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Wednesday, August 17, 2005
Market Recap
The Producer Price Index (PPI) report was out this morning before the bell and was higher than expected. This caused the futures to go down and it looked like we would have a down market today. But as usual the futures, as an indicator of market direction, were worthless. Stocks were up again today partly because of declining oil prices as oil fell $2.83 today. The DOW was up 37 points, the NASDAQ closed higher by 8 points and the S&P was up a fraction. With the PPI being stronger than expected, as well as the CPI in yesterday's report, this would signal that there is a hint of inflation in the economy and give the Fed reason to continue with the rate hikes. This should have lowered stocks today but that would be too logical. The market did the opposite of what the majority expected it to do and went up instead. The market is tough because it always seems to do the unexpected, but if you remember that the market has already priced in any news that comes out in these economic reports, then it may be easier to understand why the market does what it does. These reports are based on month old data so it should not surprise anyone if the market does not react to a news item the way that we think it should when the data is actually reported and made public.
CPI/PPI Inflation Signal
Although oil was down today, it continues to march along after hitting an all time high late last week. Gas prices continue the same trend as well, much to our dismay. The economy is strong right now, but the big question is, will it stay strong with the increases in interest rates that are coming? Greenspan could damage this economic recovery with too many raises, in our view. High oil prices have already started to affect some big business. The king of retail (Wal-Mart), recently reported earnings and cited higher gasoline prices as a major reason why numbers were lackluster. Remember, they run one of the largest shipping departments in the world so the chances are, spikes in gas prices are going to have a serious effect on their bottom line. With gas prices climbing almost daily, more and more companies are bound to be affected by it and will likely be citing higher fuel costs as part of the reason they are guiding lower on their numbers. Those companies that say fuel costs would not affect their bottom line will no doubt be passing that cost on to the consumer.
Unfortunately, you and I will end up paying more for everything to offset the rise in fuel costs that producers have to absorb. Of course, these price increases would be considered inflation by the Fed. Rising prices lead the Fed to raise interest rates to combat inflation. Is it really inflation when the price of gas is so high that it has producers passing on costs to consumers? I guess, in a technical sense, that is the true definition of inflation. The problem is that we are taking one particular cost (fuel) and skewing the entire economic picture because of it.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
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