Sunday, October 30, 2011

External Publications - 10/30/2011

One article is published on today.
  • The Right Way To Estimate Industry Ratios: Industry ratios are more important than those of an individual company. A low PE ratio of a company could be distorted by various one-time items thus may not reflect the real earnings power of the company. But a low PE of an industry is often a sure bet for a structural opportunity. One-time items will positively impact some companies in the industry while negatively impact others. Those will cancel out one another. Likewise, some companies will adopt aggressive accounting schemes and others with conservative ones. Probability theory dictates that the "average" of a group of numbers resists the errors that may severely impact individual ones. With less error, industry ratios are more likely to reflect the industry's financial strength...

Thursday, October 27, 2011

New High Before January - Possible

Bulls are celebrating today and there might be more coming for them! The earnings season is approaching to its end and it is way better than investors had feared. The Q3 GDP number is released today, again it is way better than investors had feared. Besides, what happened in Europe and China is also encouraging. European leaders finally become serious about their problem, and Chinese leaders become more growth-friendly. Before January, that is before the next earnings season and GDP number, what will a sensible investor do if a big chunk of his money is still sidelined? Surely there the market will zigzag in the next three months. But when the trend is clear and strong, miss a day will miss a lot.

Tuesday, October 11, 2011

Up Till November

We see the market will move up till November.

Germany and France vowed to save their banks, and the market is rallying on that news, even if some European countries are still doomed to fail. The catch is that they didn't have a package yet. They promised to have it ready by early November. Coincidentally it's earnings season between now and November. Investors will pay more attention to earnings while waiting for the Merkel-Sarkozy package. Recent fall of the market already priced in a new recession. The market doesn't need to have super rosy earnings to rally. Technically the market already broke 50MA, a major technical resistance. The next stop will be 200MA. We see by early November the market will move up to 200MA where it will face a major challenge. Plus by that time the earnings season is about to end and investor will switch back to the endless European problem. The Merkel-Sarkozy package will make it or break it.

Cheers! Until November.

Tuesday, October 4, 2011

Closer to Bottom

It's hard to guess the exact bottom when markets around the world are all sliding down. But it should be close to the bottom. For two consecutive days, XLK is stronger than the S&P 500, and XLU led the market down. XLU was the star in the August, September crash. It climbed to a 52-week high recently while every other sectors suffered. Clearly money was hiding in the traditional defensive sector during the market meltdown. Now with XLU being weak and XLK being strong, those money is flowing out the pit where they were hibernating for the harsh winter to embrace a warm spring. I sense the spring is coming.