I personally would like to wish all my readers, traders, members from across the world a HEALTHY and WEALTHY New Year 2010 ! It’s been another great year for us and we look forward to all the 2010 will bring! Be safe!
Jobless claims and the number of newly laid-off workers filing claims benefits dropped unexpectedly last week, another indication that the job market may be healing as the economy slowly recovers.
The Labor Department said Thursday that new claims for unemployment insurance fell by 22,000 to a seasonally adjusted 432,000, the lowest since July 2008. That was much better than the rise to 460,000 that Wall Street economists expected.
Most stocks spent most of the trading day around the neutral or zero level on light trading before the New Year. The upbeat economic data was offset by the U.S. dollar’s rise against the Japanese yen, as well as an unexpected drop in distillate inventories. More specifically, the Energy Information Administration (EIA) said escalating demand among refiners and a cold front along the East Coast weighed on oil stockpiles last week, sending the front-month crude contract to a seven-week high.
Intra-day volatility send things lower but as the major market indexes clawed their way into the black in the final minutes of trading we saw minimal gains. Crazy for a day that encompassed all of 50 points up and down.
It’s hard to believe that we are about to put 2009 in the books. We would be hard pressed to single out a more interesting year for investors. We had outright panic early in 2009 as stocks sank to 20-year lows. Then we saw the strongest rebound in history. Ironically most investors are still unsure what the economy, and the stock market’s, next move will be.
It seems clear that we’ve gotten through the worst of the fallout from the financial crisis. Housing prices are improving, unemployment seems to be bottoming, industrial activity is expanding, and the Fed is mulling how to reverse the stimulus that helped avert financial disaster.
But will unemployment actually improve in 2010? Will the housing market continue to improve after the Homebuyer Credit is removed? How will the stock market react to an interest rate hike? We’ll get the answers to these questions and more in the months ahead, and you can rest assured that SmallCapInvestor Daily will continue to bring you informed opinion and rigorous analyses on the stock markets and our global economy.
"We continue to be of the opinion that the real driver of the oil market last week and this week is the lack of trading volume in the futures market and not really the lack of oil supplies."
These were the recent words of Olivier Jakob of Petromatrix in Switzerland, and are yet another example of the bearish sentiment toward oil prices that is rampant in the analyst community. Nobody wants to admit that the current supply and demand relationship is temporary. Nobody wants to acknowledge that the world faces some tough decisions in the months and years to come regarding energy supplies.
The era of cheap oil is over. Sure, we could maybe see oil in the $60's again. But it's pure folly to expect that oil prices might remain there for any length of time.
*****The Dow Jones Industrial Average and the Russell 2000 have made their highest closes yet. On Thursday the Dow closed at 10,520.10 and the Russell closed at 634.07. And it looks as though we'll see an even higher close before 2009 is over.
Perhaps even more importantly, oil prices have rallied and are pushing to new highs for the year. It's no coincidence that stocks and oil move in tandem. This is because they both respond to economic growth expectations. And really, oil may even be more sensitive to economic growth than stocks.
That's because traders know that oil supply has a hard ceiling. And as demand improves, that ceiling looms. Early news reports this morning are looking ahead to inventory data later this week as a catalyst to push oil prices above $80 a barrel. But really, a move above $80 is inevitable, whether it comes this week or next...
*****Russia is once again holding Eastern Europe hostage to its oil supply, threatening to cut off oil shipments if transportation conflicts aren't resolved.
This is important news, and not just for Eastern Europe. State controlled oil supplies create leverage for countries like Russia, Brazil, Mexico and even OPEC. Don't be surprised at all to see these countries withhold oil to drive prices higher.
After all, these countries (with the possible exception of Brazil) are dependent on oil to fund government spending. They will maneuver to keep prices high and supplies tight. And that becomes even more significant when you realize that supplies in countries like Mexico and Russia are falling. It's imperative that these countries get the most they can for their oil because it won't be long before they have no oil to sell. Mexico, for instance, could shut off oil exports in the next 2 years...After exiting the GLD long trade with members at the TOP of the market POST HERE - we now are looking into buying some gold before the next rally higher. Since reaching unseen territory at the beginning of this month, GLD has corrected sharply. Nevertheless, the long-term weekly chart shows GLD coming into major support of an uptrend line that began with the lows of November 2008. This is shown below in the chart and seems like a great area to start buying again – but you will have to become a member to know WHEN and HOW MUCH Gold we will buy!
*** The holidays are officially here, with lots of time for fun with family and friends! I want to wish all SmallCapInvestor Daily readers a wonderful – and safe – holiday season. A few days off to spend with family and friends, time to reflect on past year and contemplate the year to come, is just what is needed.
This year my wife Carrie and I will be spending the holidays on the west coast with our families in Washington and Oregon. We plan to get out to some of the Willamette Valley vineyards to see what's new in the wine barrel. I'm a big Pinot Noir fan (in fact, we named our Chocolate Lab puppy "Pinot") and love Oregon wine country.
And speaking of the holidays, I have a holiday gift for my loyal readers. You see, on Friday I’ll be reaching out to everyone with a special offer for my brand new Energy World Profits advisory service. But I want to give loyal SmallCapInvestor Daily readers an advance opportunity to start a trial subscription at a steeply discounted rate.
Normally, the Energy World Profits service goes for $399 a year, but for this weekend only I’m letting a privileged few sign up for only $199. And because you’re a long time reader of my email newsletter, well, I’m letting you cut in front of the line.
***And speaking of energy prices. Falling supply and growing demand lead to only one thing in a free market economy – higher prices. Now you can argue that the United States is moving further away from capitalism with every bill to come out of Washington, but don’t tell that to oil traders. Crude oil for February delivery is pushing past the $75.00 level today after the American Petroleum Institute reported that inventories last week fell 1.6 million barrels more than expected. Analysts had expected a drop of 2 million, but the actual drop was 3.7 million.
These past couple of weeks have been absolutely boring – and the trading range very tight. It’s always best in these situations to just WAIT as much as it hurts to not trade. We NEED to get the true market direction before we trade and try to predict where it could go. So for now let’s watch for the following resistance and support levels on the S&P 500. NOTE: The markets will be CLOSED Friday so it’s a short week.
The US Dollar rally has made a huge move higher since the end of November – gaining of about 5%. What is interesting is that it has broken a major trendline which is history repeats itself could be the beginning of something big. As shown below, the recent action in the Dollar looks a lot like the start of the rally that occurred in the second half of 2008. Notice that after the breakout last time from a multi-year downtrend the currency went on to gain 25% over the next 7 months…
Warren Buffet has got to be one of the greatest investors of all time, and he certainly provides some great material for the media. I included the words quoted above as an introduction to the first chapter of my book, The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks. They provided a great lead in to a discussion of why small-cap stocks have a place in every investor's portfolio.
Last week I discussed the out-performance of small-cap stocks over the long-term. Today we're talking about why small-cap stocks are such strong performers. Some of this content I've included in the first chapter of my book, but I want to bring it to you here today in SmallCapInvestor Daily.
Almost all great companies start out small. The exceptions are those that are formed as spin-offs from large companies or joint ventures between two big, existing companies. But even many of these start out small. And many of the world's greatest innovations come from these small, nimble companies. In fact, it is the little guys that have increasingly been investing in research and development in recent decades – and helping to fuel economic growth in the process.
It is this growth that is the reason small-cap stocks shine since the greatest rate of growth is often during a company's early days. This is when they are producing new products, launching strategic partnerships, and entering new markets – all while flying under the radar of larger competitors and Wall street analysts and investors. But often these efforts are rewarded once enough investors realize the company's potential, and if the company continues to perform.
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| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| May 15 | SMG | $33.94 | $34.95 | $100 |
| May 11 | SFD | $9.50 | $12.50 | $1030 |
| May 5 | SFD | $8.76 | $12.50 | $57 |
| April 16 | AAPL | $114.00 | $121.00 | $134 |
| March 18 | WFC | $8.20 | $16.40 | $143 |
| March 13 | WFC | $8.20 | $13.50 | $195 |
| March 5 | EMC | $16.04 | $10.12 | ($311) |
