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Thursday, January 11, 2007

Good Morning

Assisted by the continued strength of the technology sectors, U.S. stocks saw modest gains on Wednesday. But falling oil prices brought down shares of major energy companies, such as ConocoPhillips (COP) and Chevron Corp. (CVX), which limited the up-side potential of the market. The Dow Jones Industrial Average rose 25.56 points, or 0.21 percent, to end at 12,442.16. The S&P 500 Index was up 2.74 points, or 0.19 percent, at 1,414.85. The NASDAQ Composite Index was up 15.50 points, or 0.63 percent, at 2,459.33.

Trading volume on the NYSE was moderate yesterday with about 1.57 billion shares changing hands and advancing stocks outnumbering declining stocks by about 17 to 16. On the NASDAQ, about 2.31 billion shares were traded with an advance-to-decline ratio of about 15 to 14.

Fueling the markets again was the precipitous drop in oil, with February crude falling $1.62 to $54.02 per barrel on the New York Mercantile Exchange. Traders continue to sell contracts based on increased distillate and gasoline supplies, but helping to contain losses was news that Saudi Arabia was planning to reduce exports in February.

Aside from the plunge in crude, corporate profits are making the headlines as Q4 earnings are released. After the close, Genentech Inc. (DNA) shares rose 1.6 percent to $85.06 from its $83.73 close, after the biotech company reported a higher quarterly profit. Shares of Alcoa (AA) jumped 6 percent, or $1.71, to $30.23 after the world's biggest aluminum maker posted results late on Tuesday. Sears Holdings Corp. (SHLD) forecast a jump in fourth-quarter profit. Other gainers included Altria (MO) after Credit Suisse raised its price target on it and other tobacco companies. Shares of Chevron (CVX) fell 1.7 percent on news that Q4 financial results were expected to be lower due to commodity prices.

The Commerce Department reported the trade deficit, which has not declined for three consecutive months since early 2003, unexpectedly fell for a third straight month in November by 1 percent to $58.2 billion. This led to the dollars rise against other major currencies yesterday. In afternoon New York trading, the Euro bought $1.2936, down from $1.2999 on Tuesday. The British pound fell to $1.9331 from $1.9398. The dollar edged up to 119.60 yen from 119.36 yen late Tuesday. The Commerce Department will report on retail sale this Friday. Also on the economic front, Dallas Federal Reserve Bank President Richard Fisher noted that actions to diversify foreign exchange reserves are natural moves and are not necessarily negative for the dollar.

The global markets were mixed overnight with the FTSEurofirst 300 up 0.7 percent to 1,487.3 points but Japan's Nikkei down 0.6 percent to 16,838.2 points. The European Central Bank meeting is expected to leave rates at 3.5 percent but signal another hike, possibly for February. The Bank of England is also expected to leave interest rates unchanged at 5 percent today. Emerging markets are continuing to experience elevated volatility resulting from higher interest rates and geopolitical event in Venezuela, Russia and Thailand.

Thursday’s Links

Asset links from Abnormal Returns.

Alpha Male reviews the work of Alexander Ineichen’s new book, Asymmetric Returns.

Daily Options Report on possible ETF Manipulation between the Oil Service’s ETF and the Energy sector.

The future of economics starts in Cambridge, MA.

Veryan Allen on Blogs and Hedge Funds.

Hedge funds converging with private equity firms is making investors nervous.

Kudlow sound’s off on President Bush and the new strategy in Iraq.

Dr. Brett examines trading ranges and future market activity.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since December 8th.

Asset Allocation – AAS Model Portfolios are between 18.75% and 75% long currently.

Beta Exposure and Portable Alpha Generation
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top Rated Major Market Derivative – No buy recommended major markets

Top Rated Style-Box Derivative – No buy recommended style-boxes

Top Rated Sector Derivative – iShares Dow Jones U.S. Real Estate (IYR 1/10/07)

Today’s Top “Buy” Recommended Stocks

Volt Information Sciences, Inc. (VOL 11/6/06)

Apple Inc. (AAPL 1/9/2007)

NBTY, Inc. (NTY 12/5/06)

F5 Networks Inc. (FFIV 9/20/06)

Hansen Natural Corp. (HANS 1/3/07)

The Goodyear Tire & Rubber Co. (GT 8/23/06)

Precision Castparts Corp. (PCP 9/20/06)

Savient Pharmaceuticals Inc. (SVNT N/A)

Par Pharmaceutical Companies Inc. (PRX 12/20/06)

Polo Ralph Lauren Corp. (RL 8/28/06)

Today’s Top “Sell” Recommended Stocks

CONSOL Energy Inc. (CNX 12/15/06)

Intuitive Surgical Inc. (ISRG 12/19/06)

Brightpoint Inc. (CELL 9/19/06)

Lenox Group Inc. (LNX 12/22/06)

Plexus Corp. (PLXS 12/29/07)

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