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Monday, December 13, 2004
Market Recap
The markets were back in step today, starting the week with nice gains. The Dow was up +95 points, the NASDAQ gained +20, and the S&P gained +10 points. I am surprised to see such a rally in the markets with the fed meeting on interest rates tomorrow. I think the market has priced in a ¼ point hike. I am going out on a limb and going to predict that there will be no hike this time. I am of the minority because most think a raise is a sure thing. If I am right and they do not raise interest rates, it will be hard to predict how the market will react to that news. Logically, a big rally should occur because stocks normally go up when rates are not increased. But to some, it may indicate that the economy is not in as good a shape as we believe it maybe, causing stock prices to sink. It is a tough call deciding how the market would react to a surprise. If the fed decides to raise rates, I believe the market will have no reaction as it is very much expected and already priced in.
Nanotechnology Stocks Are Back
Last year, we mentioned nanotech stocks would be the wave of the future. We were a little early when we mentioned a few of these stocks and placed them on the bulletin. Now, these stocks have returned and they are running on hype. Our favorite financial channel (BSNBC) is running a series on Nanotechnology stocks that will air all week. As a result, the nano stocks are flying as momentum traders try to capitalize on the hype. These stocks are very dangerous to trade because they are so volatile, but can be big winners if timed right. We opened a position in NGEN today just before it ran up, and it is now up 22% in one day. These stocks can drop just as fast as they run up so beware. By the end of the week when the BSNBC spots have finished running, selling may occur. Please use stops if you decide to chase this momentum.
Some nano stocks were added to the bulletin tonight as quick trades only. These are not long term holds yet because none of these companies have any earnings. Here are a few companies in this sector: NANO, TINY, NANX, NGEN, ALTI, and JMAR.
Earnings of Interest
Keep an eye on PLMO this week. They report earnings on Thursday night, and this is a stock that I predicted would have great earnings into the Christmas season. We do not have a position in the stock and will not buy before earnings, but my guess is that their earnings will beat estimates. The stock is running up in advance of earnings and this would indicate that earnings will indeed be good. It made new 52 week highs today on massive volume. This stock was first mentioned on the bulletin at $21.50, and is now up over 100% since then. It has been on and off the bulletin because it has been so volatile. Hopefully, the earnings will put an end to the roller coaster ride and send it in one direction, up.
Protection for the Troops that Protect Us
In a recent news conference with the soldiers in Iraq, Secretary of Defense Donald Rumsfeld fielded a very pointed question from a serviceman. The question was, “why soldiers in Iraq were still being forced to rummage through trash to locate scrap metal to weld onto vehicles going into hostile territory?” If the troops are doing this, it is beyond belief. We should not be sending troops in harms way unless they are adequately protected to the best of our ability. We have been told that the troops do not have as much protection as they could have because companies that provide the body armor and the armor plated vehicles have not been able to keep up with demand. As it turns out, the manufacturers are now saying that they do in fact have the capacity, and have been asking the defense department for contracts to ramp up production for some time now.
I am not sure why they would keep orders below production capacity nor do we know all the facts. What we do know, is that the troops are not as protected as they could be. In a combat environment, they need to have as much protection as possible. If the protection is not available because the government does not want to spend the money, then we have a major integrity problem with this administration. I am hearing both sides of the story and I do not know what to believe at this point. Staying away from the politics of the situation, we will focus on a trading position to profit from the increase in production of this armor, if production does in fact increase.
I would expect to see some strong moves coming out of the defense sector as more companies report an increase in reserve capacity and availability to ramp up production. We may see increased orders and a lot more talk about getting more equipment out into the field where the soldiers need it, now that it has become public knowledge that they are severely under armed in Iraq. Some of the companies that make this armor are CRDN, DHB, and FRCP.ob. There are more companies but it will require more research. If your research comes across companies who build armored vehicles for wartime use and/or body armor, please post them to our message board so we can check them out and provide you with some TA on where the stock may be headed based on the chart.
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