The Red Roadmaster’s US Market Re-cap + Stock Talk ™
9 May 2010
Date Line: Hong Kong (SAR) China
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A review the US Stock Market Action for the week ending 7 May 2010 A Look at Last Week’s Unusual Market Action Last Thursday’s Free Fall May Prompt New Exchange Rule Featuring: ATT, BIDU, DD, and MO The kind of market action we saw last Thursday, diving abruptly, and snapping back quickly in a "Woosh" of electronic trading, has been on the minds of the market operators and experts on trading for some time now. Yet, despite a consensus about what should to be done, US federal regulators may have been worried, but seemingly have not shown much urgency in rewriting the rules governing an increasingly fragmented, and computerized, trading system. That appears likely now is a definite change after the Wild, record-setting action that briefly sent the market due South and out of control. US President Obama and congressional lawmakers called for action, and regulators at agencies including the Securities and Exchange Commission promised to deliver, though they are struggling to understand the origins and details of what actually happened to cause Thursday’s "Bungee Jump". The essence of a/the solution, according to the regulators, traders and academics is this: markets need uniform rules for intervening when a stock goes into free fall. The much-discussed “stock market”, with its connotation of a single entity, is a misnomer. Investors can buy and sell stocks through about 50 markets in the United States. Most trades are placed through computer networks, at the direction of computer programs, and orders are routed automatically to the market offering the best price. It is a system that sometimes spins out of control if the computerized sellers cannot find buyers.
As a example: Last year, on April 28, the stock price of Dendreon (DNDN), fell 69% in 70 seconds before trading was halted. When trading resumed next day, most of the loss was erased in a instant. We saw the same pattern Thursday, as shares in companies including Procter & Gamble and 3M fell off of the cliff. A total of 16,000 shares between them triggered a sell of 2.2B/shrs + and a US$1T loss in 15 or so minutes. Such declines reflected what appears to be a temporary lack of buyers bids, and not a loss of value, some of the markets impose “circuit breakers” that pause trading to protect sellers from taking unnecessary losses. The New York Stock Exchange briefly suspended trading in some shares on Thursday, then slowed the pace of trading to give sellers a better chance to find buyers. But the experts say such safeguards make sense only if they are applied uniformly. When the NYSE suspended trading Thursday, sellers simply moved to other exchanges with fewer restrictions. It was reported that in some cases, the supply of buyers on those exchanges already had been exhausted, causing the computerized trading programs to offer shares at lower and lower prices. Some of the resulting downward spirals ended at US$0.01/shr. “When the New York Stock Exchange went into slow motion, a system designed to stabilize trading actually backfired in practice,” said James J. Angel, a professor at Georgetown University who studies financial markets. “No exchange should have an independent circuit breaker.” The SEC requires a suspension in trading only in the event of a broad market collapse, defined as a drop of at least 10% in the DJIA, which is based on the share prices of 30 large US companies. Other countries, like Germany, impose similar circuit breakers on trading in shares of any individual company that has a similar drop, but the SEC has never done so. A former SEC official said the possibility had been discussed in recent years, but “I don’t think there was quite the urgency to deal with it.” The SEC and the Commodity Futures Trading Commission said in a joint statement on Friday that the issue now has their attention. “We are scrutinizing the extent to which disparate trading conventions and rules across various markets may have contributed to the spike in volatility,” the statement said. “This is inconsistent with the effective functioning of our capital markets and we will make whatever structural or other changes are needed.” Early this year, the SEC began a broad review of equity markets, including whether computerized trading is properly regulated. The heads of several of the largest electronic exchanges said Friday that they will support industry wide rules for breaking off the cliff free falls. But there are other ideas to keeping computerized markets in check. Lawrence E. Harris, a finance professor at the University of Southern California, said regulators should simply require all sellers to specify a minimum price below which they do not want to complete the sale of their shares. Market orders, placed at the best available price, can be too risky in the fast-moving age of electronic trading. Last Thursday, some sellers placed orders that were not fulfilled until prices had plunged as low as a penny a share. If sellers had placed “limit orders” instead, those transactions would not have happened, Professor Harris said. “Electronic exchanges in most other countries only accept limit orders,” said Professor Harris, a former SEC chief economist. “Without any mechanisms to stop the market, we just had stocks falling through the ice.”
But Rafi Reguer, a spokesman for the electronic exchange Direct Edge, said retail investors liked market orders because limit orders could be rejected, forcing the seller to try again, in some cases at a lower price. “Sometimes what people value is the certainty of execution,” Mr. Reguer said. Experts also note that the value of limit orders can be subverted if investors routinely set unrealistically low limits, to avoid the inconvenience of having their orders rejected. According to a USA counter terrorism official the is no evidence that last Thursday's US stock market meltdown was caused by a cyber attack, it was reported on FOX News Sunday. Mr. John Brennan said securities regulators are still trying to determine the cause of Thursday's sudden drop in the Dow Jones industrial average. "They are looking at the causes for that ... So they are looking at whatever possibilities that were out there," he said. Market participants have speculated high-frequency and algorithmic trading magnified the wild swing. Securities and Exchange Commission officials are considering new curbs to slow stock trades when markets are plunging. US stocks turned negative for the year Friday on fear and questions about what triggered the previous session's dramatic plunge. The US major stock indexes finished Friday's session from 1 to 2 % lower. The weekly declines for the DJIA and the S&P 500 were the deepest since March 2009 when the market hit a 12-year low. The NAS had its largest weekly decline since November 2008. Wall Street's "fear gauge" ,the CBOE volatility index .VIX, rose 25%, while the volume of shares traded was the 2nd highest this year. On the Day: Last Friday the DJIA fell 139.89 pts, or 1.33%, to end at 10,380.43, the S&P 500 Index lost 17.27 pts, or 1.53%, to close at 1,110.88, and the NAS tallied a minus 54 pts, or 2.33%, to end the week at 2,265.64 On the Week: the DJIA was off 5.7%, the S&P 500 was off 6.4% and the NAS minus 8%. Over the past two weeks the NAS has fallen more than 10%, the correction that many traders have been looking for in the Leading Index.
US Market Indexes Technical Analysis Date
Today’s Featured Stocks AT&T (ATT), Baidu, Inc. (BIDU), E. I. DuPont de Nemours & Co. (DD), and Altria Group Inc. (MO)
AT&T (ATT) Up-date 3
Last Look: April 20, 2010
May 7, 2010 Paul A. Ebeling, Jnr. Analyst Today, letâ€™s look at AT&T (ATT), the industry-leading provider of wire line voice communications services in the USA, from a Technical POV. The overall indications, after Fridayâ€™s (May 7) market action, are Neutral: in the near term Neutral, mid-term Bearish, and long term Neutral. The recent Candle Stick analysis is Neutral.
**Chart by: http://www.stockta.com
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Fridayâ€™s Market Action Close 26.25
There is a Bearish Engulfing Candle on May 3 are no Gaps open up on the Chart, the near term resistance is 26.31, support at 26.17, and the 50 day (EMA) exponential moving average is 26.36. This is AT&T Company Description (ATT): the company, through its subsidiaries, affiliates, and operating companies, holding company AT&T is the industry-leading provider of wire line voice communications services in the US. Customers in 22 states use AT&T-branded telephone, Internet, IPvoice, and digital video services; key markets include California, Illinois, and Texas. The company's corporate, government, and public sector clients use its extensive range of conferencing, data networking, managed network, and wholesale communications services. Subsidiary AT&T Mobility is the nation's second largest wireless carrier by both sales and subscriptions (after Verizon Wireless). It provides mobile voice and data services to about 77 million subscribers. AT&Tâ€™s Business Challenges CRITICAL ISSUES Industry Depends Highly on Regulatory Decisions - The FCC regulates the interstate activities of telecom providers, including pricing and operations, while state public utility commissions (PUCs) regulate similar matters at the state level. Regulations affect most strategic decisions of telecom companies. Although the industry is moving toward deregulation and greater competition, pricing is likely to remain regulated. Demand Affected by Economic Growth - Demand for telecom services is affected by economic conditions, mainly because business customers provide a large portion of industry revenue. Consumers are also income-sensitive to the expensive new services telecom and cable providers offer. As a result, large telecom and cable companies had relatively flat revenue during the late 2000s recession. Industries Where AT&T Competes Telecommunications Services Fixed-line Voice Services Providers Local Exchange Carriers(primary) Data Services Internet & Online Services Providers Wireless Communications Services
AT&T (HQ) Randall L. Stephenson, Chairman, President, and CEO
208 S. Akard St. Dallas, TX 75202-2233 United States Phone: 210-821-4105 http://www.att.com AT&T Subsidiaries
AT&T Alascom AT&T Mobility LLC Ingenio, Inc.
Baidu, Inc. (BIDU) Up-date 5
Last Look: March 24, 2010
May 9, 2010 Paul A. Ebeling, Jnr. Analyst Today, letâ€™s look at Baidu, Inc. (BIDU), the leading China search engine, from a Technical POV. The overall indications, after Fridayâ€™s (May 7) market action, are Neutral: in the near term Neutral, mid-term Neutral, and long term Bullish. The recent Candle Stick analysis is: Neutral
**Chart by: http://www.stockta.com
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Fridayâ€™s Market Action
There is a DOJI on March 18 and six Gaps open up between November 4, 2009 and March 15, 2010 at 348.52/565.20, the near term resistance is 649.95, support at 614.54 and the 50 day (EMA) exponential moving average is 604.69 This is Baidu, Inc. (BIDU): Baidu.com provides Chinese language Internet search services primarily in the People's Republic of China. The company offers a Chinese language search platform, which consists of Web sites and online application software; and Baidu Union, a network of third-party Web sites and software applications. Its products include Baidu Web Search that allows users to locate information, products, and services using Chinese language search terms; Baidu Post Bar and Baidu Knows, which provides users with a query-based searchable community; and Baidu News that provides links to local, national, and international news. The company also offers Baidu MP3 Search that provides algorithmgenerated links to songs and other multimedia files; Baidu Image Search, which enables users to search various images on the Internet; Baidu Space to create personalized homepages in a query-based searchable community; Baidu Encyclopedia; and various online search products. In addition, it provides Baidu Desktop Search that enables users to search files without a Web browser; Baidu Sobar, which makes search function available on every Web page that a user browses; and Baidu Anti-Virus that provides anti-virus software products and computer virus-related news. Further, the company offers Japanese search services, including Web search, image search, video search, and blog search capabilities. Its services enable users to find relevant information online, including Web pages, news, images, and multimedia files. The company also offers online marketing services to its P4P and tailored solutions customers directly, as well as through its distribution network. It serves small and medium enterprises; corporations; and e-commerce, information technology services, consumer products, manufacturing, health care, entertainment, education, financial services, and real estate industries.
Industries Where Baidu.com Competes Media: China Internet Search & Navigation Services: China Baidu, Inc. (HQ) Founder, Chairman and Chief Exec. Officer Yanhong Li 12th Floor Ideal International Plaza No 58 West-North 4th Ring Beijing, 100080 China Phone: 86 10 8262 1188 Fax: 86 10 8260 7007 http://www.baidu.com
E. I. DuPont de Nemours & Co. (DD) Up-date 7
Last Look: April 28, 2010
May 9, 2010
Paul A. Ebeling, Jnr. Analyst Today letâ€™s look at E. I. DuPont de Nemours & Co. (DD), the Giant US Chemical and Agriculture company, from a Technical POV. The overall indications, after Fridayâ€™s (May 7) market action, are Neutral: in the near term Neutral, mid-term Neutral , and long term Neutral . The recent Candle Stick analysis is: Neutral
**Chart by: http://www.stockta.com
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Fridayâ€™s Market Action Close 36.23
There are no Gap open up or down on the Chart, the near term resistance is 37.24, support at 35.35, and the 50 day (EMA) exponential moving average is 37.64. This is EI DuPont de Nemours & Co. (DD): (DuPont) operates as a science and technology company in various disciplines, including agriculture, industrial biotechnology, chemistry, biology, materials science, and manufacturing. It operates in five segments: Agriculture & Nutrition, Coatings & Color Technologies, Electronic & Communication Technologies, Performance Materials, and Safety & Protection. The Agriculture & Nutrition segment offers benzene and carbamic acid related intermediates, copper, insect control products, natural gas, soybeans, soy flake, and soy lecithin, sulfonamides, corn, and soybean seeds. The Coatings & Color Technologies segment provides automotive finishes, industrial coatings, and titanium dioxide white pigments. The Electronic & Communication Technologies segment offers a range of materials for the electronics industry, flexographic printing and color communication systems, and various fluoropolymer and fluorochemical products. The Performance Materials segment provides thermoplastic, and thermoset engineering polymers and elastomers to fabricate components for mechanical and electrical systems, as well as specialized resins and films used in packaging and industrial applications, sealants and adhesives, sporting goods, and interlayers for laminated safety glass. The Safety & Protection segment offers specialty and industrial chemicals, nonwovens, aramids, and solid surfaces. The company also has interest in two antihypertensive drugs, the Cozaar and Hyzaar. It serves construction, transportation, communications, industrial chemicals, oil and gas, electric utilities, automotive, manufacturing, defense, homeland security and safety consulting, refrigeration, insulation, aerosol propellants, aerospace, automotive, electronics, chemical processing, and house ware industries. The company operates in the United States, Europe, the Asia Pacific, Canada, and Latin America. DuPont was founded in 1802 and is headquartered in Wilmington, Delaware. Competitive Landscape Demand for agricultural chemicals depends mainly on demand for various crops, which in turn depends on crop prices. The profitability of individual companies is linked to efficient operations and marketing. Big producers have large economies of scale in production. Smaller companies can compete effectively by making specialty chemicals or fertilizer mixtures for local markets. Operations are capital intensive and highly automated: annual revenue per employee at a large plant is close to US$700,000. Chemical Manufacturing - Agricultural Industry Forecast The output of US agricultural fertilizers and chemicals is forecast to grow at an annual compounded rate of 2% between 2008 and 2013. Data Sourced: December 2008 E. I. DuPont de Nemours & Co. (HQ) Chief Exec. Officer & Pres: Ellen J. Kullman 1007 Market Street Wilmington, DE 19898 United States Phone: 302-774-1000 Fax: 302-773-2631 http://www.dupont.com
DuPont Subsidiaries Du Pont China Holding Company Ltd. Du Pont (Thailand) Limited DuPont Agriculture & Nutrition
Altria Group Inc. (MO) Up-date 2
Last Look: April 20, 2009
May 9, 2010 Paul A. Ebeling, Jnr. Analyst Today, let’s look at Altria Group Inc. (MO), the largest cigarette company in the USA , from a Technical POV. The overall indications, after Friday’s (May 7) market action, are Neutral: in the near term Neutral, mid-term Neutral, and long term Very Bullish. The recent Candle Stick Analysis is: Very Bullish.
**Chart by: http://www.stockta.com
Latest News and Opinion: Cramer's 'Mad Money' Recap: This Week's Game Plan http://www.thestreet.com/_yahoo/story/10750321/1/cramers-mad-money-recap-next-weeks-gameplan-update-2.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Friday’s Market Action Close 20.76 +.01 Volume 25,538,100/shrs There is a Hammer on May 6 and are no Gaps open up or down on the Chart, the near term resistance is 20.81, support at 20.41, and the 50 day (EMA) exponential moving average is 20.77. This is Altria Group Inc. (MO): The company., through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in the United States and internationally. The company, through Philip Morris USA, offers cigarettes. Altria Group, through John Middleton, manufactures machine-made large cigars; and through, Philip Morris Capital Corporation, holds a portfolio of leveraged and direct finance lease investments. In addition, the company has a 28.6% economic and voting interest in SABMiller plc, a brewer. It sells its tobacco products to wholesalers, large retail organizations that include chain stores, and the armed services, as well as distributors, retailers, and state-owned enterprises. The company was founded in 1919 and is based in Richmond, Virginia.
Competitive Landscape Demand is driven by discretionary consumer spending and awareness of the health effects of smoking. The profitability of individual companies depends on effective marketing. Large companies have advantages in economies of scale in manufacturing and product loyalty. Small companies can compete effectively through heavy discounting, clever branding and packaging, and by exploiting niche categories such as pipe tobacco and additive-free cigarettes. The industry is highly capital-intensive: average annual revenue per worker for a typical company is US$1.5MM. Tobacco Manufacture Industry Forecast The output of US tobacco products manufacturing is forecast to flatten with an annual compounded growth rate of 0 % between 2008 and 2013. Data Sourced: December 2009
Altria Group Inc. (HQ) Chairman and Chief Exec. Officer; Michael Szymanczyk 6601 West Broad Street Richmond, VA 23230 United States Phone: 804-274-2200 http://www.altria.com
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