Tuesday, August 7, 2007

Opening Range And A Basket Case

Yesterday with the small down-tick after the open, the high of the opening range was touched. This area proved to hold and acted as support for one of the bigger positive moves the market has seen in some time. This doesn't mean that the market is out of the woods and any potential troubles are gone. It just means that this area is support for now, and if you were short the market for the last few weeks, it would be an area to book some profits.

Below is the chart of the S&P 500 Index with the opening range marked by the blue lines, and the extensions from this range marked with red dashed lines.

The next chart shows the intra-day activity. The opening range is marked along with extensions, just like the chart above. The red box shows the rejection of new lows when the market hit the opening range high from the daily chart. The green box shows the area where the top of the intra-day daily range was tested and proved to be support for the afternoon rally.

In a recent post, a basked of stocks was created that represented large-cap companies with international business exposure. This multinational basked was shown to be the leading group as the market rallied off the beginning of March low.

How would this basket have faired if today, when the S&P 500 proved to hold the daily opening range from January and in tandem establish itself above its intra-day opening range, we bought this basket of multinational stocks? To take a conservative approach we are only buying this group when it establishes it is an up day, we are not picking bottoms in the morning. This happens around 2-2:30 pm. Below is a spreadsheet comparing this basket to the SPY and OEX.

This basket had a return of 1.41% compared to the 1.18% return for the S&P 500 over the same hour-and-half time frame. This does not take into account commissions, which depending on your broker might eat away some of this percentage gain.

The chart above also shows a basket of technology stocks that have global businesses. This group also has been strong lately compared to the S&P 500. Below is how this basket preformed today.

These two baskets illustrate the concept of what can be done to get an edge on the market. Many brokers and trading software packages allow traders to create custom baskets of stocks. With the click of a couple buttons a trader can select the dollar amount of exposure and can then buy or sell an entire basket of stocks. With reduced commissions, this type of trading is now available to small traders. An institution might put on a program trade with $100 million in the same manner an individual trader might with $100 thousand. It is important to check the commission and keep costs low in smaller accounts, but if you can beat the market by 0.3% here and there it ads up. A couple times a week for an entire year would add up.

Almost any criteria can be used to create a basket. If one is trading technology stocks, a basket could be created using only the stocks in the Nasdaq 100 Index that are above their 9day moving averages, or any other technical indicator. The idea is to own the strongest stocks when the market is in rally mode. Creating custom baskets , in essence your own ETFs, can provide an powerful edge.

The basket of dividend stocks and the regional bank basket proved to be strong movers today. More on those groups in the future.


UTX - United Technologies Corporation (UTC) provides high-technology products and services to the building systems and aerospace industries. It has six segments: Otis, Carrier, UTC Fire & Security (UTC F&S), Pratt & Whitney, Hamilton Sundstrand and Sikorsky. Otis includes elevators, escalators, moving walkways and services. Carrier includes heating, ventilating, air conditioning and refrigeration systems and equipment, and food service equipment. UTC F&S offers electronic security, fire detection and suppression, monitoring and response systems and services, and security personnel services. Pratt & Whitney includes military aircraft engines, parts and services, industrial gas turbines and space propulsion. Hamilton Sundstrand includes aerospace products and aftermarket services. Sikorsky offers military and commercial helicopters, aftermarket helicopter, and aircraft parts and services. In March 2007, Sikorsky Aircraft acquired aircraft maker, PZL Mielec, from the Polish Government.

BA - The Boeing Company is involved in the design, development, manufacturing, sale and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services. The Company operates in five principal segments: Commercial Airplanes, Precision Engagement and Mobility Systems (PE&MS), Network and Space Systems (N&SS), Support Systems and Boeing Capital Corporation (BCC). PE&MS, N&SS and Support Systems comprise the Company’s Integrated Defense Systems (IDS) business.

CAT - Caterpillar Inc. operates in three principal lines of business: Machinery, Engines and Financial Products. Machinery deals with the design, manufacture, marketing and sales of construction, mining and forestry machinery. Engines business deals with the design, manufacture, marketing and sales of engines. Financial Products, consists primarily of Caterpillar Financial Services Corporation, Caterpillar Insurance Holdings, Inc., Caterpillar Power Ventures Corporation and their respective subsidiaries.

GE - General Electric Company (GE) is a diversified industrial corporation. It is engaged in developing, manufacturing and marketing a variety of products for the generation, transmission, distribution, control and utilization of electricity. During the year ended December 31, 2006, GE completed the sales of its Advanced Materials business by Industrial and GE Life, its United Kingdm-based life insurance business. During 2006, GE acquired IDX Systems Corporation, ZENON Environmental Inc. and Biacore International AB. In November 2006, GE Fanuc Embedded Systems acquired Radstone Technology PLC. In December 2006, Energy Metals Corporation's subsidiary, Golden Predator Mines Inc., acquired Springer Mining Company from GE. On March 15, 2007, GeoEye Inc. acquired M.J. Harden Associates, Inc., from GE. In May 2007, Smiths Group PLC sold its aerospace businesses to GE. In May 2007, STV Partners Corporation, the Japanese unit of GE, acquired a 97.15% interest in SANYO ELECTRIC CREDIT CO., LTD.

PCP - Precision Castparts Corp. (PCC) manufactures complex metal components and products, investment castings, forgings and fasteners/fastener systems for aerospace and industrial gas turbine (IGT) applications. The Company also provides investment castings and forgings for general industrial, automotive, armament, medical and other applications; specialty alloys, waxes and metal processing solutions for the investment casting industry; metal-injection-molded and ThixoFormed parts for automotive and other markets; sewer systems, and metalworking tools for the fastener market and other applications.

PH - Parker-Hannifin Corporation is a full-line diversified manufacturer of motion control products, including fluid power systems, electromechanical controls and related components. It has three business segments. The Industrial Segment produces motion-control and fluid systems and components used in manufacturing, packaging, processing, transportation, mobile construction, agricultural and military machinery and equipment. The Aerospace Segment designs and manufactures products and provides aftermarket support for commercial, military and general aviation aircraft, missile and spacecraft markets. The Climate & Industrial Controls Segment manufactures motion-control systems and components for use in the refrigeration and air conditioning and transportation industries.

MO - Altria Group, Inc. (ALG) is primarily a holding company. The Company, through its wholly owned subsidiaries, Philip Morris USA Inc. (PM USA) and Philip Morris International Inc. (PMI) are engaged in the manufacture and sale of cigarettes and other tobacco products. ALG’s 89% owned subsidiary Kraft Foods Inc. (Kraft) is engaged in the manufacture and sale of packaged foods and beverages. Philip Morris Capital Corporation (PMCC), another wholly owned subsidiary, maintains a portfolio of leveraged and direct finance leases.

JCI - Johnson Controls, Inc. (Johnson Controls) is engaged in the building efficiency business. It is a global supplier of heating, ventilation, and air-conditioning (HVAC) mechanical equipment and services. The Company operates in three primary businesses: building efficiency, automotive experience, and power solutions.

EMR - Emerson Electric Co. is engaged in designing and supplying product technology and delivering engineering services in a range of industrial, commercial and consumer markets.

ROP - Roper Industries, Inc. (Roper) is a diversified growth company that designs, manufactures and distributes energy systems and controls, scientific and industrial imaging products and software, industrial technology products, instrumentation products and services, and radio frequency products and services. Roper operated in four segments: Industrial Technology, Energy Systems and Controls, Scientific and Industrial Imaging, and RF Technology. The Company markets its products and services to selected segments of a range of markets, including RF applications, water, energy, research and medical, and general industry.

SWK - The Stanley Works (Stanley) is a worldwide producer of tools for professional, industrial and consumer use and security products. The Company’s operations are classified into three business segments: Consumer Products, Industrial Tools and Security Solutions.

TKR - The Timken Company (Timken) is a global manufacturer of engineered bearings, alloy and specialty steel and related components. The Company is a manufacturer of tapered roller bearings and alloy seamless mechanical steel tubing and a North America-based bearings manufacturer. Timken had facilities in 27 countries on six continents as of December 31, 2006.

KMT - Kennametal Inc. (Kennametal) is a global supplier of tooling, engineered components and advanced materials consumed in production processes. It provides metal cutting tools and tooling systems. Kennametal specializes in developing and manufacturing metalworking tools and wear-resistant parts using a specialized type of powder metallurgy. It also manufactures and markets a line of tool holders, tool holding systems and rotary cutting tools by machining and fabricating steel bars and other metal alloys.

ITT - ITT Corporation (ITT), formerly ITT Industries, Inc. is a global multi-industry company engaged, directly and through its subsidiaries, in the design and manufacture of a range of engineered products and related services. It operates in three business segments: Fluid Technology, Defense Electronics & Services, and Motion & Flow Control.

CMI - Cummins Inc. (Cummins) designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration and emissions solutions, fuel systems, controls and air handling systems. The Company operates in four segments: Engine, Power Generation, Components and Distribution.

MMM - 3M Company (3M) is a diversified technology company with a global presence in various businesses, including industrial and transportation, healthcare, display and graphics, consumer and office, safety, security and protection services, and electro and communications. The Company manages its operations in six operating business segments: Industrial and Transportation; Health Care; Display and Graphics; Consumer and Office; Safety, Security and Protection Services, and Electro and Communications.

CSCO - Cisco Systems, Inc. designs, manufactures, and sells IP-based networking and other products relating to the communications and information technology industry worldwide. It provides products for transporting data, voice, and video within buildings, across campuses, and around the world. It offers routers, which interconnect computer networks; and switching systems, which offer connectivity to end users, workstations, and servers. The company also offers application networking services products; home networking products, such as voice and data modems, network cards, media adapters, Internet video cameras, and USB adapters; and hosted small-business systems, including integrated voice and data products. In addition, it provides optical networking products; network security products and services; storage area networking products; Unified Communications, an integrated system that provides voice, video, data, and Web services; and video systems that consist of digital set-top boxes, digital media technology products, and transport and access products. Further, the company offers in-building and outdoor wireless networking products, such as access points, wireless LAN controllers, wireless management software, wireless LAN clients and client software, bridges, antennas, and accessories; and service provider IP communications and network management software products. The company offers its products and services through its direct sales force, systems integrators, service providers, other resellers, distributors, and retail partners. It has strategic alliances with Accenture, Ltd.; AT&T Corp.; BearingPoint, Inc.; Cap Gemini S.A.; Electronic Data Systems Corporation; EMC Corporation; Ericsson; Fujitsu Limited; Hewlett-Packard Company; Intel Corporation; International Business Machines Corporation; Italtel SpA; Microsoft Corporation; Motorola, Inc.; Siemens AG; and Sprint Nextel Corporation. The company was founded in 1984 and is headquartered in San Jose, California.

JNPR - Juniper Networks, Inc. engages in the design, development, and sale of assured Internet Protocol (IP) secure networking solutions primarily in Americas; Europe, Middle East, and Africa; and Asia Pacific. Its solutions are incorporated into the global Web of interconnected public and private networks across various media, including voice, video and data, and travel. The company's network infrastructure solutions enable service providers and other network-intensive businesses to support and deliver services and applications on an integrated network. Its infrastructure product family consists of M-Series and T-Series, and E-Series products. The company's service layer technologies (SLT) provide network security solutions; and enable customers to provide additional IP-based services and enhance the performance and security of their existing networks and applications. The SLT product family comprises firewall and VPN systems; firewall and VPN appliances; SSL VPN appliances; IDP appliances; application acceleration platforms; unified access control; and AAA and 802.1X products. In addition, the company offers technical assistance, hardware repair and replacement parts, unspecified software updates, and professional and educational services. Its customers include service providers, such as wireline, wireless, and cable operators, as well as Internet content providers; enterprises; governments; and research and education institutions. The company sells and markets its products through its direct sales organization, value-added resellers, and distributors. Juniper Networks, Inc. was founded in 1996 and is headquartered in Sunnyvale, California.

EMC - EMC Corporation engages in the development, delivery, and support of information infrastructure technologies and solutions worldwide. Its Information Storage segment offers networked information storage systems to be deployed in a storage area network, networked attached storage, content addressed storage, or direct attached storage environment. It also provides platform-based software that controls and enables functions, such as replication, optimization, and data movement; multi-platform software to store, protect, optimize, and leverage their information in complex IT environments; and consulting, assessment, implementation, integration and operations management, support, maintenance, education, and training services. The company's Content Management and Archiving segment offers content management software to optimize business processes, as well as to create, manage, deliver, and archive information from documents, discussions, email, Web pages, images, XML, reports, records, rich media, and application data. This segment also provides input management software for conversion, indexing, and processing of paper-based information to digital formats. EMC's RSA Information Security segment offers security product and service portfolio, such as enterprise identity and access management products, consumer identity and fraud protection solutions, encryption and key management software, and security knowledge and expertise; and tools to collect, monitor, analyze, and report on security event-related activity throughout the IT infrastructure. Its VMware Virtual Infrastructure segment offers virtual infrastructure solutions and services used by enterprises for server consolidation and containment, disaster recovery and business continuity, capacity planning and development, enterprise desktop hosting, test optimization, and software distribution. The company was founded in 1979 and is headquartered in Hopkinton, Massachusetts.

MSFT - Microsoft Corporation engages in the development, manufacture, licensing, and support of software products for various computing devices worldwide. Its Client segment engages in technical architecture, engineering, and product delivery of Windows product family comprising Windows Vista; Windows XP Professional and Home; Media Center Edition; Tablet PC Edition; and other Windows operating systems. The Server and Tools segment provides integrated server infrastructure and middleware software that support software applications and tools built on the Windows Server operating system. Its products include Windows Server operating system; Microsoft SQL Server; Microsoft Enterprise Services; product support services; Visual Studio; System Center products; Forefront Security products; Biz Talk Server; MSDN; and TechNet. The Online Services Business segment provides personal communications services, such as e-mail and instant messaging, and online information through MSN Search; MapPoint; MSN Internet Access; MSN Premium Web Services; Windows Live; and MSN Mobile Services. The Microsoft Business Division offers Microsoft office product set consisting of enterprise content management, collaboration, unified communications, and business intelligence products; and Microsoft Dynamics products that provide business solutions for financial management, customer relationship management, supply chain management, and analytics applications for small and mid-size businesses and large organizations. The Entertainment and Devices Division develops, produces, and markets the Xbox video game system, including consoles and accessories, third-party games, games published under the Microsoft brand, and Xbox Live operations. This segment also offers Zune digital music and entertainment device; PC software games; online games; Mediaroom, an Internet protocol television software; and other devices. Microsoft was founded in 1975 and is headquartered in Redmond, Washington.

BRCM - Broadcom Corporation designs, develops, and supplies semiconductors for wired and wireless communications markets. Its products enable the delivery of voice, video, data, and multimedia to and throughout the home, the office, and the mobile environment. The company provides a portfolio of system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. Broadcom offers solutions for digital cable, satellite, and Internet protocol set-top boxes; high definition television; high definition DVD players and personal video recording devices; cable and digital subscriber line modems, and residential gateways; high-speed transmission and switching for local, metropolitan, wide area, and storage networking; system I/O server solutions; broadband network and security processors; wireless and personal area networking; cellular communications; mobile multimedia and applications processors; mobile power management; and voice over Internet protocol gateway and telephony systems. The company markets and sells its products in the United States through a direct sales force, distributors, and manufacturers' representatives. It also sells its products through regional offices, and through a network of independent distributors and representatives internationally. The company was founded in 1991 and is headquartered in Irvine, California.

NOK - Nokia Corporation engages in the manufacture of mobile devices and mobile networks. It also provides equipment, solutions, and services for network operators, service providers, and corporations. The company operates in four segments: Mobile Phones, Multimedia, Enterprise Solutions, and Networks. The Mobile Phones segment offers mobile phones and devices based on GSM/EDGE, 3G/WCDMA, and CDMA cellular technologies. The Multimedia segment enables to create, access, and share multimedia in the form of advanced mobile multimedia computers and applications with connectivity over multiple technology standards. The Enterprise Solutions segment offers various products and solutions, including enterprise-grade mobile devices, underlying security infrastructure, software, and services for businesses and institutions. The Networks segment provides network infrastructure, communications, and networks service platforms, as well as professional services to operators and service providers. It focuses on the GSM family of radio technologies; networks with Internet Protocol and multi access capabilities; and professional services. The company also develops mobile WiMAX solutions. Nokia sells its products to operators, distributors, independent retailers, and corporate customers. It has its operations in Europe, the Middle East, Africa, China, the Asia-Pacific, North America, and Latin America. The company was founded in 1865 and is based in Espoo, Finland.

AMAT - Applied Materials, Inc. engages in the development, manufacture, marketing, and service of fabrication equipment for the semiconductor and semiconductor-related industries worldwide. It offers systems that perform the chip fabrication process, including atomic layer deposition, chemical vapor deposition, physical vapor deposition, electrochemical plating, etch, ion implantation, rapid thermal processing, chemical mechanical planarization, wafer wet cleaning, and wafer metrology and inspection, as well as systems that etch, measure, and inspect circuit patterns on masks used in the photolithography process. The company's chips are built on a silicon wafer base and include various circuit components, such as transistors and other devices that are connected by various layers of wiring. It supplies systems for manufacturing copper-based chips, and for depositing, etching, and planarizing the copper interconnect layers. Applied offers a range of products and services that include fab and sub-fab systems, wafer management services, chamber performance services, gas and fluid handling components, and other related services for fab operations support. The company also manufactures and services equipment to fabricate flat panel displays. In addition, it provides roll-to-roll vacuum web coating systems for depositing various films on flexible substrates for functional, aesthetic, or optical properties. The company markets and sells its products through direct sales force. It serves manufacturers of semiconductor chips and wafers, flat panel displays, and other electronic devices, such as solar photovoltaic cells. The company operates in Taiwan, North America, Korea, Japan, Asia-Pacific, and Europe. Applied Materials was founded in 1967 and is headquartered in Santa Clara, California.

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