To OTC Journal Members:
 

Go Away May- Back to One and Done

May is a month I would like to forget. I gave back hard earned gains from Q1 in my trading account, and am looking for a rebound in stocks to sell and get cash ready for summer bargains.

Here's a chart of the Russell 2000. After a tough Q4, we had a wonderful first quarter, notching some big trading wins in DXCM, HDY, HYFS, GL.VX, NWWV, and ACTC. 

The May 10th FED meeting changed the whole picture in the overall market. The market had been taking its climbing cues from the pervasive "One and Done" theme for the FED. The market was sold on the idea the FED would pause in the tightening process, and stop raising interest rates. Stable and lower interest rates generally make stocks more valuable.

However, the skyrocketing commodity prices, with oil and gold leading the way, forced the FED to suggest it was not done raising interest rates in its May 10th FOMC statement. The Bull's party ended immediately. The market didn't like it, and sold off with a vengeance. The sell off in the Russell 2000 is circled on the chart. It was a killer. (note the nearly perfect 61.8% retracement).

The market's appetite for stocks has waned. Here's a real time OTC Journal example. On April 26th HYFS announced a $50,000 sale of 11 units to NY State. The stock ran to $.44 on 2.2 million shares. A mere 5 weeks later, HYFS announced a sale of about $2.5 million on 1500 units, and the stock ran to $.40 on 1.4 million shares. I just doesn't make sense.

Fast forward to today. The market has done a 180 on interest rates. Over the past week oil and gold have been coming down. Copper has traded to limit down this past week. 

The May jobs report, released pre open Friday AM, changed the whole picture. The economy only created 75,000 new jobs- far short of the 250,000 expected. More importantly, wage growth- the key precursor to inflation, came in at .01%, down from .10% last month. Wages are very important in the inflation picture as they represent 68% of corporate overhead.

As I write this edition, the 10 year note is yielding 5%- the same yield as the overnight FED funds rate. That's unheard of. The market, which is rarely wrong about these issues, if pricing bonds as if the FED will now pause the tightening cycle.

Of course, the market will find other things to worry about. However, corrections in an ongoing bull market are characterized by swift, brutal, take no prisoners action. Look for a much improved June market climate ahead of the sleepy summer doldrums.
 

NeWave (OTC BB: NWWV) Breaks Out

NWWV has been the turn around story of the year for the OTC Journal. This ecommerce company stumbled in 2005, and is now coming back with a vengeance. In Q1, NWWV delivered its first profitable quarter on nearly $4 million in sales, up from $1.2 million in sales in Q1 of '05 (230% increase).

In last weekend's BLOG I described NWWV as a "sleeper stock". With such stellar corporate performance it was inevitable someone would take notice and start accumulating shares.

I'm hoping some of you either picked it up or held your current position. The stock broke out two days ago for no reason I know of on a major surge in volume, which bodes well for higher levels. It has traded a million shares each of the last two days. This Rip Van Winkle appears to be waking up.

Pre open on Friday NWWV announced it paid down another $550,000 in debt from its positive cash flow in May. According to the company's press release, they have now paid down 50% of their debt in 2006. Their original goal was to pay down 1/2 their debt in 2006- they achieved it in just five months.

NWWV has 40 million I&O- at $.40 it sports a $16 million market cap. This equates to a mere 1 times sales on a profitable company with a 250% growth rate. If they can keep the momentum going, this company is worth far more than where it is trading. $1 minimum.Q2 numbers could take this one to the next level in the rebound process. Hats off to management. For every NWWV there are 10 other microcaps that don't get it done.
 

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