This past week the markets leaped in both directions and this time the volatility worked against us…

The only good thing you can say about getting stopped out is that our losses were limited and now we’re on the sidelines safely back in cash. If we are going to bet with the opportunity of winning the tide is occasionally going to go against us—the key is to learn and improve.

One of the things I’ve noticed is that trying to time a reversal—like this past week on the XLF and the USO–is much more demanding than just jumping on board an existing trend and riding it. However when your timing on the reversal works the rewards can be greater.

With two losses this past week it’s important that we get positioned for winners this coming week—which is why our two new plays have extremely high odds of making us money no matter which way the market goes. You’ll see what I mean when you take a look and I’m really excited to show them to you—but before we do let’s take a good peek at…

WHICH WAY THIS MARKET IS HEADED

As you can see we’ve got two different stories going on right now. The SP-500 is weighed down by the financial sector and the recent drop in oil prices has brought energy down as well. Energy and the financials are by far the two biggest groups in the SP-500.
The Nasdaq on the other hand rallied +30 points on Friday bouncing off of its new uptrend support line. This is a bullish chart even after the mid-week drops in AAPL, RIMM, GOOG—and those stocks have already started to recover.

The bounce we saw at the beginning of last week can be attributed to relief that earnings have been better than expected–over 45% of the S&P has reported so far and 75% of those reporting beat estimates.

That is pretty good news on the surface but keep in mind earnings have still declined 17.8% for the quarter. And if you eliminate the energy sector earnings have fallen a very bearish 25.8% for the quarter.

And in spite of the rally in the XLF early last week the financial sector was expected to report an earnings decline of -60% but instead the bottom line dropped a mind-numbing 90%. Guidance has also been worse than normal with an almost unanimous view across all sectors that Q3 and Q4 will see lower profits. It is not surprising that the rebound failed on Thursday.

Lowered forward guidance brings into question the whole “the bottom is behind us” mentality that is currently keeping a bottom under share prices. Probably the biggest key is the labor market which so far has held up pretty well. We’ll get another look this Friday when the Labor Department reports on employment in July. In June, nonfarm payrolls fell 62,000, while the unemployment rate held at 5.5%.

Credit Suisse analysts expect a July decline in payroll jobs of 75,000. They forecast continued deterioration, and cited indicators such as a trend in initial jobless claims remaining at elevated levels and June’s decline in the ISM Non-Manufacturing Employment Index.

Plus the financials have not hit bottom regardless of any temporary jump in the XLF. S&P placed Fannie and Freddie on negative credit watch which is a pretty good indication they will lower their rating soon. With mortgages failing in record numbers Fannie has already raised $7 billion in capital and Freddie $5.5 billion. The government has pledged to help them and the Fed said it would open a special lending option to provide further support. Congress is expected to pass the housing bill including guarantees of up to $100 billion for the pair. Over the last year the government–along with Fannie and Freddie–have already put $1.43 billion of support into the mortgage market. As a result of the subprime crisis banks have already written off $880 billion and expectations are for that to climb to $1.5 trillion by the end of 2009—so by those estimates we’re little more than half-way through this mess.

One big indication that banks are still having problems is the Fed reported that bank borrowings at the discount window rose to an average of $16.38 billion per day in the latest week–the highest level ever. This is a strong indication banks simply cannot raise money in the private sector which means the credit markets are still locked up.

The Fed seized two more banks after the close on Friday and immediately sold them to Mutual of Omaha Bank. The two failing banks were the First National Bank of Nevada with assets of $3.4 billion and $3 billion in deposits. The second was First Heritage with assets of $254 million and $233 million in deposits. The FDIC said the estimated cost of the transactions to its insurance reserve account would be $862 million. Expect more bank failures to come.

In spite of a pretty serious situation there are signs of hope. The Durable Goods report for June rose by +0.8% when analysts were expecting a decline of -0.7%. This was the second month of positive growth. Unfilled orders also rose and the orders to shipments ratio is near its all time high. The inventory to shipments ratio is at its highest level since 2001. This was a very positive surprise.

Plus Consumer Sentiment for July spiked to 61.2 from June’s 56.4 reading–the first move higher since January. Analysts credited the tax rebate checks and a firming of home prices in many states. A reading of 61 is not great but it beat the tar out of expectations in the low 50s. Current conditions rose +6 points to 73.1 and expectations rose +4 points to 53.5. Inflation expectations remained high at 5.1% but appear to have eased somewhat from the first July reading at 5.3%.

The third positive report on Friday was the New Home Sales for June. New sales totaled 530,000 units–much better than the 501,000 analysts expected and better than the previously reported 512,000 in May. However, the Census Bureau revised the May numbers up to 530,000 as well as the April numbers to 540,000 from 520,000. This surprising improvement in sales was super news for a horribly beaten down sector. New home prices rose slightly to $237,871 from $231,087 in May for a +2.94% gain. Months of inventory decreased slightly to 10.0 from 10.4. Sales in the second quarter declined only 17% over Q1 compared to drops of nearly 40% in the prior three quarters.

The bottom line is we have data coming out heavily in both directions. If energy prices continue to slide for a few more weeks we could see more optimism in the consumer sector. However this economy is still in tough shape–the index of leading economic indicators, which attempts to forecast turning points in the economy–declined 0.1% in June with six out of the ten indicators falling. Until we see some growth this economy has not bottomed.

However the keys to market direction this week will still be earnings with nearly 750 companies reporting. This will be the heaviest week of the Q2 cycle although most of the largest companies have already reported. Earnings quality will continue to decline as we move farther into the cycle with the smaller companies reporting. This will also be a heavy week for energy earnings and those should be very strong.

So we’ve got the SP-500 looking bearish—although it may be helped by energy this week—and the Nasdaq looking bullish. The banks are still in trouble and crude has been falling—with so many counter-trends…

Trade with close stop next week everyone.

Andy Huang

Bookmark to:

Hide Sites

Here is a tip of the day from Google Adwords Insiders

“We all know the importance of measuring the impact of your ad campaigns. That’s why, today, we’re discussing the term conversion from the AdWords Glossary, which is defined as follows:

When a user completes an action on your site, such as buying something or requesting more information.

In AdWords, a conversion occurs when a user clicks on your ad, then proceeds to complete an action on your web site that you deem valuable, like a purchase, registration, or sign-up. You can track actions like this on your web site by using one (or both) of the tools we offer:

1. Conversion tracking: A tool for measuring conversion metrics for your campaigns.
2. Google Analytics: A more robust tool that tracks not just conversions, but also gives insight into how your web site visitors found your site, how they navigated through it and how you can improve their user experience — all things that ultimately help you improve the ROI of your web site.

Both conversion tracking and Google Analytics are free tools and are great ways of ensuring advertising accountability and making smarter online advertising decisions.

Learn more about setting up conversion tracking for your AdWords ads, and signing up for Google Analytics.”

Bookmark to:

Hide Sites

As the search engines continue to improve, your SEO needs to as well. A ranking tumble for your website can be devastating. You need to recover as soon as possible - it’s not the easiest task in the world, but it’s not as hard as you’d think.

The most important thing to keep in mind is that you cannot panic.
You have to keep working on your SEO projects and you need to remember that  listings and rankings come and go spiratically at times but that search engines won’t let you down if your site is useful.

The experts’ advice to websites that have lost their ranking is usually to start over, following current and good SEO information.
Look over your entire site and insure that you haven’t done something that would have caused this sudden change in listings and rankings.

Normally if you haven’t done anything wrong, your links will slowly begin to reappear again especially if you have a nice sized linking network that is listed well.

One step that you can take is to narrow your site’s focus and work hard on one or two keywords. It doesn’t seem like a lot, but it’s sufficient. Make sure each page of your site includes good enough navigation that someone can get anywhere from anywhere else, and make sure you do this with plain ‘a href’ links, not fancy JavaScript.

If you are using frames, now is a good time to dump them. You can replace them with scrollable <div> tags and have similar looking pages that search engines can index more easily. The most important concept in recovering from a ranking tumble is to perform damage control.

Any SEO operation that you have performed that could be deemed as controversial you should immediately disband. If you are lucky, your web site hasn’t been permanently deleted from any important search engines.

Once you have performed all of the local damage control that you can it is a good idea to insure that your file sizes are relatively small. Make sure that you don’t have any excessive images or large external files that will cause a search engine to give up on its attempt to index you. Make sure that you haven’t created a linking loop that Google’s bots can’t find a way out of.

Links are very important to your website’s rankings, and you need to consider finding good link partners to improve your targeted traffic and keyword relevancy. If you have a decent corp of link partners already you can request that they move their links to your site to a higher traffic page for a short period of time so that you can get re-indexed.

They may be willing to do this if you remind them that the links from your site to theirs are more valuable once you’ve been indexed than they are when you are unindexed.

If you submit to the search engines properly the first time and you have a good SEO maintenance plan, you’ll only need to submit your site once. You might consider hiring someone to keep your site regularly updated, as regularly-updated sites rank higher. If you have recently suffered a ranking tumble, use Google Sitemaps to get your page back into Google.

This is the fastest method available and is the strongest damage control that you will be able to perform.

Build great content around your keywords or phrases. Remember that content is King for both visitors and search engines. Your content must be extremely relevant to your key words at this point. You don’t want to try to pull a fast one because this was probably the reason that your ranking tumbled in the first place.

Remember: When you are recovering from a rank tumble, you are at the search engines’ mercy. You cannot possibly recover if you try to do anything that doesn’t seem right to the search engines.

Submit your website properly to each search engine and directory by hand, making sure you understand each site’s rules. Using automatic submissions is just not a good idea. There are so many things that can go wrong and you just don’t know what goes on behind the scenes.

Work by hand and if possible, contact the search engine or directory and ask them if there is a specific reason that your site was suddenly removed. Ask them if there is any action that you can take to make up for any mistakes that you may have made.

Get as many one-way links as you can from directories or pay to have good websites link to yours. One-way links are better than two-way ones.

Monitor your results regularly to find out what’s working and what’s not. Don’t be afraid to make changes.

Keep all these things in mind and you can recover from a rankings tumble easily.

Andy Huang

Bookmark to:

Hide Sites

DMOZ is the directory where Google starts when it crawls the web, so getting listed in DMOZ is good for you. SEO with DMOZ starts with selecting the search terms you’re targeting, and then finding a directory category that includes them. This can be a time-consuming and difficult task. You’ll often find lots of matching categories.

The trick is to find the most precise category and, if possible, a directory that does not have too many other competitors in it. You can hit a niche market simply by being placed in a category that has few competitors. DMOZ, of course, makes the final decision as to where your website will be located.

Don’t choose a category that’s too general for your site, as it might just get removed later on. Make your site stand out by using a unique, catchy description - one for people, not search engines.
Remember, you will probably get a pretty hefty number of hits from DMOZ itself.

When you are trying to get listed in DMOZ, don’t worry about trying to get a nice listing in the search engines that crawl here, worry about getting a good listing here. The search engines care more about where DMOZ lists your site than what you have to say about your site in your description; DMOZ cares more about how accurately described, how interesting, and how often visited your site is than where you are listed in the search engines.

A third feature to be aware of is the PageRank of the category, and the number of listings on the page. You’ll do better with more specific, smaller categories, especially if they have dedicated editors.

A small category with a high page rank is the best situation that you can run into. Remember that a page’s page rank is split between the number of links that go out from it so if you run into a page with a rank of seven with seventy-five out links you probably aren’t as well off as a page with a ranking of five and ten out links.

This is a constant for Google Page Ranks, not an exception for DMOZ. Your targeted keywords should appear in your site’s description, towards the beginning. Don’t put them towards the end, as the editor might chop them off to save space!

Remember that once a site is submitted to DMOZ, it’s very difficult to update its description. Give it a few days to think it over before you submit it, and be more vague about websites if you think they might change. Don’t write descriptions that could become out of date easily.

If you are running a monthly special you shouldn’t include this in your description unless you say something to the extent of “low price sales monthly.” If you suddenly decide that you are going to completely transform your site into something completely different you will have huge problems with your listings. Keep this in mind before you start building your site if there are possibilities that you will choose to reuse the domain that you have purchased.

If you absolutely have to resubmit, you can submit a blank form that informs the editor of your former web site that your site has changed drastically and that you want the old listing deleted. From there you can submit a new form to any category (or categories) that you need to be listed on with an updated title, description, and key words.

Multiple Listings for the Same Site.

Some editors allow multiple listings for submitted sites, especially if they’re good quality sites that span multiple DMOZ categories. It’s always best to request multiple listings - you can use the text box on the submission page to justify yourself.

If you find a good category for a niche inform the editor as to whether or not this will be a specified category and then search for any other categories that are related. You may get a good deal of hits from your niche, but it may also be a small market for a reason.

If there aren’t that many people who would be utilizing that particular category, you may want to submit to other categories that will provide you with more substantial results.

Being Patient.

Follow the submission guidelines and don’t exaggerate. If no-one seems to be reviewing your site after a week or so has gone by then you could post a question. Be patient, though: most of the DMOZ directory is edited by hand, and they’re very busy. In many cases it can take as long as three months to get added.

DMOZ simply wasn’t prepared for the sudden importance it had forced upon it. One of the biggest problems with the directory is that each site must be looked at by editors, so your site might not get indexed for no reason other than the editor not liking it, or even just losing it.

To your success!
Andy Huang

Bookmark to: