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Dallas, TX
April 3, 2009, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Clean Energy: Bust or Bargain?
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What's Hot Today: |
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U.S. stock futures were flat, awaiting the release of the employment report.
Overnight markets were mixed. Oil was slightly higher.
Today's Economic Calendar:
- 8:30 a.m. Mar Non-Farm Payrolls: Expected: -671K. Previous: -651K.
- 8:30 a.m. Mar Unemployment Rate: Expected: 8.5%. Previous: 8.1%.
- 10:00 a.m. Mar ISM Non-Manufacturing Index: Expected: 42. Previous: 41.6.
News For Thought
Congress: Does better job but is seen as corrupt. According to Rasmussen.com: "Twenty-one percent (21%) of U.S. voters now think Congress is doing a good or excellent job, its highest ratings in over a year, but nearly twice as many (41%) also think most members of Congress are corrupt."
Atlas Shrugged: Top Investment Banker Leaves Bank of America. Being an investment banker is not a popular occupation. But, like it or not, Capitalism, even in its current form, requires people that know and understand the process of capital formation and enterprise regeneration. According to The Wall Street Journal: 'George H. "Woody" Young III is leaving Bank of America Corp., the latest in a string of senior bankers with ties to Merrill Lynch & Co. who have left the Charlotte, N.C., bank since its acquisition of Merrill closed in January. Mr. Young is one of Wall Street's top telecommunications bankers and ran Merrill's global technology, media and telecommunications group."
The reason is reportedly "a growing culture clash," as "Merrill bankers have bristled at Bank of America's more corporate approach to banking and grumble that the bank doesn't understand that individuals are key to keeping banking relationships."
Mr. Young seems to be a pretty good deal maker as "Over the years (he) has advised on some blockbuster telecom deals, becoming a key figure in the rise of SBC Communications Inc., the deal-making phone company that used a dizzying series of deals to become AT&T Inc. He also advised Sprint on its $46.5 billion merger with Nextel that created Sprint Nextel Corp."
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Clean Energy: Bust or Bargain?
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Is It Time for a Big Surprise In Clean Energy?
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The Wilderhill Clean Energy Index (ECO) has lost 72% of its value since topping out in December 2007. But some are hoping that a new infusion of government money will revive the sector.
Indeed, it seems intuitive that with the Obama administration's push toward green technology, these stocks are likely to be moved toward the top of the analysis charts, if not necessarily the performance charts.
Chart Courtesy of StockCharts.com
Yet, the reality of the market place seems to be different than what seems intuitive. The fact is that the green energy complex got hit fairly hard by its inability to deliver on its promise fast enough during the last economic boom. It also failed in providing an economic cushion as many had hoped for, by providing jobs when other sectors slowed. Indeed, green energy acted much like traditional energy, proving that it's like other cyclical sectors of the economy.
Chart Courtesy of StockCharts.com
But there is a difference of sorts in the sector. While smaller, privately held companies have struggled, publicly traded Evergreen Solar (Nasdaq: ESLR) had almost $188 million in cash and equivalents on its balance sheet in September of 2008, the most recent figures available, with $16 million worth of receivables at the time. Yet, those receivables were down from $26 million in the prior quarter, clearly showing a slowing in business. With the economy slowing further during the ensuing months, the company has likely been burning cash.
And there are other signs of trouble in the solar power industry, even in big players. BP Solar recently fired over 600 employees, is shutting down two plants, and will be outsourcing its manufacturing of solar panels. BP says that it expects to sell more solar panels in 2009, but that it had to cut operational costs.
In fact, we may be witnessing a whole new approach in the solar energy industry as companies turn away from manufacturing, outsourcing that portion of their business, and instead concentrate on research and development, thus cutting down on manufacturing costs.
Conclusion
The clean energy sector has so far survived the recession. Yet, there are plenty of unanswered questions about both its viability and its direction. If government money comes with strings attached, a backlash, similar to that being experienced in the banking sector, where TARP money is being returned to the government, things could change dramatically.
The key is most likely what the overall global economy does, and how easy loan flow becomes in the next few months. There is also likely to be a significant divide between public companies and privately held concerns, with the former likely to be able to tap into funds more easily.
From an investment standpoint, it may be useful to start looking at which companies will be doing the manufacturing.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
Remain Patient
The S & P 500 made a new closing high for the current rally on 4-2. Volume on the NYSE and the Nasdaq was higher, suggesting that institutions are starting to move money into the market.
This is a good thing, but only if it remains in place. Remember, a whole lot depends on the action this Friday on the employment report and what develops out of the increasingly volatile G-20 meeting.
Once again, keep in mind that despite the recent rally, by strict definition, we are still in a bear market, and our primary trend remains down.
780-800 is still important support. We are in cash, but have given our SPY model a long entry point.
Keep positions small. Keep an eye on your sell stops. Otherwise, as we have noted multiple times of late, there is still no reason to be aggressive in this market. Lots of cash on hand remains the best strategy. Aggressive traders could short the market, but should be ready to cover quickly.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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Internet HOLDRS Trust (NYSE: HHH) Makes A Quiet Turn Higher
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The Internet HOLDRS Trust's (NYSE: HHH) has been making quiet gains lately, suggesting that value players may be moving into this clearly out of favor sector.
Chart Courtesy of StockCharts.com
Internet stocks aren't sexy anymore, and unless you consider buzzy, trendy things like Twitter, the Net is now just part of the mainstream. Which is why it makes sense to consider it as as potential sector for investment, if indeed, we are heading into a recovery.
This ETF is heavily weighted toward Amazon.com, Ebay, and Yahoo. Amazon.com has done well lately, while Ebay and Yahoo have not exactly been barnburners.
But other stocks in the portfolio, such as McAffee and Earthlink seem to have made a bottom and are adding to the overall improvement in the shares.
Dragging the ETF down, though, are Time Warner Cable, and Time Warner Inc.
So, you have a mixed bag of stocks in the ETF. Lots of them are below $5 and have bottomed out. Most of the companies in this ETF, that are pure Internet plays, have been around long enough to be able to make money in a good enough economy, though, which is what makes it attractive.
From a purely technical standpoint, HHH is at least a trading buy right now, as it's above its 20 and 50-day moving averages. The more definitive, and thus, longer play buy signal will come if HHH can close and stay above its 200-day moving average, which is close to the 4-2 close near 38.
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