Morning Glory

I was buying yesterday, and I bought early this morning into the same household names, like:

Verizon Communications Inc. [[VZ]] , $31.63; AT&T Inc. AT&T Inc. [[T]] , $28.81; Pfizer Inc. [[PFE]] , $17.95; General Electric Company [[GE]] , $19.84; The Home Depot, Inc. [[HD]] , $22.27; and Intel Corporation [[INTC]] , $15.93.

American Express Company [[AXP]] also triggered a buy signal, although I haven’t pulled the trigger on it yet. Don’t ask why. I don’t know. My gut tells me that I shouldn’t.

My speculative play is Biovail Corporation (USA) [[BVF]] , $9.05 with a 16% divi.

As I mentioned previously and over the weekend, I expect the market to rally here. Stop thinking too much and buy while it lasts. Then sell when it doesn’t.

If you’re looking for some good dividend-paying stocks, look no further than the drug sector, especially within the large cap names.

With the S&P 500 yielding 2.78%, there are currently over a dozen stocks in the drug sector that yield more than that and almost a half-dozen that yield more than 5%.

Biovail Corporation (USA) [[BVF]] , $8.60, yield: 17.44%

Pfizer Inc. [[PFE]] , $17.71, yield:  7.23%

Bristol Myers Squibb Co. [[BMY]] , $20.55, yield: 6.03%

Eli Lilly & Co. Eli Lilly & Co. [[LLY]] , $33.82, yield 5.56%

GlaxoSmithKline plc (ADR) [[GSK]] , $38.70, yield 5.53%

Other stocks within the group with dividends at least over 3% are: Merck & Co., Inc. Merck & Co., Inc. [[MRK]] , AstraZeneca plc (ADR) [[AZN]] , [[PPH]] , Sanofi-Aventis SA (ADR) [[SNY]] , and Wyeth [[WYE]] .

All-in-all, today was like watching paint dry, but we need days like this from time to time.

The VIX has now fallen for the third day in a row, the Dow didn’t get poleaxed and the Russell 2000 was positive for the fifth straight day. Line upon line, here a little, there a little and pretty soon this thing starts to look like a rally.

I used today to continue to build positions in dividend payers like AT&T Inc. [[T]] , Verizon Communications Inc. [[VZ]] , Consolidated Edison, Inc. [[ED]] , and NSTAR [[NST]] . I also sold some covered calls on stocks. Anything to generate a little extra yield right now. 

I still believe we will see a rally this month. However, it’s magnitude and longevity is now in question, given today’s ISM numbers.

Be well, and have patience!

As of last Thursday, I’ve been long equities and cash. I’m out of my inverse ETFs and not hedging.

Last Thursdays readings showed that stocks are now performing stronger than cash or bonds on a relative strength basis. Also, the NYSE Bullish Percent rose to over 32% on Friday, which is an indicator that stocks are poised to establish a sustained rally. This is a lower risk entry point here, as the market has come off a bottom and has now seen a major shift in sentiment back over the bullish 30% line.

I don’t know how long this rally will last, but I do want in on it. Therefore, I’m pushing more chips back on the table and upping the ante.

One quick and easy way for the lazy is to immediately put on in a position in the double long ETFs.

Sectors:  Just about anything should work here, as I anticipate a broad-based rally. So many sectors have been beaten up and are due for at least a little bit of a recovery. 

Buy signals on [[ICF]] ,$51.61; [[XLY]] , $22.98; [[XLE]] , $51.25; and [[XLF]] , $15.53.   

Looking at individual stocks, the aerospace/defense group looks interesting with The Boeing Company [[BA]] $52.42 , BE Aerospace, Inc. [[BEAV]] 12.87 , FedEx Corporation [[FDX]] , HEICO Corporation [[HEI]] , Lockheed Martin Corporation [[LMT]] , Teledyne Technologies Incorporated [[TDY]] , and United Technologies Corporation [[UTX]] . I don’t normally invest in airline stocks, but these can be traded: AirTran Holdings, Inc. [[AAI]] , Alaska Air Group, Inc. [[ALK]] , Continental Airlines, Inc. [[CAL]] , Delta Air Lines, Inc. [[DAL]] , US Airways Group, Inc. [[LCC]] $10.14.

Updates later in the day…..

Posting all kinds of colorful charts, is not my cup of tea, being that I’m a “low-tech” kind of guy. It’s also Halloween, which is irrelevant to this discussion.

But for those of you who want to see an interesting phenomenon, compare the charts of the Nasdaq tech bubble to crude oil recently.

Even though eight years apart, if you “normalize” the starting year for the Nasdaq as 1988, and use 1996 as the start for the run up in crude, you will see a striking correlation (over 90% just eyeballing it).

Oil has now lost over 54% from the July peak.

Energy stocks have now lost almost the same amount as they did during their bear markets of 1980-1982 and 1973-1974.

If crude oil continues in a similar correlation to the Nasdaq bubble, it should settle in just under $50 a barrel.

Just for S&G’s, it would be interesting to compare the bubble patterns for different asset classes, to see if there is a general correlation in time and magnitude.

But, I’m out for most of the day and I’ll probably forget about all this. Off to pick up some silver bullets and holly steaks [sic]. I hate Halloween.

Nucor Corporation [[NUE]] broke a double top at $38. I bought shares and set my stop loss at $29.95.

Initial target is $53. Longer term target: $70.

It’s poised to break bearish resistance at $42, which is about where the 50-DMA sits. The reward-to-risk ratio on this stock is favorable at 2.12x and 4.54x, for the $53 and $70 target prices, respectively—based on my stop price. You can improve on that by setting a higher stop.

I’m scaling in with 1/3 of the money that I’m planning to commit to NUE, and will adjust my stop loss point(s) accordingly to maintain favorable risk / reward characteristics.

Nucor is the largest minimill steelmaker in the U.S., and has one of the most diverse product lines in the industry. It carries very low debt to equity (0.38), generates substantial free cash flow, and has a AA- credit rating from S&P. The dividend yield is over 5%.

However, this should be viewed as a stock to trade, since the outlook for the steel industry in the next 12 months is negative.

NUE has been beaten down and flat rolled from a 52 week high of around $83, but demand is coming back into the stock, as evidenced by the recent run up, and more recent breakout above $38.

Get some.

Disclaimer: “Get some” means do your due diligence before plunking down your bag of coins.