OTCPicks Penny Stock Blog

• Since it's the beginning of a new year we thought we'd take a peak at the 2009 Traders Almanac and see what it has to say as follows:
• In 12 of the last 14 post-election years the year's market performance followed in January's direction. So if January is an "Up" month in the broader markets and the year's market performance is likely to follow in the same direction and likewise for a "Down" January market performance.
• Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, or a flat market for the year.
• S&P's gains during January's first five days preceded full-year gains 86.1% of the time. 10 of the last 14 post-election years followed the first five day's trading direction and act as an "Early Warning" detection.
• November, December and January typically constitute the year's best 3 month span.
• There have been five straight post-election year January gains going back to 1985 and we think there may be a pre-innaguration market rally on optimism of what will happen with the new incoming administration.

Low Oil Prices are Like a Tax Cut

• Massive infrastructure and public works projects, with money for roads, mass transit, bridges and schools, projects that Mr Obama has called "shovel ready.''
• A portion of a middle class tax cut that will become part of a permanent tax cut in the upcoming budget: immediate tax relief of some $500 for individuals and $1000 for couples.
• Doubling production of renewable energy through spending and tax incentives.
• Developing a national energy grid for harnessing and distributing power derived from water, wind and other alternative energy sources.
• Cash for states facing revenue shortfalls.
• Improving health care technology to bolster productivity and reduce bureaucratic costs.
• Extending part-time workers' unemployment compensation - a proposal Republican lawmakers have blocked in the past.
• Subsidizing employer expenses to temporarily continue health insurance coverage for laid-off and retired workers and their dependents.
• The plan may also enable workers laid-off from jobs without insurance benefits to become eligible for Medicaid coverage.

• Since it's the beginning of a new year we thought we'd take a peak at the 2009 Traders Almanac and see what it has to say as follows:
• In 12 of the last 14 post-election years the year's market performance followed in January's direction. So if January is an "Up" month in the broader markets and the year's market performance is likely to follow in the same direction and likewise for a "Down" January market performance.
• Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, or a flat market for the year.
• S&P's gains during January's first five days preceded full-year gains 86.1% of the time. 10 of the last 14 post-election years followed the first five day's trading direction and act as an "Early Warning" detection.
• November, December and January typically constitute the year's best 3 month span.
• There have been five straight post-election year January gains going back to 1985 and we think there may be a pre-innaguration market rally on optimism of what will happen with the new incoming administration.

Low Oil Prices are Like a Tax Cut

• Massive infrastructure and public works projects, with money for roads, mass transit, bridges and schools, projects that Mr Obama has called "shovel ready.''
• A portion of a middle class tax cut that will become part of a permanent tax cut in the upcoming budget: immediate tax relief of some $500 for individuals and $1000 for couples.
• Doubling production of renewable energy through spending and tax incentives.
• Developing a national energy grid for harnessing and distributing power derived from water, wind and other alternative energy sources.
• Cash for states facing revenue shortfalls.
• Improving health care technology to bolster productivity and reduce bureaucratic costs.
• Extending part-time workers' unemployment compensation - a proposal Republican lawmakers have blocked in the past.
• Subsidizing employer expenses to temporarily continue health insurance coverage for laid-off and retired workers and their dependents.
• The plan may also enable workers laid-off from jobs without insurance benefits to become eligible for Medicaid coverage.

December 8, 2008 -

Wallstreet charged ahead bullishly on Mnday as the Dow and S&P 500 surged ahead more than 3% as investors bet that the automakers will get a first installment of a bridge loan from congress, and on Barack Obama's weekend comments on a plan to implement a major infrastructure investment to help avert a deeper economic slump.

One of the infrastructure heavyweights that are Monday beneficiaries include heavy equipment maker Caterpillar (CAT) up 12%, Freeport-McMoRan (FCX) up 20%, and automakers including Ford (F) and General Motors (GM) were both up more than 16% in early trading on Monday.

After Friday's shocking payroll data that showed the economy shed more than half a million jobs in November, Obama took center stage over the weekend outlining plans for a very ambitious infrastructure investment, the largest since the 1950's.

The news was not all good on Monday. Dow Chemical Co. became the latest company to announce job cuts and plant closures and said on Monday it would close 20 facilities, divest several businesses and cut 5,000 jobs, or 11 percent of its global workforce, in response to the global economic slump. Fears that the year-long U.S. recession will deepen prompted DuPont to cut 2,500 jobs and phone company AT&T to eliminate 12,000 jobs.

U.S. stocks in recent weeks have broken their freefall and overall market down trend. It is likely given the bad news that are likely coming in jobs, continuing foreclosures, in the coming months that the market will continue its bottoming process in a somewhat drawn out way. Stocks are likely to continue to trade sideways within a range into 2009 as the economy struggles to get it's footing.

Stocks do, however, lead the broader economy out of recessions. Upward moves in the stock market always proceed the economy as a whole. So, now it the guessing game as to when stocks will begin to make that sustained upward move, and when the market bottoming process will be complete.

For now, however, there is lots of opportunity to make money if you are a short term trader. It is becoming common to have 3% to 5% swings in the market most any market day lately so you can make money buying stocks, or playing options just on trading the swings.

Also on Monday, investors also appeared more comfortable that the government is closer to legislation that would dole out billions to America's three biggest automakers within a week. Congress is expected to pass a $15 billion bailout for Ford Motor Co., General Motors Corp., and Chrysler as soon as Tuesday.

Other movers on Monday included Dell (Dell) up 12%, KBR Inc. (KBR) up 11%, Nucor (NUE) and Apple Computer was up just under 6%.

November 18, 2008 -

On Tuesday, Treasury Secretary Henry Paulson and members of Congress clashed over the best use for the $700-billion financial bailout fund, with lawmakers demanding money to stem a national wave of mortgage foreclosures.

At a House of Representatives Financial Services Committee hearing where he was grilled over his handling of the program, Paulson said the bailout plan wasn't "a panacea for all our economic difficulties" and would be more effectively used by investing in financial companies to shore up the system.

"The rescue package was not intended to be an economic stimulus or an economic recovery package. It was intended to shore up the foundation of our economy by stabilizing the financial system," the Treasury chief insisted.

Under stiff questioning from lawmakers who charged Treasury was making up strategy as it went along, Paulson conceded he hadn't totally ruled out using bailout funds to help homeowners, but said he had "reservations" about a proposal put forward by the Federal Deposit Insurance Corp.

Rep. Barney Frank, the Massachusetts Democrat who chairs the panel, lectured Paulson, telling him mortgage relief was spelled out as an option under the bailout passed by Congress.

"The fundamental policy issue is our disappointment that funds are not being used out of the $700 billion to supplement mortgage foreclosure reduction," Frank said. "There, I believe, is an overwhelmingly ... powerful set of reasons why some of the ... money must be used for mortgage foreclosure."

Paulson was also pressed about possibly tapping bailout funds to help distressed U.S. automakers but again ruled that out. He said any solution for automakers, who are pressing their case in Congress on Tuesday, should be one that helped them to re-tool to make more energy-efficient vehicles, and that wasn't what the bailout fund was set up to do.

He said Treasury was working with the U.S. central bank on a potential program, to be run by the Fed, that could be used to buy highly rated debt backed by auto loans, which could help automakers and make it easier for consumers to obtain loans.

FDIC Supports Credit Help to Slow Foreclosures

FDIC Chairman Sheila Bair, at the same hearing, told lawmakers it was "essential" Treasury offer loan guarantees and credit help to slow foreclosures, and warned that 4 million to 5 million mortgages will enter foreclosure over the next two years if nothing is done.

The FDIC says its plan could avert about 1.5 million foreclosures by encouraging lenders to restructure loans by having the government share in the cost of defaults. It is estimated the plan could cost the federal government about $24 billion.

"We are clearly falling behind the curve," Bair said. "Much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and broader economic health."

U.S. Auto Executives Visit Capital Hill to Beg for Money

U.S. auto executives warned Congress on Tuesday that their industry was teetering on the brink of disaster as they pleaded for a $25 billion aid package despite political opposition to another multibillion-dollar government bailout.

The hearings come as government and business officials around the globe decide if, and how, they should commit billions of taxpayer dollars to bolster struggling automakers.

Rick Wagoner, the head of General Motors Corp, bluntly told the Senate Banking Committee why the executives were there. "This is about much more than just Detroit," Wagoner said in his testimony. "It's about saving the U.S. economy from a catastrophic collapse."

The hearings came a day after Senate Democrats proposed to bail out the ailing industry with $25 billion in government-backed loans. Wagoner; Robert Nardelli, head of Chrysler LLC; Alan Mulally, CEO of Ford Motor Co; and Ron Gettelfinger, head of the United Auto Workers union all testified on Tuesday.

"While the domestic auto industry has made mistakes in the past, the current problems have been exacerbated by one of the worst economies in nearly three decades," Mulally said. "We are hopeful that we have enough liquidity based on current economic planning assumptions and planned cash improvement actions, but we know that we live in tumultuous economic times."

Yahoo Climbs as Yang Resigns

Yahoo! Inc., owner of the second- largest U.S. Internet-search engine, rose 8.7 percent in Nasdaq trading after Chief Executive Officer Jerry Yang agreed to step down, opening the door for a fresh Microsoft Corp. bid.

Yahoo, based in Sunnyvale, California, climbed 92 cents to $11.55 at 4 p.m. New York time on the Nasdaq Stock Market. The gain was the largest in a month.

Before today, the company's market value had fallen by more than $20 billion since Yang took over last year as discussions with Microsoft failed, an ad partnership with Google Inc. collapsed and talks with Time Warner Inc.'s AOL stalled. Goldman Sachs Group Inc. said the resignation may fuel speculation of renewed talks with Microsoft or another suitor.

November 3, 2008 -

At the end of the day on Friday I walked outside as the closing bell rang and I swear I could hear the universe exhaling with a collective sigh of relief ending one of the most volitile months ever in the U.S. and global markets.

October saw some of the biggest single-day point drops and single-day point gains ever seen in the market, and overall one of the worst months since the 1987 meltdown. Then in the last week of October we saw one of the best weeks in almost 34 years. The huge gains of the final week were reminiscent of the sharp recoveries from bear market lows in 1974 and 1982. Both of those moves came while the economy was mired in recession, as it almost certainly is now. Last week, the Dow and the Nasdaq each rose 11%, while the S&P 500 gained 10.5%.

An Upside Breakout from Here?

So, October is finally over! What's next now for U.S. and global markets? Did we see the market bottom out in October, or is there more of a downside lurking in the shadows out there? Here is a chart showing the DOW daily close line chart with some oscilators shown. It appears that the DOW is right now at a top side resistance level around 9400. If the DOW breaks out to the upside from here it might indicate a confirmation of a bottom formation and maybe we head up from here. If it does not breakout on the upside from this level we might be looking at more downside or a period of time trading within the low side range while consolidation takes place and while the market figures out how the recession will play out.

Downside Risks Still a Good Possibility

I still think there are downside risks hanging out there depending on how long and how deep investors believe this recession will take us. The markets are obviously trying to price in what they are seeing, but no one knows what the next few months will bring in terms of the slowdown and earnings reports, market data and numbers, rebound in housing, etc. Exports are slowing down dramatically as the dollar rises and as global markets follow the U.S. into their own economic slowdowns.

U.S. Factory Output Falls in October

U.S. factory activity contracted sharply in October, falling to its lowest in 26 years as the financial crisis ravaged the world's largest economy and its trading partners around the globe.

The one bright spot in the report was that its main gauge of inflation, the prices paid measure, recorded its biggest one-month drop ever. This should allow the Federal Reserve to keep interest rates low to fight off what many fear will be a deep recession.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 38.9 in October from 43.5 in September. That was well below the 50 level separating contraction from expansion, and a reading below 40 is exceptionally weak.

The global slowdown is bad news for the United States, where manufacturing had been kept afloat until August by buoyant exports helped to a great extent by a weak dollar making U.S. products financially attractive in global markets. October's report showed new export orders contracted, ending 70 consecutive months of growth, the ISM said.

In fact, the report was uniformly weak, and employment in the sector was dismal. The ISM's gauge of employment suffered its biggest one-month drop in 20 years and fell to its lowest since March 1991. The data highlighted an already crappy outlook, with the index of new orders hitting its lowest since 1980. Most analysts are saying that it will take a while for the correction to take place and for the government's economic efforts to gain traction and have a reversing effect.

Election Watch

Election history indicates that U.S. stocks may have a better chance in the first year of an Barack Obama presidency than a John McCain administration.

Since 1900, the Dow average rose 9.8 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of seven Democrats from Woodrow Wilson to Bill Clinton. Only twice did the index drop, after Wilson's victory in 1912 and Jimmy Carter's in 1976.

Polls show Democrat Obama ahead of Republican McCain as the economy looms as the main concern among voters. Obama, 47, widened his lead to 8 percentage points over McCain, 72, in an average of polls released in the last week, according to RealClearPolitics.com.

Dollar Libor Falls to Lowest Since Lehman Failure on Rate Cuts

The London interbank offered rate, or Libor, that banks charge one another for three-month loans in U.S. currency slid 17 basis points to 2.86 percent today. It was the 16th day of consecutive declines and has not been this low since the failure of Lehman Brothers Holdings Inc. on Sept. 15. The overnight rate dropped 2 basis points to 0.39 percent. Asian rates declined.

Interest rates on commercial paper and short-term debt companies sell to cover expenses such as payroll and rent, fell to the lowest level since Aug. 8. This is a confirmation that the nearly $3 trillion of emergency funds provided by global governments have extended to financial institutuions to battle the credit crisis may be working. The drop in three-month dollar Libor last week capped the first monthly slide since May.

Looking for November Calm

Stocks will be volatile but should be a little calmer in November after the crazy days of October. The presidential election should give the market a bounce this week, but once that is over the markets will shift their focus back to the economy when jobs data is released Friday.

Traders say the election Tuesday is the key to the week ahead. But they will also be watching to see if credit markets continue to improve. The market generally rallies because the headwind of an election is over and now you have greater certainty. The market has priced in some of a potential Democratic victory, as Sen. Barack Obama leads in the polls, but not entirely. Look for moves in sectors that would be affected by Obama's policies if he wins on Tuesday. Sectoral plays like construction and engineering that might benefit in an Obama Administration are currently beaten down. Health care stocks have been used as a defensive play, but they could see some selling pressure if Obama wins. Alternative energy stocks might see a post-election boost if Obama wins as well. In the week and day after the 2006 election, the stock market went up fairly significantly.

There is also a heavy calendar of economic data, and quarterly earnings from some big names, like Cisco Systems (CSCO), Walt Disney (DIS) and Berkshire Hathaway (BRK).

GM's U.S. Sales Tank in October

General Motors Corp (GM.N) on Monday reported a whopping 45 percent slide in U.S. sales, blaming the steep decline on low consumer confidence stemming from the uncertainty over a deepening credit crisis. GM said it sold 170,585 vehicles in October, down from 310,008 a year earlier. GM truck sales were down 51 percent while car sales were off 34 percent. GM reaffirmed its fourth-quarter production target at 875,000 vehicles, including 407,000 cars and 468,000 trucks. The targeted production is 16 percent lower than a year ago.

Oil Continues Slide Despite Improving Stock Market

Light, sweet crude for December delivery that had crested above $69 in early trading, tumbled $3.31 to $64.50 a barrel on the New York Mercantile Exchange and gasoline futures prices dropped more than 7 percent in early trading.

Declining gasoline futures have led to sharp drops in the price of gasoline. The price for a regular gallon of gasoline dropped to $2.41 nationally on Monday, down more than 30 percent from last month, according to auto club AAA, the Oil Price Information Service and Wright Express. In a report Monday, Credit Suisse forecast the sharpest drop in global oil demand since 1982. Most analysts expect oil to trade wtihin the $60 to $70 range for the near term.

Airlines and Telecommunications Sectors Lead Advancers Today

The Amex Airlines Index was up 5.28% today, the Amex North American Telecommunications Index was up 4.93% and the Morgan-Stanley Health Care Payor Index advanced 4%. Sector losers today were Oil & Gas and Housing Sectors.

What's Does the Rest of 2008 Hold in Store for Investors?

Looking back at 1987 and 1929, years with similar market profiles, we might extrapolate what we might expect for the rest of 2008 and beyond. In these prior market years, the market (Dow) was higher from the October crash lows by year-end. In 1987, the market came back 39% by year-end; in 1929 the Dow managed a 25% recovery from the lows seen during the October free fall. So sitting with a 19% gain from the October lows leaves probable upside room going into the last two months of the year.

Investors should look for opportunities that will lead the market out of recession, that have been over sold and which could benefit from the policies of the next U.S. administration.

October 29, 2008

Feds Cut Interest Rate Half a Point

On Wednesday Oct 29, the Federal Reserve slashed a key interest rate by half a percentage point as it seeks to revive an economy rocked by the worst financial crisis in the better part of the last century. U.S. stocks dropped in the final minutes of trading on concerns that the Federal Reserve's sixth interest- rate cut this year isn't enough to rescue the economy.

The Standard & Poor's 500 Index lost 10.42 points, or 1.1 percent, to 930.09, one day after surging 11 percent. The Dow average slumped 74.16, or 0.8 percent, to 8,990.96. Three stocks gained for every two that fell on the New York Stock Exchange.

The central bank on Wednesday reduced its federal funds rate target, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president.

The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by half a point in conjunction with rate cuts by foreign banks back on October 8th.

This is the second day that most major indexes have been in positive territory. Tuesday ended with nearly a 900 point Dow gain, and today the Dow was up more than 200 points for part of the session but those gains were erased in the final minutes of the trading day.

In addition to the rate cuts, the Fed has been starting to pump billions of dollars into the U.S. banking system to help unfreeze credit markets. Congress passed on Oct. 3 a $700 billion rescue package to make direct purchases of bank stock and buy up bad assets as a way of getting financial institutions to start lending again. This week some of the first of those bank payouts began.

Earlier this week $125 billion was sent to nine of the nation's biggest banks. Other industries, including automakers and insurance companies, are also in talks with the administration to get bailout funds.

Oil Goes Up and the Dollar Goes Down

The price of oil rose Wednesday as the dollar retreated from recent highs and signs of strength in overseas markets tempered some concerns about waning demand. The interest rate cut by the Federal Reserve seemed to have little impact on oil prices as investors appeared to have already priced in the central bank's latest attempt at boosting the economy.

Light, sweet crude for November delivery rose $4.77 to settle at $67.50 a barrel on the New York Mercantile Exchange. Earlier in the session, oil rose more than $6 to trade at $68.91 a barrel. On Tuesday, the price oil settled at $62.73 a barrel, its lowest level in 17 months. The primary driver today of oil's rise is a weakening dollar which backed off of recent highs as international markets showed some signs of strength tempering concerns about waning demand.

Prices at the pump fell for the 42nd-straight day to levels not seen since March 2007. The national average price for a gallon of regular gas fell another 4 cents overnight to $2.589, according to a daily survey by the American Automobile Association.

Separately, a recent Department of Energy report showed that Americans are driving 5.6% less than last year. And a weekly MasterCard survey of gas purchases showed motorists consumed 6.4% less gas in the past week compared to a year ago.

U.S. Regulators Mulling Plan for Government Guarantees of Home Mortgages

U.S. regulators are supposedly working on a new program that could provide government guarantees for up to $600 billion of home mortgages to help prevent foreclosures and it might fall under the control of the Federal Deposit Insurance Corp and the U.S. Treasury Department. This program could provide guarantees for some 3 million at-risk mortgages. This program has not yet officially been announced, but the Treasury Department said on Wednesday that it is working with the FDIC and other policymakers on foreclosure-prevention measures but that no detailed plan has been reached.

The plan would supposedly provide federal guarantees to entice lenders to ease the terms of troubled mortgages which has been a problem as the credit crisis has deepened. Sources said that a program is likely to be announced in the next few days.

Good News, but Harsh Results

Wall Street got the interest rate cut it wanted, but markets turned higher then slid hard in the last minutes of trading on Wednesday. The major indexes ended the day mixed, with the Dow Jones industrials falling 74 points — only the third time in October that the blue chips had just a double-digit close.