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

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.”

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

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

There are people who think that they can throw up a web page and that people will find them, and good luck too them – but it won’t happen. Any website that wants to make money needs to get optimized, and stay that way. Running and SEO campaign once or twice isn’t enough in this market: you need to consider long-term maintenance of your SEO.

For long term SEO maintenance to be effective, you need to constantly monitor the search engines algorithms, which can change very frequently. You also need to keep track of your competitors’
optimizations and adapt your strategy accordingly.

Always consider your website as an investment – you’ve put time, money and effort into it. Your investment needs to be protected, and the way to do that is SEO maintenance. This makes sure that your website is ranked high enough to bring you the traffic you need, and keeps the sales coming.

We’ve compiled a list of tips to help you with your SEO maintenance. To keep good rankings, you need to pay attention to how your site is doing. A few things to remember are:

1. Check on your pages regularly and make sure they’re still listed. Your listings are the most important part of your SEO work.
Whether the page is listed or not is vastly more important than what key words you have etc. After all, if you aren’t listed at all what good is it to optimize?

2. Monitor the listings every week or two to make sure your pages are displaying correctly and that there are no problems with your site. While your at it see whether you’ve risen, dropped, or remained constant as far as listings go.

Odds are that you will not remain constant, if you do remain constant you should consider this a small success as you have probably risen above other pages that were formerly above you while others from below you have surpassed you.

3. Watch for trouble, and fix it quickly. Don’t think it will correct itself – it won’t. Any missing pages should be checked out thoroughly. Chances are that the system has run into a problem, but if you don’t check it out you may very easily be wrong.
Always correct any of your mistakes as your mistakes can be very costly if they are not dealt with in a timely fashion.

4. Resubmit your site if you make major changes, but not for anything smaller. The most important time to resubmit your site is if you have recently changed your titles. Titles are very important in SEO and can deliver you with a completely new set of quality key words.

5. Create monthly ranking reports on your site, to see if any changes need to be made.

6. Keep building your link popularity.

7. Keep submitting your site to the big directories, as spiders use these as a starting point.

8. Watch your competitors and the methods they use. If they start trying to cheat, report them straightaway – it gets them out of your way.

9. Set goals for yourself. Write out an SEO maintenance plan, and if things change then make sure to set new goals and stick with them.

10. Stay up to date on the latest SEO information.

11. Check your site’s performance – if you’re not monitoring your traffic, find a tool to do it now.

12. Maintain a solid plan for dealing with your site’s growth.
Don’t panic if you see a blip.

This might seem like a lot of work for a small website or company, but you need to do it to help your website grow. If you don’t have growth, you have nothing. No business wants to stay where it is forever, and SEO is a good way to get more business and stay in the race.

Do you remember why you started a website to begin with? The chances are you wanted to make money. Your website is a business, and you need to run it like one. Don’t stress too much over the work involved: it’s only a few hours each week in total, and you can do it whenever you want.

To your success!
Andy Huang

MSN may be the most complete search engine out there. It seems to me that every web site that I look at in order to find the number of pages that it has listed has the following fallout: MSN has the most results, Google comes in second, Yahoo! comes last. Other search engines will generally fall somewhere between Google and Yahoo!

This is a result of some very extensive work by the team and MSN.
The beautiful thing about MSN is that you can find results for just about everything. If you can’t find it at Google, can’t find it at Yahoo! head on over to MSN and you’ll find something even if it is nothing more than a forum posting.

It’s still quite easy to figure out what you need to do to your site to rank highly at MSN. MSN generally indexes every page that it can find anyway and is a pretty handy search engine in that it is the third most popular out there and it is also a nice one to foreshadow what may be happening to your listings at Google in the not too distant future.

They’ve recently changed their algorithm, though, and everyone wants to know how it works. Well, here are some answers.

MSN’s ranking algorithm analyzes factors such as page content, the number and quality of the sites that link to your pages, and the site content, and keyword relevance. Keep in mind that there are lots of differences between MSN and Yahoo and Google.

All search engine algorithms are similar, but little differences can have big effects when it comes to SEO. The nice thing about MSN is that its algorithm isn’t as strict as those of Yahoo! and Google and is therefore a very powerful SEO tool in and of itself.

Relevant themes and topics are very important to MSN optimization, and you should also consider keyword density – remember, no keyword stuffing, as MSN explicitly says this is against their rules. The general rule is that you should make sure that there are key words in your title and then follow the basic platform for key words.

Put a few in a header at the top of your page; scatter a few throughout the page including several in the first and last paragraphs; finally, put a couple of links that contain key words towards the bottom of your page. These steps are common for all search engine optimizations and should be a set process for every page that you attempt to optimize. Complete this work before attempting any other SEO procedures as this is the basis of SEO.

Links are important, and maintaining good incoming links with your keywords will get you good rankings. It’s very important to get as many natural links as possible – providing interesting and useful content can make this happen for you with no extra work at all!
You’ll seem completely natural to MSN’s spider. These natural links are the basis of link SEO.

If you are trying to attain links you should first attempt to attain these links from pages that would naturally link to you but may not have heard of your site yet. After you have done this you should go to directories and other sources of links that may not be as obvious. First things first, don’t mess up your search engine listings because of a bunch of bogus links from unsuitable, questionable, or malicious locations. These links can and will get you banned.

MSN doesn’t allow you to pay to boost your site’s ranking, but they do offer advertising. This advertising will allow you to pay a certain amount for links in their “sponsored links” boxes on the top and sides of each results page. The value of these links depends on the demand for them. At any particular time a sponsored link could become very expensive by somebody bidding an outrageous amount for a link, or by a large number of people trying to overwhelm a niche market.

MSN doesn’t update often, but when it does it often removes links it believes to be out of date, so make sure you change your site occasionally.

One thing that MSN likes a lot is well-formed HTML code, with closed, valid tags. Watch out for broken links, and make sure you have static URLs that don’t move around, and contain your keywords.

Here for your success!

Andy Huang

This has been a tough week for the market. We traded at a new two-year low and financial stocks lead the decline. There weren’t many earnings or economic releases to cloud the price action and it was easy to spot panic selling.

Friday, concerns over Freddie Mac and Fannie Mae are weighing on the market. These “government-backed” agencies will likely be bailed out and stockholders will be left holding the bag. In other news from the financial sector, rumors that PIMCO has halted trading with Lehman spread quickly and the stock plunged to $14. Fear surrounds the financial sector and investors are worried that the crisis might spread to traditional loans. Next week’s earnings will be dominated by financial stocks. Last quarter, worst-case scenarios were “priced in” and financial stocks rallied after posting dismal results. In the first chart you can see the April decline and rally.

Foreclosure rates spiked by 50% in June (year-over-year) and one out of every 500 homes is now in default. A big round of mortgage resets is taking place right now and higher interest rates could place even more pressure on homeowners.

The Fed has been preparing the market for tightening. A quarter-point rate increase has been priced into September bond prices and another quarter point has been priced in for October. Next week, the FOMC minutes will be released. If they indicate that inflation is the primary focus, the market will have a negative reaction.

Energy prices are placing a huge burden on our economy and they just won’t go down. This week, oil inventories showed a much larger than expected draw. The pullback in oil prices was brief over the last week and today we are right back up to $145 a barrel.

Next week, we will get the CPI and PPI. I am expecting to see an increase in the CPI. To this point, the PPI has been climbing faster than the CPI and companies have been absorbing higher costs. This will hurt profit margins this earnings season. Many companies have started to pass those costs on; however, they have cut back on production because higher prices are reducing the demand for their products.

The unemployment rate continues to climb and jobs are the cornerstone for this economy. Last week’s Unemployment Report was dismal. We lost 62,000 jobs in June and the numbers for April and May were revised upwards by 50,000. Fortunately, initial jobless claims came in better than expected this week. It is only a one-week number and I would not give it too much weight.

GE announced its earnings before the open and they met expectations. Unfortunately, cautious statements about the future are keeping a lid on the stock. This multinational conglomerate is representative of how earnings season should play out. Soft guidance worries me and profit margins for some companies could suffer since they have not passed on higher costs.

I am long-term bearish, however, I believe we will see a capitulation low soon. If you look at the second chart, you will see that the air pockets we experienced last month are gone. In the last week, we have seen volatile, two-sided trading action and prices are starting to compress. The bulls and the bears are fighting it out and we might be getting close to support. In order for us to find that capitulation low, the market must freefall. An intraday reversal with follow through rallies for two days would mark a significant support level. We might see that low and reversal unfold today.

I doubt that traders will want to hold stocks going into the weekend ahead of earnings next week in the financial sector. Fear is influencing trading and we could see a big drop today. The reversal would set us up for a bounce next week on the actual earnings releases. If you are going to trade this move, you need to have your stocks lined up. Look for situations where support has been established, the stock has maintained a long term uptrend and the stock has bounced during rallies. Biotech looks solid here.

Remember, this is a low probability trade. I am not looking for a sustained rally. Conditions (inflation, interest rates, unemployment, and earnings) are much worse now than they were in April and this bounce will be brief. As soon as the shorts cover, it will be time to get bearish again.

The better play at this juncture is to lighten up on short positions, wait for the bounce and then re-enter.

A whopping $3000 profit this week during a shaky market.