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Archive for November, 2011

Sector Detector: Technology surges to top of quant rankings

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics

Fear has subsided enough to let loose the bulls, which in turn has sent bears running for cover to add fuel to the rally. On Wednesday, an international effort to support global liquidity, along with a host of other positive headlines, got the party started. The Dow soared nearly 500 points to close just above the 12,000 level. This put the markets back near the flat line for both the month of November and for 2011 YTD—which in retrospect is a welcome result, indeed, given the huge price swings and pervasive fears of global economic collapse.

Energy and Basic Materials have led the rally this week, but it is Technology that now sits atop Sabrient’s SectorCast rankings of the 10 U.S. sector iShares.

On Wednesday, the Federal Reserve, ECB, and other central banks stepped in to shore up global money markets and ensure that European banks have sufficient funding, as government bond yields have surged. This is essential for keeping interest on debt at a manageable level. It followed China’s unexpected reduction in bank reserve requirements, intended to boost its somewhat sluggish economy.

The ten highest-yielding Dow stocks (a.k.a., Dogs of the Dow) are now yielding over 4%, which is more than double the 10-year Treasury yield, so stock valuations are low. Earnings reports, industrial production, payrolls, and consumer confidence have all been quite promising, so the only holdup has been Europe. Any sign of a possible solution to their debt crisis is an excuse for the U.S. stock market to rally.

The market now has some positive momentum as it enters the month of December, which is historically strong. With market essentially flat for the year, there is a chance for a net gain for 2011.

Despite good overall earnings reports this season, suspect earnings quality nevertheless has been the downfall of a number of stocks. Forensic accounting firm and recent Sabrient acquisition Gradient Analytics (http://www.EarningsQuality.com) saw a number of stocks that it had red-flagged fall after their earnings reports. Abercrombie & Fitch (ANF) and j2 Global Communications (JCOM) are two of the latest stocks that have taken a fall.

The SPY closed Wednesday right at the 125 level. After pulling a big turkey last week, with one of the worst…
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Cablevision Experiences and Remediates DDoS Attack on Optimum Online

Courtesy of Benzinga.

Cablevision Systems Corporation (NYSE: CVC) is alerting customers that it experienced a Distributed Denial of Service attack on the Optimum Online network during the evening hours Tuesday night. The company announced that the attack has been remediated and resolved. It began at approximately 6 p.m. Tuesday and was resolved shortly after midnight, when all service returned to normal.

The attack Tuesday night caused a disruptive increase in automated requests on a portion of the network, which impacted the ability of some customers to access certain websites and other Internet services.

DDoS attacks have been directed at several leading technology companies in recent months. Cablevision is continuing to investigate the cause of the attack.

For more Benzinga, visit Benzinga Professional Service, Value Investor, and Stocks Under $5.





Of Imminent Defaults And Self Deception. Kyle Bass Prepares For The Worst

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.

Whether it is Kahneman’s “availability heuristic” (wherein participants assess the probability of an event based on whether relevant examples are cognitively “available”), the Pavlovian pro-cyclicality of thought, or the extraordinary delusions of groupthink, investors in today’s sovereign debt markets can’t seem to envision the consequences of a default.

His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.

Hayman_Nov2011

(h/t The Fly)





China Manufacturing Contracts As New Export Orders See Biggest 2 Month Drop Since Dec2008

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Suddenly this morning’s RRR cut doesn’t feel quite so much like China doing Europe a favor. Chinese Manufacturing PMI printed at a lower-than-expectations 49, signaling its first contraction (<50) since Feb 2009. As if it was really ever so, as clearly concerns were growing since we had the Flash PMIs earlier in the month. Across the board, sub-indices were weak with New Orders and New Export Orders falling significantly as the latter remains below 50 and Inventories rose significantly. Notably New Export Orders have now fallen the most over two months since Dec 2008.

The overall index fell below 50 for the first time since Feb 2009.

And New Orders and New Export Orders continue to slide.

But the two-month drop in New Export Orders is very significant – as bad as entering the previous dramatic downturn.

Charts: Bloomberg

UPDATE: HSBC China Manufacturing PMI prints at 47.7, deteriorating at fastest rate (and lowest level) in 32 Months





China Manufacturing Contracts As New Export Orders See Biggest 2 Month Drop Since Dec 2008

Courtesy of ZeroHedge. View original post here.

Suddenly this morning’s RRR cut doesn’t feel quite so much like China doing Europe a favor. Chinese Manufacturing PMI printed at a lower-than-expectations 49, signaling its first contraction (<50) since Feb 2009. As if it was really ever so, as clearly concerns were growing since we had the Flash PMIs earlier in the month. Across the board, sub-indices were weak with New Orders and New Export Orders falling significantly as the latter remains below 50 and Inventories rose significantly. Notably New Export Orders have now fallen the most over two months since Dec 2008.

The overall index fell below 50 for the first time since Feb 2009.

And New Orders and New Export Orders continue to slide.

But the two-month drop in New Export Orders is very significant – as bad as entering the previous dramatic downturn.

Charts: Bloomberg





Deflation is coming

Courtesy of ZeroHedge. View original post here.

Submitted by South of Wall Street.

Deflation is coming
www.southofwallstreet.com

In going thru old research I found a note from Dave Rosenberg in March of ’08, where he discusses Bernanke’s decisions on rate cuts and points to his speech from 2002 on deflation as a road map for his options.  At the time, cutting the Fed Funds rate was ‘the answer’ that rallied markets and substantiated the Fed’s ability to maintain confidence in financial markets.  We all know how that ended.

Rosenberg from 3/18/08 at ML:

We believe that Fed Chairman Bernanke is now fully in charge of the FOMC and he likely does not want to take a chance of disappointing the still very fragile financial markets. More importantly he understands that we are simultaneously facing a credit crisis, deepening housing market meltdown, and an unfolding economic recession.  (Sounds a lot like today, doesn’t it?)
He goes on to question what Bernanke can do if rate cuts don’t work:
Since the last rate cut, the Dow is down more than 500 points and
BBB corporate spreads have widened out an extra 50 basis points. Financial
conditions are actually tightening. So don’t think for a second that Bernanke does not have something up his sleeve – we think the press statement is going to be very key. What other aggressive action can the central bank possibly take?

Today Big Ben sits in a similar, but more nuclear situation.  In this 2002 speech he suggests the ability to buy foreign debt:

The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt

We aren’t far away from that being our last option, are we?  It


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Peter Schiff Explains What Today’s Global Fed-Funded Bailout Means For The Future

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

If anyone is still confused by what has transpired today, here is Peter Schiff explaining in simple words, why what happened “may be one of the most important economic events of the year” and what to do next: “Today’s unprecedented announcement by the world’s most powerful central banks was a loud and clear bell ringing to buy precious metals. The move, disguised as an attempt to help the fragile state of the global economy, is in reality a move to prop up failing banks in Europe and the US. By reducing interest rates paid for dollar swaps, central bankers are in effect increasing the quantity of global dollars in circulation. The result? The dollar will weaken, inflation will rise, and gold will soar. Gold was up more than $30 today, and the dollar got crushed. I urge you to take 7 minutes to watch the video I recorded exclusively for my subscribers a few hours ago. It explains, in plain language, what happened today – and what is the likely outcome for your portfolio. This may be one of the most important economic events of the year.” And pardon Schiff’s self-promotional piece at the end, but the truth is that he is essentially correct about what the actions means from a big picture perspective. Furthermore, as Goldman made all too clear, this is merely the beginning as more and more inflationary actions have to be undertaken by central banks to save banks from being crushed by untenable debt loads. Whether they succeed in overturning the deflationary tsunami is unknown. What is certain is that they will bring fiat currencies to the verge of viability (and beyond) in trying.





Goldman On Today’s Coordinated Central Bank Bailout: “It Isn’t Enough To Save Anyone Or Solve Averything” And “Why Now?”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Naturally, if there was one party that would be disappointed by today’s action, it would be Goldman Sachs: on one hand because it is nowhere near enough to actually fix anything, and on the other because it delayed the moment when the 2-3 European banks which we have been saying for over a week would keel over and die leaving a power vacuum for Goldman to fill, has just been delayed. As a result, Goldman dissatisfied note makes more than enough sense: “Up, up, and away for stocks after the coordinated ease this morning. USD funding just got cheaper, which is of course a good thing. But the difference between OIS + 50 and OIS + 100 isn’t enough to save anyone or solve everything. It’s the symbolism of policy-makers again acting in concert that I find most encouraging.” But, and there is always a but: “Although there is the obvious counter: why act now – is there something lurking around the corner? Those are worries for tomorrow though.” Indeed, and when the worries resurface, as they will, especially following the resumption in European record yielding auctions, which incidentally the Fed’s action does nothing to fix, following France and Spain bond auctions. And who knows what else. Oh yes, Goldman just cut its GDP forecast for Europe from +0.1% to -0.8%: hello, recession, the very same catalyst which S&P said a month ago will be sufficient for it to downgrade France. As usual, Egan-Jones was way ahead of the crowd.

More from Goldman:

If the FED is giving the world dollars, then sell your dollars. Less reason now to hold USD longs to cover your USD funding. EURUSD trade to a high of 1.3533. Stops the whole way up. A steady drip lower for the rest of the session though yesterday’s high providing support. Just missed out on a bullish key day reversal – that was what started October’s rally. Still 1% higher in EURUSD is nothing to sneeze at. AUD the day’s best performer though. Up 2.8% vs. the dollar. USDBRL back to 1.80. Amazing that just last week we were testing the top of the 1.70 / 1.90 range. So much for EM being an elevator only on the way down.

 

The rates market finished


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Central Banks’ Latest Move Shows Desperation

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

The coordinated swap line bailout by the Federal Reserve Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank- and China’s reduction of reserve requirements by .5% – shows desperation. (For background on swap lines, see this, this and this.)

The Street notes:

Don’t get flustered by the terminology of “dollar swap lines” above. Here’s a more simple explanation: Central banks around the globe have acted in desperation to boost liquidity in the system, which has sparked a rally in equities.

In a separate article, The Street points out:

What’s great for the banks isn’t so good for everyone else, though. Investment strategists already are noting the desperation of the move, adding that flooding the banking system with liquidity doesn’t do anything to solve the real problem of ballooning, unmanageable debt levels.

Ron Paul said today:

The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed. Under current law Congress cannot examine these types of agreements. Those who would argue that auditing the Fed or these agreements with central banks harms the Fed’s independence should reevaluate the Fed’s supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.

 

Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis. Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance. Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars. These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.

 


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Moving Averages: Month-End Update

Courtesy of Doug Short.

Valid until the market close on December 30, 2011

The S&P 500 closed November with an impressive 4.33% rally on the last day of the month. But November’s close was down 0.51% from the October close. The index signals remain unchanged from last month. See the specifics here.

The Ivy Portfolio

The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I’ve also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.

Backtesting Moving Averages

Monthly Close Signals Over the past few years I’ve used Excel to track the performance of various moving-average timing strategies. But now I use the backtesting tools available on the ETFReplay.com website. Anyone who is interested in market timing with ETFs should have a look at this website. Here are the two tools I most frequently use:

Background on Moving Averages

Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets. In essence, when the monthly close of the index is above the moving average value, you hold the index. When the index closes below, you move to cash. The disadvantage is that it never gets you out at the precise top or back in at the very bottom. Also, it can produce the occasional whipsaw (short-term buy or sell signal), such as we’ve experienced this summer.

Nevertheless, a chart of the S&P 500 monthly closes since 1995 shows that a 10- or 12-month simple moving average (SMA) strategy would have insured participation in most of the upside price movement while dramatically reducing losses.

The 10-month exponential moving average (EMA) is a slight variant on the simple moving average. This version mathematically increases the weighting of newer data in the 10-month sequence. Since 1995 it has produced fewer whipsaws than the equivalent simple moving average, although it was a month slower to signal a sell after these two market tops.


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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Chart School

The End of QE: Some Common Misunderstandings

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

I have discussed for some time that there are a couple of inherent misunderstandings about the Federal Reserve's ending of the current large-scale asset purchase program (LSAP), or more affectionately known as Quantitative Easing (QE). The first is "tapering is not tightening" and the second is "interest rates will rise." Let me explain.

The Federal Reserve has been running extremely "accommodative" monetary policies since the end 2008. The two primary goals of the Federal Reserve have been to artificially suppress interest rates and boost asset prices in "hopes" that an organic economic recovery would take root. As I quoted in "How E...



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Zero Hedge

China Meat Scandal Spreads: McDonald's Japan Slashes Guidance

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

We warned last week that the scandal over Chinese meat supplier OSI was spreading (and Asians were increasingly shunning western fast-food restaurants) and now, as The FT reports, McDonald’s Japan has pulled its full-year profit guidance on the back of falling sales. It had previously forecast sales of $2.45bn for the year to December but warned it could not commit to new targets as it was too soon to estimate the...



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Phil's Favorites

Oh Yeah, About That Con Con Con

Oh Yeah, About That Con Con Con

Courtesy of Lee Adler 

As usual, the Conference Board and all the major media press release repeaters put a positive spin on the highest reading of Consumer Confidence (aka the Con Con Con) since October 2007. None of the media echo chamber reports pointed out that October 2007 was the beginning of the worst bear market in US stocks since 1973-74. So I thought it important that the issue be given a little perspective (as I did recently with the Thompson Rhoiders Michigan Con Index).

First things first, the Con Con Con is an amalgamation of the results of two survey questions presented to “consumers” (aka real people). One question asks...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




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...

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Insider Scoop

Report: IBM Rejects Offer For Chip Operations

Courtesy of Benzinga.

Related IBM Blackberry Attempts To Rebound From IBM/Apple Deal The 10 Most-Respected Corporate Brands Can the iRally Endure? (Fox Business)

International Business Machines (NYSE: IBM) rejected an offer for part of its semiconductor manufacturing operations, according to unnamed sources cited by ...



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Option Review

Kellogg Call Options Active Ahead Of Earnings

Shares in packaged foods producer Kellogg Co. (Ticker: K) are in positive territory on Monday afternoon, trading up by roughly 0.20% at $65.48 as of 2:20 p.m. ET. Options volume on the stock is well above average levels today, with around 12,500 contracts traded on the name versus an average daily reading of around 1,700 contracts. Most of the volume is concentrated in September expiry calls, perhaps ahead of the company’s second-quarter earnings report set for release ahead of the opening bell on Thursday. Time and sales data suggests traders are snapping up calls at the Sep 67.5, 70.0 and 72.5 strikes. Volume is heaviest in the Sep 72.5 strike calls, with around 4,600 contracts traded against sizable open interest of approximately 11,800 contracts. It looks like traders paid an average premium of $0.37 per contrac...



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Sabrient

Sector Detector: Bold bulls dare meek bears to take another crack

Courtesy of Sabrient Systems and Gradient Analytics

Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...



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OpTrader

Swing trading portfolio - week of July 28th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

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 ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW in the comments below each post. 

Our weekly newsletter Stock World Weekly is ready for your enjoyment.

Read about the week ahead, trade ideas from Phil, and more. Please click here and sign in with your PSW user name and password. Or take a free trial.

We appreciate your feedback--please let us know what you think in the comment section below.  

...

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Digital Currencies

BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Courtesy of Reggie Middleton.

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent ...



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Market Shadows

Danger: Falling Prices

Danger: Falling Prices

By Dr. Paul Price of Market Shadows

 

We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about." 

All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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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...

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