It was brought to my attention that some of you may not understand my discussions of overhead resistance in evaluating the current market conditions.

First, on a Daily chart of the DOW (for example) with corresponding 20, 50 & 200-Day MA’s set on your chart “studies”, you will see clearly that the DOW broke through “support” on increasing volume on 1/21 & 1/22.

Since that time, all of these trends (20, 50 & 200-Day MA’s) now represent overhead resistance to the prospect of the DOW moving higher, especially given that the controlling trend… the 20-Day… has rolled over and has broken below the 40 & 50-Day MA’s.  This type of action is called a bearish crossover and historically indicates sustained short-term (ST) weakness.

From a Weekly perspective, the DOW has been in a bearish pattern since the Week of June 23rd, 2008 when it broke below its 200-Week MA and has not made a single attempt to break back above this longer term trend since that time.  In addition, 2 weeks ago the DOW broke below its 20-Week MA and now that trend appears to be rolling over to the downside.

From a monthly perspective, since the DOW broke back above its 200-Month MA in June of 2009 it climbed for 6 straight months… however… since breaking back above its downsloping 20-Month MA on relatively weak monthly volume, the DOW has weakened as it has approached its downsloping 50-Month MA, without making any significant challenge of that long-term (LT) trend, which currently resides at roughly 11,150…

All of these indications has caused us to conclude that we may be headed for at least a ST correction without any clear catalyst to drive the averages higher.

If you have any questions please send those along.

Coach BD

RMBS

Today RMBS announced Mobile XDR deployment.  This announcement is almost certainly related to the Samsung settlement and a clear indication that they have indeed signed a new license with Samsung for deployment of XDR in Samsung mobile phones and devices.

http://www.investorvillage.com/mbthread.asp?mb=3666&tid=8563279&showall=1

Coach BD

Friday offered a glimmer of hope in an otherwise bad market.  There was a high volume reversal ending the day at the top of the day’s range on all of the major averages.

However, until we break back above the ST trends which are in the process of rolling over, we will be happy to be observers, with 2 exceptions…

If the market rallies back up into resistance and fails to breakout we will likely initiate positions on the short side using the QQQQ’s and a corresponding VIX hedge which we intend to sell monthly premium against for income generation.

We have used the VIX successfully as an effective portfolio and market hedge over the years and the current market conditions appear to be setting up nicely for a VIX entry.

Coach BD

RMBS

Many have been disappointed by the price action of RMBS since the announced settlement with Samsung.  Granted, this has been very puzzling… however, we believe there is a huge disconnect between the stock price and the importance of this settlement.

First, Samsung is THE Gorilla of memory, just as Intel is THE Gorilla of processors… but… Samsung’s product line is so diverse that we believe everyone is grossly underestimating the enormity of this deal.  This settlement and new partnership puts RMBS into virtually every device on the market that uses advanced memory.  So while we will not know exactly what the terms of the new licenses are, we suspect as revenues begin to show up on RMBS’s balance sheet, investors will be very pleased.

Additionally, this agreement puts tremendous pressure on ALL of Samsung’s competitors to acquire RMBS’s superior memory solutions or face being left far behind the already clear market leader.  The time for holding back RMBS’s innovative technologies through collusion and price-fixing have ended.  The MM’s must now innovate or die… it’s that simple.

As for our projections of RMBS’s value via market cap… there are an almost endless number of prognostications of RMBS’s worth given the Samsung settlement and educated guesses about forward licensing rates.  We simply used the most conservative of those estimates for the combination of cash and EPS going forward @ $5.00/share, with a forward P/E of 20 on the low end, to 40 on the high end, which for a high growth company, is fairly common.  Those are the figures that brought us to our value estimates of $10 - $20 BILLION dollars over the next 2-3 years.

Coach BD