Despite the recent rise in the market, insiders continue to sell at a rate of 3 sellers for every 1 buyer. In addition, many of the insider purchases are among "no name" stocks. While the tech stocks continue to be touted by guests on the financial channels, the technical rankings among the group has been moving lower. This indicates that stock prices have moved above earnings expectations.
Among the noticeable buyers and sellers, I have identified the following:
BUYERS: Fifth Third Bank (FITB), Bank of America (BAC), JP Morgan (JPM), Chesapeake Energy (CHK), Radio Shack (RSH), Midway Games (MWY).
SELLERS: Google (GOOG), Toll Brothers (TOL), Hewlett Packard (HPQ), Northwest Air (NWAC), Best Buy (BBY), Lennar (LEN), Ryland (RYL), Hovnanian (HOV), Monsanto (MON), Nike (NKE), Motorola (MOT), Intel (INTC), Oracle (ORCL).
In earlier posts I mentioned that the tech group was heavily shorted, and it seems that short covering is beginning to run its course. For the group to make another noticeable leap higher, increased earnings estimates, and profits need to become a reality. We need to remember that the tech sector has not come back into favor, it is just drawing attention. The summertime move in tech reminds me of a similar move in 1994 just prior to a nasty selloff. While I cannot rule out another move higher later in the year, I need more confirmation among the entire sector before I get excited. We may stick our toe in the water on some selected issues, I am not going to dive in head first. Why? I don't trust Wall Street's advice or motives, and neither should you.
While we believe the market is due for a 5-10% correction, we will be using the pullback to add "trading" stocks to our portfolio. We will buy and sell our trading stocks within a 3-4 month window. I am not very positive on the markets for 2006. Here are some stocks that we are looking to trade on a pullback. Some of these stocks are very "hot" and volitile.
TRADING STOCKS: Texas Instruments (TXN), Oracle (ORCL), Google (GOOG), Pulte Homes (PHM), Velaro Energy (VLO), Genentech (DNA).
THIS WEEK'S CALENDAR:
Monday, August 1: June Existing Home Sales is due out at 10:00 a.m. and expected to rise by 0.7% from -0.9%.
Tuesday, August 2: June Personal Income and Factory Orders are due out at 8:30 and 10:00. They are expected to increase by 0.4% and 1.0%.
Wednesday, August 3: The Treasury will announce whether it will re-introduce the 30-year bond.
Friday, August 5: Employment numbers are due out as it is the first Friday of the month. July Nonfarm Payrolls and the Unemployment Rate are due out at 8:30 and are expected to rise to 180,000 from 146,000 with the 5.0% current unemployment.
