Week Ahead: Road Upward for Stocks Is Getting Rougher

The road higher for stocks is likely to be a slower, more difficult climb that could get bumpy along the way.

AP Wall Street Trader

For that reason, a number of strategists have been recommending investors steer clear of lower quality stocks and focus instead on those with better balance sheets for this next leg of the trip.

In the week ahead, markets will be tested by a fresh batch of economic news and will be dominated by the debate over whether the dollar's behavior signals the beginning of a turn for the greenback. Fed Chairman Ben Bernanke is in the spotlight Monday when he speaks at the Economic Club of Washington, and President Obama is expected to unveil a new plan to promote job creation Tuesday.

Retail sales, international trade and weekly jobless claims are some of the important numbers to watch. The Treasury is auctioning $74 billion in 3-years, 10-years and 30-year bonds Tuesday, Wednesday and Thursday.

Whither Stocks?

BlackRock Vice Chairman Bob Doll sees the stock market going higher but he says investors should be careful and invest a bit more defensively. He also said any correction would tend to be relatively shallow because of the uninvested cash on the sidelines, waiting to buy dips, and the fact that the recovery and bull market are in early stages.

"Here are the things that bug me a little bit. We've been churning for six or seven weeks. We've gone nowhere. Leadership? Where is it? Financial stocks have been underperformers. Volume has slowed noticeably," he said. Other concerns are that the broader Value line index has been trailing the S&P 500, meaning investors are becoming more discerning and are moving into higher quality names.

"Economic news has turned mixed from more positive. Bank credit contraction continues. Sentiment is still constructive but not as constructive as it was," he said.

"If the market closes out the year at our 1000 to 1050 (S&P) target, or where it is now, or a little higher or a little lower, people will look back at this year and go "whew"—A double digit gain after all that turmoil is a good thing," he said.

The year end is also a factor for investors. "I think we'll see rallies that are being met by sellers that want to close out their books for the end of the year," said Jefferies managing director Art Hogan.

"If you have to be invested, things are going to be more volatile. There was a period of time where the market was going to go up and you could put more risk in your portfolio. Now is not the time to do that," Hogan said.

Major U.S. Indexes

	Last	Change	Today's % Change	1 Week % Change	YTD % Change
Dow	10388.22	22.07	0.21%	0.76%	18.37%
NASDAQ	2194.35	21.21	0.98%	2.61%	39.14%
S&P 500	1105.89	5.97	0.54%	1.32%	22.43%
Russell 2000	602.79	14.01	2.38%	4.43%	20.69%
CBOE VIX	21.24	-1.22	-5.43%	-14.53%	-46.90%
FTSE CNBC Global 300	4548.41	-13.13	-0.29%	1.83%	26.08%

Stocks ended the past week higher, with the Dow up 0.8 percent at 10,399 and the S&P, up 1.3 percent at 1105. On Friday, markets broke free of the so-called "risk trade," where the dollar declines in the face of good news for the global recovery, and risk assets, like stocks and commodities, rise. The catalyst was the much better-than-expected November employment report—which showed the loss of just 11,000 non farm payrolls and a lower unemployment rate of 10 percent.

The dollar shot higher Friday, and the stock market also ended slightly higher. Bonds were under pressure and rates rose. The Dow traded both higher and lower in a 200 point-range but finished with a gain of 78 points. Commodities were mostly lower Friday, and gold was hit very hard, losing 4 percent to $1168.80 per ounce, after days of gains.

Financial shares were among the week's winners, gaining momentum to finish up 2.4 percent, after Bank of America's $19 billion secondary offering Thursday. Material stocks were up just a half percent and energy was down 1.6 percent. Both groups were hit by dollar-related selling Friday. The week's top group was the defensive utilities sector, up 3.9 percent.

"I don't want to abandon cyclicals because we are in a global recovery and fairly early on," said Doll. "I do think people who have had some of that can take a little money off the table and add a little quality to the portfolio. By that, I mean one less metal stock and one more health care stock." Doll said he is looking for companies with good cash flow that are in a good position to increase or initiate dividends.

"The path of least resistance is up, but it's going to be harder. It's going be more about the economy and earnings...and less about liquidity," Doll said.

Trading positions for 4th December 2009

Closed the following positions:
Financial One @ 0.524 (+$570.49)

Opened the following positions:

Indo Agri @ $2.10389

As of now, Europe is gaining strength and US futures suddenly shoot up more than hundred points!
As U.S. employers cut a far fewer-than-expected 11,000 jobs in November, the smallest decline since the start of the recession in December 2007, this has boosted the markets and will this strength stay or big boys will take this chance to sell into strength once more?

Trading positions for 3rd December 2009

Today was a messy day:

Closed minor positions in Ezra @ $2.18

Opened the following position:
Ezra @ $2.2
Financial One @ $0.5082

With STI closing at 2808.18, above 2800 for the 1st time in the past few months, tomorrow will be a pivot point to see whether it can hold its ground above this major psychological point. Whether it is support or resistance, it cannot be confirmed yet.

With Europe currently in the green, fluctuating within 0.3% to 0.9%, the sales for retailers in US are slowly coming out. Thanks to CNBC, here is a nice table summarizing all:

November Same-Store Sales

Retailers	November 2009 Estimate	November 2009 Actual
Costco Wholesale (total sales)	8.1%	6%
Target	(0.5%)
BJ's Wholesale	4.7%
JCPenney	(4.4%)
Kohl's	1.0%
Dillards	(8.0%)
JW Nordstrom	2.2%
Saks	(20.8%)
Macy's	(3.1%)
Gap	0.1%
TJX	9.3%
Limited	(2.5%)
Ross Stores	6.1%
Stein Mart	(6.5%)
Abercrombie	(9.3%)
American Eagle	(1.9%)
Children's Place	1.0%
Aeropostale	7.7%
Hot Topic	(8.1%)
Wet Seal	(6.7%)
The Buckle	3.9%
Zumiez	(8.2%)
Walgreen	6.0%	3.9%
Rite Aid	1.8%

source: Thomson Financial, Company reports. Figures in parenthesis are losses.

Costco has missed analysts' expectations by 2%, and its anxious to see how the rest will fare in the coming days. Unemployment data will be out this friday and general consensus is expecting some fall since the previous report which is below 500,000.

Bank of America to Repay US All $45 Billion in TARP Funds

This just came out after trading hours, Bank of America announced that it will repay the entire $45 billion in TARP funds it received during last year's financial crisis.

For the complete news, please press here: http://www.cnbc.com/id/34239400

They are intending to raise capital within the next few days and possibly through placement or sale of current equity holdings to private investors. The big question now is, who's next in the queue to return the TARP money? Most of the traders are currently speculating Wells Fargos is next. Sadly, Citigroup is more or less the last as they gained literally nothing out of this crisis while others like BoFA, who got Merrill Lynch, and Wells Fargos getting Wachovia, JP Morgan getting Bear Stearns.

Timeless and Time-Tested Warren Buffett Watch Predictions

This is a interesting article from Warrent Buffett on his views.

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As a new year approaches, it is customary for journalists to make predictions about the future.

In keeping with Buffett's long-term way of looking at things, Warren Buffett Watch offers eight predictions that are intentionally on the 'timeless' side of the prognostication spectrum.

In keeping with what's becoming a holiday tradition, they are the same set of predictions we've offered for the past two years. We still stand by them.

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Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he's forecasting the future.

Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.

Of course, it helps when you can give your predictions plenty of time to come true. That's one reason Buffett's favorite holding period for investments in "outstanding businesses with outstanding managements" is "forever." After all, "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."

With that in mind, here are Warren Buffett Watch's 'timeless' predictions.

1. Recessions can't be avoided forever. As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. "It is the nature of capitalism to periodically have recessions. People overshoot." (He told Becky she's young enough to expect to see 6 or 7 or them.)

AP The economic downturn took its toll at the almost-empty Bayshore Town Center Mall in Milwaukee, Wisconsin. (2008 File photo)

2. We'll survive current and future recessions just as we've survived past problems. As Buffett told us in August, 2007, (and repeated throughout 2008 and 2009): "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average... We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."

3. Recessions will create opportunities. "I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap."

4. All stocks won't be cheap. Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"

5. The crowd will make mistakes. Buffett cites this piece of advice from his mentor Benjamin Graham: "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."

6. Investors will mistakenly think falling stock prices are bad. "If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper."

Walt Disney (1950) Cinderella rushes for the exit as midnight approaches

7. Good times will prompt bad decisions. In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."

8. There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don’t learn from history."

Trading positions for November

Been missing out posting for a month, as I was away in China for a short holiday and busy with work recently. Here are all my trades for November and December:

Previously missed out this:
Jason Marine @ $0.41 (+$455.40)

November trades:
Ramba @ $0.66 - sold @ $0.675 (+$57.61)
Mermaid @ $0.82 - sold @ $0.815 (-$239.08)
Kepland @ $3.01 - sold @ $3.133 (+$1937.45)
Ausgroup @ $0.66 - sold @ $0.665 (-$31.78)
Kepland @ $3.1575 - sold @ $3.05 (-$2678.04)
Kepland @ $3.13 - sold @ $3.12 (-$731.66)
Ausgroup @ $0.66833 - sold @ $0.66 (-$838.98)

December trades:
Indoagri @ $2.025 - sold @ $2.06 (+$705.02)
Ezra @ $2.15
Sinotel @ $0.612

Alot of choppy trades in November, especially when it was near the end of November, the markets were going wild and gains are getting lesser and lesser. After the Dubai saga, markets have resumed back to the peaks and now hitting the top. That is most probably a heavy resistance and expect some pullback for this. STI's peak is at around 2800 and everytime it touches, the fall begins. Tomorrow may be the day to hit 2800 again and we got to see how things go from here.
US markets are going to open soon and Europe is currently trading flat to slightly negative, while Asia markets have rallied about closed to 1% each. USD has been falling and almost reaching the bottom. Looking at the inverse, gold has rallied non stop and reached $1,211! Remember the late 2008, where oil hit $150? Now this is the moment for gold. Will it happen in the same way?