Stock Market at a critical level for investors

Stock Market chart watchers should pay close attention to what the major averages do in the next couple of days, especially the big daddy Dow Jones Industial Average.



If we pull back in the next couple of days then a classic double top would start to form on the daily chart which will probably lead to a second major pullback as we experienced in the end of February. Of course if we break out to new highs then that would be healthy so long as volume is strong, however already early into the first quarter earnings season, results are starting to disappoint.

I am using this opportunity the introduce the six major market average ETFs to my model portfolios. Details will follow in a later post today. For now, this may be a good time to take any near term profits and hold back to make new entries at lower prices.

I am executing long entries into 3 managed exchange traded funds that short the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100.

DXD - Ultra Short Dow 30 Proshares, SDS - Ultra Short S&P 500 Proshares, and QID - Ultra Short Nasdaq 100 Proshares. These three funds are managed funds whose objective is to move at twice the rate of the underlying moving averages.

I am also executing short entries into the three regular exchange traded funds that represent the same underlying averages only the objective is to match the indexes at the same rate of return.

These are DIA - Diamond Trust Series representing the Dow Jones Industrial Average, SPY Spyder Dep Receipts which tracks the S&P 500 and QQQQ Powershares QQQ series trust which follows the Nasdaq 100 Index.

The objective is to get a gain over any near term (1-4 weeks) correction where we will close our shorts and buy into these same funds at lower prices.

Detailed posts will follow on each of these positions.

SMI initiates coverage on UTH - Utilities Holdrs

Investors in search of a safe place to park money for the long term should consider adding to their portfolios UTH, Utilities Holdrs, a diversified mix of utility stocks.

While there are many individual stocks that offer long term growth and solid dividend returns, this basket instrument helps to take the guess work out of deciding which stock in this sector is best. Most recently this sector has been bucking the downtrend in the markets since the start of the year. The chart below displays the outperformance of the Utilities versus the Dow and S&P.




Institutions looking for some safe havens having been moving into this sector for many reasons.

The recent prospects of private equity buyouts and consolidation in the sector along with lower interest rates boosts the near term performance potential for both long term investors and short term market timers.

Analyst Thomas Chenoweth will be adding UTH to his Top Pick portfolios on any near term weakness so stay subscribed for this market call.

Why is Warren Buffett buying railroad stocks?

Warren Buffett's investments are the talk of Wall St. and once again he has created a buzz.

In a recent filing with the Securities and Exchange commssion, Buffett's investing behemoth Berkshire Hathaway disclosed a major stake worth over $3 billion dollars into Burlington Northern Santa Fe company. The position represents a 10.9% stake.

Analysts on Wall St. believe the railroad stocks are at peak valuations so, What is the "Oracle of Omaha" seeing that they are not?

As Mr. Buffett is reaching his later years, his legacy will not only be his eagle eye for good value. He has set forth in motion a legacy of giving back so much of what he gained.

Last year his announcement of his intention to donate most of his stock holdings to various foundations included a $30 billion dollar gift to the Bill and Melinda Gates foundation for health and education in poor areas of the world.

This railroad investment represents, in my opinion, a firm belief that the rail industry is about to experience a revolution of it's own, and the investment required to help transform the industry into this new millenium, might require major stakes and investment into the infrastructure which only a man like Buffett is capable of, taking a lead where the government needs to follow.

I am sure that a man like Mr. Buffett would like to see in this day and age, where global warming dominates the headlines and a failing US auto industry that is incapable of reinventing themselves, calls for a new awakening and a new investment opportunity much like the days of the Vanderbilts, America's first railroad magnates, who themselves gave much of their fortune away to good causes.

I believe there will be more news in the future of Buffett's railroad investment plans. I believe that recent events like France's new bullet train that travels 350 mph inspires a man like Buffett to have the vision to see what impact today's world problems could have on a industry such as the railroads, and how the railroad industry could impact today's world problems.

For now though the simple equation is that surging transportation demands and lower oil prices in the next couple of years will reflect handsomely in these stocks.

This was a great investment on his part and investors should be "all aboard that train", so to speak.

My CNBC Million Dollar Contest Portfolio Update

Contest Players - 543,433
My Rank - 7472 (Top 2%)

Portfolio Value - $1,282,388.39 up 28.2% in 5 weeks.

As the midway point approaches for the CNBC Million Dollar portfolio contest, I have to take some comfort in being ranked in the top 2% of the contest. I was in the top 1% last week with my portfolio up 35%, but I lost almost 7% on my third trip holding FMT stock.

If I can maintain my current pace, there is no reason why I can't be a contender for the top 20 portfolios with a few good picks. Therefore i thought it would be a good time to start a little journal highlighting my championship run to the million dollar paycheck.

The contest rules make it difficult to employ any real trading strategies, but the fun is participating with many players executing all-in positions and experiencing the large percentage swings that this risky strategy produces. If this was real money, being able to produce percentage returns in the double digits is enough to make any hedge fund jealous, and getting recognition by having your name listed in the top player's list is valuable exposure, so my mission will be considered a success if i can just get my name on the list.

The top players in the contest have been able to take advantage of earnings events and small priced high percentage movers to get to their rank levels and this seems to be the only way to get to the top but let me make a couple of suggestions to players.

First, concentrate on beating your own rank each day rather than the leaders and strive to make each trade a profitable one even if it is just 1-2 percent a day. You will watch your rank jump over 10-20 thousand people with such moves. If in the next 25 days of the contest, you can average 2% per day you should get into the top 1% of players in the contest. Then from there all you will need is a few 10-15% movers to have a shot at the finals. Stocks that are about to report earnings are "your best chances" for these types of moves. So if you employ this strategy (buy the day before earnings) you will have a chance at not only winning the a seat in the finals but you might get that little $10,000 weekly prize.

Below are two tables showing what your portfolio will be worth assuming these daily percentage factors. The first table is 25 days of 2% a day to get a portfolio value that will place you in the top 1 %.

# Days 1,000,000.00
1 2.0% 1,020,000.00
2 2.0% 1,040,400.00
3 2.0% 1,061,208.00
4 2.0% 1,082,432.16
5 2.0% 1,104,080.80
6 2.0% 1,126,162.42
7 2.0% 1,148,685.67
8 2.0% 1,171,659.38
9 2.0% 1,195,092.57
10 2.0% 1,218,994.42
11 2.0% 1,243,374.31
12 2.0% 1,268,241.79
13 2.0% 1,293,606.63
14 2.0% 1,319,478.76
15 2.0% 1,345,868.34
16 2.0% 1,372,785.71
17 2.0% 1,400,241.42
18 2.0% 1,428,246.25
19 2.0% 1,456,811.17
20 2.0% 1,485,947.40
21 2.0% 1,515,666.34
22 2.0% 1,545,979.67
23 2.0% 1,576,899.26
24 2.0% 1,608,437.25
25 2.0% 1,640,605.99

The second table assumes the same with 5 10% daily moves the last 5 days. If this happens you would be in the top 10 players for a shot at the finals.

# Days 1,000,000.00
1 2.0% 1,020,000.00
2 2.0% 1,040,400.00
3 2.0% 1,061,208.00
4 2.0% 1,082,432.16
5 2.0% 1,104,080.80
6 2.0% 1,126,162.42
7 2.0% 1,148,685.67
8 2.0% 1,171,659.38
9 2.0% 1,195,092.57
10 2.0% 1,218,994.42
11 2.0% 1,243,374.31
12 2.0% 1,268,241.79
13 2.0% 1,293,606.63
14 2.0% 1,319,478.76
15 2.0% 1,345,868.34
16 2.0% 1,372,785.71
17 2.0% 1,400,241.42
18 2.0% 1,428,246.25
19 2.0% 1,456,811.17
20 2.0% 1,485,947.40
21 10.0% 1,634,542.14
22 10.0% 1,797,996.35
23 10.0% 1,977,795.98
24 10.0% 2,175,575.58
25 10.0% 2,393,133.14

I will update my progress so you can get a measure for where you might need to be to get to my ranking, so check back.

Top players in the contest as of 4/5/2007 according to CNBC contest blog.

Name Portfolio Value
1. Parker Robinson $2,790,103.27
2. Deborah Taft 2,588,876.30
3. Ken Guillory 2,496,077.04
4. Chad Mazeika 2,433,347.81
5. Evan Scherer 2,300,624.35
6. Emmanuel Nogueira 2,269,175.73
7. James Kraber 2,257,242.52
8. George Lee 2,252,185.92
9. Joe Dondero 2,251,956.57
10. Barry Dressler 2,201,790.02
11. Chris Humphrey 2,158,211.77
12. Rob Bender 2,144,584.95
13. Maheshwari Gupta 2,104,565.91
14. Mark Dallas 2,103,758.36
15. Sacey Platte 2,097,165.63
16. Bob Stolzenburg 2,090,453.50
17. Jaems Meisner 2,083,660.01
18. Philip McKibbin 2,070,054.44
19. Doua Vang 2,069,450.59
20. William Garrett 2,067,786.42

Most actives as of the close on 4/4:
Gammon Lake Resources: Appears on the list for the first time, and the gold and silver producer named a new CEO on 4/3.
CMGI
Revlon
Crystallex International
Conexant
Sirius
Fremont General
Rio Narcea Gold Mines
Vonage
Oilsands Quest

Widely helds as of the close on 4/4:
CMGI with 4,191,717,487 shares held, down from Tuesday.
Revlon 2,084,897,505 shares held, up from Tuesday.
Conexant: 1,585,725,595 shares held, up from Tuesday.
Sirius: 1,424,673,762 shares held, up from Tuesday.
Crystallex International: 1,328,385,264 shares held, down from Tuesday.
Fremont General: 970,521,373 shares held replacing Vonage in the list.

SMI initiates coverage on Monsanto -- MON, Overall Rank -- Bullish / Investor Rank -- Buy

SMI this morning is initiating coverage on Monsanto-MON, a global leader in the agricultural products market . Trader and analyst Thomas Chenoweth is quoted as saying "Monsanto represents one of the most exciting developments in the financial markets based on the company's strategy which places them in a unique position to be a dominant product supplier encompassing the food , energy , and biotech industries . "




Tom is convinced that the company will show that bio-engineered crops could be the holy grail that revolutionizes ethanol production which will spawn a mass plantings of crops for several years to come of which the company directly benefits . Adding to that the defensive nature of providing food to the masses, Tom says, "this company can be one of the greatest growth stories of the 21st century ."

Monsanto beat analysts' forecasts yesterday by reporting higher sales and earnings for the quarter ending February 28, 2007.

Sales rose to 2.62 billion, up from 2.2 billion in the year ago period, an increase of 19%. Earnings rose to 543 million , up from 440 million , with earnings per share of 98¢ versus 80¢, up 17.5%. The company also raised guidance for the year citing strong demand for their seed products such as in Brazil , one of Monsanto's growing markets , who last year announced their nation's goal to become energy independent and have begun making large investments into their ethanol industry.

The stock yesterday rose into a new range based on the positive earnings report but we are waiting to open positions and will be soon accumulating shares during various pullbacks . Check back for updates .