SAILING MARKETS

New URL for this Blog

2010-03-30T19:44:00.000-07:00

Sailing Markets has moved to the Trading Effect blog with all the previous posts and valuable comments.

PFE: update

2010-03-28T19:53:00.000-07:00

Price/(book value): 2.08

Annual EPS growth (last 3 years): 7 % / DEC/2009 (quarter) vs June/2009 (quarter): -13%

Revenue growth Dec/2009 vs Sep/2009: -51%

Dividend yield: 4.2%

GE - General Electric

2010-03-28T19:04:00.000-07:00

It has one of the lowest Price/book value of the DOW's companies.

The annual rate of growth in the EPS in the last 3 years is negative, -18%. (and it has decreased 53% from dec/2007 to dec/2009).

Total Debt to equity: 4.35. One of the highest of the DOW JONES.

Annual revenue growth (dec/2008 vs dec/2009): -14%. But from March/2009 to Dec/2009, revenue increased 8%.

Dividend yield: 2.5%.

Weekly chart:

Daily charts:

GOLD

2010-03-25T20:37:00.000-07:00

This is one of the elliot wave counts and patterns that I am following in Gold. May be this is a good risk-reward opportunity to go long on gold, considering that the US Dollar is at very high levels and (in my humble opinion) finishing the last impulse (wave 5).

Weekly chart:

Daily Chart:

C: Target reached

2010-03-25T15:19:00.000-07:00

Today C reached the objective of 4.34 (EMA 200). I have this tentative elliot structure in the intraday chart...

In the daily chart, this is the structure. Notice the divergences in the RSI. This divergence at least tell us that we should not go long here... but the EMA's tell that we should not go short too. The 200 daily EMA is the next resistance (4.34) . In addition huge volume today.

3 days frequency chart: notice the resistance in the 23.6 % fibonacci retracement (4.40)

Euro-Usd

2010-03-16T19:45:00.000-07:00

Yes, the signal it is not clear enough, but may be the next coming days we will understand. This could be more fuel to the market rally, (if it breaks the channel).

EURO-USD weekly chart - Fibo's:

EURO-USD daily chart - Fibo's:

Let's see what's happening in the FXE:

PFE: watch-list

2010-03-15T20:11:00.000-07:00

IWM: Bull

2010-03-14T20:20:00.000-07:00

Notice how the Russell 2000 broke the key resistance.... but we can expect a pullback this week. The target is 74.55. Amazing the rally of this index.

XOM: Update

2010-03-14T16:43:00.000-07:00

We had a buy signal some days ago. Look the interesting pattern that is developing. I am not sure but looking at the volume decreasing during the formation of the triangle and the break with relative high volume (a little high), I would guess that we have a change in the trend, at least in the short term. The target could be 71.5, where it is the 61.8% fibonacci retracement and where it fills the gap.
In addition I suggest to look in the previous post about XOM where there is a long term perspective for the stock.

Critical levels

2010-03-14T14:43:00.000-07:00

To continue with the previous post in which we measure the SPX in euro, we notice the critical resistance reached.

In the previous post on the S & P 500, we highlighted a down trend-line that was acting as a resistance. But this red down trend-line have been broken. Then, I think 1222 in S & P are possible, but respecting the trend-line from 1962 (green dotted line). The green trend line cross 1222 in October 2010.

Quarterly chart S & P 500:

DOW JONES: Fundamental Analysis

2010-03-13T20:14:00.000-08:00

During February and March, we have received the last balance sheets of the DOW JONES components. Using the statistics of Yahoo Finance and the information available in my broker, I made some relationships and comparisons between them. In addition, I compare the situation now and some periods ago.

First, lets take a look to the Current Price / Book value relationship. I am wondering why BA is so high, and the implications. AA, BAC, CVX, GE, DIS, JPM, KFT, T and TRV have good ratios.

Now, here we compare the beta of each stock. Notice that sectors like energy (XOM & CVX), consumer goods (KO, KFT, PG), Services (MCD & WMT), telecomunications (VZ & T) and drugs manufactures (PFE, MRK & JNJ) have the lowest. This are the "defensives" companies.

Now that we have some idea about how this companies could react to the crisis, let's take a look on how they reacted until now.

First, the revenues and the E.P.S.: MRK, T, PFE, MCD, PG, T, VZ and WMT were little affected.

The E.P.S. growth vs. dividend growth (annual rate, from January 2007 to December 2009). It is interesting to notice the growth in the EPS of MRK, but this growth is not in relationship with the growth in dividend. Then, I would consider that an increase of dividends in MRK is something possible. MCD, PG, PFE and KFT are some companies in the same situation as MRK.

Revenue year over year (2009 vs 2008) and quarter over quarter (DEC/2009 vs SEP/2009). Notice that revenues from BA, HPQ, JNJ,, MCD, MRK, TRV, PFE, T and VZ were not affected.

Average annual revenue, income and E.P.S. (2007 = 100%). I add up the revenue, income and E.P.S. of the 30 companies and divided by 30, to obtain an idea of this key numbers and their evolution during 2008 and 2009:

Average quarter revenue, income and E.P.S. (June 2009 = 100%):

DOW JONES: The bear case

2010-02-26T20:03:00.000-08:00

This rising wedge is something that is worrying me. The 200 daily exponential moving average is the key support (resistance in May 2009) and is the key point in which I definitely will wear the bear suit. Meanwhile, a trading range between 10.600 and 9.840. In addition, the US dollar in an uptrend is something that give power to the bears.

S & P 500: 1222 possible?

2010-02-21T08:20:00.000-08:00

This is one of the "road-maps" that I am following. It is possible?. Looking the previous posts, I think is something to be aware. I am not going short. The uptrend looks steady.

I think we can not go against the trend despite the apparent fallacy of the bull market.

I have been reading and listening a lot of reasons for the market to crash since Abril 2009. But the market does not listen to them. Then, I think them should listen to the market.

The fiscal tightening of China could be interpreted like something positive for the market, because it means that the economy is growing more than expected (!!!)

The systemic risk and the possibility of radical and political changes is something that were present in 2009 (and the market went UP UP UP).

Then, from the fundamentals, I think there is room for growth.

DAX in US Dollar

2010-02-20T18:40:00.000-08:00

Notice the down trend-line (white line) and the candlestick pattern (short term reversal, yellow circle). In addition, the index is below its 21 EMA (white line) for the first time since March 2009.

S & P 500 in euro: the soft bearish side

2010-02-20T16:18:00.000-08:00

Some people ask me why to look the S & P in euro. I think looking S&P in euro you can eliminate the effect in the charts caused by the depreciation/appreciation of the currency. I am from Argentina, and when Argentina depreciated its currency (the 'peso") in 2002, the financial markets went up because of the depreciation effect. Then, in USA, the depreciation/appreciation of the US dollar is something that have a big impact in the SP500. Looking the SP500 in euro you change the US dollar fluctuation by the euro fluctuation, and then you have another valid and original view of the index. You can find for example which % of the ups and downs (or broken resistances / supports too) are caused by the currency fluctuation, additional targets, etc.

This chart does not looks bearish, but the target of the inverted head and shoulders have been reached.

Watchlist: Citigroup, Gold & XOM

2010-02-17T04:44:00.000-08:00

These are some securities that I am following. The bull US dollar is something to worry (it is not good going against the US dollar now, buying stocks), but I think that the bull US dollar is a sign of weakness on the euro, rather than weakness in commodities and stocks.

Citigroup: wating for the breakup of the down trendline (with volume)

C daily:

GLD: a good buy could be 107 USD

$GOLD daily:

GLD hourly:

XOM: down trendline broken. Refer to older post in order to look up for other timeframes charts.

XOM hourly:

S & P 500 in US euros: bullish signs

2010-02-12T20:18:00.000-08:00

Notice the bullish divergence in the slow stochastics. In addition, the EMA's are still pointing up and the trendline is intact. I am not bearish.

XOM

2010-02-09T17:53:00.000-08:00

It is difficult to imagine the market making new lows after this pattern in XOM.... but the trend is your friend. And mine.

S & P 500 in US dollars: supports and MA's

2010-02-07T19:36:00.000-08:00

SLV: distribution with Head and shoulders?

2010-02-05T21:12:00.000-08:00

Volume: As the Head and Shoulders pattern unfolds, volume plays an important role in confirmation. Volume can be measured as an indicator (OBV, Chaikin Money Flow) or simply by analyzing volume levels. Ideally, but not always, volume during the advance of the left shoulder should be higher than during the advance of the head. This decrease in volume and the new high of the head, together, serve as a warning sign. The next warning sign comes when volume increases on the decline from the peak of the head. Final confirmation comes when volume further increases during the decline of the right shoulder.

To learn more on this pattern, click here

GDP chart analysis

2010-01-31T15:56:00.000-08:00

Let's take a look at the evolution of the GDP. In these charts we show the % change from preceding period in Real Gross Domestic Product, seasonally adjusted at annual rates. There are some interesting things to notice,like the "Services" component, in which the principal trend starts falling in the 2nd quarter of 2007 and then recovers in the 4th quarter of 2008 (coinciding with the market trend at that time)

GDP: Personal Consumption expenditures:

Gross private domestic investments:

Exports:

Imports:

Government expenditures:

For additional information: click here

This week Watchlist

2010-01-24T19:04:00.000-08:00

The past week we saw a big down movement in the major world indexes. The Obama's proposal to reform the banks "to big to fail" and the announcement of China's government to put limits on the activities of the banks had been the "reasons" that the media use to justify these movements.

I am bearish in the SP500 (short term), so if I buy any of this stocks (not the UUP) I will use tighten stops loss.

For this week, I have these in my watchlist. Notice that I am using the 9, 22 and 35 EMA's to follow trend.

UUP: the EMA's had confirmed the uptrend. Now I am waiting for an entry point.

MCD:

AA:

GE:

PG:

DOW JONES, S & P 500, DOW TRANSPORTS & other key financial indexes trend lines & fibonacci's

2010-01-21T17:07:00.000-08:00

DOW JONES INDUSTRIAL (weekly chart) - Key trend line:

SPY (S & P 500) (weekly chart) - Key trend line:

NASDAQ COMPOSITE (monthly chart) - Key trend line:

DOW JONES TRANSPORTS (weekly chart) - Key trend line:

DOW JONES US FINANCIAL INDEX (weekly chart) - Key trend lines:

IWM iShares Russel 2000 ETF (weekly chart) - Key trend lines:

IYR - DOW JONES REAL STATE iShares ETF (weekly chart) - Key trend lines:

To learn more on trendlines:

Stock charts trendlines (school)

GOLD in Euro

2010-01-20T18:13:00.000-08:00

In this chart I want to notice something estrange that happen between 2008 & 2010 regarding gold.
If we measure gold in euro, and then compare it against US dollar, we find that both were good investments...but... I used to think that gold and US dolar move in opposites directions...

CRB index & crude oil measured in euros

2010-01-20T16:29:00.000-08:00

This is the CRB index measured in euros. Look at the uptrending channel and relate this with the previous post. Conclusions?. If we are bullish in the US dollar, (and then the euro is downtrending), CRB should go down in the near future (more than the euro). The same could be concluded on the crude oil (second chart).... Time will tell....

$CRB:$XEU (stockcharts.com)

$WTIC:$XEU (stockcharts.com):

UUP - Elliot wave count

2010-01-20T16:07:00.000-08:00

I am following this elliot wave pattern. I think the US dollar is bullish since the last month, if we use the EMA'a (9, 22 & 50) as a guide.
This is in line with the CRB index measured in euros, which I will explain in the next post.

XOM vs PBR, and the US Dollar Index

2009-12-19T16:48:00.000-08:00

In this chart we can see the relationship between XOM and PBR. Take a look at the black line (the US dollar index) and the red line (XOM/PBR). We can see how the two lines have a close correlation. In my opinion, this relationship could be very useful to decide in which stock you should be invested. I think that (may be) the US dollar index can anticipate this relationship.

Time to sell PBR and buy XOM? May be. The next days I will be following this relationship.

In addition, a long term look at XOM. It is over an important tendency line, which was effective since 2002. Also, pay attention to the red line (9 EMA) and the yellow line (22 EMA), which give a buy signal in October 2009 and it is still valid (in the weekly chart).

Short term look:

AT & T

2009-10-06T16:36:00.000-07:00

On T and VZ, the dividends and the fact that they have lagged the market during the recovery are the reasons to look at them. Telecommunications may come back into vogue and we would be rewarded.In addittion, they are low beta stocks.

If we discount the annual dividends (after taxes) using the 10-years treasury bond yield as the risk-free rate (3.22%) and substract the price of the stock, we have the highest present value of the cash flow of all the 30 companies listed in the DOW JONES.

Some numbers:

EPS 12/2008: $0.41
EPS 03/2009: $0.53
EPS 06/2009: $0.54

Annual dividend: $1.64. Taxes: 35%

Discount cash flow = - Today's price close + Annual dividend *(1-35%)/ (Risk free rate) =
-27.15 + 1.64*(1-0.35)/0.0325 = $5.65

The discount cash flow (using the risk free rate) is the highest in the Dow Jones.

In addition, the payout ratio is very high. We can doubt on the sustainability of the dividends in the near future, but the EPS and sales are stable. However, 100% of the revenues come from the US, which increase the volatility of them.

Some charts:

REVENUE, GROSS PROFIT AND GROSS MARGIN:

Explore more T Data on Wikinvest

Interest Coverage:

Explore more T Data on Wikinvest

Technical's charts:

Daily charts:

Weekly charts:

Some US Indexes and key patterns

2009-09-01T20:04:00.000-07:00

Previous related posts:
Real State Index and Financials

Dow Jones Industrial

S & P 400 / Mid Cap Index

2009-08-25T16:01:00.000-07:00

Some long term charts of this index. Next resistance: 50% fibonacci retracement.

OIL vs GAS

2009-08-24T20:26:00.000-07:00

Following a suggestion of a good friend, here we can see the OIL / NATURAL GAS ratio.
It interesting to notice the bearish divergences in this ratio (full stochastics), and therefore, we can expect a possible rebound in the index. This mean that, in the near future, the probability of Natural Gas outperforming OIL is very high.
In addition, I suggest to look the long term situation of the Natural gas (here), which is struggling with a support @ USD 2.71.
Time for a reversal in Natural Gas? A big drop coming in Oil?. As it always happen, time will tell.

Natural Gas: shelter?

2009-08-24T19:35:00.000-07:00

Some long term charts on the Natural Gas Future. Time of rebound?

Natural Gas Future Weekly chart:

Natural Gas Future daily chart:

Natural Gas Future daily chart (only price)

Natural Gas Future monthly chart:

Natural Gas Future Long Term weekly chart:

Exact Fibonacci's confluence at DOW JONES

2009-08-20T15:46:00.001-07:00

We have a double confluence fibonacci's resistance in the DOW (both monthly and weekly charts).

Look at the 38.2% Fibonacci's resistance in the monthly chart (9.410 points), 20 years period, from 1989 to 2009.

Then, look the the 38.2% Fibonacci's resistance in the weekly chart (9.409 points, this chart is from the August 10 week), October 2007, September 2009. Link to the previous post (some additional charts)

Both coincides in the 9.410 level.

If we look at the technicals indicators, we can expect that the rally resumes, since they are very bullish, on both, weekly and monthly charts. But it will not be easy to overcome. Tight your stops!

Merck & Co. (MRK) Update

2009-08-19T16:04:00.000-07:00

I find very interesting the pattern that MRK is developing, as the MRK fundamentals.

From the fundamentals:

Merck & Co. is one of the largest pharmaceutical companies in the world with 2008 annual sales of $24.2 billion. While Merck produces a wide assortment of medications, a few blockbuster drugs bring in the bulk of its revenue. Currently Merck's four most profitable drugs account for more than half of total sales.
The company's decision to acquire rival Schering-Plough (SGP) will be a major expansion, though, as the two companies' combined 2008 revenues were $47 billion.

Some key ratios:

Explore more MRK Data on Wikinvest

Number of drugs in face I:

Explore more MRK Data on Wikinvest

Revenue, Net Income and Net Margin:

Explore more MRK Data on Wikinvest

Interest coverage:

Explore more MRK Data on Wikinvest

You can read more from:

http://www.wikinvest.com/wiki/Mrk

Technical perspective:

MRK Monthly chart:

Daily Chart:

Be careful, tight your stops if you are holding MRK, because it is developing some divergences (RSI, CMF, Accum/Dist, MACD and Force Index).

Updating MCD

2009-08-17T20:22:00.000-07:00

The falling had stopped today in the 61.8% fibonacci retracement. It developed a bullish inverted hammer which requires confirmation tomorrow. From the bear side, it looks like it broke the symmetrical triangle with a little increase in volume. In addition, we can see the bullish divergence in the RSI (parametrized at 7)

2002 megaphone and currently short term supports

2009-08-17T16:06:00.000-07:00

Big sell-off with a huge gap down today (which we could expect to be filled by the bulls) and the VIX almost 15% up. This bring back to my memory this 2002 chart, with a similar chart pattern that is developing today (the famous "megaphone", almost so famous like the failed H & S)

Anyway, it is something interesting to remember:

This are the key levels supports and objectives in the short term (established in the previous posts) that I am following:

Dow Jones US financial Index: key support at 232 (23.6% fibonacci). Today's close: 241.02. But, the XLF is developing a pennant?:

Dow Jones Real State ETF (IYR): it broke the key support at 38.5. Today's close: 37.52. Next support: 35.

Dow Jones Industrial: key support at 8.960. Today's close: 9.135.

Dow Jones Transport: key support at 3.420 (38.2% Fibonacci). Today's close: 3.576.

Nasdaq Composite: Huge gap and very close to resolve (or not) the rising wedge:

UUP: it can not break the downward channel. But it looks like it will keep trying:

10 year US treasury Bond yield:

For the first time in the last 9 months, it broke the uptrend channel.

SPY: some people could see a Head & shoulder, which obejctive is 97:

US Financial Index and US Real State Index

2009-08-11T16:24:00.000-07:00

To complement the previous post, the charts on the Dow Jones Financial Index and the Real State Index. The similarities between them are very interesting.
Also, I read some articles explaining that the recent rally was a big short covering. But, after watching this charts, I doubt it. Take a look, I would like to know your opinions.

Dow Jones US Financial Index:

Dow Jones US Real State Index ETF (IYR):

Some charts: Dow Jones Ind., Dow Transports & Nasdaq

2009-08-10T19:59:00.000-07:00

I try with some Pitchfork's charts and Fibo's. Here, some interesting findings (especially the coincidence in the objectives of the elliot wave counts and the pitchfork's resistances)

Dow Jones Industrial:

Dow Jones Transport:

Nasdaq Composite:

MCD - McDonald's Corp.

2009-08-08T19:46:00.000-07:00

When the economy tanks, people change their habits. They start buying more things from discounters like Family Dollar (NYSE: FDO), and more meals from less expensive eateries such as McDonald's (NYSE: MCD).
McDonald's Corporation franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, limited, value-priced menu in more than 100 countries globally. The restaurants are operated either by the Company or by franchisees, including franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements. During the year ended December 31, 2007, the Company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean, which totaled 1,571 restaurants, to a developmental licensee organization. The Company and its franchisees purchase food, packaging, equipment and other goods from numerous independent suppliers.
There are roughly 32,000 McDonald's outlets worldwide, with the company owning about 6,500 and the rest being franchised.

Explore more MCD Data on Wikinvest

Positive: The revenues are increasing year after year, and also the net income. The business is relative low risk business. Low Beta: 0.7.

Explore more MCD Data on Wikinvest

In a conference call with investors, Chief Operating Officer Ralph Alvarez said that while same-store sales did slow in June, they were still positive and "our U.S. July comp sales are trending similar to or better than they did in June."

Further, he noted the company has begun the rollout of its Angus burger and although it is not yet being advertised nationally, "early results are strong, and customers are telling us they love the products. The Angus burger line will also be accretive to our margins."

Negative: First, the company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean. I think this will affect future revenue and increase the risk of the company since it is highly exposed to developed economies. But, on the other hand, steering in this direction has resulted in greater cash flow (which increased by 12% in 2007), reduced spending on operations, and less corporate exposure to rising commodities prices.

Secondly, the insider activity: selling. Over the last six months, 5K shares were bought, and 258K shares were sold in insider trading.
In addition, in the last quarter, revenue including results from franchised outlets fell to $5.65 billion from $6.08 billion. Revenue would have risen 4% but for the currency fluctuations.

MCD Quarterly chart and possible EWC (I will need your help with elliot since I am not an EW technician).

MCD Weekly chart with Fibonacci's supports:

MCD monthly chart:
The security is moving within an uptrend channel, close to the support.

MCD weekly chart and possible Elliot Wave pattern for wave 4:

MCD Daily charts:

MCD vs USD Index: MCD is very sensitive to the movements in the USD Index:

Two different patterns in the S & P 500

2009-08-03T13:57:00.000-07:00

Which one is the right? A rising wedge, which is not confirmed, or the head and shoulders, which could be confirmed since the breakout of 950 (but I do not see huge volume)?

10 year US Treasury bond yield analysis

2009-08-02T15:55:00.001-07:00

I was wondering on the possibility of the yield of the 10/year T-bonds (from now, the TNX) to continue up, if we consider that a sharp correction in the financial markets is very likely.

Then, I started looking at the correlation between the TNX and the S & P 500. Here are the results:

As we can see in the chart, there is no evidence of correlation between the indexes. Then, it is possible to expect new lows for the market, with a flat or rising TNX (like the January - March 2009 period). The red line represents the regression line, which estimates the relation between the two variables, the TNX and the S & P 500. The R square is 0.001, almost null. Number of observations: 2481. From January 1962 to July 2009.

What about the Fed Fund Rate?

Macroeconomic theory tells us that long term interest rates tend to move in the same direction with short term interest rates. Then, we would expect the yield on a long term asset like the 10 year T-bond to move up when short term rate like the federal funds rate moves up.
I read a paper entitled "How the Federal Reserve Fund rate affect the 10-year T-Bond yield" and conclude that the federal reserve funds directly influences the 10 year T-bond yield.

TNX vs. Fed Fund Rate:

In addition, from the fundamental side, I do not expect a new "flight to quality". The reasons:

1) The constant issue of new debt from the treasury. The government debt is loosing "quality".

2) The panic. We do not have a panic or high since October 2008, and it is not expected new volatility for the future as we can see in the dowtrending VIX.

3) The Federal Reserve does not have space to decrease the FED FUND rate given the current levels.

4) In the short term, I expect that the FED will continue with the minimum discount rate, because at the moment inflation is unlikely. But, in the near term, with the economy improving, the inflation threats will oblige the Fed to rise interest rates. This will push up the TNX, and, which is more dangerous, the conventional mortgage rate. See the chart:

Technical perspective:

TNX daily chart:

TNX monthly chart:

As I always say, this is my humble opinion. But this are the facts. It would be interesting to know your opinions.

Source of research:

http://www.federalreserve.gov/econresdata/releases/statisticsdata.htm

In the begining of the correction?

2009-07-28T17:03:00.002-07:00

Continuing with the post "DOW: Green Monday?", now I think a correction is very likely. Not necessarily tomorrow, because we need some confirmations, but the process is in development. We have some sell signals.

In the short term:

First, look at the UUP (BULL US Dollar index ETF). If we look at the moving averages that I use to track trend (when the 22 EMA cross the 100 SMA in the 15 minutes frequency chart, and is confirmed by the price, we have a signal), they are showing a change in trend. In addition, we can notice the bullish divergences. This does not mean that the indexes are going to fall from here, but they could begin to move sideways. This is not good for commodities and latin-american indexes.

Then, we have the BUY signal in the VIX. It is the same signal as the one in the UUP. Look that the charts, they are very similar.

This scenario is right, if we suppose that the markets are going to maintain the negative correlation with the dollar that they had until today.

Finally, if we look at the indexes, it is interesting to notice that we do not have a sell signal yet. Then, It is early to short the market (in my humble opinion). We need a confirmation in the SPY.

Gaining more perspective, here some daily charts:

SPY:

UUP:

QQQQ:

DOW JONES TRANSPORT:

Ticker sense: (bullish)

http://tickersense.typepad.com/.a/6a00d8341c924353ef0115723ba8d7970b-popup

In my opinion, we should look at the 950 level in the S & P 500. This is the key support.

Some amazing coincidences

2009-07-16T19:40:00.000-07:00

Looking some charts I have found some interesting coincidences that I would like to share.
First, look at the DJI monthly chart. In July, the 200 EMA cross the monthly 200 SMA. In addition, in the daily chart, we have the same resistance!. The 200 daily EMA.

DOW JONES Monthly Chart:

DOW JONES monthly chart with RSI, CMF, MACD & Stocastics:

Now looking at the 2002 bear market, we can see the same pattern. In my humble opinion, the reason of the recent movements of the market is shorts squeezes. And in the bottom of 2003, it looks like other short squeeze, to go down after.

DOW JONES 2002 bottom:

DOW JONES 2009 ......bottom?

S & P 500 & VIX

2009-07-15T13:41:00.000-07:00

Today, there was something in the market that was very interesting to watch. The correlation between S & P 500 and the VIX. I had read some interesting articles that doubts on the possibility of making technical analysis on indexes like the VIX, but I consider this findings very useful.

Today, we could see the VIX rising as the S & p500. I try to look for the last time this happen, and finally I found something in August 2008.

In addition, the divergences in the ROC (Rate of change) are very similar as the structure of the movement in the S & P 500.

Here I attach the chart. I do not reach any conclusion yet. But, if we relate this with the definition of the VIX, it looks like the investors do not believe in this prices movements, and are paying higher prices to cover their risks in prices changes. The other possibility could be that the correlation between markets and VIX is changing.

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from volatility.If investors see high risks of a change in prices, they will require a greater premium to insure against such a change by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

If you want to read more on the VIX, click here.

Related documents:

http://www.cboe.com/micro/vix/vixwhite.pdf

http://vixandmore.blogspot.com/2007/05/high-positive-correlation-between-vix.html

Updating some indexes

2009-07-13T13:29:00.000-07:00

DOW JONES TRANSPORT:

DOW JONES INDUSTRIAL

DOW JONES US FINANCIAL INDEX:

SDS ETF (SPY SHORT)

DIA:

DBC: watch-list

2009-07-12T15:32:00.001-07:00

I find interesting to take a close look at what DBC is doing.

DBC seeks to reflect the performance of the Deutsche Bank Liquid Commodity index. The fund will pursue its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the index, or the index commodities. The index commodities are light, sweet crude oil, heating oil, aluminum, gold, corn and wheat. The index is composed of notional amounts of each of the index commodities. The notional amounts of each index commodity are broadly in proportion to historical levels of the world’s production and supply.

Weekly chart:

Daily Chart:

Intraday chart:

DBC vs Gold and other commodities:

DBC vs Gold and other commodities:

Interesting related readings:

Embrace Deflation - It's The Cure, Not The Problem

Commodities' Blame Game

A New Moving Average System for ETF Portfolios

Hyperinflation or deflation

Bespoke's Commodity Snapshot (7/8/09)

DOW: green monday?

2009-07-10T15:38:00.000-07:00

Today, the DOW closed with some interesting divergences.
First, on the intraday chart, we can see the divergence on the MACD and the RSI. In addition, the dynamical resistance had been broken:

On the daily chart, we can see the divergence in the RSI (parametrized at 7).

Finally, on the weekly chart, all the indicators remains in bearish situation:

Transports ($TRAN in stockcharts.com) is the sector that is supporting the rest of the indexes. It is showing an amazing strength. This is the sector to look closely and follow.

Finally, the SPY is still over the 200 SMA. During the last 3 days, it showed weakness to the downside. I think the reason is that the overall traders and blogs are expecting big moves downward. Then, Mr. Market enjoys making them loose their patience and doing the opposite.

POT: watchlist

2009-07-09T15:44:00.000-07:00

Here I found POT, which is moving in an upward channel. My doubt is on the last channel that had been forming during the past two weeks. It looks like a bear flag.....
Here I attach a summary on the activities of Potash. For an accurate research of the fundamentals, I suggest visit Wikinvest.

http://www.wikinvest.com/stock/Potash_Corporation_of_Saskatchewan_%28POT%29

The Potash Corporation of Saskatchewan (NYSE: POT) (TSE: POT) was the largest crop fertilizer company in the world in 2008 with $9.4 billion in sales.^[1] In 2008, Potash Corporation was the world's largest potash producer and was also the world's the third largest producer of both nitrogen and phosphate.^[2] These are the three primary crop nutrients essential for producing fertilizer. The company also controls the majority of the world's excess potash supply. By adjusting its production to match world demand, the company is able to maintain high prices. Also, the company benefits from operating in an industry with high barriers to entry. Potash Corporation estimates that a new entrant would have to spend at least $2.5B to get a new mine operational.

Here is the daily chart of POT. May be it is developing a H & S pattern. If this is the case, the 88 level is key.

Weekly Chart:

Daily Chart:
POT vs OIL, CRB index and S & P 500:

DJ USFN vs DJ USTRANS

2009-07-08T18:13:00.001-07:00

Will the US transport index follow the US Financial Index?

DOW JONES US Financial Index:

DOW JONES US TRANSPORT index:

Today's close

2009-07-08T13:46:00.001-07:00

This is one scenario we could consider for the indexes. We have a dozen, but this one is, in my opinion, the most likely, since it is in accordance with some elliot wave counts that I have seen in other blogs.
The range 880-885 is a key level. If, in the coming days, the S & P 500 closes over this level, we have to change the hypothesis. The head and shoulder would be invalid, and then, this range is a good number to put your stops in case you had gone short.

We can see the 200 DMA acting as a resistance (dotted yellow line), the 50 DMA broken support (dotted green line) and the Andrew's Pitchfork channels on both, DOW JONES and SPY.
It is worth note that in the SPY, the 200 DMA is supporting the downward pressure, while in the DOW JONES is playing as resistance.

DOW JONES:

SPY:

SPY: Medium Term Trendlines

2009-07-07T20:24:00.000-07:00

DOW JONES: Today's close

2009-07-07T13:55:00.000-07:00

The neckline had been broken today. We can expect a bounce for tomorrow until 8250 / 8300 for the DOW JONES. But it's is clear that the trend is down....

DBA: Watch-list

2009-07-06T19:23:00.001-07:00

DBA is moving within a channel. If we want to go long, be aware on how you see the US dollar Index. I do not have a clear signal to go long or short in UUP. Here is the chart of the UUP (PB USD BULL ETF):

And here you can see the correlation between UUP and DBA. Notice that there is a period (from Dec. 23 2008 to Jan. 6 2009) in which both ETFs have positive correlation. The rest of the year the correlation had been negative.

DBA daily Chart:

DBA Weekly Chart:

Dow Jones: Weekly chart SELL Signals

2009-07-06T16:57:00.000-07:00

Today's close

2009-07-06T15:00:00.000-07:00

DOW JONES:

Watchlist: WRB

2009-07-06T08:21:00.000-07:00

Because the market risk is very high, I am concentrating on low-beta shares (low correlation with the market). Among these, I found very interesting William R. Berkley (WRB).

W. R. Berkley Corporation (W. R. Berkley) is an insurance holding company. The Company operates in five segments of the property casualty insurance business: specialty, regional, alternative markets, reinsurance and international. The specialty segment underwrites complex and third-party liability risks, principally within excess and surplus lines, and includes specialty lines of insurance. The regional segment provides commercial property casualty insurance. The Company's alternative markets operations specialize in insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Its reinsurance operations consist of seven operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. The international segment has operations in Australia, South America, the United Kingdom and Continental Europe.

Beta: 0.9
Dividend yield: $0.24 - 1.1% (very low)
Average volume (10 days): 1.9 m.

WRB reported 1st quarter 2009 earnings of $0.25 per share on April 27, 2009. This missed the $0.37 consensus expectations of the 13 analysts following the company.
The next earnings announcement from WRB is expected the week of July 27, 2009. $0.62 is expected by analysts.

Valuation Ratios:
Price/Earnings (TTM) 54.41x
Price/Sales (TTM) 0.8x
Price/Book (MRQ) 1.12x
Price/Cash Flow (TTM) 24.2x

WRB's debt to total capital ratio, at 29.22%, is in-line with the Insurance (Prop. & Casualty) industry's norm despite its increase over the last year.

This is basic information. You can look in many web pages to analyze the rest of the fundamentals.

Form 10-Q
Quarterly Report:

http://ir.wrberkley.com/secfiling.cfm?filingID=950123-09-8373

Daily Chart:

Weekly Chart:

Long Term WRB arithmetic chart and Fibonacci proportions:

Short Term Logarithmic chart and Fibonacci proportions:

NEWS: Negative for WRB.

http://seekingalpha.com/article/146950-state-budget-gaps-and-investment-implications

Stock Market Impact of the state budget gaps:

Banks have enough trouble without defaults on muni bonds on top, but that is a possibility to keep on the radar screen.

P&C insurance companies are perhaps more at risk. According to Morningstar, 40% of P&C insurance company assets are in muni bonds, and for Travelers (TRV), Chubb (CB), WR Berkely (WRB) and Mercury General (MCY), the holdings are 50% or more. Expectation of significant muni payment deferrals (sounds better than default) would have adverse stock price impact on P&C insurance companies.

SDS: playing the short side

2009-07-04T21:46:00.000-07:00

In line with the previous post, SDS (the ultrashort S & P 500 ETF) could be a good option to play the short side. If you want something less volatile, use the SH ETF.
We do not have a buy confirmed, but it is recommended to include it in your watch-list, because it looks like it will reverse the trend, in line with the global markets.

But remember, this ETFs, are not for the long term. They tend to zero in the long term.

Weekly Chart:

Daily chart:

SDS / SPY ratio:

Dow Jones / S & P 500

2009-07-02T12:48:00.000-07:00

Well, the month had finished and it is a good moment to try to see what can we expect for the next month, without making futurology. In the S & P 500, we can consider 880 and 780 as the key levels. Here, the 23.6% and 61.8% fibonacci retracements are the supports in case the head and shoulder patterns is confirmed. Meanwhile, is a good strategy Wait & See, until the market defines the course. If we look at some indicators (see the charts below, specially the weekly chart of the S & P500), we could consider that the market had already define the trend (look the ADX).

In addition, if we relates this charts with the charts of the VIX, the conclusion is that the direction for the next month should be downward. An spike in the VIX is very likely from this levels. But.... be careful, because the majority of the blogs and financial sites that I am visiting see the Head and Shoulder pattern (pattern formed during may and June). When everybody see the same pattern, the market likes to do the opposite.

Look at the RSI. It was moving between 50 and 90 during all the rebound (from March until June 15). Now, it is moving below 50. This indicates a change in the trend. Also, pay attention to the Bollinger Bands. The central band had been broken.

S & P 500:

The 61.8% Fibonacci retracement is at 778. The key support is 880.

Dow Jones Industrial:

A look at the VIX

2009-07-01T10:54:00.000-07:00

This is the VIX in a 3 days frequency chart, 3 years long. It is holding in the long term dinamic support, and look at the divergence in the RSI. It's scary, isn't it?

Now lets take a look to the VIX / SPY ratio. Look at the ADX in april 2007, and look at it now. Looks like it is ready to take off? Interesting divergences in the CCI.

UNG again

2009-06-25T11:02:00.000-07:00

Here we can compare the behavior of the Natural Gas when it was in similar inventory conditions as it is today.

Stocks of Natural Gas. The red line shows the increasing stocks of Natural Gas Today and in September 2007. Look and compare it with the movements in prices and take your own conclusions.

Note: The shaded area indicates the range between the historical minimum and maximum values for the weekly series from 2004 through 2008.
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report." The dashed vertical lines indicate current and year-ago weekly periods.

Source: EIA

http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html

UNG

UNG trendlines:

US Treasury Bonds: TBT & TNX

2009-06-25T10:49:00.000-07:00

During the lasts day, is interesting to note how the Us Treasuries were going up, although the fear to the inflation that is around the markets.

If we look at the daily chart of the 10 years US treasury Bonds yield ($UST10Y), we can see that this uptrend still very powerful.

Note that it is still inside the uptrend channel.

10 years US treasury Bonds yield (Daily chart):

10 years US treasury Bonds yield(Weekly chart):

TBT

This is the short ETF of the 10 years US treasury bonds. We could expect a bounce on the 200 SMA (Green line).

TBT compared to TNX (The 10 US treasury bond Yield):

It is interesting to watch how the ratio is changing its trend. But, in the long term, this ratio should continue downward. In the short term, TBT should outperform TNX.

TNX LONG TERM logarithmic CHART:

Important NEWS:

Treasuries Gain as Asian Stocks Fall, Fed Plans to Buy Notes

http://www.bloomberg.com/apps/news?pid=20601009&sid=aRqviLbpagjE

U.S. Foreign Solvency

2009-06-10T19:11:00.000-07:00

The economy theory developed a model with which we can analyze the solvency situation of a country. It defines the solvency considering the temporal budgetary constraints and the sum of the balance of payments of the public and private sectors.

Initial debt = Actual Value of the Trade balance + Actual Value of the Final Debt

The Actual Value of the final debt should tend to zero to avoid Ponzi scheme’s. Then, the foreign solvency requires that the country generates commercial surplus in the future in order to pay the external and internal debt.

In short, the foreign solvency requires that the country generates commercial surplus big enough to pay the net foreign liabilities.

Therefore:

Initial Debt = ∑_((t=1))^((T-1))▒〖BCt/[(1+i) 〗^t]

Also, i > ∆ Debt > ∆ GDP

Then,

Current Account = CC = Trade Balance (TB) – i x D* = -∆ D*

As D*2 (external debt in the second period) – D*1 (external Debt in the first period) =i x D*1-TB1

We divide by GDP:

d*2 – d*1 = i / [(1 + G) x d*1] – tb1 ; where d is D/GDP and G is (GDP2 – GDP1)/GDP1

d*2 = (1+i)/[(1+G) x d*1–bc1 G= nominal GDP growth

d*2 – d*1 = (1+i-1-G) / (1+G) x d*1 – bc1

d*2 – d*1 = 0 = (i – G) / (1 + G) x d*1 – bc1

If G = g(real G)+p(inflation)

bc = (r-g) x D*1

Then, the formula says that to maintain constant the relation Net Debt / GDP, the TB should increase if the difference between the real interest rate and the potential real GDP growth is rising and also if there is a bigger ratio D*/GDP.

If we apply this theory to USA case:

p = 3% (forecasted average for the next 5 years);
G=5% (forecasted average for the next 5 years) ;
g = 2% real growth (forecasted average for the next 5 years);
D = 11.5trillions (Jun/2009) ; GDP = 14.265 trillions (2008) ;
I = 6% (10 years US treasury bonds rate average forecasted for the next 5 years)

Therefore:

BC =( 3%-2%) x 11.5 trillions
BC = 0.115 trillions or 114.576.404.000 USD (115 billions)
BC 2008= -681 billions

In conclusion, the US should reverse its BC in order to pay it foreign debt by 681 billions + 115 billions, this is786 bllions. The open question is: HOW?

UNG

2009-06-02T12:43:00.001-07:00

United States Natural Gas Fund. Specialty-Natural Res

The fund seeks to replicate the performance, net of expenses, of natural gas. The trust invests in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire.

It looks like it is under accumulation. I am waiting for the break-up.

UNG is a good option to diversify the portfolio.

Daily chart:

NASDAQ Composite

2009-05-26T13:41:00.000-07:00

Let's use the PVI for the NASDAQ composite. What is more interesting is that in this index, we have the same pattern as in 2003. The divergence in this indicator with the other indexes such like the Dow Jones Transport, Dow Jones Industrial and S & P 500 is something to analyze.

In 2002 - 2003, this indicator give the buy signal on october 2002, 6 months before than the buy signal in the DOW JONES. Then, we could expect the same now, although the markets never behave the same way.

NASDAQ 2003:

NASDAQ 2009:

DOW JONES INDUSTRIAL

2009-05-25T13:12:00.000-07:00

We will compare the 2003 bottom, with the 2009 lows (we do not know if we have a bottom yet). For the comparison, we can use the MACD combined with the Positive Volume Index (PVI, with the 200 SMA in red), and the 200 SMA in the Dow Jones (in yellow). For those who are not familiar with the Positive Volume Index:

Calculation:

1) If today's Volume > yesterday's volume then:

PVI = yesterday's PVI + (today's close - yesterday's close)/[yesterday's close × yesterday's PVI]

2) If today's volume < yesterday's volume then:

PVI = yesterday's PVI

Interpretation:
This indicator links the behavior of volume and price.
It can identify a rise in volumes synchronized with a rise in prices. The PVI or Positive Volume Index, detects only the rising signals contrary to the Negative Volume Indicator.
Less informed investors follow the rise in volumes and are in the market.
On the contrary when volume decrease the more informed investors are in the market.
The market is bullish when the two indicators rise above their moving averages.

Now, let´s see how this indicator worked out in 2003:

DOW JONES 2003 bottom:

DOW JONES 2009 lows:

Could it work in the 2009 lows?

MRK - Merck & Co Inc.

2009-05-17T11:49:00.000-07:00

MRK - Drug Manufacturers - Major

MRK is one of my favorites. Look the daily chart. It seems like a H & S bottom. Look at the volume, the neckline and the technical indicators.

On the volume, this is what we can expect in a H & S bottom pattern:

Volume levels during the first half of the pattern are less important than in the second half. Volume on the decline of the left shoulder is usually pretty heavy and selling pressure quite intense. The intensity of selling can even continue during the decline that forms the low of the head. After this low, subsequent volume patterns should be watched carefully to look for expansion during the advances.

The advance from the low of the head should show an increase in volume and/or better indicator readings, e.g., CMF > 0 or rise in OBV. After the reaction high forms the second neckline point, the right shoulder's decline should be accompanied with light volume. It is normal to experience profit-taking after an advance. Volume analysis helps distinguish between normal profit-taking and heavy selling pressure. With light volume on the pullback, indicators like CMF and OBV should remain strong. The most important moment for volume occurs on the advance from the low of the right shoulder. For a breakout to be considered valid, there needs to be an expansion of volume on the advance and during the breakout.

Weekly Chart:

MRK need a little help of the Dow Jones to take-off. I am considering going short on the Dow and Long on MRK. Cover MRK with an inverse ETF. A good entry point could be after the brake of the neckline (30 USD) or any price on the dynamical support. In case of confirming the head & shoulders, the objective is the level of 40 USD.

Fundamentals:

Merck & Co., Inc. (Merck) is a global research-driven pharmaceutical company that discovers, develops, manufactures and markets a range of products to improve human and animal health. The Company's operations are principally managed on a products basis and comprises of two business segments: the Pharmaceutical segment and the Vaccines and Infectious Diseases segment. The Pharmaceutical segment includes human health pharmaceutical products marketed either directly or through joint ventures. These products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. Merck sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations and pharmacy benefit managers. In March 2009, Insmed Incorporated closed the sale of its assets related to the follow-on biologics business, to a subsidiary of Merck & Co., Inc.

Valuation Ratios:

Price/Earnings (TTM) 9.14x - (MRK reported 1st quarter 2009 earnings of $0.74 per share on April 21, 2009, down 17% from $0.89 per share in Q1 2008.) Analyst expects $0.78 per share for the Q2 2009.

Price/Sales (TTM) 2.29x

Price/Book (MRQ) 2.75x

Price/Cash Flow (TTM) 7.05x

Book Value Per Share (mrq): $ 9.277

Because MRK is in the Major Drugs industry and has positive earnings, the PEG, PE, and Price to Book ratios are the most appropriate valuation measures. The Price to Sales ratio is less instructive than the PEG or PE since the company has positive earnings. Therefore MRK seems expensive with a PEG value of 2.0119, above the Major Drugs industry median PEG of 1.44, however their PE is only 9.1408, among the lowest in the industry.

Solvency:

MRK's debt to total capital ratio, at 23.45%, is in-line with the Major Drugs industry's norm despite its increase over the last year. The company's balance sheet shows that liquid assets are plentiful enough to service current liabilities in the event that operating earnings are unable to.

Profitability:

MRK is one of the more profitable companies in the Major Drugs industry with a net margin of 25.33%. Its operating margin and net margin are among the strongest of any peer while its gross margin is above the industry median.

Dividends:

MRK pays an annual dividend of $1.52 which, at its current stock price, produces a yield of 5.84%%, above both the Major Drugs industry average of 4.38% and the average stock in the S&P 500 Index at 3.00%. This is even more impressive since most companies in the Major Drugs industry do not pay a dividend.

Revenues:

MRK grew earnings in the face of decreased revenues over the past twelve months. This is a trend that is not sustainable if profits are to continue to grow at this rate. However, this result was better than that of the average company in the Major Drugs industry.

MRK is overall quite efficient in comparison to it's peers with a Return on Assets, Return on Equity, and Revenues Per Employee of 12.67%, 30.35%, and $424,154.00 respectively. Despite average performance at managing their resources, the company is among the best at managing their owner's equity and at generating revenues from employees compared to other companies in the Major Drugs industry.

Financial strength:

INSIDERS:

There is no important insider activity, but they are buying.

http://finance.yahoo.com/q/it?s=MRK

http://www.insider-monitor.com/trading/cik64978.html

NEWS:

Drug Industry hits back as EU finalizes probe

http://www.reuters.com/article/marketsNews/idINLE91694420090514?rpc=44

Health-Care Reform and the 'Innovation Test'

http://online.wsj.com/article/SB124227053842018311.html

Cramer: Prepare for Sector Rotation?

http://www.cnbc.com/id/30726780/site/14081545?__source=yahoo|headline|quote|text|&par=yahoo

Principal sources: Reuters, TD Ameritrade, Yahoo finance and Finviz.com & Stokchcharts.com.

MTSC - MTS Systems Corp

2009-05-11T19:58:00.000-07:00

NASDAQ: MTSC

Small Cap Blend. Sector: Technology / Scientific & Technical Instruments

In today’s market it is very difficult to find companies with a good risk / reward ratio. Then, you should not expect to find the perfect company in today’s market situation…..But I think that this company would outperform the SP500 the next weeks.

Be careful with the average volume, which is very low.

Daily chart:

We can see that MTSC is moving, like NRG, within a channel with support in 20 and a resistance in 26. Also, the chart pattern looks like a wedge. If we look for the divergences, supports and resistances in the chart, it seems to have high possibilities to be broken to the upside.

Weekly chart:

Bullish signals: Watch the big divergence in the Money Flow indicator and the MACD. The Stochastic looks like it is ready to overcome the 20 level, which is very bullish. The 13 SMA is the resistance moving average.

Fundamentals:

MTS Systems Corporation supplies mechanical testing systems and industrial position sensors in North America, Europe, and Asia. The company’s Test segment offers road and track simulators, tire performance, and transmission test systems for automobile, truck, motorcycle, construction equipment, agricultural equipment, and off-road vehicle manufacturers and their suppliers. It also offers systems to test wear and performance of implants, prostheses, and other medical and dental materials and devices for bio-mechanical applications. In addition, this segment provides products, systems, and software for structural tests on aircraft and space vehicles, as well as to test sub-systems, components, and materials primarily to the manufacturers of commercial, military, and private aircraft and their suppliers. The company’s Sensors segment offers products based on magnetostriction technology to the manufacturers of plastic injection molding machines, steel mills, fluid power, oil and gas, medical, wood product processing equipment, mobile equipment, and alternative energy; and products used to measure fluid displacement, such as liquid levels for customers in the process industries. MTS Systems sells its products and systems through a direct sales force, independent sales representatives, and independent distributors, as well as through the Internet and catalog. The company was founded in 1966 and is headquartered in Eden Prairie, Minnesota.

On 4/22/09 MTS Systems Corporation reported fiscal second quarter earnings per share of $0.44, a decrease of 42 % compared to second quarter fiscal 2008, on net income of $7.5 million. (MTSC Fiscal Year ends in September).

When MTSC reported 2nd quarter 2009 earnings of $0.44 per share, it met the consensus estimate of the 2 analysts covering the company.

The analyst's estimates ranged from a high of $0.48 to a low of $0.39, with a median estimate of $0.42.

MTSC is expected to announce 3rd quarter earnings the week of July 20, 2009. For the coming quarter, analysts estimate MTSC will earn $0.28 per share, a 56.92% decrease over the prior year 3rd quarter results.

Key Statistics:

Market Cap: 353.80M

EPS: $ 2.49

P/E: 8.48 - Industry Average: 22.84.

Forward P/E (fye 27-Sep-10): 12.95

Share Price: $ 21.11

Book Value Per Share (mrq): $12.057

Price/Book (mrq):1.75 – Industry average: 2.67.

Enterprise Value/EBITDA (ttm): 4.147

Profit Margin (ttm): 9.17%

Operating Margin (ttm): 13.12%

Beta:0.87

Competitors: ITW Illinois Tool Work Inc.

MTSC is one of the more profitable companies in the Scientific & Technical Instr. industry with a net margin of 9.17%. Its net margin and operating margin are both among the strongest of any peer, while its gross margin is inline with the industry median.

Total DEBT Evolution (values in thousands):

Q3 2008 $8,146 / Q4 2008 $26,646 / Q1 2009 $42,692 / Q2 2009 $41,434

I do not like that the level of the debt is increasing Q over Q. But, MTSC's debt to total capital ratio, at 17.02%, is in-line with the Scientific & Technical Instr. industry's norm. With an Interest Coverage ratio of 46.62 and a Quick ratio of 1.31 the company should be able to comfortably repay its debt.

Total revenue evolution (values in thousands):

Q3 2008 $ 116,886 / Q4 2008 $ 124,069 / Q1 2009 $ 116,609 / Q2 2009 $ 107,652

Revenues are decreasing Q over Q.

Income Available to Common Excluding Extra. Items (values in thousands):

Q3 2008 $10,985 / Q4 2008 $14,499 / Q1 2009 $9,751 / Q2 2009 $7,448

Incomes are decreasing Q over Q.

Cash Flow (values in thousands):
Q3 2008 15,530 / Q4 2008 9,754 / Q1 2009 (9,313) / Q2 2009 (14,750)

Cash is decreasing Q over Q.

I would like to note that, the company is very dependent on the economic activity, since it is the supplier for construction equipment, agricultural equipment, and off-road vehicle manufacturers and their suppliers.

If we expect an estabilization on the economic situation, MTSC is a good bet, since It is underestimated by the market.

We can wait to buy on the rupture of the wedge to the upside. If this is the case, do not forget your STOP LOSS.

Other interesting matters:
Insiders:

http://finance.yahoo.com/q/it?s=MTSC

http://insidercow.com/history/company.jsp?company=mtsc&B1=Search!

Recent news and articles:

Five Thinly Traded Stocks with Plenty of Upside

http://seekingalpha.com/article/123969-five-thinly-traded-stocks-with-plenty-of-upside

SAILING MARKETS

New URL for this Blog

PFE: update

GE - General Electric

GOLD

C: Target reached

Euro-Usd

PFE: watch-list

IWM: Bull

XOM: Update

Critical levels

DOW JONES: Fundamental Analysis

DOW JONES: The bear case

S & P 500: 1222 possible?

DAX in US Dollar

S & P 500 in euro: the soft bearish side

Watchlist: Citigroup, Gold & XOM

S & P 500 in US euros: bullish signs

XOM

S & P 500 in US dollars: supports and MA's

SLV: distribution with Head and shoulders?

GDP chart analysis

This week Watchlist

DOW JONES, S & P 500, DOW TRANSPORTS & other key financial indexes trend lines & fibonacci's

GOLD in Euro

CRB index & crude oil measured in euros

UUP - Elliot wave count

XOM vs PBR, and the US Dollar Index

AT & T

Some US Indexes and key patterns

S & P 400 / Mid Cap Index

OIL vs GAS

Natural Gas: shelter?

Exact Fibonacci's confluence at DOW JONES

Merck & Co. (MRK) Update

Updating MCD

2002 megaphone and currently short term supports

US Financial Index and US Real State Index

Some charts: Dow Jones Ind., Dow Transports & Nasdaq

MCD - McDonald's Corp.

Two different patterns in the S & P 500

10 year US Treasury bond yield analysis

In the begining of the correction?

Some amazing coincidences

S & P 500 & VIX

Updating some indexes

DBC: watch-list

DOW: green monday?

POT: watchlist

DJ USFN vs DJ USTRANS

Today's close

SPY: Medium Term Trendlines

DOW JONES: Today's close

DBA: Watch-list

Dow Jones: Weekly chart SELL Signals

Today's close

Watchlist: WRB

Form 10-QQuarterly Report:

SDS: playing the short side

Dow Jones / S & P 500

A look at the VIX

UNG again

US Treasury Bonds: TBT & TNX

U.S. Foreign Solvency

UNG

NASDAQ Composite

DOW JONES INDUSTRIAL

MRK - Merck & Co Inc.

MTSC - MTS Systems Corp

Form 10-Q
Quarterly Report: