Archive for
July 3rd, 2009
by David Fry - July 3rd, 2009 11:50 pm
Dave Fry’s ETF Digest, July 2, 2009
Maybe, maybe not—this is all I can say since bulls have repeatedly demonstrated their “energizer bunny” quality. Maybe over the weekend investors will forget about the sting of today’s drop as no doubt the powers that be will roll-out their spokesmen to cheer everyone up.
This action is why over roughly the past two months our cash balances have been high. Once we got the weekly DeMark sequential 9 counts we were expecting a reaction. Sometimes we just move in a herky-jerky manner sideways while in other circumstances we get an immediate impact. If the trends are very strong then the DeMark 9 can be blown away and that’s the tricky part—how to get back in. But, never mind that for now, let’s look again.
Volume has been higher on down days and you can assuredly know that breadth both sucked and blowed today.
The longer-term Summation Index (not updated with today’s data) no doubt restarted its recently paused rollover.
Our podcast/video interview with the EMM (Emerging Markets Monitor) should be posted sometime this evening or early tomorrow morning for you listening pleasure. These are smart folks and have done a good job in providing thoughtful analysis regarding global markets. You should listen despite some inferior sound quality.
Two articles caught my attention these past few days. The first describes how FNM and FRE are starting to provide 125% mortgage loans. Isn’t this type of activity what got us in trouble in the first place? The next is an amusing expose from the WSJ (subscription required) outlining the inner workings of our friends at the Federal Reserve. You can see clearly from it who’s running the show there and on Wall Street.
We’ve kept a large cash reserve (70% more or less) for some time now. It’s a defensive posture clearly and reflects our lack of confidence in the mixed signals markets are presenting technically. When this is the situation sometimes it’s best to stand aside until things become clear.
For those of you long the markets in general, Mr. Market didn’t give us a happy send off to our country’s birthday. But, let’s see what happens next.
Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, DBC, USL, XLE, DBB, EWZ and FXI.
The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell…
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by ilene - July 3rd, 2009 7:23 pm
Here’s Karl Denninger’s mid-year review of his new year predictions, and thoughts on 2009 part 2.
Mid-Year 2009 Checkup
Courtesy of Karl at The Market Ticker
It doesn’t seem possible that six months have passed under the bridge of time in 2009 yet, does it? Yet they have.
Let’s take a look at the scorecard first from my 2009 Prediction Ticker, remembering of course that I have six months left!
- The economy will not recover in 2009. No sign of it yet, "green shooters" be damned. I predicted that U3 would reach 8% by the end of the year, it has exceeded that wildly, and is now 9.5%. U-6 also has exceeded my predicted value already.
- Deflation, not inflation, will become evident well beyond housing. Already has. CPI and PPI have come in with negative prints as has capital goods pricing.
- Housing prices will continue to decline. Yep.
- The Fed’s attempt to "pump liquidity" will be shown to be an abject failure. I’ll leave this one on the table for now; I believe the evidence is in, but I’m in the minority. Score this one as a "no result" as of yet.
- GDP will post a 12-month negative number. 12 months aren’t up yet, but we’re working on it!
- The Stock Market has not bottomed. Remember, this was made with the market around the 900 level. Major check; we declined to 666. My secondary prediction was a 50% trading range and a 5xx low; we missed that by 67 points, but I still have six months left. I’m sticking with this one.
- Precious metals will not be a safe haven. Oh Jim Sinclair! Where’s my $1,600+ gold price? (Or for some, their $5,000+ gold price?) Missing, that’s where. I know, I know, its all manipulation (instead of debt deflation.) Check.
- The Dollar will not collapse. Hasn’t yet.
- The pound or euro will be where the FX dislocation originates if it occurs. I predicted Par for both being a possibility, not happening yet. We’ll see what the next six months bring.
- The US Consumer will go from a negative savings rate to a seriously-positive one. I’m predicting 4% but it could go as high as 10%. Major double-check! We’re up close to 7% now. That’s a home run in any book.
- Commercial Real Estate will effectively collapse. The REITs have not yet imploded but the pricing and occupancy look like something that came out of the back end of a horse. Anyone got a finger to lend to push…
Tags: Commercial Real Estate, Economy, green shoots, Job losses, predictions, unemployment rates
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by ilene - July 3rd, 2009 4:36 pm
Courtesy of Henry Blodget at ClusterStock
Calculated Risk illustrates what we already knew: the bank stress tests weren’t nearly stressful enough.
The chart below looks at unemployment by quarter. The green bars are the "base case" in the stress tests (the most likely scenario, in the government’s opinion). The blue bars are the "adverse case" scenario–unlikely but possible. And the red bars are what’s actually happening (Q2 is a forecast).
The larger story here, unfortunately, is that the Obama administration continues to blow its credibility on the economy. By being too optimistic from the get-go, the administration is opening the door for critics and opponents who are already arguing that the Obama plan has failed.
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Calculated Risk has a bigger version of the chart and more thoughts here >
Tags: calculated risks, stress tests, unemployment
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by Zero Hedge - July 3rd, 2009 4:31 pm
The chart below indicates that while the market is exactly where it was in early December 2008, the VIX has droped by almost 60%. And traditional theories that suggest that the corporate risk is merely being offset to sovereing don’t seem to hold much sway- US CDS is again trading at ludicrously tight level. So the question arises: just who is selling 1 month forward vol, and just how are they hedging effectively. Granted, one could make the argument that risk was priced at “total chaos” levels in November and December, the market was running a more headless chicken in March and breaching lower loes, yet the VIX was unable to even threaten penetrating penetrate prior resistance levels.
Alternatively said, even with net option open interest increasing, the VIX shows barely any indication of widening. Who is writing these options? Who is buying these options? Why (for both camps), and what do they know (don’t know) that we don’t know (know).
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by Phil - July 3rd, 2009 3:17 pm
By Travis W of PursuingWealth.com
Finding investing education advice for stock options trading can be a frustrating endeavor at times. New traders often share with me that it feels like the options trading community is a very tight-lipped community with a high price of admission. I’ve been through that process so I’d like to offer you some advice.
Learning to invest your own money is a journey, not a destination. It takes time, patience, and education. It’s a proactive journey for those who no longer desire to be a victim of the so called experts.
Over the years I’ve made enough mistakes and have had enough successes to know that the ability to master your money is not something that just happens. It takes a bit of work on your part.
Increasing your investment IQ is a key part, especially when you’re dealing with stock options. You have to find a qualified and trustworthy source for investing education. There’s quite a bit of hype out there so you have to filter out all the "noise".
You may have already searched online for information on stock options, or read a few books. Most people are drawn to options trading by the potential to create large sums of money in a short period of time. Here is my forewarning; having a great deal of head knowledge about stock options doesn’t necessarily mean you’ll be a great trader. It’s going to take some real world practice.
Most of what I’ve learned about investing did not come from a classroom or a book; it came from real world experiences. I found people who were willing to give me unbiased investing education and I applied the knowledge through practice and a bit of trial and error.
Investing Education is your Financial Road Map
Investing education has a purpose in our lives like a map has a purpose to a traveler. A map can take you from point "A" to point "B" when you’re traveling. Investing education can take you from school loans, credit card debt, and no budget to debt-free with money to burn. It’s your financial map so to speak.
You could try to figure out options trading on your own, but if you’re smart and value your time you’ll find a map that can get you to your destination quicker. It’s extremely rare for me to meet someone who doesn’t want to provide additional income for their family, position themselves to retire early,…
Tags: Education, Hedging, Options, stock
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by ilene - July 3rd, 2009 2:53 pm
Courtesy of Corey Rosenbloom at Afraid to Trade
It’s being broadly circulated around the analysis circles, but there appears to be a distinct Head and Shoulders forming on the daily chart of the S&P 500. I’m picking up volume and momentum divergences as well, hinting that lower prices are yet to come but let’s take a look at these structures and what they might mean for traders.
With today’s 3% free-fall (Trend Day Down) in the broader stock market, it appears now that the dominant technical pattern is the developing Head and Shoulders on the S&P 500.
It’s not guaranteed, of course, but according to classical technical analysis patterns, we would expect the next move in price to be a ‘magnet trade’ down to test key support about the 885 level in the index.
This support is strongly established as the February highs along with the May lows. This level also forms the “Neckline” of the expected reversal pattern.
A break (and clean close) below 880 could trigger a flood of short-sell orders (and stop-losses from buyers) which could create a ’self-fulfilling prophecy’ as traders and investors push price lower.
The classic measuring move is the distance from the Head to the Neckline (about 75 points) which is subtracted from the neckline at 885 to give us a target from 800 to 810 for the next level of possible pattern support.
Take a look at Volume, which has been steadily trailing lower as price has creeped its way higher. That serves as a non-confirmation of higher prices and hints at an impending reversal.
Finally, look at the 3/10 Momentum Oscillator - as price has been inching higher, the 3/10 Oscillator has been making lower highs along with price, and has even set-up the dreaded “Three Push” reversal pattern (a triple negative momentum divergence, which you see if you look closely).
As a caveat, there’s no guarantee price has to break these levels, and one astute reader (Michael) even noted in the comments of the prior post, because the Head and Shoulders pattern is so obvious, it might be ‘faded’ or fail to materialize because so many people are watching it. No one said trading had to be easy!
Until we see something different, this is the current price structure of the S&P 500 as we head into the holiday weekend.
Corey Rosenbloom, CMT
…
Tags: Divergences, Head and Shoulders, S&P 500, SPX
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by ilene - July 3rd, 2009 2:44 pm
Courtesy of Corey at Afraid to Trade
June’s monthly candle closed with a ‘doji’ at Fibonacci resistance - that’s a bearish development as we start the new month of July. Let’s take a look at the S&P 500 monthly chart to see its current structure.
We see the S&P 500 is still below levels from 1998 - in fact, price recently came into the 950 level which was prior support in late 1998 (and for the September spike-down in 2001).
Most importantly, we have come into the 38.2% Fibonacci resistance level of the May 2008 highs to the March 2009 lows - virtually to the point.
In combination with that, we have a bearish doji candle formation at overhead resistance - and as of June 2nd, we have a down-candle.
Don’t put so much emphasis on the two trading days in July as equal to the full months the other candles represent - but it’s telling.
If price continues in the direction it appears to be traveling (down), then we will have a confirmed reversal/retracement down off the 950 highs in mid-June.
Corey Rosenbloom, CMT
Afraid to Trade.com
Tags: Afraid to Trade, Corey, Monthly SP500 Chart
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by Phil - July 3rd, 2009 8:14 am
Wheee, what a great way to end the week!
As I mentioned in yesterday’s post, we had gone into the day flipping our short firepower to BG $60 puts at $1.30 and TOT $55 puts at $1.20 as well as our remaining DIA $84 puts at .84. We went back to cash for the weekend but consider that the DIA $84 puts finished at $2.04 (up 142%), BG $60 puts finished at $2.10 (up 61%) and TOT $55 puts finished at $2.83 (135%) and you can see how even small allocations out of cash yield very nice one-day returns on put options. You do not have to take big risks to make big rewards, playing put options allows us to stay flexible and mainly in cash without "missing" too many market market moves.
We blew right through the upper targets I set in the morning and the Dow flew right down near enough our 8,250 (June lows) target that it looked bounceable, as the other indexes were holding up better than the Dow we felt we could play it for a small recovery over the weekend. We picked up some DIA $85 calls for .76 but elected not to DD at our scale-in target of .64 into the close as we already had bullish plays on ZION as well as Dow components AA, BA, GE and PFE, all longer-term plays that we are looking forward to adding to cheaper if they keep heading down. VLO and SNY were added in the afternoon as well as a UNG spread since they decided to just give it away at $13 again.
While we are just dipping our toes into some long posItions, it is the first time in a month we’ve been happy enough with the pricing to even take a chance. Of course we maintain our long put covers (just in case) but what’s the point of having protection if you have nothing to protect? On the whole, the volume simply wasn’t that impressive and we attribute much of this drop to people who were "shocked" that the economy isn’t as good as they thought it was (cough, Cramer fans, cough, cough) but it’s EXACTLY as weak as we thought it was and that means there are certain price points we are willing to hit long-term. Kudos to all who patiently waited with us for pretty much the whole month of June - now comes…
Tags: AA, BA, BG, DIA, GE, GS, LCC, OIH, Oil, PFE, SNY, TNK, TOT, UNG, USO, VLO, ZION
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March 15th, 2010 7:53 pm
Courtesy of George Washington
Instead of going into a lengthy analysis about the pros and cons of Chris Dodd's financial reform bill, I'll let the Senator speak for himself:
This legislation will not stop the next crisis from coming. No legislation can...
What Dodd is really saying is that there's no use in doing any of the things which all of the top independent economists and financial experts say need to be done to stabilize the economy. See this, this and this.
Poor old Wall Street has to become a more from Tyler
March 15th, 2010 6:25 pm
CONSTRUCTIVE PULLBACK COULD CREATE BUYING OPPORTUNITIES
Courtesy of David Grandey at All About Trends
The S&P 500 hit resistance at 1150 last week and is now pulling back. It's all about the trend channels at this point.
Bottom line this overbought condition when viewing the 60 minute charts gets worked off by either going sideways or a pullback to trend channel support.
See the S&P 500 during January? It went sideways range bound. Don't rule that out over the next week or so.
Well as you can see we are starting to work our way towards the trend channel support line. We'll either do that sideways till we catch it or down to it. Thus far the action seems corrective vs. impulsive.
Market Leaders
Some MAY be topping right here. It doesn't take a rocket s...
more from Chart School
March 15th, 2010 3:36pm
Back 0n August 21, 2008, we published an article called
Top High Priced Share Stocks, which listed all the stocks trading in excess of $100 a share, that had P/E ratios less than 20, PEG ratios less than 1, market caps above $15 billion, and all but one paid a dividend. Remember, this is just before the market took its big dump.
Surprisingly, an interesting correlation turned up. The higher the higher priced shares, the better the return, and the shares that traded close to the $100 breakpoint did the worse. All the stocks that traded under $135 per share were down, and the others were up.
Goldman Sachs Group, Inc. (GS) the large investment banking firm, had the highest priced shares on the list at about $154 per share. It is now trading at $175, an increase of 14%.
CNOOC Limited (CEO) is the explorer and producer of crude oil and natural gas off the coast of China ...
more from Goddess
By Andrew Wilkinson
March 15th, 2010 4:10 pm
Today’s tickers: FO, STJ, XLB, BSX, BIDU, VRSN & MNKD
FO - Fortune Brands, Inc. – Shares of the holding company with subsidiaries such as Beam Global Spirits & Wine, Inc., which manufactures Jim Beam whiskey and Maker’s Mark, and Acushnet Company, the producer of Titleist golf products, rallied 2.35% during the session to reach a new 52-week high of $48.45. The increase in Fortune’s share price inspired bullish options trading on the stock today. Approximately 1,000 calls were picked up at the April $50 strike for an average premium of $0.66 apiece. But, the real action took place at the June $50 strike where nearly 15,500 calls were purchased for an average premium of $1.68 per contract. Investors holding the June $50 strike call options stand ready to amass profits only if Fortune Brands’ shares rall...
more from Andrew
March 15th, 2010 6:49 pm
By Ilene
Let's take a look at Insider Buying and Selling over the last week or so. These are screen shots from Finviz - the significant buys against a green background first and significant sells against the pink background second. All the buys fit into my screen shot but the sells did not. Click here to see all the sells.
Note that the largest buy in the group, for KITD was at a price of 9.73 (KITD is currently at 11.54). The buy was part of an Equity Offering rather than an open market purchase. Tuzman Kaleil Isaza's (KITD's Chairman and Chief Exec. Officer) history of buys is http://www.insidercow.com/
more from Insider
March 15th, 2010 8:55 am
This post is for live trades and daily comments.
To learn more about the swing trading portfolio (strategy, membership etc.), please click here
- Optrader
...
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About Phil:
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...
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