Artic Cat ($ACAT) Surges 25%!!

On 12/7 I highlighted the recreational vehicle sector and $ACAT was mentioned as a stock that was attractive both fundamentally and technically. This morning the stock is surging 25%.

To read the article on $ACAT and other recreational vehicle stocks click below.

Read Article

My 2012 Market Outlook for Investors on CNN

This morning I sat down with Ali Velshi to talk about what investors should be doing heading int0 2012.

Here is the link:

Click to Watch

Weekly Market Wrap

The Week in Numbers

Major Indices

SPDRs S&P 500 ETF ($SPY): -3.5%
iShares Germany ETF ($EWG): -7.8%
iShares China 25 ETF ($FXI): -4.9%
iShares Italy ETF ($EWI): -9.1%
iShares Brazil ETF ($EWZ): -5.5%

S&P 500 Movers & Shakers

Vulcan Materials ($VMC): +15.4%
Novellus Systems ($NVLS): +8.0%
Edwards Life Sciences ($EW): +4.4%
First Solar ($FSLR): -30.1%
Best Buy ($BBY): -17.5%

Commodities

SPDR Gold ETF ($GLD): -6.7%
iShares Silver ETF ($SLV): -8.0%
US Oil Fund ($USO): -5.8%
Teucrium Corn Fund ($CORN): -1.7%

Stocks and Gold Pre-Market

Futures Point to a Higher Open - Stocks are modestly higher in pre-market trading with the investors looking to add to the gains from yesterday as the news out of Europe has subdued heading in to the weekend. Even a downgrade by Fitch to several large banks, including Goldman Sachs ($GS) and Bank of America ($BAC) was not enough to keep the bargain hunters from buying stocks this morning. Or it could be that any credibility the ratings agencies have left is gone - they are useless in my opinion.

Gold Finding a Bottom - After taking one of its worst week-long beatings in years the price of the yellow metal may have found a price where buyers once again find it an attractive investment. The shares of the SPDR Gold ETF ($GLD) fell from $170 last week to $152 yesterday. In pre-market the ETF is back near $155, an area that is important support (see earlier blog post). We continue to have a long position in gold and feel GLD will hold steady in the $150-$155 range for a couple of days.

Our Love-Hate With Europe

When it comes to Europe I believe Americans have a mixed view on the continent. We have a love-have relationship with the mishmash of countries.

We all love a good crepe from France, but hate that the rumors today that it may be downgraded from AAA rating put pressure on stocks. (Yes, France is still AAA and the US is not.)

We love Italian red wine, but hate the fact their bond yields spiked to new post-Euro levels today. This put pressure on the country and spread around the region and over the pond to the US.

We love Estonia for their fried pigs ears, but hate them for..... Nothing. Who could hate Estonia.

I think you get my point. I would be willing to give up my Italian wine, French crepes, and Estonian pigs ears for the Euro to disappear for a year. Because I believe without the problems in Europe and the attached rumors that go along with the situation that the stock market in the US would be at multi-year highs.

Fundamentally the numbers suggest much higher prices for stocks, but when you add in the "Europe" discount the end result is stocks priced down even though they may have no direct connection to what is happening in the region across the pond.

I am going to use this theory when I put together my 2012 Investment Outlook in the coming weeks. Stay tuned!!

Must-See Chart of Gold ETF - $GLD

The chart above is of the SPDR Gold ETF ($GLD), which has fallen by 12.6% in the last 5 weeks and is down 10% in the last 12 days. A sudden panic has taken a hold of gold as news and rumors swirl about the yellow metal.

A few of the factors moving gold lower: a higher US Dollar, rumors Paulson is selling gold in his large hedge fund, rumors of maneuvering by Central Banks around the globe, and the risk-on trade is not off and hurting hold and forcing many investors that were leveraged to sell.

Technically $GLD fell through important support at the $161 area and fell right down to the next and even more important support zone of $151 - $154.50. This area is highlighted by the two horizontal black lines on the chart. The ETF closed today at $152.88, still in the range.

So far, I am still on the side of gold, BUT I will watch the next 2 days very very close.

Muni Bonds Continue to Outperform - I Was Right!!

Last year on 12/23 the world reacted to an extremely, uneducated call on the municipal bond market by pundit Meredith Whitney. She claimed there would be mass destruction in the muni bond market.... I was one of the first to come out and refute her ridiculous assumptions.

The NY Post, NY Times, Fox Biz, etc. all called me to get my insights and basically they thought I was crazy because Whitney was a known commodity after her call that the banking system had issues in 2007. I will give her credit where credit is due. She was spot-on on that call, but when it comes to munis she was simply trying to pump her new business.

Take a look at this paragraph from a story on www.bloomberg.com today:

Refuting Whitney’s forecast, which helped send borrowing costs to two-year highs in January, the $3.7 trillion municipal- bond market rebounded this year, generating an average total return of 10 percent through Dec. 12, better than U.S. Treasuries and corporate bonds, Bank of America Merrill Lynch indexes show. Munis also trounced equities as the Standard & Poor’s 500 Index lost (SPX) 0.6 percent in the same period.

YEP!! I was right!! But not only was I right - I own quite a bit of the iShares Muni Bond ETF ($MUB) and the Market Vectors Muni High Yield ETF ($HYD).

And yes, both ETFs are beating the S&P 500 since Whitney's fateful call on the muni bond market.

3 Top Stock Picks on Fox Business Yesterday

Every Monday at 1pm ET on Fox News Live I talk about the upcoming market week and share three top stocks and ETF picks.

Here are the 3 from Monday 12/12/11:

1. Oceaneering International ($OII) - A few days off an all-time high, the company concentrates on offshore and deepwater drilling for oil and gas. With large areas of untapped ocean available for drilling, OII should continue to prosper.

1. General Mills ($GIS) - The maker of Cheerios, Hamburger Helper, Progresso, Betty Crocker, etc. is also just off an all-time high. With a 3% dividend and the ability to hold up in volatile markets, GIS is a stable option.

1. SPDRs Utilities ETF ($XLU) - Invests in a basket of utility stocks, which have been very strong this year. Add in the 3.8% dividend yield and XLU becomes very attractive.

** PFG owns shares of $XLU for clients.

US Dollar Breaks Out - Currency Update

The PowerShares US Dollar Index Bullish ETF (NYSE: UUP) rallied to a new 2-month high late morning after negative news from the EU sent the Euro to the lowest level since January.

The Rydex CurrencyShares Japanese Yen ETF (NYSE: FXY) remains in the green, up 0.2%. As the "old" safe-haven Rydex CurrencyShares Swiss Franc ETF (NYSE: FXF) falls to the lowest level since February.

I will continue to watch $UUP closely as it approaches major resistance at $22.62. The last trade was $22.48 - up 0.6%.

Retail Sales Miss Expectations

The weekly retail sales numbers from several reporting agencies came in below expectations for the last week. A similar tone has been expressed, "shoppers are waiting until the last minute to buy gifts and are looking for discounts". This is no surprise to me and I expected the numbers the next 2 weeks to be much better than expected.

The SPDR S&P Retail ETF ($XRT) is up 10% in 2011 versus a loss for the S&P 500.

Some of my favorite retailers are the Discount Stores: Wal-Mart ($WMT), TJX Companies ($TJX), Ross Stores ($ROST).

Market Wrap - Gold Tumble, Dollar Rises on Euro Issues

More Europe

Both Fitch and Moody’s, the ratings agencies, weighed in today on the EU situation after the meeting last week. Neither agency seemed to be pleased with the outcome and the stiff warnings fueled a sell-off that began overnight in Europe. The day-to-day perception of the situation in Europe is not going to end anytime soon. So if you cannot take the triple-digit daily moves on the Dow you may want to close your eyes for a few weeks/months.

My analogy of Europe being a gaping wound in a patient remains. However, the governments of the EU and around the globe will continue to bandage it up to keep the economy and stock market from falling too hard. This is why I believe there is a good chance of a stock market rally into early next year based on the actions of the ECB, Fed, EU, IMF, and any other acronym you think of.

US Dollar Strength

One of the lone safe havens throughout the day was the Greenback. The PowerShares US Dollar Index Bullish ETF ($UUP) rose by 1.1% and is nearing a 2-month high. My argument is that when the risk-on trade is “off” that safety is the number one goal of investors and the US Dollar is perceived as the “safest” currency at this time. Even though the US has its own issues with a rising deficit, it is the best of the worst. Would you rather own the Euro or the Greenback?

Gold Falls

Gold suffered one of its worst days in months today as it fell due to a rise in the US Dollar and a technical breakdown. There is also a lesser-known factor that could have affected gold today. India, the world’s largest consumer of gold, reported that industrial production in the country fell for the first time in over 2 years. Granted it is a secondary factor at best, it could have added fuel to the bears argument that gold needs to correct more. We continue to hold gold as our largest position via ETFs $GLD and $IAU.

Matt McCall's TV Reel

In case anyone was interested.

Weekend Update - Top Stocks on WatchList

Utilities

The Utility stocks are looking good heading into the new week. The Dow Jones Utility Index is 2.25% from a 3-year high and is up 10.4% year-to-date, easily beating the more broad-based benchmarks.

Investors could choose to go with the SPDRs Utilities ETF ($XLU) that invests in a basket of stocks in the sector and currently pays a 3.8% yield. Or there is always the option of individual utility stocks. A few on the PFG WatchList that are near buy points include Exelon ($EXC), American Water Works ($AWK), and Consolidated Edison ($ED). The three stocks pay dividends of 4.8%, 2.9%, and 4.1%, respectively.

More Dividends

Other than the utility stocks, the overwhelming theme this week when going through the PFG WatchList was stocks that pay above-average dividend yields. Some of the names near buy points are:

EV Energy Partners ($EVEP) – Oil and natural gas L.P. that has a 4.7% dividend yield.

Wal-Mart ($WMT) – Largest retailer in the U.S. that pays a 2.5% dividend yield.

Enbridge ($ENB) – Energy pipeline company with a 2.8% dividend yield.

iShares High Dividend Equity ETF ($HDV) – Invest mainly in heath care and consumer goods stocks and pays a 3.8% dividend yield.

More Energy

The niche energy equipment and services sector has been getting a boost from oil trading at or near the $100 level. Two names on the PFG WatchList are in this sector and are outperforming the market and their peers.

Hornbeck Offshore Services ($HOS) - provides marine services to exploration and production, oilfield service, offshore construction, and the United States military customers.

Oceaneering International ($OII) – Just off an all-time high, the name gives it away. It is an offshore, deepwater oil and gas service company.

Recreational Vehicles Unlikely Success

My story on how companies like Arctic Cat and Polaris are doing well in a rough economy.

Recreational Vehicles Unlikely Success

ETF of the Day - Market Vectors Junior Gold Miners ETF ($GDXJ)

If you follow by blog (as you should), you would know my thoughts on gold and the SPDR Gold ETF $GLD. The pullback in gold brought the precious metal and currency alternative down to support and it is now at an attractive level to move higher in the coming months.

While GLD tracks the price of Gold Bullion, there are other options for investors. One Niche ETF that is out there for the risk hunger investors is the Market Vectors Junior Gold Miners ETF ($GDXJ).

GLD is up 24% over the last 12 months with GDXJ down 30%. This is a major difference in such a short time period. A lot of it has to do with the "risk off" trade that saw money come out of perceived risky assets and into more safe haven areas such as physical gold or low volatility stocks.

BUT, if I am correct in my thinking that gold will continue to move higher and eventually get to the $2000/ounce level, GDXJ and the junior gold miners will be some of the biggest winners. The one risk is similar to the last year, if gold rises due to major issues with the global economy it could limit the upside for GDXJ.

Bullish Action in Gold Today - $GLD

My blog post last week regarding the SPDR Gold ETF ($GLD) highlighted how the ETF pulled back to support at the $164 area and bounced It ran up to $170 on Friday before pulling back yesterday and this morning. At one point $GLD was down to $165.53 and hitting a new one-week low. It appeared that support would be tested once again.

However, midday Gold began to rally and $GLD closed up 0.5% on the day at $168.18. The bullish one-day reversal today was another positive signal for the precious metal. I still believe that nearly every possible scenario in 2012 has Gold moving higher. I continue have believe $GLD and its competitor $IAU are buying opportunities at current levels.

ETF of the Day - IQ Canada Small Cap ETF $CNDA

The IQ Canada Small Cap ETF ($CNDA) has not garnered much attention since it began trading in March 2010. The ETF has approximately $40 million in assets and is composed of 100 Canadian small-cap stocks.

The ETF is heavily focused on Materials and Energy, which make up 73% of the portfolio. The expense ratio is 0.69%. So far in 2011, CNDA has lagged the iShares Canada ETF ($EWC) as the large-cap focused ETF has out performed. The main reason for the under performance was the weak performance of the commodity stocks earlier this year.

With the price of oil increasing and hanging around the $100 level and gold bouncing off support I once again turn to the commodity sector as a place to put money and $CNDA looks like an attractive option.

Today $CNDA was up 2% as $EWC was flat.

Attention All (Greek) Gamblers

Later this week ETF company Global X will be introducing the Global X FTSE Greek 20 ETF (NYSE: GREK). The ETF will track the FTSE/ATHEX 20 Capped Index, which is down 65% in the last 12 months.

If you believe that Greece and the rest of the European continent will find a way to get out of the current situation, the high-risk, high-reward play would be the new ETF. However, if Europe does not fair as well - look out below.

As they say, "I would not go there". Too much risk for not enough reward. Until the Greek population realizes they have to pay taxes, the upside will be limited to short-term rallies for Greek stocks.

A country in that region, Austria is another high-risk play, but has the ability to turn around and continue in the right direction if they ever figure out how to fix the European situation. The symbol for the iShares Austria ETF is $EWO.

Market Recap - Europe and Sector ETFs

All Europe, All the Time – The day began with a rally that was spurred by renewed talks of a large scale resolution for the European mess. That momentum came from Germany and France and by the way of new austerity measures passed by Italy. (See earlier blog about Italian and Spanish yields dropping.)

In the final hour of trading a rumor hit the wires concerning Standard & Poor’s putting 15 EU nations on credit watch negative. The 2 countries not included were Greece (already at CC) and Cyprus, which is already on negative credit watch. The official report was confirmed after the closing bell and the S&P futures are down 0.3% on the news.

I have little if any faith in S&P or any other ratings agency. They have been late to the game for years and it appears they are once again lagging the story. Therefore, I am not changing my outlook based on anything they have to say – it is old news.

There are meeting in Europe planned for Thursday and Friday and that will be the pivot point for how stocks trade for the remainder of the year. Obviously investors believe some type of backstop will be put in place for the region based on the buying of stocks the last week. If this fails to take shape, look for a heavy sell-off in stocks around the world. I will keep you up-to-date as we approach the meetings later this week.

Sector ETFs - Even after the late-day selling, the financial sector held onto gains of 2% with the SPDR Financial ETF ($XLF) closing at the best level in over 2 weeks. The SPDR Retail ETF ($XRT) continued its rally, gaining 1.5% and quickly approaching a new all-time high. The laggard was the SPDR Health Care ETF ($XLV) with a gain of 0.2%. The defensive sector does not attract big money when the "risk-on" trade is working.

ETF of the Day - Corporate Bond ETF $LQD

The iShares iBoxx Corporate Bond ETF ($LQD) has been perplexing lately to say the least, however a recent turnaround has the ETF back on my list of favorites for the next 1-2 years.

We made our first purchase of LQD on 3/6/09. This was the day the S&P 500 bottomed. Since that time the S&P 500 is up 82%. LQD is up 42% including dividends. The argument is that LQD is greatly under performing the broad equity market. And yes it sure is, however it is a bond ETF, not an equity ETF and it turned out to be a top steady performer for our clients.

The ETF fell from a multi-year high of $115.68 on 11/4 down to a low of 11/28 of $109.81. This is a big drop for a bond ETF. I began adding more LQD last week for clients that need to gain exposure to the sector and in the last few days the ETF has created a bottom at $110 and looks like a very attractive long-term option.

LQD currently pays a dividend of 4.5% and with corporate America not falling apart all we care about is the companies paying their quarterly interest payment. As long as that continues, which I feel it will, corporate bonds are priced to move higher!

Cloud Computing ETF - Playing More Mergers

The First Trust ISE Cloud Computing ETF ($SKYY) is a basket of 40 stocks that are related to the niche sector in some manner.

Top holdings include Netsuite ($N), Rightnow Technologies ($RNOW - recently agreed to be purchased by Oracle), Cisco ($CSCO), Google ($GOOG), and TIBCO Software ($TIBX).

From a low on 8/19/11 the ETF is up 23% versus a gain of 13% for the $SPY. Of all the technology niche sectors, Cloud Computing continues to be a favorite of mine.

European Bond Yields Fall - End of the European Trouble??

The yield on an Italian 10-year bond fell to 6.11% on Monday after hitting a high of 7.11% on 11/25. This is a dramatic drop in just over a week and even more telling is the fall from 6.56% on Friday.

Spain's 10-year bond yield had a similar drop. Falling to 5.18% on Monday from 5.56% on Friday and a record 6.67% on 11/25.

Since 11/25 the S&P 500 is up 9%.

Apparently investors are cheering the possibility of a European bailout after little talks this weekend.

Another Takeover - Cloud Computing Stocks to Watch

This weekend saw another Cloud Computing stock bought by a larger competitor and a high premium.

German software giant SAP ($SAP) has agreed to purchase cloud computing company SuccessFactors ($SFSF) for $3.4 billion or $40/share - a 52% premium from Friday's closing price.

The takeover follows Oracle's ($ORCL) purchase of Rightnow Technologies ($RNOW) in October.

Here are a list of other Cloud Computing names to watch:

Taleo Corp ($TLEO)
Concur Technologies ($CNQR)
Salesforce.com ($CRM)
Netsuite ($N)
Ultimate Software Group ($ULTI)
Liveperson ($LPSN)
Kenexa Corp ($KNXA)
Tangoe ($TNGO)

Today's Top WishList Stocks

Some of the stocks on our ever-changing WishList that are outperforming the last day of the week.

• Gulfmark Offshore ($GLF)
• Huron Consulting Group ($HURN)
• Colfax Corp ($CFX)
• Chipotle Mexican Grill ($CMG)
• True Religion ($TRLG)
  

3 Top Stock Picks on Fox Business at 120ET Today!!

Tune into Fox Business Network today at 1:20ET to here my three top stock picks of the day.

The include a precious metal? A bargain department store? And a railroad operator?

Two of the stocks I already have in some clients' accounts.

DO NOT MISS IT!

5 Stocks For A Stable, Dividend Portfolio

The link below to my article on building a portfolio with 5 solid, high dividend stocks.


5 Stocks For A Stable, Dividend Portfolio

Breaking Down the Jobs Number

The country added 120,000 jobs in the month of November.

The Unemployment Rate fell to 8.6%, the lowest since March 2009.

October and September jobs numbers were revised higher by 72,000 jobs.

Private Sector adds 140,000 jobs as Public (government) loses 20,000 jobs.

Average Hourly Earnings fall by 0.1% to $23.18.

Size of US Labor Force declines by 315,000.

Retailers add the most jobs in November - 50,000.

The widely watched broader unemployment reading the U6 Rate fell to 15.6% from 16.2%.

****** My initial reaction is HOW DID THE unemployment rate fall to 8.6%? Was it because the number of participants in the labor force fell by 315,000? Or just another way the government massages numbers to make them look better? I will look for more info on how this occurred.

Interesting Stocks Hitting New Highs

The S&P remains 9% below a multi-year high set in early May and down 1% for the year, but there is a growing number of stocks breaking out to new highs. A number of them are either in Portfolios of PFG Clients or on our WatchList.

Here are a few that are catching my eye:

• McDonald's ($MCD) - The stock closed down 2 cents today, but hit a new all-time high intraday. The company remains resilient in the face of volatility around the globe and the 3% dividend yield is attractive.

• Ross Stores ($ROST) - An apparel store that I have mentioned several times hitting a new all-time high today after strong November sales numbers.

• American Water Works ($AWK) - The country's largest water utility closed at the best price ever. Utilities are strong and it pays a 3% dividend.

• Core Laboratories ($CLB) - The energy play closed at the best level ever today as it continues to be a leader in the niche sector of utilizing oil and gas wells.

I never promote buying at highs, but rather wait for a pullback to initiate positions.

** PFG has ownership in $MCD and $CLB.

Time to Buy or Sell?

After a nearly 500-point rally for the Dow on Wednesday and a gain of 700 points in three days it has once again sparked a buzz on Wall Street. The big question is should investors be optimistic about the rally and move money from cash to stocks. Or should the rally be viewed as another chance to raise cash by selling stocks before another market sell-off.

This is not an easy question to answer because my view is based on a short-term and long-term time horizon. First of all, I remain optimistic in the short-term when looking at stocks and the overall market.

Artificial Rally

The move by the Fed and other Central Banks around the globe on Wednesday to flood the system with liquidity was the catalyst for the big rally. The money that has been injected into the system could be enough to create an artificial rally that lasts for several months and well into 2012.

Think back to QE2 when the Fed flooded the market with money as it bought up Treasuries in November 2010. The market rallied about 14% in the six months following the announcement. A similar rally would propel the major stock indices to multi-year highs.

Based on Wednesday’s action and the high probability of more action in the coming weeks from agencies around the globe, the “artificial rally” will likely continue. The reason refer to this rally as artificial has to do with the reason behind the rally. It is not based on the fact Europe finally figured out a way to fix its debt issues. The rally is based on this flood of liquidity that is only a short-term fix to a long-term problem.

I like to use the analogy of someone with a major flesh wound on his or her leg. To cure the issue the patient must receive serious medical attention. Instead, the doctor puts on a large Band-Aid and stops the bleeding for the time being. Eventually the Band-Aid will have to be removed and stiches will be required. But until the doctor is ready to put in stitches the Band-Aid will keep the patient alive and kicking.

The leaders of the EU are the doctors that continue to apply Band-Aids to the debt issue in the region, which is the flesh wound. Eventually the EU will have to realize things must change dramatically and fast or it will run out of Band-Aids and they may lose the patient. Losing the patient would be equivalent to the EU breaking up and the Euro no longer a currency.

I know this is very pessimistic from me, considering I typically take a cautiously optimistic view on the economy, world, and life in general. The reason for the change is because I do not believe the leaders of the world realize they are playing Russian Roulette with the world economy. But they are!!

Your Portfolio

Back to the original question about what to do now with you hard-earned money.

I will continue to ride the “artificial rally” that the Central Banks are creating and be long stocks. I would not suggest 100% of your money in stocks, but I would also not want to be 100% in cash either.

The exact mix of stocks, cash, gold, bonds, etc. will have to be determined by your risk tolerance, time horizon, and goals for the money in the portfolio. I cannot even throw out a number because I would not be doing you justice. If you want a Free Portfolio Review from Penn Financial Group, we will be offering just that during the month of December.

info@pennfinancialgroup.com or call 1-877-383-7366 for more information.>

Matt McCall

President, Penn Financial Group

ETF of the Day - iShares High Dividend ETF

ETF of the Day - iShares High Dividend Equity ETF ($HDV)

The ETF is a basket of 75 stocks, mainly health care (27%), consumer goods (23%), utilities (17%), and telecom (16%). The ETF invests in a basket of stocks that pay above-average dividends, that in this market are highly sought after. Considering the S&P 500 is down 1% through 11 months, the 3.8% dividend yield on $HDV is attractive.

The ETF began trading on 3/31 and since that time is up 6.2%. During the same time frame the SPDR S&P 500 ETF ($SPY) is down 5.6%. A MAJOR DIFFERENCE.

The expense ratio is 0.40%.

Technically the ETF is on the verge of a breakout and can be bought in the low-$50's. Keep in mind $HDV will likely lag during a strong bull market, but should hold up better in a sideways/volatile market that we are experiencing now.

4 Top Stocks This Week

Link to my article this week on Investopedia.com:

4 Top Stocks This Week

November Retail Sales Winners/Losers

November Retails Sales Numbers Hit the Wires Today

And here are the Winners and Losers.

WINNERS

• Ross Stores ($ROST)
• Nordstrom ($JWN)
• Limited ($LTD)
• Saks ($SKS)
• Buckle ($BKE)
• Macy's ($M)
  

LOSERS

• Kohl's ($KSS)
• JC Penney ($JCP)
• Target ($TGT)
• Gap ($GPS)
  

Buy-Sell Signals on S&P 500

The chart above is a snapshot of the S&P 500 since July. As you can see during that time the index is down slightly with no real trend in place. More importantly there is the "resistance zone", which is between the two horizontal green lines (1230 to 1250).

With 20 minutes left in trading the index is in the middle of the range and therefore at an important level heading into the last 2 trading days of the week. I suspect the S&P 500 falters at the 1250 area and closes somewhere in the resistance zone heading into the weekend. The next short-term move will be determined by news out of Europe and the jobs numbers.

A breakout above 1250 would signal a new buying opportunity.

A failure at 1250 for a few days would signal time to sell the weak positions and/or enter hedging positions.

Stay tuned!!

High Income, Low Volatility Emerging Markets

High Income, Low Volatility Emerging Markets

Short Squeeze Candidates

One of the stock scans at Penn Financial Group (PFG) searches for stocks that have a high Short Interest Ratio (above 8) and trading within 5% of a new 52-week high. The theory behind this scan is that stocks with large short positions could be candidates for a short squeeze if they break out to new highs.

(A short squeeze occurs when the short sellers cover their positions. To do this they must buy back the stock creating a frenzy of buyers and a big move higher.)

Here are a few from the scan:

• Conn's ($CONN) - Electronics Store
• Universal Corp ($UVV) - Tobacco Products
• FTI Consulting ($FCN) - Business Services
• Astronics ($ATRO) - Aerospace/Defense
• Genesee & Wyoming ($GWR) - Railroads
  

ETFs Flashing Buy Signals

One of our most reliable (if not the most reliable) indicator in spotting buying opportunities over the last decade has been an RSI Crossover. This occurs when the RSI reading moves from oversold (below 30) back to neutral (30 to 70).

An extremely high number of ETFs and stocks are flashing this buy signal today. Included in that list is the S&P 500!!
Here are a few ETFs on the list:

• Global X Fertilizer ETF ($SOIL)

• SPDRS Consumer Discretionary ETF ($XLY)

• WisdomTree Asia Local Debt ETF ($ALD)

• Vanguard Mid-Cap ETF ($VO)

• Global X Copper Miners ETF ($COPX)

• SPDR S&P Retail ETF ($XRT)

Stocks Surge on Band-Aid Plan - THE WINNERS

As I mentioned in yesterday's Blog Post regarding Europe's Situation, a Band-Aid would likely be put on the gaping wound that is Europe's sovereign debt issue.

That Band-Aid came in the form of more liquidity. Basically the major Central Banks around the world (Fed, ECB, BOE, BOJ, and SNB). By lowering the price of US Dollar swaps by 50 basis points it floods the market with money. This will help shore up credit for businesses and individuals.

THE WINNERS

1. Equities - The risk-on trade is back on and with money flooding the world, it will shore up and concerns with Europe in the short-term. This cash will also make its way into the best option right now - Equities. S&P 500 +3.2% ($SPY)

1. Foreign Currencies - As more US Dollars hit the market, the value of the greenback falls as foreign currencies rise. US Dollar Index -1.2% ($UUP). Euro +1.2% ($FXE).

1. Gold - A weak US Dollar and the fact the Central Banks realize things are dire, make Gold a currency alternative as well as a safety play. Gold up 1.7% ($GLD).
   

Europe and What it Means to You - A MUST READ!

The topic on everyone’s mind is what is wrong with Europe and more importantly how does it affect me?

And when I refer to “me”, that can be the active investor, the average investor that has a retirement account, a homeowner under water with their mortgage, or the unemployed. I will explain how Europe could affect us all.

First, I must lay out in elementary terms what has happened to get Europe to where it is today.

Again, this is in very simple terms so you can get a grip on what is happening. It started with countries in Europe borrowing money at low interest rates to fund projects and spending and to get out of the financial mess of 2007/2008. The money was borrowed by issuing bonds in which the countries make periodic interest payments to the buyers of the bonds. In this instance, the majority of the buyers were European and other banks.

As countries such as Ireland and Greece began to get into situations where they borrowed too much money, it was clear they could not afford to pay back their loans in a timely manner. It would be similar to you using a low-interest credit card to live a lifestyle above your means and eventually you realized you racked up a credit card bill you cannot pay off – for two reasons. One, you cannot borrow any more money (or if you can borrow it is at very high interest rates). And two, you are not making enough money via your job to pay back the loans. Greece is an example that was not bringing in tax revenue to pay off its loans (Greeks and taxes is a whole separate topic.).

For the last few months the stronger economies in the European Union (EU) have been picking up the slack for the over spenders with mini-bailouts as the offenders agreed to not spend as much through what is called austerity measures. This was good enough at the time. However, it was just the tip of the iceberg.

Recently it has been highlighted that the economic troubles spread beyond just Ireland and Greece and to large European nations such as Italy and France. The most recent market swoon was caused by Italy and their soaring bond interest rates. As buyers of the bonds (the lenders) require a higher interest payment because they do not have as much faith in the country (Italy) and the current bond holders sell their holdings (send bond prices lower and interest rates higher), it is a very bad combo for Italy.

As the yield on Italian 10-year bonds moved above 7% it increased the borrow cost for Italy to levels that many experts do not believe are sustainable. This goes back to you needing to borrow more from your credit card, but now they are charging you such a high interest rate that you are not able to make the interest payments.

SO NOW WHAT?

If Italy or any other country cannot make interest payments it will result in a default or at a minimum a need of a bailout from the ECB or IMF or possibly the US. Or they could settle to pay most of the payments, but not all.

If it were you in this situation it would result in you filing bankruptcy or possibly settling with the lenders for a lower payment. Either way your borrowing costs will be high for years to come – This is a big fear for Greece, Italy and any other nation in trouble.

So, in the end does somebody (ECB, IMF, US, etc.) bailout the European nations and entire EU? Or does everyone look the other way as the EU falls apart along with the Euro?

The stalwart, Germany, may want to get out of the EU and go back to being the strongest and most stable nation in Europe. But at what cost would that be? Ending the EU could create years of economic turmoil for nations around the globe and in particular Germany and its neighbors.

Only time will tell, but the action today suggests something will get done to place yet another Band-Aid over the gaping wound of Europe. This Band-Aid may be enough to keep the stock market and economy afloat for another few months or up to a year’s time. BUT, eventually a long-term solution must be achieved.

As far as the stock market and your portfolios are concerned, I will remain cautious based on the Europe situation. However, I am cognizant that a Band-Aid may be used and it could lead to higher stock prices and will be ready to capture that. Honestly, it will take some outside-the-box thinking on my part in the coming months, but I am confident we can get out of this unscathed.

One Stock Smoking the Rest

I always sift through the list of stocks hitting new 52-week highs on a daily basis to see who is outperforming. But more importantly to see if there is a trend that is forming. For example, if a number of bank stocks (which they are not) begin to hit new highs it could suggest others will join and could generate new investment ideas.

The list has not been too long lately as the market drifts sideways, however from time to time I see a stock that catches my eye. Today was a stock that we own for some of Investment Advisory Clients at Penn Financial Group (PFG). The stock is Philip Morris International ($PM).

The stock is up 29% in 2011 and currently pays a 4.3% dividend. The company distributes tobacco products to hundreds of countries around the globe, not including the US. As I mentioned we own the stock and purchased it because we felt it would hold up well in a volatile market, which it has, and the dividend was attractive. Buying on a pullback is the only strategy at this point.

Some competitors include: $BTI, $RAI, $LO, $MO.

Can the Rally Continue?

The broad-based market rally today was not a big surprise considering the oversold levels of markets around the globe. The hint of good news this weekend out of Europe was enough to send the bears to the sell counter and money on the sidelines rushed into stocks at bargain levels.

The big question is whether this is simply a short-term rally based on the European news and "so far, so good" holiday sales reports OR it is a sustainable rally? I am leaning towards a short to intermediate-term rally in stocks before more negative news out of Europe derails any long-term uptrend.

A push by the bulls in the final 10 minutes helped the market recover from a late-day swoon and close hear the highs of the session. The action the next few days will be key to the direction of the market over the remainder of the year. A failure to follow-through after today's rally will be viewed in a very negative manner and it will call for a move to raise cash and/or initiate new "hedging" positions.

Stay tuned this week!

Rally Fades

After being up as much as 38 points early in the day, the S&P 500 is beginning to give back some of the gains in late afternoon trading. With an hour left in trading the index was up 30 points, giving up a quarter of its gain from the high of the day.

As stocks begin to drift lower it has had an affect on other asset classes. Gold ($GLD) is at its low of the day, but remains higher by 1.6%. Even the Junk Bond ETF ($JNK) is sliding off its highs and is now up 1.5%.

I will update you after the close today on how the last hour shapes the rest of the week.

Apple Black Friday Results

According to Piper Jaffray store checks they observed 15 iPads being sold per hour per Apple store on Black Friday - this is up 68% from last year. They also noted 10 Macs per hour, up 25% from a year earlier.

They also go on to say their estimate is for 13.5 million iPads to be sold in the December quarter, this would result in a sales increase of 84% from last year.

There are also rumors that $AAPL had its best one-day in sales ever at its stores AND met its high expectation by 7pm. Keep in mind this is rumors from sources.

The stock is up 2.7% today after hitting a 2-month low on Friday.

PFG owns shares of Apple ($AAPL).

Top Retail Stocks after Black Friday

Some of the top performing Retail Stocks the day after the Holiday Weekend shopping spree:

1. Cost Plus ($CPWM)
2. HHGregg ($HGG) - Electronics
3. Overstock.com ($OSTK) - Online
4. Saks ($SKS) - High-end clothing
5. Amazon.com ($AMZN) - Online
6. Big Five Sporting Goods ($BGFV) - Sporting goods
7. Foot Locker ($FL) - Sporting goods
8. Zale Corp ($ZLC) - Jewelry
9. Hibbett Sports ($HIBB) - Sporting goods
10. Tiffany & Co. ($TIF) - High-end jewelry

It appears sporting goods stores and high-end are doing well - somewhat of a surprise.

Moving the Markets This Morning

Stocks open the new week on a high note after taking a drubbing during the Thanksgiving holiday. Now that the bulls are well-fed and ready to get back to buying, what are the key stories moving the market this morning?

• Another European Rescue Plan - News over the weekend regarding Italy, the ECB, and the IMF working together or separate will come up with a plan to buy Italian bonds. The news coupled with a severe oversold situation in stocks had Europe up big overnight. Watch the iShares Italy ETF ($EWI) - up 6.5% on the open.

• Holiday Shopping looking good - It appears Black Friday for the brick and mortar stores and a weekend of online shopping has been strong according to most reporting agencies. Today is just as important as Cyber Monday gets underway with bargains all over the world wide web. The SPDR Retail ETF ($XRT) is up 4.2% early.

• The Charts - The technicals on the charts show an extreme oversold situation that could result in a short-covering rally that lasts a few days if any bit of good news hits the wires. That is exactly what is going on with the news out of Europe, causing the shorts to cover and attracting new buyers. The key will be if the rally has legs into mid-week.
  

Black Friday So Far....

Some Black Friday News:

IBM's Coremetrics retail data indicates online Thanksgiving sales were up 39% Y/Y, as consumers scooped up major electronics and apparel promotions. It's added that the share of consumers using a mobile device to make a purchase rose to 11.09%, from 4.25% in the year-ago period.

The National Retail Federation expects the number of consumers to go shopping this weekend to rise 10% from last year to 152M, but that November-December sales growth will slow to +2.8% from +5.2%.

Visits to several retail locations in the southern and northern California markets show a significant increase in apparent store traffic, in excess of 1000 people in some locations. Parking lots were very full for Best Buy, Target, Walmart and Fry’s. This could be due to the earlier opening times, around midnight in most cases as opposed to 4am last year, or possibly the very aggressive promotions, especially for TVs.

In fact, most of the first people in line were waiting for TVs. Tickets handed out at Best Buy for guaranteed door-buster stock were gone within the first 100 people or so.

*MORE UP-TO-DATE RETAIL INFO FROM ME AT 2:30ET ON FOX NEWS CHANNEL

Gold Rallies off Support Level

The chart below shows the SPDR Gold ETF ($GLD) after it pulled back to support (horizontal white line) and bounced today. The technicals point to Gold moving higher in the coming days and my long-term outlook remains very bullish.

If you are looking to buy into Gold, this week would be a good time to build a half of a position based on the chart. **GLD is my firms largest holding.

Talking Markets on Fox Biz

Market Recap - Down but not Out??

Yes the market closed in the red today after taking the lead from Asia and Europe overnight. The Dow closed down 250 points or 2.1%, but well off the intraday low that had the index off by 340 points. The S&P 500 (-1.8%) and NASDAQ (-1.7%) fared slightly better, but overall it was an ugly day for stocks.

WHY?? - I am not going to get into why stocks were down. I covered there reasons in an earlier blog post if you want to know my thoughts.

DOLLAR & COMMODITIES - The US Dollar Index ETF ($UUP) was up 0.2% on the day as its currency counterparts fell along with commodities across the board. A strong US Dollar is historically negative for commodities and that was evident today with Gold ($GLD) down 2.4%, Copper ($JJC) losing 2.9%, and Oil ($USO) off by 0.5%. The US Dollar Index hit a new 6-week high today as Gold hit a new 1-month low. There is definitely a correlation between the two asset classes. Short-term this may continue, however long-term I want to be long Gold and at a minimum flat the US Dollar.

SOCIAL MEDIA ETF HIT HARD - The shares of newly introduced Global X Social Media ETF ($SOCL) took a dive today, losing 5.2% after several of its holdings fell due to Chinese rumors/reports. Muddy Waters Research firm went after $FMCN today (-40%) as it has a number of Chinese ADRs. I have yet to determine if this firm is actually right on or simply a scam to take down companies they are short. Only time will tell. Anyway, it hurt other Chinese internet ADRs that make up the portfolio of $SOCL. Shares of Sina ($SINA), a top three holding of $SOCL was down 11% and Renren ($RENN), another holding fell 8.6%. I love the social media angle, but I would not run out and buy $SOCL today. There is too much risk, with not enough upside reward in the short-term.

DRUGS ON A DAY LIKE THIS - One of the very few bright spots today was the iShares US Pharmaceutical ETF ($IHE) with a gain of 0.75%, easily beating its peers. The iShares Utilities ETF ($XLU) lost 1.3%, also beating the overall market.



**BONUS --- Speaking of Utility Stocks. A water utility based here in the US just jumped into our top-five rated stocks on the PFG WatchList. If you happen to be a Client or Subscriber to one of our newsletters and want the name of the stock - please email info@pennfinancialgroup.com with Water Stock in the Subject Line.

ETFs to Hedge Market Weakness

The daily volatility in the stock market is not going to disappear anytime soon. Therefore, as investors we must have a few positions that hedge against the downswings, such as last week and today.

The beauty of ETFs is that they offer a variety of options when it comes to investing for down markets. There are inverse ETFs that move in the opposite direction of a chosen index. For example the ProShares Short S&P 500 ETF ($SH), which will gain 1% on a day the S&P loses 1%; and vice versa.

But for the investors that may not feel comfortable shorting the market there are other ETFs available that will either do well in a down market or much better than the overall action.

• Rydex CurrencyShares Japanese Yen ETF ($FXY) - The Japanese Yen has been a safe-haven investment for several years and other than an intervention by the Bank of Japan last month, the ETF has been moving steadily higher to all-time highs and is up again today.
• PowerShares US Dollar Index Bullish ETF ($UUP) - Stocks and the US Dollar have been moving in opposite directions lately. So to combat against a big down day there is the option of buying into an ETF that tracks the US Dollar Index to hedge a portfolio. Up today with the market lower.
• iShares Municipal Bond ETF ($MUB) - Even with bad press for over a year, which I have consistently disagreed with, the muni bond ETF remains a place for safety during market sell-offs. The distribution yield is currently 3.26% (tax-free). The taxable equivalent is approximately 5%.

**PFG currently owns positions in all 3 for various clients.

More Selling - But Why??

The US markets are set to open lower by 1.2% to begin the holiday-shortened week. We can turn to Europe as the usual suspect, but there are other factors putting pressure on stocks.

Europe - Moody's warns France could be downgraded due to rising interest rates and other factors. This is very much a self-fulfilling prophecy in my mind. As the fear rises, investors sell bonds and interest rates rise. As interest rates rise the fear increases because the high rates could lead to a potential default. When does the wheel stop is the question??

Asia - A Chinese politician warned of a "chronic" global recession in the future and suggests the country focus on their own growth and not rely on the US. This may be a bit far-fetched, but in combination with the other negative news it is enough to create new sellers.

North America - And finally the good ole US and the "less than-Super Committee". If a large group of politicians could not agree on a deal to cut the deficit, why would a smaller sample of the same group succeed? Exactly, the political situation is borderline laughable and that leads investors to sell stocks now and reevaluate the situation.

Three Stocks/ETFs Looking Good

Heading into a holiday-shortened week there are a number of stocks that are now back to the support or have broken out to trigger buy signals. The weekend review of the PFG WatchList has revealed quite a few stocks at attractive levels.

Here are three popular stocks/ETFs that caught my eye.

1. Wal-Mart ($WMT) - Stock broke above resistance two weeks ago to trade at the best level in 3 years. The pullback has been orderly and now WMT is offering a high reward-to-risk buying opportunity. The dividend yield is 2.6%.

1. Toro ($TTC) - The maker of farm machinery and small tools broke above resistance at $55 and rallied for 2 weeks before pulling back to the now support level. With a PEG ratio of 1.0 and a dividend yield of 1.6%, TTC look s like a nice value play.

1. iShares Corporate Bond ETF ($LQD) - The large basket of investment-grade corporate bonds has pulled back for 2 straight weeks after hitting a multi-year high. The pullback combined with the strong outlook for corporate bonds and the 4.5% yield make LQD very attractive.

Weekly Market Review

Stocks fell hard this week as more negative news came from across the pond. The fear that Greece is just the tip of the iceberg had yields on Italian, Spanish, and even French bonds soaring.

The fears led to the bulls selling and the bears re-establishing short positions. The S&P 500 fell by 3.8% and more importantly is back below the support zone I have been watching. The 1230 to 1250 area was resistance for two months before the breakout in October. In the month after the breakout the index was able to hold near the range, but the sell-off on Thursday was too much for the chart to handle.

The one bright spot is the 50-day moving average at 1207. If the index can bounce off the 1200 area it could be enough to spur a rally into the holiday. On the flip side, the news this weekend out of Europe has been shaky and thus we could see more fear selling into the long weekend.

For the most part we are looking to use the recent selling as an opportunity to buy into stocks and ETFs we feel are the best positioned for more upside into the end of the year.

Water Wars - Investing in Water

This week's issue of The Economist highlights the growing tensions between India, Pakistan, and China over water rights to several rivers.

Water is in high demand in the fast-growing region as there are more mouths demanding food and water. The water needed for farming is quickly becoming scarce in many areas within the region and therefore the battles have begun.

I highlighted the issue with water in my book, "The Next Great Bull Market", and I feel it will be the cause of wars in the future - unfortunately.

As far as investing in water, there are ETFs available as well as individual water companies.

The world's largest water company is Veolia Environment ($VE), based in France. The stock has been decimated recently as other issues are hurting the share price.

There are 4 water ETFs available in the US: $PHO, $PIO, $FIW, and $CGW.

Another angle to invest in the water story is through companies that own water rights or technologies to increase the amount of water in an area or lower the amount of water used for farming.

Head to www.amazon.com and pick up a copy of my book, "The Next Great Bull Market" for more water stock ideas.

Flat Market Equals Stocks Breaking Out

After 2 big down days for stocks, the major US indices are slightly higher heading into the lunch hour on Friday. The news out of Europe has been mixed, but with the negative news of the week already baked into stocks, the bulls have found a reason to buy.

Even as the major indices flutter around today there are a handful of stocks that are on the PFG WishList and a few that we own for clients that are breaking out today. Here are some of the leaders that we should be watching.

• Enbridge ($ENB) - Canadian pipeline company that pays a 2.8% dividend.
  
• Susser Holdings ($SUSS) - Operates convenience stores in 4 Southern states.
  
• Philip Morris International ($PM) - Sell tobacco products outside the US and pays a 4.3% dividend.
  
• Kansas City Southern ($KSU) - Operates railways mainly in the Midwest.
• Barrett Business Services ($BBSI) - Offers HR management to small and mid-sized companies and pays a 2.5% dividend.
  

Spain - You are on the Clock

The market took a beating last week when Italian 10-year bonds rose above a 7% yield. Overnight the Spaniards joined the Italians with yields over 10% - hitting a high of 7.15%.

This was short-lived as the ECB stepped in to buy up European bonds and the yield has fallen to 6.95% in the last half hour. The rally in European bonds has helped stocks in the US and on the other side of the pond. European stocks are still down 1%, but they have halved their losses.

US stocks are set for a small decline after being down much more earlier this morning. The Euro has also moved into positive territory after trading near a 6-week low. The action today will be important after investors gave up on stocks yesterday in late trading.

Some ETFs to Watch: Rydes Euro ($FXE), SPDR International Treasury Bond ETF ($BWX), iShares Spain ETF ($EWP), iShares 20+ Year Treasury ETF ($TLT), US Oil ETF ($USO).

Oil and Europe Weigh on the Market

Oil touches $100 per barrel for the first time in since July even as fears from Europe continue to weigh on global stock indices.

Playing the Oil Rush - My suggestion is to look at the price of oil (breaking out) and compare it to the sector, SPDR Energy ETF ($XLE). As oil rallies to new highs, XLE remains approximately 4% below its comparable high. This leads me to look at the Energy stocks as the better play right now. Even if oil falls back into the low $90's it will be high enough for great earnings for the Energy stocks.

Europe and Bond Yields - Yesterday the bond yields on many European countries bonds jump to spreads versus the stable German paper. We all know about Italy going above 7%, but then there is France with their highest spread versus Germany in nearly 2 decades. The newbies to that list include Austria, the Netherlands, and Finland - Spreads are increasing. This shows the true fear amongst the bond traders. Suddenly the US looks more stable every day.

Considering I was just in Finland yesterday, I can tell you firsthand that the economy does not appear too robust at this time. Across the sea in Tallinn, Estonia there was more going on than in the capital of Helsinki. More to come on what insights I came across on my business/research trip to Europe.

Recapping November so Far

We are halfway through the month of November and also at the mid-point of the fourth quarter. Through 2 weeks of November the S&P 500 is up a minimal 0.5% as it has picked up volatility on a daily basis - of course driven by news out of Europe.

Technically the US markets broke out of a very important trading range in October and for the most part it has held the breakout level and confirmed the trend will remain higher. With that being said I am leaning more towards the bullish stance heading into 2012.

The number one task on the to-do list is to build a small list of stocks and ETFs that could be potential buying opportunities in the coming days/weeks. Our WishList is well over 100 this morning and depending on the client we must remove a few from the list to narrow it down to the Top Candidates.

I may share a few of the stocks/ ETFs that we feel are our top candidates in the coming days, but as you can imagine that is what our clients and subscribers pay for.

I will share one stock with you that has been very strong and looks like it is ready for another breakout - Mistras Group ($MG). The company provides technology-generated solutions for the infrastructure that evaluates them. It currently has a PEG ratio of 1.3 and does not pay a dividend.

We do not own any shares of $MG at this time.

Market Recap

There is not much more for me to say in the blog today. If you read the morning and mid-day updates you will see how I feel. The market was clearly moved by Europe and in particular Italy. The next few days will hinge on the news out of the EU.

What makes today even more interesting is where the S&P 500 closed - 1229.59. I told you earlier in the day to watch support between 1230 and 1250 and here we are!! Watch tomorrow closely.

Off to give my thoughts on Fox Business Network - tune in at 5:10 ET for the exclusive interview.

FYI.... A few bright spots to end the day: $SUSS, $BKS, $VRTX, $DPL, $TDS, and $VSEA

Talking Markets on TV this Week

Tonight I will be on the "Willis Report" at 5:10pm ET on the Fox Business Network talking about today's market sell-off and what it means for individual investors.


I will also be on during the 6-8am ET hour of CNN on Friday morning live from London discussing how the markets are setting up for the last day of the week. I will be there speaking at the World MoneyShow if you happen to be in the area.

Mid-Day Update: France Next? and Top Sectors

With three hours of trading left in the session the major indices are down over 2% - and why??

Well today the answer is Italy. Even though the country has a primary budget surplus (balance before interest payments), they just happen to be next in line to get hammered by bond traders. The yield on the Italian 10-year bonds surged through 7%, the level many view as the threshold of how high rates can go without the country running into trouble making payments.

The elephant in the room was Ireland a couple years ago, then Greece, now Italy, and next is….. France!

Yes, the spread between French and German bonds hit 1.47 percentage points today (an all-time high since the Euro began), well higher than the 0.45 spread last year.

The iShares France ETF ($EWQ) is down 5% and the iShares Italy ETF ($EWI) is losing 8%. The related bond ETFs are also falling, the SPDR International Treasury Bond ETF ($BWX) is down 1.4%.

In the US the hardest hit sector is the Metals & Mining ($XME), down 5%. Even though every entire sector ETFs we follow are negative, the best performers are the Utilities ($XLU) and Consumer Staples ($XLP).

The level to watch on the S&P 500 is 1230-1250 range – and yep it is trading right in there now!!

Pre-Market Update

Stocks are taking a beating this morning one day after rallying 1% on news that Italian PM Berlusconi was stepping down. Today the news out of the country know for wine and food is on the other end of the spectrum. The yield on Italian bonds shoot above the important 7% level as fears of a default spread around the globe. The spread between the Italian bonds and the German bunds is at the highest level since the introduction of the Euro.

First it was Greece, now Italy, could France be next? The spread between the French OATS and German bunds spiked to their highest level post-Euro this morning. Is France really next on the list? Or are investors listening to their emotions and fear versus sanity? I believe the fear has gotten a hold of investors this morning and France just happened to be next on the list. In all seriousness we all know the European nations have issues, but with Italy, Spain, Portugal, Ireland, Greece, etc. already with high yields - France was simply the next victim.

ETFs to Watch: $EWQ $EWI $IEV $EUFN $BWX

My call heading into the open today is not to panic and let the market open lower (currently indicating down over 200 points on the Dow) and see how things look around lunch time.

One bright spot this morning is Gold. The SPDR Gold ETF $GLD is indicating it will open higher by about 0.5% after losing some luster yesterday. Today it is a safe haven play once again.

I will post more updates throughout the day.

Market Recap

Italy Spurs Rally

The rumor that Italy’s Silvio Berlusconi will step down after the country approved a new austerity bill was credited with the mid-day rally in stocks. In a matter of 30 minutes the S&P 500 rallied 15 points (over 1%) to retest the highs from earlier in the session (1271). Earlier this morning the yields on Italian bonds were spiking as fears increased that the country could be Greece 2.0. I beg to differ, but it is tough to argue with the bond traders as they are typically a smart crew – keep in my typically (not all the time).

The markets closed out the day by about 1% and once again the bears went back into hibernation as the news out of Europe continues to improve and the news in the US remains consistent. The US is not showing great signs of growth, but there is growth and after pricing in a recession it means there is still more room ahead for stocks into the end of the year. We will be buyers on most dips in the next coupe of weeks. Stay tuned for stock and ETF ideas!! Earlier today I highlighted the drug and utility sectors.

Oil Futures at Multi-Month High

Oil futures closed higher for the fifth straight session as the rise in the stock market boosted the outlook for the global economic backdrop. There were also heightened concerns about Iran’s nuclear program that added to the buying today. The December futures contract closed up 1.3% to $96.80 per barrel. This is the highest close for the most-active contract since July 28.

Here is a look at how oil-related ETFs have performed so far in the fourth quarter:

• SPDR Energy ETF ($XLU) up 24%
• Global X China Energy ETF ($CHIE) up 18%
• HOLDRS Oil Service ETF ($OIH) up 29%
• United States Oil ETF ($USO) up 23%
• SPDR S&P 500 ETF ($SPY) up 13%
  

The PFG WishList of Stocks

Each day I will go through a bevy of stock and ETF scans to find new ideas and some times eliminate possible buying opportunities. The scans include both fundamental and technical scans and some that combine the two.

As of today the list stand at 122 stocks/ETFs. The list ranges from Apple ($AAPL), which we already own some of, to IQ Global Oil Small-Cap ETF ($IOIL). As a client of PFG you are able to get our WishList at anytime and this is where the majority of stocks/ETFs we buy for clients originate.

To give you a quick peek inside the list, here are a few that are doing well today with the market in the red.

• Cardtronics ($CATM)
• MAKO Surgical ($MAKO)
• British American Tobacco ($BTI)
• Wal-Mart ($WMT)
• Cloud Peak Energy ($CLD)
  

Hedge Funds Lagging the Market

Even though October was the best month of the year for Hedge Funds, they continue to lag behind the overall market. The HFRI Fund Index that tracks over 2000 funds gained 2.4% in October. This may sound like a solid return, but the S&P 500 was up 10.9%. A major lag for managers.

The small gain was a reprieve after a 6.5% decline in the 3rd quarter, the fourth worst in history.

So if you think it has been easy for the "big hedge fund managers", think again. This market has been difficult for everyone involved.

Drugs and Utilities Looking Good

After scanning through the daily WatchList this morning there was a theme that I picked up on early. The stocks that were pulling back to support and had solid long-term trends were coming from two sectors - Drugs and Utilities.

The two drug stocks that were at the top of my list were Allergan ($AGN), the maker of Botox and breast implants and Celgene ($CELG), a biotech firm. The two companies are in healthcare, but are not very similar. But their charts are both very bullish - pulling back to support after hitting recent highs. This is the type of pattern we are looking for in a market that is now trending higher.

The two utility stocks were Nisource ($NI) and Centerpoint Energy ($CNP), both are diversified utility companies. The charts are almost identical to $CELG and $AGN - they are both pulling back from recent highs to support. The bonus with the utility companies is the dividends: $NI pays 4.2% and $CNP 3.9%.

I do own a small position in $AGN for clients and may be looking to add more or invest in some of the others mentioned in this post.