see improvement from here.

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