Market Levels & Another MANDA Addition

Index support levels
Well, it looks like the VIX is continuing its uphill march closing over 80 today, up almost 9%. As the VIX shoots up, so plummets the market. Major market averages closed down 5-7%. The only intelligent thing I can say from looking at their charts is that from a bullish standpoint they all completely suck…and it appears that they are going continue to suck. (“Suck” is the financial technical term for really really really awful.)

So, what are the next support levels?

Unfortunately, pretty far away. In fact, I can’t even give you a number on the Dow Industrials and the OEX (S&P 100) because they’ve both surpassed their ten year support levels and I don’t have data going back any further. The good news is that I can give you support levels for the other indices:

S&P 500 ($752): Minor support is at 670. The next major support level is at—no, you don’t want to know. (Okay, it’s at 470.)

Nasdaq ($1316): The Nazzie is right on major support. Next stop is 1175, but I do think we could see it brush 1000. Remember Nasdaq 5000?

Dow Transports ($299): Minor support levels are 285, 250, and 215-220. Next major support is 200. Let’s hope it doesn’t come to that.

What does this all mean?
It means that you should be out of all your losing long positions and either be in cash or in short positions. (See previous blogs for shorting ideas.)

Another MANDA Addition
I don’t know how I missed this one, but SM&A (WINS) is a management services company that provides business capture and proposal development services along with post-award risk management and profit maximizing to the homeland security, aerospace, information technology, and engineering industries.

On October 31st, the company announced a proposed merger agreement with Odyssey Investment Partners, a privately held middle market private equity firm. Terms of the all-cash deal is $119M which translates into $6.25 per SM&A share.

According to the company press release, management is delighted at the offer which is subject to the usual anti-trust regulatory issues and shareholder approval. It also may solicit other takeover offers during the first 45 days. The deal is being financed by Caltius Mezzanine and this is the only thing that really bothers me about this deal. Caltius finances deals in the $5-$75M range so I’m wondering where the extra dough is coming from…?

BUT…the stock has held up pretty well considering the market climate and I don’t think that Odyssey would be dumb enough to make such an offer if it knew it couldn’t raise the cash. The deal is expected to close late this year or early next year.

The stock is going into the MANDA portfolio today at a price of $5.61. This gives a yield of around 11.4% on the trade.

Disclosure: I’m going to purchase the stock in my own portfolio if it trades at or below $5.55.

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