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Archive for 2011

Investor Sentiment: Ugly but There is Always Hope

Courtesy of ZeroHedge. View original post here.

Submitted by thetechnicaltake.

After last week’s selling pressure, investor sentiment remains ugly and bearish.  This is expected.  Nonetheless, prices on the SP500 still remain above our “line in the sand” at 1133.65.  This level was tested and so far has held.  This sets up a low risk entry for those looking to go long.  But understand this is bear market, and capital should be protected vigorously.   A weekly close below this key level, while sentiment is bearish, could possibly lead to a waterfall decline (see: “Put Your Hard Hats On”).

For those looking for absolutes, the question as always is which way will the market go, and in the absence of a crystal ball, I don’t think anyone knows.  However, there must be some clues out there, and surveying the investing landscape, there are a lot of assets and sectors of the market being taken to the woodshed and shot.  Commodities hammered.  Emerging markets bludgeoned (for 12% last week).  Copper crushed (for 16% this week alone).  China slammed.  Financials killed.  There is a message in all of this selling -  isn’t there?  Regardless, the major indices still remain above support albeit barely.  I guess it ain’t over until it is over.  Maybe this is the kind of despair we need to see before the market turns around – is this hopeful thinking too?

In summary, it is ugly but with prices still above support, there is hope.

The “Dumb Money” indicator (see figure 1) looks for extremes in the data  from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio.   This indicator shows extreme bearish sentiment, and this is a bull signal.

Figure 1. “Dumb Money”/ weekly

Figure 2 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel.  From the InsiderScore weekly report: “Sentiment remained Neutral as the number of buyers fell -8% week-over-week and the number of sellers increased 29%. Buyers were still in the lead, outpacing sellers 6-to-5, but there was an obvious lack of conviction on both sides of the trade. As was the case the prior week, no sector or industry flashed a…
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Deutsche Bank Charts a Danger Map For A Crisis Prone And Credit Troubled World

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Against a background of 30%-plus falls in bank share prices around the world and growing fears of a severe blow to the European bank sector in the event of a sovereign debt default, Deutsche Bank has produced a lengthy tome that answers ‘everything you wanted to know about the global banking sector but were afraid to ask’. A compendium of charts and tables, summarized effectively by ‘Danger Maps’ designed to highlight countries which face greater (or lesser) stresses for their banking systems is further extended into a country-by-country breakdown for developed and emerging markets. While their findings may not line up perfectly with our more global contagion perspective, they do create a systematic framework for judging relative investment opportunities that sees Japan, Australia, Hong Kong, and the Nordics as the least risky; US and UK about average on macro scores; while unsurprisingly (with the exception of Germany) the Eurozone countries have the highest danger scores. Transmission channels are discussed and they make a critical point on bank valuations that earnings estimates are extremely sensitive now to bad debt charges and credit quality assumptions.

 

While using prior crises as a basis for projection may be a faulty premise, the Deutsche team has done a good job of outlining how key drivers, factors, themes will impact/create winners and losers.

 

And the Danger Maps (for both developed and emerging nations) are as follows – higher number indicates more risk – which in turn is factored into their name-by-name modeling of financials.

 

The full document is below but the more focused Credit Strategy article this week indicates Deutsche’s view (which remains similar to ours) from a trading perspective, that:

The primary market shutdown has meant that banks are not able to fund long term and given the refinancing needs for Q4 2011 (c.€183 bn) and the next 3 years (€1.5 trn until 2013) we expect term funding to remain stressed unless markets reopen and function normally. And the consequence of this challenge could be deleveraging by banks which is a negative for economic growth. We highlight the redemption schedule on a month by month basis and by security type along with the banks with the biggest redemptions inside the article.

 

The lack of long term funding


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Ackerman Takes Fresh Look at Old Foe Lira’s Ideas

Courtesy of ZeroHedge. View original post here.

Submitted by RickAckerman.

 

With deflation tightening its choke-hold on the global economy, we thought we’d drop in on our supposed nemesis, Gonzalo Lira, to see how he was coping in these very un-hyperinflationary times.  To his credit, the erstwhile arch-inflationist, bending to reality, has acknowledged forthrightly that deflation rules the economic and financial worlds right now. “Yields are  low, unemployment up, CPI numbers are down (and under some metrics, negative) – in short, everything screams ‘deflation.’ ” He wrote those words a month ago in an essay entitled How Hyperinflation Will Happen, and although we are obliged to point out below certain dangers in relying too heavily on the scenario he describes, readers should trust, as we do, that he has gotten the big picture right. For, as he asserts, economic recovery is no longer remotely possible for the U.S. Nor is it a case of double-dipping into recession, as most economists and the mainstream media would have it.  In fact, as Lira flatly declares, we never emerged from the first recession. The inevitable result, he says – and we must unfortunately concur — is that an epic financial panic centered on the dollar’s collapse is coming, and it will push the U.S. from intractable recession into full-blown Depression. 

 

As to how we might prepare for this, Lira has his ideas and we have ours. Possessing physical bullion in any form, as he would doubtless agree, will be a part of the solution no matter what. Where we part company, however, is on the crucial question of whether any of us will be able to respond defensively, let alone advantageously, once the avalanche has begun.  While Lira talks about shifting assets from paper to real goods as hyperinflation plays out, our fear is that the dollar’s complete destruction will occur so swiftly – think May 2010’s flash crash, but on a global scale – that there will be no chance for anyone to liquidate intangibles (to whom?) in order to replace them with real goods. For all we know, the world’s bourses will be shuttered for a week or longer, diverting angry mobs to branch banks that, as the mobs will discover, hold precious little cash in their vaults.  Under the circumstances, it’s possible investors will have no opportunity to get money out of banks, or…
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Treasury Yields in Perspective

Courtesy of Doug Short.

Note from dshort: On Thursday of last week the 10-year yield hit an all-time closing low of 1.72. It rose 12 basis points to close the week at 1.84. The 56 economists who participated in the WSJ monthly survey back in January had an average 2011 year-end forecast of 3.97 for the 10-year note see chart. The September forecasts were much lower, averaging 2.37 (see update). The yield trend since the publication of the September suggests that we’ll see further downward revisions next month.

Let’s have a look at a long-term perspective on Treasury yields. The chart below shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.


 

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Now let’s overlay the S&P 500 to see historical pattern of equities versus treasuries. This is a nominal chart, which significantly distorted the real value of both yields and equity prices.

 

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Here’s the same chart with the S&P 500 adjusted for inflation and the annualized inflation rate subtracted from the yields. The impact of stagflation becomes much clearer. We can better understand the severity of the decline in equities from the mid-1960s to the bottom in 1982. And we can also see why high yields can be deceptive in periods of double-digit inflation.

 

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The most interesting series in the charts is the FFR red line. We can see how the Fed has used rate to control inflation, accelerate growth and, when needed, apply the brakes. Unfortunately, the FFR has been virtually zero since December 2008, so it is no longer available as a tool to stimulate the economy. Incidentally, I annotated the top chart with the tenures of the last three Fed chairmen so we can see who was managing the various FFR cycles since the summer of 1979.

The next chart is based on daily data and adds some additional Treasuries for a close look at yields since 2007.

 

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I update the long-term charts each weekend and the last chart more frequently, depending on yield volatility.

 

 

 

 





The ‘Real’ Mega-Bears: Weekend Update

Courtesy of Doug Short.

It’s time again for the weekend update of our “Real” Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

The chart below is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the “real” all-time high for the S&P 500 occurred in March 2000.


 

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Here is the nominal version to help clarify the impact of inflation and deflation, which varied significantly across these three markets.

 

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See also my alternate version, which charts the comparison from the 2007 nominal all-time high in the S&P 500. This series also includes the Nasdaq from the 2000 Tech Bubble peak.

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The Split Personality of Gasoline and Diesel

Courtesy of www.econmatters.com.

By EconMatters

Crude oil tanked to its lowest in more than six weeks, amid a broad selloff in other commodities and equities with investors increasing fear of another global recession after the U.S. Federal Reserve warned of “significant downside risks” to the U.S. economy on Thursday, Sept. 22. Oil prices plunged $5.00 a barrel on that day, and as of Friday, Sept. 23, WTI sank to $79.96 a barrel, while the ever relentless Brent also retreated to $103.97.

Market expectation is that crude oil prices are expected to continue to fall in the coming week on concern economic growth will slow in the U.S. and China, according to a Bloomberg survey.  However, Financial Times noted a diverging expectation between the financial and physical traders:

“The crude oil market is witnessing a titanic battle: some macroeconomic hedge funds are betting on a drop in prices yet most physical traders are placing wagers that prices will rise.”

Reuters also reported in mid September that lower production and disruptions to North Sea, plus the loss of Libyan crude exports have “combined to produce an extraordinary backwardation across European crude markets.” Backwardation refers to the market condition where the price of a futures contract is trading lower than the spot price, which typically reflects a tight supply market for immediate purchases and deliveries.

A similar split is also observed in the gasoline and diesel product markets. Bloomberg cited a report from API (American Petroleum Institute) that distillate fuel deliveries, which include diesel and heating oil, hit record highs, rising 11% year-over-year to 4.15 million b/d for the August month, while motor gasoline deliveries fell to a 10-year low. (See Charts Below). Overall, year-to-date product consumption averaged 19.1 million a day, down 0.3% from a year ago.

Chart Source: EIA
Chart Source: EIA

This disparity is primarily due to the diverging drivers behind the consumer and industrial activities as high unemployment and stagnant wage continue to crimp consumer spending, while industrial…
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Rio Tinto May Spin-Off Part of Aussie Aluminum Business

Courtesy of Benzinga.

Rio Tinto (NYSE: RIO), the world’s second-largest mining company, may be mulling a spin-off of its Australian aluminum business, according to a report in the Australian Financial Review. The company has been in talks with Macquarie Group and PricewaterhouseCoopers to discuss options for the business, the newspaper reported.

Rio Tinto said last week it may consider the sale of two non-specified assets to boost EBITDA.

Rio Tinto has three refineries, three smelters and two bauxite mines in Australia. The company is likely to hold onto the bauxite mines because of their profitability the Financial Review reported.

BHP Billiton (NYSE: BHP) is the world’s largest mining company.





Hugh Hendry Makes Rare Media Appearance, Discusses Greece And Other Cheap Folding Suits

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The man who singlehandedly took "I would recommend you panic" and made it into one of the catch phrases of the year (if not decade), and who has recently been in a self-imposed media blackout, had a rare media appearance when late last week he appeared on the BBC show The Bottom Line Evan together with Guy Berruyer, chief executive of global business software supplier Sage Group; and internet entrepreneur Brent Hoberman, founder of online interior decoration business mydeco.com.

Obviously we were mostly interested in what Hugh would say, and luckily he did say quite a lot, if nothing too shocking for those familiar with his generally cheery outlook on the world.  Among the snazzy soundbites was his explanation that the UK is not in a recession, but a depression, something Zero Hedge has been saying about the entire, never mind England, for the past 2.5 years, and the proceeds to give the rational breakdown of the Greek situation, which as everyone knows is that it is purely due to political power grabbing and banker greed and financial innovation allowing the masking of reality. As for the outcome, we all know it: Greece defaults, creditors take major haircuts, speculators get blamed, etc.

Fast forward to 6:30 into the clip for the primary part of Hendry’s expostulation.

Bottomline 20110922-2100a by user5452365

And while he may not have had anything new to add to our outlook on the world, he did have some very entertaining suggestions on grooming for hedge fund managers. Watch those in the clip below.





Charting Down Under: The Australian Bear Market

Courtesy of Doug Short.

Note from dshort: After posting my weekend update of the eight world markets I track, I took a quick look at Australia’s All Ordinaries Index to see how it has been faring since my last All Ords post on September 7th. The index fell 5.94% last week and crossed below the 20% decline benchmark for a cyclical bear market on Thursday. The All Ords is currently 21.4% below its interim high, set on April 11th.


What would the S&P 500 look like without the Tech Bubble? Perhaps something resembling Australia’s All Ordinaries Index. I’ve included the S&P 500 in the background to support the idea.

 

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I’m not a technical analyst, but the twin peaks in the S&P 500 over the last dozen years looks like a double top. On a smaller scale the shape of the All Ords since the 2009 trough also has a bit of “twin-peaks” appearance.

There are some who might view the All Ordinaries dramatic 56-month rise to the 2007 peak as a bubble. While the All Ords may indeed have become frothy, it’s no match for a couple of widely acknowledged historic bubbles.

 

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Footnote: Why the linear regression in the top chart? I included it merely to give a sense of what a mathematically precise line through the daily closes would look like. The regression divides the closes so that they are, in simple terms, evenly divided above and below the line.

 

 

 

 





S&P Reminds Europe Of Its Toxic Catch 22, Warns EFSF Expansion Will Lead To More Sovereign Downgrades, Rendering EFSF Itself Useless

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Finally, little by little, the fog of toddler-like euphoria over any and every most recent European bailout plan is starting to lift, this time with the S&P finally speaking up and reminding everyone of what they already know: namely that an expansion of that now-daily deux ex machina, the EFSF, will "potentially trigger credit rating downgrades in the region, a top Standard & Poor’s official warned. David Beers, the head of S&P’s sovereign rating group, said it is still too soon to know how European policymakers will boost the European Financial Stability Facility, how effective that will be and its possible credit implications….But he said the various alternatives could have "potential credit implications in different ways," including for leading euro zone countries such as France and Germany." Get that? As Zero Hedge said back on July 21, the European bailout Catch 22 is now once again front and center, namely that any expansion in the EFSF will lead to a downgrade in one of the two Eurocore countries, France or Germany, and should France get cut from AAA (which it will), the entire burden of footing the European bailout bill will fall on Germany. And if Germany is also downgraded to AA, kiss your SPV CDO goodbye, and with it Europe. Which means that while we will hear many more threats by both and against S&P, more posturing that the EFSF will be enhanced to tens if not hundreds of trillions with virtually unlimited leverage, however idiotic those may be, the end result is just one: whether or not Germany risks a full blown government collapse by instituting the only thing that has a chance of containing the crisis – EuroBonds. Of course, shoul those come to be, the German Pirate party will very soon have an absolute majority in the German parliament… and shortly thereafter in various previously unheard of beer halls.

Some choice S&P quotes from Reuters:

"There is some recognition in the euro zone that there is no cheap, risk-free leveraging options for the EFSF any more," Beers told Reuters.

"We’re getting to a point where the guarantee approach of the sort that the EFSF highlights is running out of road." Beers said in an interview late on Saturday.

Beers declined to comment on implications of each of the


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Zero Hedge

The Death of Hope and Belief

Courtesy of ZeroHedge. View original post here.

Submitted by Cognitive Dissonance.

The Death of Hope and Belief

By

Cognitive Dissonance

 

 

You will always find original articles by Cognitive Dissonance and other authors first on www.TwoIceFloes.com before they are posted here on ZH. To become a Premium or Basic member click here. If you wish to subscribe to ‘Dispatches’, a periodic newsletter from Cognitive Dissonance and TwoIceFloes Creations, please ...



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Phil's Favorites

Can the Eurozone Survive? Not in Its Current Form Says PIMCO; Mish Response

Courtesy of Mish.

Echoing statements I have made many times, PIMCO says the single currency area must become a "United States of Europe" in order to secure its future.

Please consider Eurozone can't survive in current form, says PIMCO.
The eurozone is "untenable" in its current form and cannot survive unless countries are prepared to cede sovereignty and become a "United States of Europe", the manager of the world's biggest bond fund has warned.

The Pacific Investment Management Company (PIMCO) said that while the bloc was likely to stay together in the medium term, with Greece remaining in the eurozone, the single currency could not survive if countries did not move closer together.

Persistently weak gro...



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Chart School

Gann Angles on the Dow Jones Industrials - Update

Courtesy of Read the Ticker.

A trend lines requires 2 points to draw, and Gann Angle only requires 1 point, a huge difference. Something  is going to break soon!

Previous Post here

Why?

Simply that Gann Angle is not determined by price pivot points at the last price end, where as a trend line is. That is the beauty!

Price is still holding true to the blue 2x1 Gann Angle. This angle is the demand line, this is why we need to pay  attention to it.

As stated before .."As you can see price is now entering a pinch zone, it will bust out either way."... soon the fun will start.

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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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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

Raymond James Downgrades Power Integrations To Market Perform

Courtesy of Benzinga.

Related POWI Benzinga's Top Downgrades Benzinga's Volume Movers

Analysts at Raymond James downgraded Power Integrations Inc. (NASDAQ: POWI) from Outperform to Market Perform and removed the price target of $57.00.

Power Integrations shares have dropped 18.42% over the past 52 weeks, while the S&P 500 index has surged 10.69% in the same period.

Power Integrations' shares fell 1.51% to $51.65 in pre-market trading.

Latest Ratings for POWI DateFirmActionFrom...

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Sabrient

Sector Detector: Bulls retake the wheel, with a little help from their friends at the Fed

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

Courtesy of Scott Martindale at Sabrient Systems

Well, it didn’t take long for the bulls to jump on their buying opportunity, with a little help from the bulls’ friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing clichés continue to work -- “Don’t fight the Fed,” and “The trend is your friend.”

In this weekly update, I give my view of the cur...



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OpTrader

Swing trading portfolio - week of March, 23rd, 2015

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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Digital Currencies

Bitcoin vs. Uber: Bitcoin Lovers Respond to Mish

Courtesy of Mish.

I recently commented that it would not surprise me if bitcoin plunged to $1.00. That was not a prediction, it was a comment.

Still, I still feel a collapse in bitcoin is likely.

For discussion, please see Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?

In response, reader Creighton writes ...

Hello Mish

While I'm not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.

While it's likely that the US government watching Bitco...



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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Option Review

Cypress Semi Draws Bullish Option Plays

Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...



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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Stock World Weekly

Stock World Weekly

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

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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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!




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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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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