Thursday Thrust – Enough to Break on Through?
by Phil - May 24th, 2012 8:28 am
I've listened to preachers
I've listened to fools
I've watched all the dropouts
Who make their own rules
One person conditioned to rule and control
The media sells it and you live the role
Mental wounds still screaming
Driving me insane
I'm going off the rails on a crazy train – Ozzy
Wheeeee, that was fun!
We called for a "Whipsaw Wednesday" and it doesn't come much more whipsawed that that. Fortunately we stuck with the plan from my morning post to take the money and run on our short plays and we even pulled the hedges off our $25,000 Portfolio, leaving it 100% bullish at 11:11 in Member Chat.
That left us a little nervous for the next hour but, of course, we had a plan for that too and, at 12:27, I put up a chart of the our indexes over the last 5 days saying: "Note our lows of last Friday – Those are the lines we need to give up at if we fail them!"
That's a very important point about aggressively trading – it's OK to pick a bottom and flip bullish, but ONLY IF YOUR BOTTOM HOLDS! The biggest problem traders have is they guess a bottom (1,300 on the S&P was ours) but then, when their premise fails – they FAIL to give up on the position. This is much like saying in the morning that you don't think it's going to rain – then having breakfast and seeing it pouring with rain outside – and refusing to take an umbrella because you didn't think it was going to rain (see "The Microwave Oven Theory of Behavior" for more on this subject).
Here was the chart we looked at at 12:27 in chat:
Things were not looking good, were they? Remember, we had gone bullish on that first pause and failed to hold that line so the first thing we had to do was make a new plan — just in case. If you don't know EXACTLY what you are going to do "just in case," you are going to let yourself get shoved around by these crazy markets. We had laid out our Just in Case plays in the Morning Alert at 9:57 with three aggressive hedges to…
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DiggSector Detector: New “Grecian Formula” is making us all gray
by Sabrient - May 24th, 2012 2:14 am
Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Despite the fact that U.S. equities are well-positioned and well-supported to go up, once again it is the headlines out of Europe—especially Greece—that are scaring off investors. Some are saying that it is now likely (and even desirable) that Greece will default on all its sovereign debt, withdraw from the euro, and severely devalue its domestic currency (Drachma?). This will allow them to operate a balanced budget while pumping cash into growth initiatives, rather than suffer the ravages of Germany-mandated austerity.
Some say, so what? Greece makes up only about 2% of the Eurozone’s overall economy. Nevertheless, you might say that this new “Grecian Formula” is creating the opposite effect to the men’s hair product, i.e.., rather than losing the gray we are all getting grayer from the stress of it all—especially the banks holding all that Greek debt. The new Greek elections are set for June 17, which will tell us much about how this all resolves.
On Wednesday, Germany sold about $5.8 billion worth of 2-year zero coupon bonds with an effective yield of virtually zero. In other words, investors are buying them simply to preserve capital, i.e., a return of their principal rather than trying to seek any kind of return on their principal (and risk losing it). While Spain and Italy have to pay increasingly higher yields on their bonds, Germany’s stability allows them to receive free money from the investment community. And Greece, you might ask? Its 1-year bond is yielding over 1,100%.
As the euro continues to fall against the U.S. dollar, U.S. equities suffer, even though recent U.S. economic data continues to improve. Even housing is getting in on the upswing. And of course, although the latest stimulus program, Operation Twist, is set to end in June, the Fed has promised to stand ready to provide all liquidity required to keep the U.S. economy functioning. Nothing beats free money. But still, investor worry about global economic dominoes falling prevails.
Let me make a brief comment on the latest Wall Street boondoggle—also known as Facebook (FB). Of course, we all know that it is a terrific destination with a huge and rapidly growing following of loyal users. Surely there will be a way to continue growing revenues without chasing away their legions of fans. But the fact…
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Sabrient Risers – 5/24/2012
by Sabrient - May 24th, 2012 12:00 am
Top 5 Risers |
||||
| Stock | Rating | Analysis | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| KRO | STRONGBUY | Kronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant. | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
| URI | BUY | Projected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected. | ||
| NCS | BUY | NCI Building Systems has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
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AT&T Weekly Puts In Play
by Option Review - May 23rd, 2012 1:55 pm
Today’s tickers: T, FXE & OI
T - AT&T, Inc. – U.S. equities are on the decline as Europe’s woes once again take center stage. Shares in AT&T, down 0.90% at $33.24 this afternoon, are faring better than most of the other Dow components so far, though options activity on the wireless carrier suggests some strategists are bracing for further declines ahead of the long weekend. Traders exchanged more than 6,800 puts at the May 25 ’12 $33 strike against open interest of 646 open positions, and appear to have purchased the bulk of the volume at an average premium of $0.17 apiece. Bearish positions in the $33 strike weekly puts may be profitable at expiration should shares in AT&T settle below the average breakeven price of $32.83.
FXE - CurrencyShares Euro Trust – Bearish positions initiated yesterday in FXE options are worth far more on Wednesday as the Euro, and of course the Euro Currency Trust that mirrors its performance, continue to slide on fears Greece may leave the euro. Traders betting on further weakness in the currency on Tuesday picked up around 1,000 of the May 25 ’12 $125 strike puts for an average premium of $0.16 apiece. As of Wednesday afternoon just before 12:30 p.m. ET, these same contracts cost $0.60 apiece, or nearly four times as much. Overnight profits are also available for those effectively taking a short position in the currency on Tuesday. Buyers of around 1,000 deep in-the-money put options at the $127 strike for an average premium of $0.71 apiece yesterday could currently sell those contracts at $2.10 apiece for a net gain of nearly 200.0% on the position. The FXE currently trades 0.96% lower on the day at $124.96 as of 1:10 p.m. in New York.
OI - Owens-Illinois, Inc. – The maker…
Whipsaw Wednesday – You’re Lucky They Don’t Charge You to Take Your Money!
by Phil - May 23rd, 2012 7:49 am
Germany sold $6Bn worth of 2-year notes at 0% this morning.
That's right, if you give Germany $6Bn for 2 years, they promise to give it back – AND THERE WAS STRONG DEMAND! How low can we go? Well, the yield in Swiss 2-year paper is actually -0.10%. That's right, you pay them 0.1% to hold your money for two years. Don't like it? Shut up – you're lucky they don't take it all!
Of course the markets are crashing this week – the G8 has bonds to sell! If the markets are flying you're not likely to be so anxious to give your government free money to hold for a couple of years, are you? So this is a great week to take the markets down and the US sold $35Bn worth of 2-year notes at Depression-level lows (1.78%) yesterday and today we sell $35Bn worth of 5-year notes and Thursday we sell $29Bn worth of 7-year notes and THEN we have most of what we need to borrow to take us through the end of May.
People have to be terrified to take the money out of a bank that pays them 2% or out of a dividend-paying stock that pays them 4% to give it to a Government that pays them 0%. While the World Governments make a big showing of hunting for terrorists, it is actually they who are terrorizing their own people – causing them to endure lives of non-stop fear and desperation as their Government plunges them further and further into debt in order to make sure that the BONDHOLDERS (hallowed be their names) take no losses.
To do that, YOU (the not rich enough to have a lot of money in bonds) must be made to suffer the slings and arrows of outrageous misfortune – to be alarmed by Global seas of troubles, to worry, perchance to panic – and in your panic, perchance to hand your money over at zero percent interest rates where you money will be or not to be returned – depending on whether the EU or the rest of the Global economy survives 24 more months.
Come on folks, wise up to the game! You are lending money at 0% so your Government can make whole the people who lent them money for 30 years at 15% back in 1982. You are…
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Sabrient Risers – 5/23/2012
by Sabrient - May 23rd, 2012 12:00 am
Top 5 Risers |
||||
| Stock | Rating | Analysis | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| KRO | STRONGBUY | Kronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant. | ||
| URI | BUY | Projected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected. | ||
| SWHC | BUY | An increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a few weeks ago make Smith and Wesson Holding a company to watch. | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(