Small Cap Network Blog

This would normally be the point where the RoadRunner or some sort of ACME-brand device somehow trips up the coyote…just when it looks like the goal is within reach. But, this time may finally be the time we don’t see it happen.

What am I talking about? The U.S. Dollar Index is on the verge of hitting new multi-month highs. If it does, oil prices will continue to be pressured lower, inflation (for Americans) will sink at least a little, and the United States may help bleed off some of its current financial pressure. (The ‘too good to be true’ scenario is the reason I’m worried.)

My optimism is two-pronged.

First, take a look at the horizontal dashed line at 74.30. That’s where we peaked in June, and that’s where we closed on Wednesday. If we can make it past that level, it will be the first time in years the sawbuck has made a higher significant high following a higher significant low. If we can just inch past 74.30, that could go far in keeping this rebound in place. By the way, that lower purple line is a resistance line that no longer applies…we broke past it in June.

Second, the green moving average line is a 200 day average - the grandmother of all technical indicators. We’ve not been above it since 2006, though it has been a bearish reversal point several times. We technically closed above it on Wednesday, but I’d like to confirm that crossover with a higher close.

Now take a look at the weekly chart to see where the upper resistance line fits in. If we can sail past that line too, I’ll expect a full recovery from the U.S. Dollar…eventually Unfortunately, that’s llikely to be accompanied by higher interest rates, but higher rates and a stronger dollar is the lesser of two evils at this point.

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We made a stock pick of Tenet Healthcare (THC) several months ago, expecting the very thing we saw….smaller losses, and eventually, a return to profitability. Well, Tenet did their job - they lost only $15 million last quarter, or 3 cents per share. In the same quarter a year ago they lost 6 cents per share. Yet, the stock took a pretty hard hit, sinking from $6.23 to the current price of $5.49.

Actually, I know what it was….analysts were looking for a loss of only 1 cent per share. God forbid you don’t meet analyst’s expectations; clearly they know everything. (Yes, I’m being a smart-%$#*)

Whatever. This was never a trade. This was an investment, and we’re looking out the next several months…not the next few days. These cases where investors ‘buy the rumor and sell the news’ are best just ridden out, since they’re usually temporary.

Those same analysts are still expecting earnings of 1 cent per share for 2008, and 10 cents per share in 2009. They still don’t have a lot of credibility in my book, but if they’re anywhere close it’ll be a huge turn-around for Tenet. That was the whole point of tapping into the chart, which by the way, is still up by 34% from where we got in late last year.

So, we’re not flinching here. The uptrend is still technically intact, and this volatility is nothing new. Let’s stand pat.

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