Read the August 29, 2016 Where To Invest in September 2016 Market Investing Strategies Newsletter in .pdf format here
August 29, 2016
Market Strategies Newsletter – Sample Issue
Balanced Investing Strategies To Make Money In Up Or Down Markets
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King, Charles Moskowitz
Where To Invest In 2016 Newsletter Covering:
Where to Invest in September 2016
Best Stocks To Buy in September 2016
Stock Market Investing Strategies
Stock Options Trade Alerts
How To Trade Options
Proven Profits Trading Success
Results From Our Recent Trade Alerts:
134% Profits on HL Calls in 55 Days
51% Loss on TBT Calls in 3 Days
50% Profits on TBT Calls in 8 Days
86% Profits on AA Calls in 6 Days
66% Profits on SPY Puts in 2 Days
47% Profits on SLV Calls in 3 Days
18% Loss on QQQ Calls in 5 Days
58% Profits on SUN Calls in 3 Days
85% Profits on SPY Puts in 3 Days
82% Profits on SLV Calls in 2 Days
51% Profits on AA Calls in 7 Days
157% Profits on NEM Calls in 4 Days
107% Profits on SIG Puts in 14 Days
28% Profits on NEM Calls in 13 Days
105% Profits on SIG Puts in 14 Days
97% Profits on SJM Puts in 7 Days
207% Profits on SIG Puts in 6 Days
70% Profits on GLD Calls in 1 Day
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$10,000 Trading Portfolio
Charles Moskowitz Discussion
There are 4 Open positions:
Long 3 HL Sept 3.50 Calls
Written 3 HL Sept 6.00 Calls
Long 10 BMY Sept 62.50 Calls
Long 4 WFM Sept 31 Calls
Funds in Use $ 1,067
The gain in SIG was also a bit of a disappointment since it started looking stronger on Monday, Tuesday and Wednesday and rallying to a new recent high. I got out early since I don’t like playing earning only to see a miss as well as the announcement of a class action against the company. The stock gapped down to $78 from 96 and the options went to $7 and closed the week @ $5.30. There will be another shot at this one, I promise.
I still think that BMY and WFM positions still have potential after their big selloffs. There’s not much else for me to say tonight. The market internals looked lousy on Friday and the up 100 / down 100 in the Dow certainly wasn’t pleasant. The sentiment numbers turned weak but the indexes (except Transports) are near their lower Bollinger Bands. The biggest problem I can see is the uncertainty in this election cycle and the lack of any real trust in the FED. The more they speak, the more lack of consensus we see. All new trades will be texted this week…CAM
Market Strategies $10,000 Trading Account Trade Table
All trades were based on your participation in the texting service to receive updates.
| DATE | TRADES | PRICE | COST | PROCEEDS | RESULTS |
| 08/23 | Bought 10 BMY Sept 62.50 Calls | 0.44 | 440 | ||
| 08/22 | Sold 4 SIG Sept 85 Puts | 2.25 | 900 | 220 Gain | |
| 08/19 | Bought 4 SIG Sept 85 Puts | 1.70 | 680 | ||
| 08/15 | Bought 4 WFM September 31 Calls | 0.72 | 288 | ||
| 07/06 | Sold 3 HL September 6.00 Calls written against remaining 3 lot long position | 0.52 | 156 | 156 credit | |
| 05/03 | Bought 3 HL September 3.50 Calls | 0.85 | 255 |
3rd Week expiration when the month is listed without a date
Previous closed out trades not listed here may be seen in previous market letters in the
VIP Subscribers Members Area.
Remember, these trades are based on your participation in the
Subscriber Members Only
TEXTING SERVICE TO RECEIVE ALL UPDATES.
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New Trades Will Be TEXTED To MEMBERS
MARKET Laboratory – Weekly Changes
Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect.
| Dow
18,395.40 -157.17 -0.85% |
Nasdaq
5218.92 -19.46 |
S&P 500
2169.04 14.83 -0.68% |
Transportation
7824.54 -105.81 -1.33% |
Russell 2000
1238.03 +1.28 +0.10% |
Nasdaq100
4783.69 -22.44 -0.47% |
| Gold (spot)
1321.50 -18.90 -1.4% |
Silver
1865.1 -66.6 -3.4% |
Crude
47.64 +0.88 -1.8% |
Heating Oil
151.11 -2.75 -1.8% |
Unleaded Gas
1.4284 -0.0101 -0.7% |
Natural Gas
2.913 +0.294 +11.4% |
| VIX
13.65 +2.31 +20.3% |
Put/Call Ratios
S&P 100 97/100’s +34/100’s |
Put/Call Ratios
CBOE Equity 67/100’s +9/100’s
|
Bonds
170-10 -25 2.28%+0-02% |
10 Yr. Note
131-12 -184 1.60%+0.04%
|
Copper
207.85 -8.85 -4.1% |
| CRB Inflation
Index 186.11. -2.67 -1.4% |
Barron’s* Confidence
67.1 -1.5 |
S&P100
959.06 -5.74 -0.59% |
5 Yr. Note
120-297 -145 1.21% +0.09%
|
Dollar
94.50 -0.97 -1.0% |
DJ Utilities
667.09 -16.12 -2.36% |
| AAII
Confidence Index
Long Term Average |
Bullish
29.4% -6.2%
38.74% |
Bearish
29.7% +3.4%
30.30% |
Neutral
40.9% +2.8% 30.96% |
M! Money
Supply +9.53% Aug 15th |
M2 Money
Supply +7.07% Aug 15th |
* Component Change in the Confidence Index
M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits
M2.. adds Savings and Money Market Accounts both compared with the previous year.
Market Strategies Technical Information
Support/Resistance Levels: SUPPORT RESISTANCE
S&P 500 2147 2190
Dow 18,260 18,572
QQQ 115.10 117.80
Transports 7725 7930
NASDAQ 5160 52.60
$100,000 Trading Portfolio Stock Positions and Trades
Each stock is allocated a theoretical $ 5,000 share of the portfolio unless otherwise indicated.
| Stock
|
Purchase Price | Purchase Date | Stop/Loss | Price/
Date Sold |
Profit/ (Loss) |
||
| CRR 400 | 13.73 | 08/24 | 13.32 sco | 13.15 08/25 | ( $ 232 ) | ||
| SCO 20 | 87.22 | 08/16 | |||||
| FAST 150 | 42.15 | 07/28 | 41.44 sco | ||||
| AA 500 | 10.43 | 07/25 | |||||
| SPXU 200 | 23.86 | 07/14 | |||||
| HL 1000 | 3.95 | 05/03 | |||||
| MOS 200 | 27.53 | 05/02 | |||||
| EYES 500 | 5.04 | 04/04 | |||||
| SUN 300 | 29.50 | 02/23 | |||||
| EYES 1000 | 6.49 | 12/28 | |||||
| TWTR 200 | 28.51 | 10/28 | |||||
| MOS 100 | 43.55 | 08/14 | |||||
| NBGGY 600 | 1.40 | 02/17 | |||||
| SAN 600 | 8.40 | 12/16 | |||||
| AA 500 | 14.21 | 10/16 | |||||
| TEXQY* 200 | 6.56 | 7/11 | |||||
| REPR* 5000 | 0.22 | 10/22/12 | |||||
Recommendations will be both listed in this letter and texted to members.
Previous closed out stock and option positions can be found in past Market Strategies Newsletter issues available in the VIP Subscribers Members Area.
For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, DXD, SDS,TZA and RWM, which go up when the DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.
Market Strategies $100,000 Trading Account
There was one closed out option position, the 8 SIG September 85 Puts were sold at $ 2.25 making $ 244, which was also the total gain for the quiet week.
The Carbo Ceramics ( CRR ) bought on the 24th at $ 13.76 was stopped out at $ 13.15 sco
(stop close only) on the close of Thursday, the 25th. The stock trade lost $ 232.00.
For the entire week the net profit was $ 12.
For the entire year on closed out trades, our hypothetical profits increased by $ 12 to $19,753
The options expire on the third Friday of each Month unless otherwise posted.
The Stock table has the following positions:
AA ( 2 ), YES (2), FAST, HL, MOS(2), NBGGY, REPR ,
SAN, SCO, SPXU, SUN, TEXQY, TWTR
The options call for a $ 2,500 investment unless otherwise stated; each stock position requires $5,000 unless otherwise mentioned specifically.
The money management is based on a hypothetical $ 100,000.
We are using a total of $70,824 for the 16 open long stock positions.
The Open Option Positions require $ 1,654.
This increases the margin requirement to $ 72,478.
The 6 written Hecla Call positions reduce the margin requirement by $ 312 which lowered the margin requirement to $ 72,166,
leaving $ 27,834 in cash.
Open position losses increased by $ 1,840 to minus $ 11,092.
These figures are approximate and there might be errors.
We have not counted the dividends received from many previous trades such as Apple, Colgate Palmolive, JP Morgan, Mosaic, North American Tankers, STNG, Santander, which pays over 5%, their Brazil affiliate BSBR and Blue Capital Reinsurance which was sold for a profit and many others.
The trading is hypothetical and we do not count commission costs.
Executions that have occurred at or near the open or close of trading sometimes vary from our actual numbers. For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower. This sometimes results in a 50% trade that is slightly above or below the exact number.
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Previous Week’s Recommendations and
Rules for the Market Strategies
$100,000 Portfolio Trading Account
- All options count for about $ 2,500.00 for model portfolio calculations unless
otherwise stated
- When the option has doubled sell half the position
- Stop Loss protection is either half or offered with each trade
- The cost of the option is the asking price (or the price between the bid and ask,
whichever is more realistic)
- The options will be followed until closed out.
- Option Symbols are stock symbol with expiration month and strike price
| Option | COST | Date | Sold | Date | Profit/
(Loss) |
| BMY Sept 85
8 lots |
Puts
0.44 |
08/23/16 | |||
| SIG Sept 85
8 lots |
Puts
1.70 |
08/19/16 | 2.25 | 08/22/2016 | $ 440 |
| BMY Sept 62.50
8 lots |
Calls
0.90 |
08/15/16 | 0.45
( 50% Loss Rule ) |
08/17/2016 | ( $ 360 ) |
| WFM Sept 31
8 lots |
Calls
0.72 |
08/15/16 | |||
| HL Sept 6
Covered Write 6 lots Open |
Calls
0.52 |
0.52 | 07/06.2016 | $ 312 Credit | |
| HL Sept 3.50
6 lots remain |
Calls
0.85 |
05/03/16 | 1.99
(100% Profit Rule plus Gap) |
07/01/2016 | $ 684 |
Recommendations will be both listed in this letter and texted to members.
Previous closed out stock and option positions can be found in past Market Strategies Newsletter issues available in the VIP Subscribers Members Area.
This Weeks’ Economic Numbers
Earnings Releases and Media Data
Before the Open on top of the Row;
After the close below the Economics Information
| MONDAY | 08:30 hrs Personal Income July ( 0.4% vs 0.2% )
Personal Spending ( 0.3% vs 0.4% ) CORE PCE Prices ( +0.1% vs +0.1% )
Catalent CTLT ( 0.53 vs 0.61 ) Prospect Capital PSEC ( 0.25 vs 0.25 ) Scan Source SCSC ( 0.71 vs 0.66 ) Philbro Animal Health PAHC ( 0.37 vs 0.44 )
|
| TUESDAY | Abercrombie & Fitch ANF ( -0.21 vs 0.12 ) Bank of Nova Scotia BNS ( 1.48 vs 1.45 ) Fred’s
FRED ( -0.20 vs -0.13 ) HIS Markit INFO ( 0.44 vs 0.36 ) DSW DSW ( 0.30 vs 0.42 )
09:00 hrs Case-Shiller 20-city Index June ( +5.1% vs + 5.2% ) 10:00 hrs Consumer Confidence August ( 97.0 vs 97.3 ) Caleres CAL ( 0.50 vs 0.50 ) H&R Block HRB ( -0.54 vs -0.35 ) NCI Building Systems NCS ( 0.27 vs 0.15 ) Palo Alto Networks PANW ( 0.49 vs 0.28 ) Veeva Systems VEEV 0.13 v 0.13 |
| WEDNESDAY | Bob Evans BOBE ( 0.44 vs 0.51 ) Orbital ATK OA ( 1.39 vs 1.28 ) Chicos CHS 0.22 vs 0.25
07:00 hrs MBA Mortgage Index 08/27 ( NA vs -2.1% ) 07:15 hrs ADP Employment Change August ( 170K vs 179K ) 09:45 hrs Chicago PMI August ( 54.5 vs 55.8 ) 10:00 hrs Pending Home Sales July ( 0.7% vs 0.2% ) 10:30 hrs Crude Inventories 08/27 ( NA vs + 2.501 Mln Bbls ) Ctrip CTRP ( -0.02 vs 0.30 ) Greif GEF ( 0.72 vs 0.60 ) Five Below FIVE ( 0.17 vs 0.13 ) Ollies Bargain Outlet OLLI ( m0.18 vs 0.15 ) Salesforce.com CRM ( 0.22 vs 0.19 ) |
| THURSDAY | Campbell Soup CPB ( 0.50 vs 0.43 ) Genesco GCO ( 0.29 vs 0.36 ) Joy Global JOY ( 0.12 vs 0.54 ) lululemon athletica LULU ( 0.38 vs 0.34 ) Navistar NAV ( 0.13 vs -0.37 )
Challenger, Grey and Christmas posts job-cut announcements for August. 07:30 MBA Mortgage Index 08/27 ( NA vs -2.1% ) 08:30 hrs Initial Claims 08/27 ( 265K vs 261K ) Continuing Claims 08/20 ( NA vs 2145K ) 08:30 hrs Productivity-Rev 2nd Qtr ( -0.6% vs -0.5% ) 08:30 hrs Unit Labor Costs – Rev 2nd Qtr ( +2.1% vs +2.0% ) 10:00 hrs Construction Spending July ( +0.6% vs -0.6% ) 10:00 hrs ISM Index August ( 52.2 vs 52.6 ) 10:30 hrs Natural Gas Inventories 08/27 ( NA vs 11bcf ) 14:00 hrs Auto Sales August ( NA vs 5.916 Mln Units ) 14:00 hrs Truck Sales August ( NA vs 9.10 Mln Units ) Ambarella AMBA ( 0.38 vs 0.88 ) Broadcom AVGO ( 2.78 vs 2.24 ) Cooper COO 2.29 v1.97 |
| FRIDAY | Liberty Tax TAX ( -0.68 )
U.S. President Barack Obama travels to China for the Group of 20 meeting, he will meet with China’s president Xi Jinping and later travel to Laos for a summit between the U.S. and the Association of Southeast Asian Nations. . 08:30 hrs Nonfarm Payrolls August ( 180K vs 255K ) Nonfarm Private Payrolls August ( 175K vs 217K ) 08:30 hrs Unemployment Rate August ( 4.8% vs 4.9% ) 08:30 hrs Average Hourly Earnings August ( +0.2% vs +0.3% ) 08:30 hrs Average Workweek August ( 34.5 vs 34.5 ) 08:30 hrs Trade Balance July ( -$43.0Bln vs -$44.5Bln ) 10:00 hrs Factory Orders July ( +2.0% vs -1.5% ) U.S. Oil Rig Count did not rise for the first time in nine weeks at 406. The Nat Gas rig count fell by 2 to 81, making a total US rig count of 487. Crude closed at $ 47.64 down 0.88.The total rig count is lower by 405 from a year earlier, while the oil only, is down by 278. Natural Gas closed the week very strong at $ 2.913, a gain of $ 0.294 or 11.4% to $ 2.913. |
Market Strategies Fundamentals
The DJ Transportation Average ( 7824.54 ) – 105.81 or – 1.33% sold off again reversing all the gains of the previous week like a mirror image down, but holding just above its 13 and 50 day moving averages at the 77.20-40 level. The Dow Jones had its worst week since the week of May 18th falling 157 points or 0.85%, with 21 out of 30 Dow Jones components closing in the red.
| Index | Started Week | Ended Week | Change | % Change | YTD % |
| DJIA | 18552.57 | 18396.98 | -155.59 | -0.8 | 5.6 |
| Nasdaq | 5238.38 | 5218.92 | -19.46 | -0.4 | 4.2 |
| S&P 500 | 2183.87 | 2169.16 | -14.71 | -0.7 | 6.1 |
| Russell 2000 | 1236.86 | 1238.88 | 2.02 | 0.2 | 9.1 |
Health care and medical stocks were among the hardest hit.United Health Group (UNH $136.62 ) – $ 5.42 or – 3.8% was the hardest hit Dow stock. Wal-Mart Stores ( WMT: $ 71.14 ) – $ 1.67 or – 2.3% and Apple ( AAPL: $ 106.94 ) dropped $ 2.42 or – 2.2%. United Technologies ( UTX $ 107.31 ) – $ 1.83 or – 1.7%; Rounding out the worst five, Boeing ( BA: $ 132.23 ) – $ 2.21 or – 1.6%. Cisco Systems ( CSCO: $ 31.35 ) + $ 0.83 or + 2.7% rose a little with a higher high and higher low each day of last week.
The Standard and Poor’s 500 index declined 15 points or 0.7% to 2169.04. The Nasdaq Composite fell 0.4% to 5218.92. The Russell held steady withstanding the turmoil. Several S&P 500 stocks suffered double-digit losses for the week: Dollar General ( DG: $ 75.50 ) – $ 1.35 or down 16.9% led all losers. Signet Jewelers ( SIG: $ 80.65 ) was next worst off $ 12.40 or 13.3%. Mylan ( MYL: $ 43.03 ) – $ 5.63 or a loss of 11.6%; Dollar Tree Inc ( DLTR: $ $ 85.50 ) – $ 10.07 or – 10.5%; Ensco PLC ( ESV: $ $ 7.80 ) lost $ 0.91 or -10.4%; and J.M. Smucker ( SJM: $ 138.98 ) – $ 15.63 or – 10.1%.
Mylan was caught up in the drug pricing controversy with its EpiPen pricing- surge scandal. The price of the EpiPen drug has exploded to more than $ 600 over the past decade. Epinephrine, the actual medicine in EpiPens is cheap, a form of adrenalin which costs about $ 1 a milliliter and one EpiPen auto-injector from Mylan contains about one-third of a milliliter. When Mylan acquired the auto injectors as part of a 2007 deal, they were priced at about $ 57, according to Truven Health Analytics.
Although Friday’s focus was squarely on the speech from Fed Chair Yellen, investors also received the second estimate of second-quarter GDP, which was revised down to 1.1% from 1.2%, as expected, while the GDP Price Deflator was revised up to 2.3% (Briefing.com consensus 2.2%) from 2.2%. There was no real change to second-quarter GDP, which everyone had already realized was quite disappointing despite the strong pickup in consumer spending.
The Fed Chairlady said that the economy was stronger making a better case for raising rates. Stocks then made a full recovery before Stanley Fischer, the Fed vice chair, appeared on CNBC and indicated the possibility of rate hikes both in September and December. Equities weren’t prepared for such a rate hike and stocks then plummeted a full 1% from the day’s highs.
The US dollar ( DXYO: 95.48 ) + 0.98 or plus 1% had a strong technical week with an outside day up on Friday mostly in response to the hawkish tone of Fed members speaking at Jackson Hole, Wyoming.
Volatility finally reversed as the VIX rose more than 20% on the week.. The CBOE Market Volatility Index ( VIX: 13.65 ) +2.31 or + 20.3% had a huge reversal week. The week before last week was the first week in two months that volatility had not made a new weekly low. Since the VIX closed at 25.76 on Friday, June 24th, the volatility indexes have been extremely low causing the exchanges to necessarily reverse. That makes seven- to- nine weeks consecutively with lower volatility. In our tabloid last week we mentioned that “ Last week’s low made at least a temporary double bottom.”
The Ultra VIX Short Term Triple Volatility ETF ( UVXY: $ 20.83 ) + 1.08 or + 5.5% rallied sharply all the way to 22.21 on Friday before settling back down to its closing level. Volatility was overdue for this rally. Volatility has been at extremely low levels with the likelihood of continued economic uncertainty, interest rate hikes, geopolitical uncertainties and a contentious presidential election.
With the S&P 500 SPY down three days in a row, the bears are once again out in full force. Every time we get a couple of down days in a row their prophecies start up again about impending doom. Despite all of their efforts in July, the S&P 500 is still up over 9% from its July lows from 1990 to 2175. The S&P 500 continues to trade in a tight range while the Russell is holding its lofty levels. The Nasdaq made a new all-time high last week, while the Russell 2000 has now taken out its resistance from November and December of last year. Despite the S&P 500 being quite anticlimactic the past few weeks, a couple of rare signals are flashing which are pointing to much higher prices. Bears have continually warned about the gloomy fundamentals, despite technical indicators painting a completely different story as most U.S. markets trade at new highs. Unfortunately for bears, these new signals are both technical and fundamental and spell trouble for their “problematic fundamentals” thesis.
Earnings recession coming to an end
While the bears have been babbling for months about how we’re in a recession, they’ve ignored the most recent Q2 2016 statistic. Based on S&P 500 revenue growth for 2016, the market has come out of its recession the past 5 months and has turned positive despite headwinds in biotech and energy. While 0.1% is a meager number and not huge growth for the quarter, it has come a long way from the brief earnings recession we were in the past 5 months. The fact that the market shrugged off Q1 2016 revenue growth of negative 1.5% is an example of how the market is forward looking.
In addition to revenue growth swinging positive for the S&P 500, there is the highest percentage of companies raising guidance in the past 10 years. The below chart by Callum Thomas shows that nearly 90% of companies are raising guidance, higher than the 88% reading in late 2009 and the 85% reading in early 2004. Historically we have seen these readings as the market exited bear markets, and we are seeing the same thing again today after we have experienced two sharp corrections of 12% or more over the past 12 months. While everyone was expecting lower oil and continued misses on earnings for companies, most companies have beat and raised guidance just last month. In 2004 this signal sparked a 42% rally over the next 3 years, and in 2009 another 85% + reading sparked a 90% rally over the next 5 years.
The S&P 500 has done something very rare as of August. The market has advanced for 5 months in a row, which tends to have very bullish implications going forward. Over the past 90 years when the market has been up 5 months in a row, it has been higher one year later nearly 85% of the time. I have no doubt the bears will cite the 5 times out of 32 that it went down as a warning that we should stay out of the market. The market is in the process of absorbing bearish rate hike news. It is never bullish as the cost of huge corporate debt goes higher in a period of poor earnings The fact is this dip coming in September, which could go 3%-4%, is a buying opportunity.
Bears have been calling for a crash this whole year but now, September, may be their last opportunity before the election rally. One year after this signal the market is up nearly 85% of the time, and down 15% of the time. This tells you that you have a significant edge by buying the dip so to speak.
Mining stocks fell sharply this week amid speculation that the Fed was getting ready to raise interest rates in September. Goldcorp (NYSE:GG) was one of the biggest decliners, falling almost 9%. Even though economic conditions have worsened in recent months, Janet Yellen claimed Friday that the “case for higher interest rates had increased”. After months and months of Fed backtracking we don’t believe a word that Yellen says, and don’t think rates will go higher in 2016. This should support a continued rise in the price of gold throughout the year, and Goldcorp will be one of the biggest beneficiaries.
As the price of the price of gold has ascended the stock price of GG has lagged those of its large peers Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM). GG is up 39% YTD, compared to 147% for ABX and 122% for NEM. Whereas in the past GG has traded at a premium to the industry average across standard valuation metrics, the company now trades at a discount. The difference in performance and valuations between GG and its peers has to do with the massive investments the company made over the past three years that led to large losses and weak cash flows as the price of gold continued to plummet. GG has spent an average of 45% of sales on capex over the past three years, compared to 29% for ABX and 19% for NEM. GG’s median operating margin of -63.2% pales in comparison to those of ABX (33%) and NEM (15%). GG was forced to cut its dividend as a result of the spending spree, and the consensus view in the investment community is that GG has been reckless when it should have been prudent.
But GG hasn’t been reckless. Upgrades to existing mines and acquisitions of additional low cost mines will make the company more competitive going forward. And there is room to add more value through cost cuts. Barron’s estimates that cost cuts will generate $2 billion of net asset value in the next two years. The company’s portfolio of high-quality, low-cost mines (such as the Red Lake mine in Canada and the Penasquito mine in Mexico) in relatively safe jurisdictions with less geopolitical risk.
Market Strategies Economic Data
Second quarter GDP was revised down to 1.1% from 1.2%, as expected, while the GDP Price Deflator was revised up to 2.3% (Briefing.com consensus 2.2%) from 2.2%.
Looking at the revisions to major categories of GDP, consumption was revised up further. It added 2.94% Q over Q to GDP; real consumption grew sequentially at a 4.37% annualized rate in Q2, the second fastest of the expansion. Upward revision was driven by faster consumption of autos and utilities.
There were lots of disappointing revisions as well. Residential fixed investment was revised down 6 bps to -0.30% contribution; the sequential growth rate (-7.7% at an annual rate) was the lowest since 2010. Business fixed investment’s contribution was revised up by 17 bps, with 20 bps of that coming from higher fixed investment in intellectual property products. Trade’s impact on output was revised down, as lower goods exports and higher goods imports reduced the positive impact initially reported in the first estimate of GDP a month ago. Finally, we note that state and local government fixed investment contribution was revised down 10 bps, leading to a total contribution downward revision of -11 bps.
State and local governments continue to spend less, and that cost a quarter of a point on GDP in total for Q2 per this estimate from the BEA. Below, we present a table summarizing this release’s revisions: the increased contribution from PCE was offset by larger drags from the change in private inventories-1.26 percentage points versus -1.16 percentage points and government spending -0.27 percentage points versus -0.16 percentage points.
The contribution from net exports was also revised down to +0.10 percentage points from +0.23 percentage points.
The contribution from gross private domestic investment was pretty much unchanged, subtracting 1.67 percentage points from GDP growth versus 1.68 percentage points in the advance report.
The key takeaway from the revision for the market is that there was no real change to second quarter GDP, which everyone had already realized was quite disappointing despite the strong pickup in consumer spending.
| Category | Q2 | Q1 | Q4 | Q3 | Q2 |
| GDP | 1.1% | 0.8% | 0.9% | 2.0% | 2.6% |
| Inventories (change) | -$12.4B | $40.7B | $56.9B | $70.9B | $93.8B |
| Final Sales | 2.4% | 1.3% | 1.2% | 2.6% | 3.2% |
| PCE | 4.4% | 1.6% | 2.3% | 2.7% | 2.9% |
| Nonresidential Inv. | -0.9% | -3.4% | -3.3% | 3.9% | 1.6% |
| Structures | -8.4% | 0.1% | -15.2% | -4.3% | -2.7% |
| Equipment | -3.7% | -9.5% | -2.6% | 9.1% | -0.3% |
| Intellectual Property | 8.6% | 3.8% | 4.5% | 2.1% | 8.0% |
| Residential Inv. | -7.7% | 7.8% | 11.5% | 12.6% | 14.8% |
| Net Exports | -$562.0B | -$566.3B | -$566.6B | -$547.1B | -$524.9B |
| Export | 1.2% | -0.7% | -2.7% | -2.7% | 2.8% |
| Imports | 0.3% | -0.6% | 0.7% | 0.7% | 2.9% |
| Government | -1.5% | 1.6% | 1.0% | 1.0% | 3.2% |
| GDP Price Index | 2.3% | 0.5% | 0.8% | 0.8% | 2.3% |
After tax, without adjustments to take into account changes in the value of inventories and the consumption of fixed capital, corporate profits bounced from 8.48% of GDP to 8.82%. Over the last two quarters, the measure is up 1.01%, the biggest jump since the 1.03% leap in the two quarters ending Q1 2012. That suggests that the “profits recession” is winding down on an economy-wide basis.
The deflator is moving in the right direction giving the Fed latitude for raising rates sooner than later.
Durable goods orders increased 4.4% in July (Briefing.com consensus +3.5%) on the back of a 10.5% increase in transportation equipment orders, which was fueled by an 89.9% increase in nondefense aircraft and parts orders.
Excluding transportation, orders were up 1.5% (Briefing.com consensus +0.4%), paced by gains in nearly all categories. Orders for computers and electronic products (+3.6%), machinery (+1.6%), fabricated metal products (+1.5%), and primary metals (+1.4%) all rebounded nicely after showing little or no growth in the prior two months. Communications equipment was off (-1.0%) while motor vehicles and parts were flat (0.0%).
Orders for nondefense capital equipment, excluding aircraft — a proxy for business spending — increased 1.6%. That was good to see, yet shipments of these same goods declining 0.4% was not since that is what factors into GDP computations.
| Category | JUL | JUN | MAY | APR | MAR |
| Total Durable Orders | 4.4% | -4.2% | -2.9% | 3.2% | 2.0% |
| Less Defense | 3.8% | -4.0% | -1.6% | 3.6% | -0.5% |
| Less Transport | 1.5% | -0.3% | -0.5% | 0.3% | 0.3% |
| Transportation | 10.5% | -11.4% | -7.1% | 8.5% | 5.3% |
| Capital Goods | 12.7% | -12.3% | -6.0% | 7.5% | 7.8% |
| Nondefense | 10.2% | -10.9% | -1.7% | 8.3% | 0.3% |
| Nondefense/non-aircraft (core capital goods) | 1.6% | 0.5% | -0.6% | -0.9% | 0.3% |
| Defense Cap Goods | 35.7% | -23.2% | -30.1% | 3.3% | 80.7% |
The key takeaway from the Durable Goods Orders report is that orders for the manufacturing sector have picked up again after declining in both May and June. On a year-over-year basis, durable goods orders are down 0.9%. Excluding transportation, they are down 1.4%.
New home sales increased 12.4% month-over-month in July to a seasonally adjusted annual rate of 654,000. That was well above the Briefing.com consensus estimate of 580,000 and up 31.3% from the same period a year ago.
The sales strength was driven by a 40% increase in new home sales in the Northeast and an 18.1% increase in new home sales in the more influential South region. Sales in the Midwest were up 1.2% and were flat in the West.
Notably, the median price of a new home sold declined 0.5% to $294,600. Overall, the increased sales activity occurred at the ends of the new home market with homes priced under $300,000 accounting for 52% of homes sold in July versus 48% in June and homes priced over $750,000 accounting for 4% of homes sold versus 3% in June.
Homes priced between $300,000 and $749,999 made up 44% of homes sold versus 50% in June. Median prices might tick higher in coming months based on limited supply.
At the sales pace in July, the inventory of new homes for sale dropped to a 4.3-month supply from 4.9 months in June. July 2016 marked the strongest pace of new home sales since October 2007.
The key takeaway from the report is that it is an encouraging reading for the homebuilding companies and an encouraging sign for the U.S. economy since new home sales (reported when a contract is signed) are seen as a leading indicator. At the same time, the strength in July is a data point that fits with the view among some Fed officials that another rate hike should come sooner rather than later.
| Category | JUL | JUN | MAY | APR | MAR |
| Total Sales | 654K | 582K | 572K | 570K | 537K |
| Inventory (months) | 4.3 | 4.9 | 5.0 | 5.1 | 5.5 |
| Median Price Y/Y | -0.5% | 7.4% | 1.1% | 9.8% | 6.1% |
Market Strategies Cycles
Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971), Russell 1000, and Russell 2000 (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the dot.com bubble madness. Bullish election-year forces do little to improve on September’s poor overall performance over the same timeframe. September’s performance does improve slightly in election years, but it is still negative nearly across the board. Only the Russell 1000 and Russell 2000 have been able to escape negative territory and post modest 0.2% and 0.7% average gains respectively in the last nine election year Septembers.
Although the month has opened strong 13 of the last 21 years, once tans begin to fade and the new school year begins, fund managers tend to clean house as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (Dow: -11.1%) and the collapse of Lehman Brothers in 2008 (Dow: -6.0%). Solid September gains in 2010; DJIA’s 7.7%, S&P 500’s 8.8% were the best since 1939, but the month suffered nearly the same magnitude declines in 2011, confirming that September can be a volatile month.
September Triple Witching week is generally bullish with S&P 500 advancing nearly twice as many times as declining since 1990, but is has suffered some large losses. DJIA, S&P 500, Russell 1000 and 2000 recorded gains on Monday of expiration week for three straight years 2009-2011. NASDAQ has been down four straight years since. Triple-Witching Friday has been firm the past twelve years with every index advancing at least eight times. The week after Triple Witching has been brutal, down 22 of the last 26, averaging an S&P 500 loss of 1.1%. In 2011, DJIA and S&P 500 both lost in excess of 6%.
In recent years, Labor Day has become the unofficial end of summer and the three-day weekend has become prime vacation time for many. Business activity ahead of the holiday was more energetic in the old days. From 1950 through 1977 the three days before Labor Day pushed the DJIA higher in twenty-five of twenty-eight years. Bullishness has since shifted to favor the two days after the holiday as opposed to the days before. DJIA has gained in 15 of the last 22 Tuesdays and 16 of the last 21 Wednesdays following Labor Day.
Undervalued Small Cap Stocks
Lower Priced stocks that look to be a buy:
Repro-Med Systems,Inc ( OTCQX: REPR 0.39 )*
Fourth quarter preliminary net revenues will exceed $3.2 million, representing a slight increase over the $3.1 million of the previous quarter. Sales are led by the Company’s proprietary infusion products. The Company’s fiscal year ended February 29, 2016.
Andy Sealfon, Company President and CEO commented, “The military has expressed interest in our products for utilization in emergency applications as well as use in VA hospitals. We believe that because of our performance standards and the reliability of our products, we will provide them with great value and benefits.”
The Company manufactures medical products used for infusions and suctioning. The Infusion product portfolio currently includes the FREEDOM60(R) and the newer FreedomEdge™ Syringe Infusion Pumps, RMS Precision Flow Rate Tubing(TM) and RMS HIgH-Flo(TM) Subcutaneous Safety Needle Sets. These devices are used for infusions administered in professional healthcare settings as well as at home. The Company’s RES-Q-VAC line of medical suctioning products is used by emergency medical service providers in addition to a variety of other healthcare providers.
NHIA is a trade association representing the interests of entities providing infusion and specialty pharmacy products and services to home-based infusion patients.
The Company’s website is www.rmsmedicalproducts.com.
Repro-Med Systems, Inc has had an increase in sales each of the last four years. They finished the year of 2014 with $ 11.2 million in sales reflecting top line growth of 29% from 2013.In each of the previous two years they had a 12% increase in sales. The company has had at least $ 700 thousand of net income in each of the past four years and has no debt. The patented needle sets alone can give the company a huge growth potential. In my opinion, with new products coming on stream, the stock should trade between $ 3 and $ 8 in the next two years.
Enzo Biochem ( ENZ: $ 5.60 The stock moved from approximately $5 a share to approximately $7.00 from May 1 to July. If you look at the chart pattern of the stock the big volume came in on May 9 which coincided with the Louis Navellier recommendation. He recommended 5 stocks of which 3 (including Enzo) all had similar chart patterns with significant increases in trading volume. I don’t know how much of that volume came from individual investors but the buying had lots of 100-500 share trades which tells me that individuals, not institutional investors were strong buyers of Enzo.
In the last few days Enzo stock has been under heavy pressure. There is nothing fundamental to cause the slide in price. So the business model remains in place and hopefully will add new products over the remainder of the year. They completed the 2016 fiscal year at the end of July and probably had a cash position of some $65 million and no debt to speak of. I noticed when the stock cleared the $7 level that the Relative Strength Index was over 70 which is overbought. That $7 number was a 4 year high The last two days has brought the Index close to 30 which is oversold and we should see a bounce in the stock price this week.(just a guess) We have to remember the Russell Indexes that bought close to 3 million shares in late June also shorted close to a million shares as a hedge. That short position declined by some 300,000 shares from July 1 to July 15.
Over the rest of the year we could see more AmpiProbe panels being approved; NIH comments on the Optiquel trial for Uveitis; positive outcomes in the litigations.
The stock is approaching oversold territory and as the fear grows the opportunity becomes bigger. The fundamentals haven’t changed and in fact have become stronger with the latest AmpiProbe approval. Enzo has cash of $50 million and no debt. There are 7 more cases to get settled in Delaware which can provide significant additions to the cash position. AmpiProbe will have more submissions to the New York regulatory agency this year. AmpiProbe is cheaper, better and faster than existing technology and that is a $3 billion market.
This is an awesome potential for a 47 million share company and who knows what will happen if the NIH has positive statements on their Optiquel test for Uveitis. The stock is 50% owned by Institutions and funds, 15% by insiders and I guess 10% by hedge funds. That leaves some 11 million shares in the float. If the Russell causes 2-3 million shares to be bought the float then become 8-9 million shares. Good news can really move the price.
Oakridge Global Energy Solutions, Inc. (OTCQB:OGES 0.67) *
Oakridge global energy is a developer, designer and manufacturer of proprietary energy storage solutions. The Company is based out of Florida’s “space coast” near Kennedy Space Center. They make premium quality, proprietary batteries, battery systems and lithium ion cells that are built for maximum performance over the traditional lead/acid batteries. OGES, proudly manufacturing in America since 1986, produces batteries for military, consumer, government, and industrial applications. Target market priorities include golf cars and other recreational vehicles, electronics, and devices requiring rechargeable batteries.
Oakridge Global Energy Solutions is commencing production of state-of-the-art Lithium-Ion batteries. The company is currently in the process of soliciting bookings for presale orders with several key industries to include the federal government. Perhaps the most important takeaway regarding Oakridge Global Energy Solutions lies in its relationships that will make it one of the few world manufacturers who are able to produce first generation lithium-ion technology that will surpass what is effectively being currently produced.
Furthermore, the company has developed an industrial design team that has incorporated a 21st Century contemporary art style to its cell products. The company has numerous patents for its technology but perhaps the most interesting of those centers around the Nano-sized lithium thin film solid state batteries with a Nano encasement. This product in itself stands to propel the company into areas that currently only it has the rights to manufacture in the United States. The Nano lithium thin film solid state battery has a large upside market potential both domestically and abroad.
Lithium ion batteries deliver twice the energy of nickel cadmium batteries and are the fastest growing battery segment. Their growth and demand dynamically forward trending. They are lightweight and easy to maintain. They deliver superior electro-chemical output and provide highest energy density for weight, non-metallic and are rechargeable. In 2015, the OGES Pro Series golf car was launched at the annual PGA show, the largest golf show in the world. OGES plans to have a new factory producing its patented thin film solid state lithium ion batteries by 2017. OGES is commencing delivery of a small format prismatic to help several smart card customers reach the next generation. Their growth will be serviced by the new factory. These batteries are also in a rapidly growing demand for a variety of applications.
Gold Mining USA OTC: GMUI ( 0.01 )* Has both mining activities in Australia and the U.S. Gold Mining USA Inc is an emerging natural resources company focused on developing metallurgical and mining projects. The Company’s business model is to acquire projects with the potential to provide significant resources through exploratory drilling and generate value through their development, joint venture or divestment. Australia and Nevada provide the opportunities to exploit smaller, undeveloped or previously mined gold resources that are of no interest to the large mining companies. In addition, there are numerous small hard rock and alluvial gold mines which have viable gold resources but are unable to raise the funds to start up or continue operations.
The company has signed an ongoing agreement with Cardno, a professional infrastructure and environmental services company, to assist in the evaluation and implementation of a work program on one of its North America properties. Steve Craig, a well-known Certified Professional Geologist, will be heading up the efforts on the project.
Night Food, Inc. ( NGTF.0.22 )* is a wholly-owned subsidiary of Night food Holdings incorporated in Nevada in 2013 to manufacture and distribute healthy-choice bedtime snacks. The Company has an exclusive agreement with RFI, natural ingredient manufacturer and proprietor of Chocamine, a patented chocolate ingredient
Americans keep gaining more weight. People have the tendency to grab for goodies at the end of the evening as they relax to enjoy some T.V. Eating and snacking too late at night is a contributing factor to gaining weight. Seventy percent of adults, ages 18-54, eat right before bed. Chocamine delivers the health benefits of chocolate to the body (amino acids, minerals and polyphenols) without the added sugars, caffeine or fat.
People give in to the intense hunger cravings that leads to the consumption of sugary, salty or calorie dense foods to satisfy their appetite. Most of the snacks that people typically eat create a disturbance in sleep, causing a person to wake up feeling unrested. Night Food offers nutrient filled alternatives to high-calorie junk foods. There are flavor filled snack bars-either Cookies and Dreams or Midnight Chocolate Crunch that will help curb hunger, satisfy cravings, improve rest and give the body essential vitamins and minerals. Consumers spend over $50 billion/ year on night-time snacks, nearly 1 billion a week. More people desire healthy alternatives to late night consumption of the traditional fattening ice cream, chips and cookies.
Sugar and caffeine in most snacks causes disruptive sleep. Each bar has only 142 calories and 5 grams of fiber for slow absorption of energy and gives a feeling of fullness and satisfaction. There is also 132 mg of calcium and zinc for replenishing the body and feeling well rested in the morning.
iSIGN Media Solutions ( ISDSF: $ 0.13 )y Announces Signed Contract Between We Build Apps and a Major Shopping Complex Located in Ohio. The contract covers installation of 500 Smart Antennas into a first Shopping Complex; Minimum Revenue to iSIGN is $2.7 million Canadian.
Recent news has pushed it above its 30 day moving average and it has exceeded $0.15 on a high volume breakout. We expect the stock to move above its next resistance at $0.20 and move towards its 2 yr high of $0.28.
iSign is on the verge of major revenue streams from different industries such as shopping complexes/amusement parks and airports. It is our belief that iSIGN’s licensing agreement with Rich Multimedia Technologies that call for 8600 Smart Antennas to be integrated into their phone kiosks for installation in Mexico and major airports throughout North Americas will, on its own, bring about profitability to the Company.
The Crocker people and their 22 developments can bring iSign significant revenues. Homeland Security and a major insurance company deemed the smart antenna as a safety device as well as a security device making the potential for new markets is limitless. One deal brings in 3 million times that by 20 deals because the insurance company gives a 20-25% premium discount to companies that use the smart antenna.
According to the iSign Media reseller, JEA Technologies, eHealth Consortium Group’s intention is to start installations in hospitals located in the State of Victoria. Installations into hospitals located in the States of New South Wales, Queensland, Northern Territory, Western Australia, South Australia, Tasmania and Australian Capital Territory might follow later.
Fundamental Analysis Stocks To Buy with Stops
Using fundamentals the following are stocks to buy and they have done well.
The table is hypothetical. We have taken numerous profits as indicated on the table below.
Balance is critical.
The Boeing made two closes over the 200day M.A. on August 11th and 12th thus taking us out of a short position. We bought and have profits in the HOG. We are still very much interested in the Flushing Financial and finally bought FFIC at our theoretical buy limit. Buy the HDGE on a close above 9.65.
| Symbol | Name | Business Description | PE | P/S | MV mln | Price | Buy or Sell Limit | Stop Loss
Or offset |
| CL | Colgate Palmolive | Consumer Goods; Personal products like toothpaste | 49-24 | 4.24 | 66.8B | 74.47 | 75.40 sell short Unable on Friday | 76.20x |
| DY | Dycom | Materials. Construction Cell Towers internet Infrastructure | 25 | 1.1 | 2.7B | 87.94 | 86.71 | 92x stopped out on 8/10/16 |
| BA | Boeing | Aerospace, commercial jetliners, military systems | 14 | 0.85 | 81B | 132.23 | Buy at 132
200 day m.a. |
131.20sco |
| HL | Hecla Mining | Basic Materials | 44 | 3.61 | 1.7B | 5.74 | 3.95 | 6.40scostopped out on 8/22/16 |
| FFIC | Flushing Financial | Bank Holding company Savings and loans | 13 | 3,5 | 592Mln | 22.84 | 19.10
06/27 |
19.90x |
| SUN | Sunoco | Oil and Gas Refining and marketing | 10 | 0.2 | 2.1B | 30.05 | 29.50
06/27/16 |
29x |
| AA | Alcoa | Aluminum Processing and Technology | N/A | 0.4 | 9.5B | 10.00 | 7.05 originally bought 2/8/16 | Must hold 10 |
| HOG | Harley Davidson | Motorcycles and related products | 11 | 1.32 | 8B | 52.57 | 45 bought June 10th
|
new stop at 51.50 |
| CHD | Church & Dwight | Consumer Products Sodium bicarbonate Arm and Hammer | 25 | 3 | 10.6B | 99.10 | 79.80
01/26/16 |
Sold at 94.20 |
| T | AT&T | Communications | 36 | 1.54 | 211.7B | 40.68 | 34.10 | 37.78x |
| VA | Virgin Air | Regional Airlines | 7.2 | 0.9 | 1.5B | 55.97 | 30.30
Bought |
Merging with Alaska |
| ENZ | Enzo Biochem | Life Sciences | NA | 1.35 | 134M | 5.60 | 6.05
Originally bought at $ 2.78 8/24/15 |
5.68x |
| BAC | Bank of America | Commercial Bank | 10 | 2.02 | 165.3B | 15.79
|
13.34
07/11/16 |
14.60x |
| HDGE | Advisor Shares | Ranger Bear ETF | 9.55
|
Buy a close over 9.65 the 13 dma | 9.47sco if bought above the 13 |
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Rule 17B Attestations and Disclaimers
Princeton Research, Inc. has approximately 2,581,578 shares of AIVN both free and restricted and represents them for Investor relations. Princeton also has about 40,000 shares of TXGE. Princeton is paid $ 1,500 per month from RMS Medical Products. Princeton has bought 81,100 shares of RMS Medical Products. Princeton was paid $ 2,500 to write a report on Xinergy. Princeton has signed a contract with CBLI to be paid $ 2500 for July and August for investor relations. Princeton has been engaged by Target Energy. No contract is currently in place. Princeton was paid about 500,000 restricted shares of Leo Motors.
When there is no movement in penny stocks, even though there is none or very small losses, we will liquidate ( sold AIVN on stop ) even though we like the company, if money is needed for better opportunities.
We now believe REPR represents upside opportunity. The Target ADR trades at about $ 4.50 in U.S. vs 0.05 in Australia. Princeton owns 400,000 Australia shares and about 900 U.S. ADR’s.
Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this e-mail issue. Princeton may buy or sell its free-trading shares in companies it represents at any time.
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