As we can see from AlphaTrends chart, that’s going to be a tough breakout and, even if we do make it, can we hold it? In yesterday’s post I said we were ready to switch off our brains and BUYBUYBUY the rally and our breakout levels did all hold yesterday but I decided, in Member Chat, that we needed to raise the bar slightly before we started shutting down our thought processes into the weekend. We simply used the 2.5% lines of Dow 9,297, S&P 1,000 (interesting!), Nas 2,017, NYSE 6,438, Rut 562 and SOX 308 in my 10:16 Alert as our official buying breakouts but those same levels gave us a great indicator to get out of our longs and press our shorts as they ALL failed by 11:09.
It is going to be very much up to the GDP report and we have a pretty low-bar expectation of -1.5% but that’s a heck of an improvement over last quarter’s -5.5% and this earnings season has been nothing if not a celebration of "getting worse more slowly." As we all know, personal consumption makes up 70% of the GDP while government is about 18% and business investment just 12%. Durable goods are only 8% of the GDP while consumables (which includes clothes and, obviously, food and fuel) are 20% and 40% is "services" but 1/4 of that number is Real Estate so that’s a little confusing.
As we know, not much is actually getting better but that’s not the issue with GDP as we are measuring "growth" compared to the prior 4 quarters and our prior year was a disaster! This is like when a raging fire causes a house to collapse and you stand there looking at the wreckage and say "at least most of the fire is out now."
The good news is the comps just keep getting easier and easier the worse things get so, at some point, you are bound to improve! As you can see from Briefing.com’s Real GDP chart on the left, there’s a pretty wide disparity between the Real and Nominal GDP and that’s because the Real GDP meansures the production of goods and services valued at constant prices. So we aren’t producing that much less, we’re just getting less for it…
We’ll get the scoop at 8:30 but our global partners weren’t waiting with…
It is hard to tell, but whatever does happen it will be difficult to initiate a spectacular day trade because the market will move so greatly in one direction right out of the gate. Therefore, in order to make the most of movement in the market tomorrow, The Oxen Group wants to play Direxion’s Daily Oil/Energy 3x ETFs, depending on the GDP report.
The market is bullish going into the GDP, with futures up and the President making calls on it Thursday evening. Asia is currently up on their own bullish economic data and a reaction to our positive day. The only person that seems scared of the GDP is me. We were at nearly 5% decline in Q1. Where are we at Q2? Estimates are around 1.5%. I just think that is too low.With unemployment rising, revenues dropping for most companies in their Q2, and really not a strong upswing in good orders and manufacturing numbers, it is hard to imagine GDP rising that greatly.
However, even if it does miss, you won’t be able to make a move until everyone already knows that. Therefore, entry/exit will be crucial. If the GDP misses, buy ERY right away. The oil market will sell off and with Chevron reporting earnings, which should be weak, this will give the oil market fuel to the fire to make a downward movement. I would buy into ERY right away if GDP is bad as it should move down throughout the day. ERX should be bought on a pullback from the open, however, take profits quickly here as this stock may peak intraday and move back down, as the market again is toppy like it did Thursday.
Entry: See entry recommendation above. Exit: We recommend exiting after a 2-4% increase. Stop Loss: We recommend a 3% stop loss on all buy in prices Upper Resistance: For ERY, 21.50. For ERX, 33.00
Many people have been asking me for an Ewave update on the S&P 500. I still don’t have one as there are numerous viable counts in play. To me unless the count is reasonably clear, all Ewave is going to tell you is what happened.
That is a general complaint about Ewave (and technical analysis in general) but no one says you have to trade these corrective "jello counts" or patterns.
So let’s leave the S&P 500 aside. I do have a clear, as well as interesting count of the US dollar to discuss.
US Dollar Weekly Chart
I have been following the above chart for some time and a few weeks ago emailed a friend "There is room for one more wave down". And so here we are.
But hold your horses. Wave 5′s can truncate or extend. That is why I have two "?" on the chart. Either way, the count appears corrective and there should be another relatively strong wave (of some sort) back up once wave 5 down has finished.
Right now, should the weekly candle continue up and solidly break the trendline, it would be suggestive that wave 5 is over.
This is very significant given the fact that the US$ is typically inversely correlated with the S&P 500 as well as commodities. So rather than focusing on the S&P 500 "jello" counts directly, one is likely better off following the US$.
Bear in mind, the primary focus of technical analysis in general is not predictive capability, but rather to find spots where one can initiate a trade with a stop loss relatively close by. In that regard, the solid trendline above is the place to watch.
Daneric’s Elliott Waves
I am not the only one to come up with that US dollar count. Dan at Daneric’s Elliott Waves sent me the same, but far more detailed, count a few days ago (click on above link to see).
Since then I have been following his site and I can easily say he knows far more about Ewave than I do. What I really like are his "no nonsense" comments such as:
PS – I don’t really pay attention to what EWI has as a $ count. This chart I just made up
Over the past week everyone seems to have jumped on the HFT bandwagon: people who know nothing about the issue, as well as tested industry veterans, all of a sudden are chiming in, with some, like quant legend Paul Wilmott debating the potential dangers of HFT, while others such as respected bloggers including Eric Falkenstein and John Hempton saying it is too much noise over nothing. Both sides of the debate are respected, as, if nothing else it forces further clarity on this most secretive topic.
While long-time Zero Hedge readers have known our position on the issue since early April, the basis of our perspective has always been a (very relevant) question. Which is why it is useful to hear those who are directly involved in not only the HFT market, and not only were instrumental in developing the HFT architecture, but have worked for the largest HFT option trading desk in the US, that of Citadel (and likely were sitting one desk away from the likes of Misha Malyshev, made infamous by his involvement in the Aleynikov-GS scandal). We present to you Michael Durbin, who tips his cards in a piece by Reuters’ Matt Goldstein who broke the Aleynikov scandal.
Durbin says it’s reasonable to wonder whether Wall Street’s unfettered embrace of algorithmic automated trading could be setting the stage for a future meltdown. “You have multiple HFT trading firms and sometimes their agendas are complementary and sometimes they’re not,” explains Durbin, director of HFT research with Blue Capital Group, a small Chicago-based options trading firm.
“There could be a time where these HFT programs unintentionally collaborate and you have a two- or three-minute period where the markets are going crazy. Then other traders respond to it and it simply gets out of control.”
What Durbin’s talking about is the dreaded contagion effect, in which a bad trade or a rogue algorithm misfires — sparking copycat sell orders at other high frequency desks.
A little on Durbin’s background:
Durbin certainly has the bona fides to speak to the potential risk. Before joining Blue Capital, he worked for two years at Citadel Investment Group, constructing the hedge fund’s high frequency trading desk for stock options — the largest in the business.
July 30 (Bloomberg) — The U.S. Securities and Exchange Commission will review so-called flash orders used by four equity markets, NYSE Euronext Chief Executive Officer Duncan Niederauer said.
Charles Schumer, the third-ranking Democrat in the U.S. Senate, told the SEC to review flash orders in a July 24 letter. Regulators told NYSE officials they will examine them, and based on those discussions it appears unlikely the SEC will impose curbs on other forms of high-speed trading, Niederauer said today in a conference call with analysts to discuss the New York-based company’s second-quarter results.
“I don’t think there is any fear of them doing something that would severely damage the displayed liquidity on U.S. equity markets,” he said. “High-frequency trading is actually the most consistent source of liquidity.”[TD: Time for one more of those "The Y in the NYSE stands for Trust" ads]
John Nester, a spokesman for the SEC, didn’t return a telephone call seeking comment. Last month, SEC Chairman Mary Schapiro said the agency is concerned that electronic indications of bids and offers are being disseminated to a select group of brokerages.
NYSE’s competitors — Nasdaq OMX Group Inc., Bats Global Markets, Direct Edge Holdings LLC and the CBOE Stock Exchange — give information to their clients about orders for a fraction of a second before the trades are routed to rival platforms. NYSE Euronext, the world’s largest owner of stock exchanges, told the SEC in May that these flash orders result in most investors getting worse prices.
A "Description of Principles" concept paper by Barney Frank essentially proposes that only dealers are allowed to trade CDS going forward. Barney believes, this is critical to "limiting speculation." Here is what will actually be considered:
1. Limitation on Speculation
Prohibition on any purchase of credit protection using a CDS contracts unless:
The party owns the referenced security or (one or more) of the securities in an index of securities.
The party has a bona fide economic interest that will be protected by the contract.
The party is a bona fide market maker.
Regulators will have authority to monitor market activity and impose position limit where necessary.
Here is Barney’s tremendous regulatory insight on the matter:
"The fundamental purpose here is to improve the regulation of derivatives so that they continue to perform their important market function but are less likely to contribute to a kind of irresponsibility that can cause a crisis. Nobody here wants to ban them or even severely diminish them as an economic instrument. The Committee on Agriculture represents a lot of end users for whom they are very important. The Committee on Financial Services deals with a lot of the financial institutions. They have an interest that has to be blended. I thank Chairman Peterson and his staff for their cooperation on this effort."
Well, if the Committee on Agriculture believes that Merrill trading exclusively with Goldman and vice versa will promote lower irresponsibility, we can see why they are the Committee on Agirculture.
The bloodbath at GE’s propaganda station has reached critical levels: according to Nielsen, CNBC has lost 28% of viewers year over year, and 24% in the 25-54 age group category. This is obviously a stunning failure in an environment where the top stories on any other medium are finance and economy related. Maybe if they were to actually report objective news, Jeff Immelt would not have to scratch his head in wonderment, pondering how to generate ad revenue and something even remotely resembling positive cash flow. Then again what are the poor anchors to do since the infamous Immelt memo made the rounds. At least GE stock is up: and for that GE, Barney Frank and Goldman Sachs, deserve a golf clap.
Oh, and Larry, with a 46% drop, you may want to reevaluate your content strategy.
But for all intents and purposes, CNBC’s core viewership has spoken and it openly demands more of Amanda Drudy’s enhanced cleavage.
I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in p...
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To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
In an effort to reach the angry mob, CNBC's Rick Santelli goes all Sesame Street on the numbers behind the US Debt Ceiling Rise. Focusing for two minutes on what this practically means for every man, woman, child, and politician, the shouting Chicagoan points out that when the US breaches this new limit then the world's entire population will be on the hook for $2,346 each (and $52,409 per US person).
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).
Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its...
Some combination of better made cars, and less Americans able to pay new car prices has conspired to push up the average age of U.S. vehicles to a new record high. Reflecting this sea change, one of the best investment g...
Shares of battered tech company Research in Motion (NASDAQ: RIMM) are seeing much strength during Friday's trading session.
Fairfax Financial Holdings released a 13G filing with the SEC this morning, in which they disclosed a 5.12% stake in Research in Motion.
Currently, shares of Research in motion are up over 4% at $16.85. Over the last year, Research in Motion is down over 72%.
Research In Motion Limited is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. RIM provides platforms and solutions for access to information, including e-mail, voice, instant messaging, short message service.
Top 5 RisersStockRatingAnalysisASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving.CZZSTRONGBUYThe recent earnings history for Cosan Ltd shows significant improvement while projected valuation continues to rise.STLDBUYProjected value continues to rise for Steel Dynamics while long term increases in earnings growth are also becoming more widely expected.PSESTRONGBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a fe...
Major markets and major index ETFs corrected slightly today after the stock market’s euphoric party yesterday
Major markets suffered a slight hangover today, as the S&P 500 dropped .57%, the Dow Jones Industrial Average dropped .18%, the NASDAQ dropped .46% and the Russell 2000 Index dropped .34%, after yesterday’s crazy Fed and Tech Sector induced Wall Street Party. The NASDAQ, in particular, partied very hard, so hard in fact that the NASDAQ reached its 11 year record high.
The major market index ETFs were hungover too as the SPDR S&P 500 ETF lowered .51%, the SPDR Dow Jones Industrial ...
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Here is the virtual portfolio weekend update. Basically a recap of the positions and some notes about the trades. As usual, I'll post the previous week's P&L for comparison. Not the greatest of week in general!
AA Money
Only transaction last week as we bought back the AA Feb 9 puts on Tuesday for close to a 70% profit. The idea is to sell another set of put as soon as we get a chance.
Previous week P&L - $400.00
We lost some ground this week, but we'll keep on selling premium!
FAS Money
We also lost some ground in this virtual portfolio, but we have sold plenty of premium for the coming week. A little correction would go a long way to help! On Wednesday we sold the FAS Feb 72 puts (already good for 50%), on Thursday we added the Jan4 78 calls and on Friday we had to roll the Jan 78 puts to the Jan 80 puts. We were hoping for these ones to expire worthless on Friday, but a late stick killed that hope.
Previous week P&L - $4372.00...
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Here's the latest Stock World Weekly. We discuss the Fed's next move, and it's new policy for more QE-cating. Brief review of Sabrient's trade ideas for 2012 (already doing well) and a few new buy-writes from Phil and Pharmboy. Enjoy! (Feedback appreciated - give some life to the comment section below.)
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
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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Over the past week everyone seems to have jumped on the HFT bandwagon: people who know nothing about the issue, as well as tested industry veterans, all of a sudden are chiming in, with some, like quant legend Paul Wilmott debating the potential dangers of HFT, while others such as respected bloggers including Eric Falkenstein and John Hempton saying it is too much noise over nothing. Both sides of the debate are respected, as, if nothing else it forces further clarity on this most secretive topic.
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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
(