Portable Alpha Daily

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Tuesday, February 13, 2007

Good Morning

Our long-term market model remains bearish as of December 8th. The total universe of stocks, ETF and funds which we review on a daily basis is 1885. Of those reviewed, 322 are rated "Buy," 523 are rated "Sell" and 1040 "Neutral." Our model portfolios are currently allocated between 56.25% and 75% long.

Our analytic continues to resist upgrading any major markets or style box investments to “buy” status. In terms of our sector analysis, Retail (RTH) is again the top rated investment followed by Telecommunication (IYZ) and Real Estate (IYR).

Carrying Friday’s weakness through to Monday, U.S. stocks declined yesterday thanks in part to a sell-off in energy shares as well as concerns over the housing market and its impact on consumer spending. The Dow Jones Industrial Average lost 28.28 points, or 0.22 percent, to end at 12,552.55. The S&P 500 Index slipped 4.69 points, or 0.33 percent, to finish at 1,433.37 while the NASDAQ Composite Index declined 9.44 points, or 0.38 percent, to close at 2,450.38.

Trading was moderate on the NYSE, with about 1.32 billion shares changing hands and declining stocks outnumbered advancing ones by a ratio of about 5 to 3. On the NASDAQ, about 1.89 billion shares traded, below last year's daily average of 2.02 billion with 17 advancers for every 13 decliners.

The benchmark 10-year note fell 5/32 in price to 98-18/32, while its yield rose to 4.81 percent from 4.79 percent late Friday while the 30-year bond closed with a yield of 4.89.

U.S. crude oil for March delivery fell $2.08 to settle at $57.81 a barrel after OPEC signaled contentment with the current environment and reluctance to cut supplies further. The sharp drop in oil prices resulted in a sell-off of big oil companies, which in turn brought down both the Dow and the S&P 500. London Brent crude slid $2.41 to $56.60. COMEX April gold dropped $5.00 to end at $667.30 an ounce.

Aside from energy companies, mortgage bankers, homebuilders and REIT’s lost ground for the second day with the MSCI U.S. REIT Index closing down 1.9 percent. Last Friday, Countrywide Financial Corp. (CFC) noted that foreclosures were at the highest level since 2002 and New Century Financial Corp. (NEW) issued a warning that their bottom line would be impacted by bad sub prime loans.

Share trading in Japan was closed for a holiday, but elsewhere in Asia, the MSCI Asia-Pacific Index closed down 0.9 percent.

The European markets didn’t fare well either on Monday, with the FTSEurofirst 300 Index down 0.6 percent lower at 1,533.15 points. Britain's FTSE 100 closed down 0.4 percent, France's CAC 40 was down 0.9 percent and Germany's DAX lost 0.8 percent.

The currency markets were looking for a stronger message after this weekends G7 summit. But much to their disappointment, the topic of the weak Japanese currency was only discussed indirectly and G7 officials appear reluctant to pressure Tokyo. The result was heavy selling of the yen. The Euro traded at 159.00 yen intra-day, the highest level since the common currency's 1999 launch, but closed at 157.78 yen, down 0.3 percent. The dollar neared a four-year peak against the Yen and closed at 121.88. Against the Euro, the dollar closed at 0.7714. The Euro declined 0.32 percent to $1.2963.

With such low interest rates, investors borrow on a cheap yen to purchase higher yielding investments in what’s referred to as a carry-trade. The result is a yen valued at its lowest level in more than two decades on a trade-weighted basis, but the increased liquidity has translated to gains in equities.

Short-Term Technical Indicators

Investor Sentiment

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

Asset Allocation – AAS Model Portfolios are between 56.25% 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 market investments

Top Rated Style-Box Derivative – No buy recommended style-box investments

Top Rated Sector Derivative – Retail HOLDRs (RTH 1/29/07)

Today’s Top “Buy” Recommended Stocks

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

CPI Corp. (CPY 1/23/07)

Martin Marietta Materials, Inc. (MLM 11/6/06)

Navistar International Corp. (NAV 9/12/06)

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

LCA-Vision Inc. (LCAV 2/12/07)

Investors Financial Services Corp. (IFIN 1/12/07)

Energizer Holdings Inc. (ENR 1/26/07)

USANA Health Sciences Inc. (USNA 12/20/06)

Public Storage Inc. (PSA 12/13/06)

Today’s Top “Sell” Recommended Stocks

New Century Financial Corp. (NEW 6/13/06)

Google Inc. (GOOG 12/18/06)

Advanced Micro Devices Inc. (AMD 9/27/06)

Plexus Corp. (PLXS 12/29/06)

Administaff, Inc. (ASF 1/10/07)



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