Larry’s Look at the Markets: July 21, 2008

It was a pretty ho hum day. The day started out reasonably strong as B of A came out and announced much lower write downs than the market had anticipated. Financials were up early, and carried the market a bit higher. The larger financial institutions are not doing as badly as the market would have you believe.

As usual, the market has totally emotionally over reacted to what people believe might be the worst case scenario.

Oil sabotaged a low volume day a bit as it rose 2 points. However, I know of a number of technicians who believe oil might have broken it’s uptrend line, and we could be in for a little relief from the unbelievable run up in that particular commodity.

As I have published in the past, I don’t know where oil belongs, but I do know oil’s recent parabolic rise in unsustainable, and something is going to change the pattern.

For those who believe the high price of oil is a death knell for the US economy, you would be wrong. I have friends who run businesses in Bulgaria, and they have been paying $8 per gallon for years, and their economy is growing at 10% per annum. It’s simply an issue of “getting used” to the new reality of oil prices.

There will be a 10 year bubble in alternative energy stocks- more on that in future editions.

We’re in the teeth of the most boring part of the year. Go play golf. Have fun with your kids. Things will change in the next month or two, and I hope for the better.

eFood in Equities Magazine

I know there hasn’t been a lot to chew on out of EFSF of late. I have been briefed on developments at the company. The DR program is being fine tuned, and they will be back out there soon with a bigger commitment.

There was an article that appeared in a recent edition of Equities Magazine. For informed followers of EFSF, there isn’t much in the article you don’t know. However, FYI, here’s a link. You can find it in the archive section on EFSF as well:

Larry’s Look at Today’s Market: 7/16- 12:50 Pacific

Oil, oil, oil, oil. Huge bank rally today along with the first decent up day in the larger markets in the last month. The S&P 500 has dropped 220 points and the DOW has dropped 2,000 points since we’ve had a decent up day like this.

One decent day in the larger market does not make for a trend, and I am seeing no signs of a bottom in the micros except perhaps on the psychological side.

I’ve been reading some great hints the bottom could be at hand in some of the micros I am following. Yes, they have all been decimated this summer- with the exception of recent edition PLTG which is in the energy space.

Here’s some commentary I have been reading of late: EFSF is going out of business. Horse hockey. SPKL has closed 10 stores- simply false. In fact, most of the stores are doing great. Based on 22 years in this market, I can tell you these are the kinds of rumors that make for good market bottoms. Near at hand. Watching SPKL come apart has been particularly painful for me, but I made the decision to just hang in there and tough it out.

Oil down $8 in the last two days along with great earnings out of Wells Fargo today really put a bid under the market. It the first decent up day in a month.

Here’s the bad news- Oil has corrected nicely, but hasn’t broken it’s uptrend. Still intact. We need a close below $130 before it’s time to really believe, and it’s not here yet.

At any rate, I am going to keep watching, but I have kind of abandoned the idea of going short into earnings releases. Most of the stocks I am watching are going up into the earnings releases, suggesting they were so blown out there was no where to go even on misses. In addition, most analysts have the projected numbers ratcheted down so low companies can beat the estimates pretty easily.

I recognize this strategy is not working. Perhaps I should simply flip it over, and look at going long. Different markets call for different strategies.

Let’s hope today’s rally continues.

Larry’s Look at Today’s Market: 7/14- 1:00 Pacific

Another miserable day for the markets, albeit not quite as dismal as last week. The market opened strong on the heels of a formal announcement over the weekend Freddie and Fannie would be bailed out.

However, about an hour into the trading day they started selling again, and the market hasn’t looked back.

In my view, the market has nearly reached crises proportion, but could be setting up for one of the best buying opportunities since 1987.

It was all quiet in micro land today, with most of my ideas holding at fairly anemic values. I am personally starting to liquidate many of the positions in my trading account- I’m getting liquid out in front of what I believe could be a once in a life time opportunity to buy cheap. There will be easy money made in the first short covering rally. Right now, the shorts totally rule the markets.

The first stock on my earnings watch list from the weekend edition reports after the close today. Genentech- (NYSE: DNA). The market is looking for $.86 per share in earnings.

Let’s see what happens after today’s close. I didn’t take a position as the stock traded down in today’s action. However, that could have been an indication to get short. Hard to say. We’ll see post close.

No position on DNA, but an interest to see how the market responds.

Earnings are out- the missed by $.04- the stock is down about 3 points in after hours trading. The profits were there for the taking.

Larry’s Look at Today’s Market: 7/10- 1:37 Pacific

Another rodeo ride in the markets today. This is about as volatile a market as I can ever remember. I need Dramamine.

The rumored insolvency of FreddiMac and Fanny Mae had the market all riled up today, along with the $5 rise in oil prices.

Here’s a chart that is mind boggling:

This is a chart of the S&P 500- The faint yellow line is the 10 day moving average. The S&P has now spent 24 consecutive trading days below the 10 day moving average. Can you guess when this last happened? February of 1984. Over 28 years ago. This is a pretty extraordinary event.

I can’t help thinking the market is long overdue for some sort of move to the upside. The rhetoric is so negative you could cut it with a chain saw. This is the kind of mentality that makes for a great market bottom.

I can’t say when the turn will be. However, the market made a gallant attempt to come back towards the end of the day.

I reloaded on my RIMM options today just before the close. I picked up 20 of the 110 August Calls at $11.10 - that about a $22k investment. When the stock closed about one half hour later, I was in the money about $1100.

Since the market staged a reasonable comeback at the end of the day today, we could have a decent day tomorrow.

There could be a pretty furious rally before the end of the year as the short interest in many stocks is by far the highest in history, and that is the rocket fuel to drive stocks higher. It just needs to be ignited.

Nothing happened of any interest in microcap land today. Hopefully, next week will be a big more exciting.

Comments and questions are welcome.

Larry’s Look at Today’s Market: 7/09- 2:35 Pacific

Yesterday’s gains were met with another sell off today. We are in the teeth of it right now.It’s the middle of a very tough summer, and if you haven’t sold whatever you wanted to sell, you’re probably close to selling somewhere near a bottom if you want to sell now.

Despite a big drop in the DOW down 236 with the NASDAQ down 60, there were some positives to take away from today’s market.

I really liked the action in oil today. Iran was testing nuclear missiles overnight, and in past years that would have made oil run up like crazy. Instead, the price of oil dropped $.40 per barrel, which makes me think oil’s meteoric rise might be coming to a close. A significant drop in oil would be huge for the markets.

New lows have slowed considerably. There were only about 100 new lows printed in each of the major indexes today, suggesting a bottoming process is underway.

The only bright spot in microcap land was Nighthawk (OTC BB: NIHK) which staged a kind of low volume mini rally. The company announced the largest remote disconnect order in its history- 1,000 units in one order. An east coast utility has been adding the devices where appropriate for their customers, and they could order thousands more. Hopefully, this will lead to more large orders.

Everything else we follow was down today on the usual summer’s light volume. We are right in the teeth of a pretty nasty low volume summer sell down, and the media is not giving anyone any reason to buy.

We are closing in on some pretty attractive bottoms in some of these small stocks, and investors with a six month time window could be getting in position to make some big returns.

Comments and questions are welcome.

Larry’s Look at Today’s Market: 7/08- 7:51 Pacific

It was inevitable that the market would have a good day. Earnings season begins tomorrow, and the market might stop obsessing about oil and recession, and turn its attention to numbers. At any rate, some sort of rebound was inevitable. The market has now spent 20 days in a row below the 10 day moving average- it’s only happened twice in the last 20 years.

My call in yesterday’s edition for a short term, oversold bounce in RIMM was very good- the stock was up $6.38 today and closed at $122.04- Up substantially from the early AM going of $115 where I suggested pouncing.

In fact, I decided to sell my 10 August 110 calls- I netted about $2200 on a $12k investment in two days. I’ll take that anytime. I decided to hold the 500 shares I picked up at $116.85- looking for higher levels there.

In fact, let’s look at an LPO (Logical profit objective) for RIMM. Here’s the chart:

On the left you see the perfect 61.8% retracement I covered in Monday’s edition. On the right you see the LPOs. Your first stop would be about $124, which the stock will probably hit in the AM if the market’s move today carries over to tomorrow.

If $124 gives way, I’ll be looking for $131.50 as the next target price. I’ll probably hang in there and hope for that level.

If you sold the QID and jumped into this trade, you should be very pleased. These trades can be profitable when the micros are simply stalled, which is the case in the current market malaise.

Aside from an update on SPKL today via the BLOG, there’s not much for report on the microcap front. Hoping for some news out of one or two of these puppies in the next week or so.

Comments and questions are welcome.

Spicy Pickle Update: Pickle Shareholders Not Recession Proof

The home page at the OTC Journal lists my SSL (suggested stop loss) for Spicy Pickle at $.90. For those of you who understand the concept of an SSL, you know that you have now become a long term shareholder if you have continued to hold the stock.

As a very early stage investor, I was happy to notch a big profit at the end of 2007 when the stock was trading with liquidity above $1.50. Since then I have done very little trading in this issue- some buying and selling, but I don’t think I’ve done a trade in the stock in quite some time.

I knew things could get rough coming into the summer months. For starters, the summer can be rough on microcaps- summers are generally characterized by low volume pullbacks.

This summer has been particularly rough with the backdrop of a US recession. In short, any company who sells anything to US consumers is getting pretty rough treatment by the US markets right now. A couple of exceptions would be WalMart and Costco- the big discounters.

Fundamentally, there’s not much reason for the shoddy treatment. It’s more market and recession related. The company’s 41 stores are doing very well for the most part, and the expansion will continue.

I was able to get an update on current events this past weekend. Two new stores are slated to open in July in two new states- the first Michigan and Brooklyn stores are scheduled for opening.

There are more under construction. More leases are close to being signed. New franchisees are close to coming on board. The money that was going out for the 7 corporate stores is over, and they are now contributing gross profits regularly.

No franchise commitments are being shelved in this tough market. Real estate continues to be the expansion Achilles Heel- finding the right locations cannot be rushed, and finding the good locations is still difficult. A good recession might actually a positive on the expansion side- the real estate might become more readily available.

So- here’s the slap of reality- we’re in a recession, we’re in a Bear Market, and we’re in the middle of the summer doldrums. My accounts are awash in red ink, but I made the decision to tough it out.

SPKL has a very loyal shareholder base, but has still come down into the mid $.70′s on a little selling pressure without the accompanying buy side pressure.

The company will continue opening new stores for the forseeable future, albeit not as fast as I would like to see. Each new store opening contributes a little more cash flow on an ongoing basis forever.

I can’t call where the bottom might be or when the stock will start a reasonable and sustainable rebound phase. I suspect the stock will be a lot higher by year’s end, but there’s no telling for sure. Here’s one certainty- the market will start pricing stock’s out of this recession long before economists give the all clear signal.

If I have to hang in there for two months or two years to catch the next Bull Market surge for consumer related US stocks, then so be it. That’s what I’m going to do.

Comments and questions are welcome.