Ian Woodward's Investing Blog

 Late Breaking News as I go to Press – We have had a second Hindenburg signal today, on top of the one on Monday!

The U.S. economy slowed at the end of the third quarter and into the start of the fourth, while businesses grew even more uncertain about the future, the Federal Reserve said in its latest beige book released Wednesday.  Housing continued to take a toll, meanwhile, and is expected to remain “subdued” for several months, the Fed said.

U.S. stocks pared gains on Wednesday, with the Dow turning negative as a disappointing outlook from United Technologies Corp (UTX) and lackluster hardware sales from IBM (IBM) tempered optimism about profits.

Needless-to-say, the Market took a beating mid-way through the session, but once the dust cleared the little engine that could…the Stock Market, rallied again to wind up positive for the day on the Nasdaq and only a paltry 20 points down on the DOW.  This could have been the third distribution day in a row and that coupled with the one last Thursday would have suggested that we were heading for a correction today.  We still may be, but the Bulls live to fight another day.  Did you see the QID and the QLD change places as they each had a swing from positive to negative territory and back again? The VIX jumped 2 points and gave back as many (between friends) at the close.  Volatility and Yo-Yo Market continue to be the key words of the moment.

The Lesson learned today is to never panic, and if your stomach can bear the agony and the ecstasy, just wait till the market is closing to make your call, unless of course it is painfully obvious the market is headed for a disastrous day of >200 points on the DOW.  The way I do that is to watch the Gorilla RonIandex I gave you in the Newsletter and although that Index got down to near zero gain for the day, it stayed positive and came roaring back to give us a 1.44% gain based on 100 share lots.  Ron and I have emphasized it often to watch the Leaders, and here they are.  Best Regards, Ian.

After Hours the Technology Stocks of the likes of Yahoo (YHOO) and Intel (INTC) reported stellar Earnings for the 3^rd Qtr.  After three distribution days on Last Thursday, yesterday and today, we needed good news to prop this market up and hopefully that will happen tomorrow after the dismal reports from Keycorp: 

1. Shares of Yahoo surged nearly 10 percent in after-hours trading following a more than 4 percent decline in regular trading on the Nasdaq Tuesday.
2. Shares of INTC jumped nearly 5 percent after-hours immediately following the announcement, after closing down slightly at $25.48. 

This led to a spate of buying in the Technology Stocks in after hours, and this looks encouraging for further good news later this week when two key earnings reports are due from GOOG on October 18 and AAPL on Oct. 22.  This should stiffen up our backbones as here are some After Hours results:

Do your homework, but as usual they were nibbling today on MOS and POT in the Chemical Specialty group, and QMAR, NM, and FREE in Transportation-Shipping, but be careful as many of these stocks are extended.  You live by the sword and die by the sword, but when the wind is at your back, attack.  Your trump card is “nimble”, so use it if things go sour. 

Best regards, Ian.

 I have Late Breaking News tonight…The Hindenburg Omen triggered today.  Those of you who are new to this signal should read an earlier Blog of mine written on September 30^th, 2007, describing its potency.  So to be fore-warned is to be fore-armed.  Please understand that a SINGLE signal does not constitute gloom and doom to come; there must be a minimum of two and preferably more before one should take full heed.  In other words, this is a YELLOW Alert and not a Red Alert.  We need to watch carefully from here but there are a few observations we can make:

1. We have risen sharply on all Indexes in the last eight weeks with many Indexes into new highs.
2. We had our first shot across the bow when they knee jerked the Market with the BIDU downgrade last Thursday.
3. The Market had another sell off today based on the Citigroup EPS Report, and although this was expected to be disappointing, they took the market down anyway.
4. Since the McClellan Oscillator was positive up to now, this was the perfect set up to trigger the Hindenburg Omen as it turned negative today…being one of the required conditions that rarely occur in concert with the other requirements.

The Hindenburg worked true to form as shown by the chart predicting a correction accurately. Since this is new to us all during this 2007 period, this signal today may be a one day wonder in which case it will be shrugged off as a spurious signal.  We must wait to see if we get another one shortly and what further factors come into play in the future.  In addition, although the Gorilla RonIandex we gave you in today’s Newsletter was negative today relative to the S&P 500, it is far too early to declare that we have anything but a one day knee jerk.  Please read the points I made in the Newsletter on the Calendar of Events leading up to the FOMC meeting on October 31^st.  Two key earnings reports are due from GOOG on October 18 and AAPL on Oct. 22.  How the market reacts then will be a serious clue of what might be in store for the future.  So I am not for one minute suggesting anything but caution at this stage.   

The bottom line is that this is a Heads-Up Message.  Best Regards, Ian.

Overview:

We have just two weeks to go until we meet for the October 27 to 29 HGS Investor Seminar here in sunny California, and the HGSI Team will be here to greet you in full force.  Besides Ron and I we have the pleasure of George Roberts and Matt Sorrels at the seminar in addition to Denis Trover and Bill Roberts who helped me do the Hindenburg Omen (Hindy for short) research.    

I gave you a preview of what to expect on the Blog labeled “The Goose that Laid the Golden Eggs” which concentrates on establishing early warning signs at both Market Tops and Bottoms using the NYSE Index.  In addition, you have noticed that I have resurrected a process we use relating to ferreting for Wolf Packs and that is the thrust of Ron’s movie for this month’s newsletter. The technique uses the proprietary feature of RelStr/Vel/Acel in the Group Ranking Tool and we will show you how to flip through and spy those groups that show signs of life as they abruptly change from red and yellow to green from one week to the next.  We will do this exercise as a Case Study so that you can become proficient at the concept, but we felt we would also explain the process to you ahead of time so that those attending and the newsletter users get a movie from Ron and an explanation from me with snapshots of the views we use. 

I’m sure you all breathed a sigh of relief when the FOMC intervened not once, but twice to give relief to Central Banks in coping with the sub-prime debacle by reducing the Fed Funds and Discount Rates.  We were snatched from the brink of a Bear Market, and the subsequent Bounce Play has been spectacular in its rise to not only wipe out the deficit, but also have most Indexes move into New High territory.  As a teaser, I show you a one page spreadsheet of the Hindy and give you chapter and verse on the perspective of the past eight weeks, the Calendar of Events affecting the market direction leading up to the FOMC meeting on October 31^st. and Ron’s and my Trick or Treat present to you all well ahead of time!  Enjoy.  

We have had a strong sign up for the seminar and expect a full house and look forward to seeing you bright eyed and bushy tailed on Saturday, October 27^th.  I assure you that as usual it will be well worth the trip, and you will go home with your Bongos under your arm and singing “Bingo, Bango, Bongo”!

Best regards, Ian 

I know you chuckle at some of my captions but they always have a message even though I hope most are amusing…that’s my fun.  Recall this one I gave you moons ago…well the rusty old car tells it all. Now it will have meaning to “newbie’s” who are trying to learn how to tell when an Index or stock is extended. 

Cautious comments regarding BIDU and the hot Tech Sector coupled with some member of the European Central Bank putting out hawkish comments seemingly caused the intraday decline, but at least there was an attempt at a bounce back in the last half hour.  Both AAPL and RIMM had a major sell off before the bounce to accompany the sell off on BIDU, and so most portfolios took a haircut.  I gave you the hint that one should watch the Nasdaq 100 in my Fly Me to the Moon blog on October 6, and I trust you did your homework.  I suggested that the target for the NDX was 2200 on the nose and it hit 2194…close enough for government work! 

Tomorrow will tell whether this was a one day knee jerk, or the start of a much needed pause to refresh, or yet again something more of a correction.  Time will tell, but act accordingly.  Best regards, Ian.