Tuesday, June 06, 2006

Decision Time

Another down day on the market, which is fine and dandy, but at this point I think one of two things is going to happen: (a) we're going to get another multi-day push upward in the market or (b) we're going to see another meaningful down day Wednesday (meaningful being greater than 100 points) at which point we'll all realize we're not in Kansas anymore.

As much as I'd love to see some new lows created, I'm thinking (a) is probably more likely. More on that in a moment. A quick look at yesterday's short recommendations shows 3 of the 4 with handsome drops, and the 1 that went up was up quite modestly. Overall, the four suggestions got zapped nicely (in just one day, no less).

ANDE down 5.43%
COF up .83%
MTH down 2.55%
TOA down 7.89%

The NASDAQ Composite, on a daily chart, looks like it's easing up on its desire to fall hard.

The same chart for the past several weeks on a minute-by-minute basis clearly shows the double bottom (indeed, the most recent bottom today was higher than the earlier one, which is, sadly, bullish).

The Dow Industrials has hit two areas of support. One of them is a large trendline extending back to October (which is actually pierced today, but it closed above it). And second is a Fibonacci retracement level. The head and shoulders is complete, but it's a pretty scrawny one.

As with the NASDAQ, the intraday seems to suggest a short-term double bottom.

One clue the S&P 500 daily chart (using a candlestick format) gives us is the spinning top. As you can see, the spinning top that took place a couple of weeks ago preceded a recovery rally. I've got a feeling we may see a replay of that here with today's similar spinning top.

At the risk of being a broken record, we see on an intraday basis a substantial double bottom forming here.

If we get another push up, I think that's just going to add to everyone's frustration. Bulls are sick of the carpet being yanked out from under them, and bears are sick of not being able to get serious about a steady, persistent bear market. If the market does get walloped Wednesday (improbable, but possible) we bears can focus a lot more about profiting from long-term disintegration instead of this hurky jerky nonsense.


PB said...

the market will do it's best to mess everyone around. So it looks like more of the same farting around, wait 'till the fed raises by 50bps for the real fireworks to start!

Super Bull said...

Well, I just focus on individual stocks instead of the whole market. Toward that end, I would like to ask Hurricane5 a question regarding one of his favorite stocks, that being NTRI. Fundamentally, I know it has got very good earnings but one nagging concern that I have is what is its barrier to entry for its products. What if its competitors sell the same kind of products and drive down the prices?

Bay said...

Are you ready to call a double bottom? Or is it time to wait and see what happens?

cristri25 said...

well today was a blood bath ... japan currently down 350.

Hurricane5 said...

Super bull, I will be more than happy to address your concerns about NTRI. Nutrisystem has been around over 30 years. They are a well established brand. Brands matter in weight loss. Nutrisystem sells an ingestible product, so the customer has to put a reasonable amount of trust into the company. As for driving down the costs...I do not see this happening. The customer pays roughly $10 a day for their meals. That is very cheap. Nutrisystem has actually been steadily raising their price over the years because they have tremendous pricing power. Some of the commercial weight loss companies are much more expensive. WeightWatchers +$40..LA weightloss, Jenny Craig +$100. Medifast and Ediets seem to be doing ok, but they are only midgets compared to Nutrisystem.

With over 70 million Americans on a diet, the market is huge. So if a controversial science or pill were to gain some traction I do not believe it would hurt nutrisystem. Obesity continues to be a major health crisis. It is estimated that 2/3 of americans are either overweight or obese. This is very encouraging for NTRI.

I am most excited about the men's program. I believe it could as big as the women's eventually. Men do not like to cook. They do not like to discuss going on a diet. They do not respond to commercial weight loss companies. In comes NTRI. You can eat pasta, pizza, burgers, and you do not even have to cook or leave your home. They pitch an improved sex life and better looks to the men and it is working.

The bottom line is NTRI is here to stay. They remain the #1 play on obesity. It is a huge and growing market. At $65 NTRI is a steal. They will earn at least $2.20 a share and trade at no less than 55x that. It's headed for $80 this summer as a weigh-station to $120.

cristri25 said...

WOW ............. WOW JAPAN DOWN 460

John Wheatcroft said...

This is a good shakeout - a couple more days of this and next week should be full speed ahead. Hope you bears have been making some bucks and not waiting for some magical something to happen.

Here's what I see. Possibly one more down day that forms a hammer or maybe even a morning star. After that a couple of up days followed by sideways movement into the Fed meeting.

The fed can do one of three things - raise .25 (which is the dumbest thing to do so they probably will), pass (they aren't in the "pass" business so they won't), raise .5 (which is the smartest thing to do and should have been done this last time out).

If they raise it by .5 look out above because Wall Street will take that as an end and there will be general euphoria for several days. Then we'll return to the sideways-up (SWUP) that always accompanies a recession until the first .25 cut in rates in October. Why October? Ben is there to get Repubs re-elected and that's the only possible way to do it. So in "anticipation of the recession" he will start cutting then.