The Crystal Ball

Hi Everybody,

Have you had a good long weekend so far? I saw you are nodding, good. Swimmer went to a nearby sea shore city and had some fun in boat-riding, got wet with the family, a good kick-off of the holiday long weekend.

Site traffic is all the way down, I only got 5 people visiting me yesterday, one friend from Germany. That's a good sign, people are enjoying the long weekend.

The poll said you predominantly like to explain a little more on stock pick, thank you for your responses. After all, it's your site, if you have more enthusiasm, interact more, I will post more. I hope I can post some winning strategies, so we can all rob the bank (legally of course)!

Market Posture (Smart Money Trail):

President Bush and Big Ben Bernanke made some positive comments, expressed their willingness to do whatever possible to help on subprime/mortgage crisis. The short sellers started panicking. Actually they are angry, they angry why Bush/Bernanke and the Co. will bailout the crazy mortgage lenders and risk taking hedge funds (it would be a nice story for another post -- but you guys don't want the funny stories any way, I will keep that in mind). Well, well, angry is one thing, they are too greedy and shorted the financial stocks too much for too long, they will be squeezed, some strategies will be posted later.



Well, smart money added more positions nearly to all major indices, Dow, NASD. Every time is different. Last time in March, the smart money bought aggressively on Russell 2000, which was a very nice indication for market bottom. But this time I did not see this kind of big jump in any of the major indices, but the commercial bought big way (the week of Aug. 16th) on the Goldman Sachs index, that was a clear cut signal. Market is the market, whenever you figured out its way, it will change. The only concern I have is that NASDAQ is right at Resistance, one of the smart money index indicating short term overbought. Likely scenario is to pull back a little initially then market moves up.

Strategies:

Swimmer's Rocket Scan (looking for strong stocks) generated ALTR. But they will report earning on Sep. 5th, so you need be careful. Last earning was a positive surprise.

Other safer bets are: C, JCI based on smart money trail.

NFI is interestig, deserves some more discussion.

On a side note, hott wanted me to look into some home builders and mortgage lenders and give my opinion. I looked at them today with my spreadsheet. Remember, none of them have any fundamentals to speak of, all of them will have tough time to meet their numbers. But for a short time frame, some of them are oversold and a rebounce is due. In particular, NFI, it got 92% of it's float (total number of shares available for common market. That's stupid, how can you short it to almost 100% of float without being crushed by a squeeze!) shorted.

Well, data from another source:
NFI $ 8.49
Shares Short 8,104,600
Days to Cover (Short Ratio) 1.8
Short % of Float 92.20 %
Shares Short - Prior 23,630,500
Short % Increase / Decrease -65.70 %
% from 52-Wk HIGH ( 32.88 ) -287.28 %
% from 52-Wk LOW ( 3.25 ) 61.72 %
Price % Change (52-Wk) -72.80 %

Look at the chart, it went down as low as $3-4 on 8/16, then it bounced back to near $9 as the shorts are covering (from 23.6 millions to 8 millions). For a few brave ones, they made more than 100% return (but very risky). Now pull back a little, money flow is positive, it may be able to wage another comeback.

Simply put, if you believe there will be an interest rate cut, if you believe Bush is going to take some actions to save the mortgage lenders, for a short term buy, NFI is a good choice, relative to other stocks on my spreadsheet (I collected more than 20). But if you are Buffett type investor, please do not touch this one.

It's a new month now, I would like to find out what you like the most:

Which articles you like the most?
The Number Crunching Game
Happy Weekend
The Poker Game
Smart Money
Cramer Cheerleader
Bear Trap
Tax Rebelling
Short Side Story


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