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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

"Timestamp Fraud": A Rigged Market Explained In One Simple Animation

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The topic of High-Frequency-Trading quickly dissolves into a smorgasbord of mnemonics and 'inside-baseball' technical terms - just complicated enough to lose everyone that matters or should care about its implications. Despite the fair-and-balanced defense from the mainstream media business channels (sponsored by the belief in the status quo fair markets that 'America the free' is known for), the fact is that HFT does front-run (perfectly legal under the umbrella protection of Reg NMS) order flow, but there may be one more wrinkle - one which would cement the Michael Lewis (accurate) allegation that the market is rigged.

Because if...



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Chart School

Weekly Market Summary

Courtesy of Doug Short.

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

The set-up coming into this past week was clean: SPX and NDX exhibited breadth extremes from which they usually bounce and April Opex is a seasonally strong week (post).

In the event, SPX rose nearly 3%. In the process it exhibited a familiar pattern: overnight gaps in the past 4 days accounted 60% of the week's gain. Cash hours, when liquidity is greatest, was not where the meat of the gains took place. That was even more true for RUT and NDX which only posted cash hour gains during two of the four days.

After a sharp drop and a strong bounce, where does that leave the markets? Let's run through each of our market indicators...



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Insider Scoop

Nike Laying Off Fuel Band Team, According to CNET

Courtesy of Benzinga.

Nike (NYSE: NKE) is laying off 70-80 percent the engineers who created its FuelBand Fitness Tracker. according to a post that first surfaced on the social network Secret and was reported Saturday by CNET. Approximately 55 of the 70 employees on Nike's Digital Sport hardware team are reportedly being cut.

View full article http://www.cnet.com/news/nike-fires-fuelband-engineers-will-stop-making-wearable-hardware/

Posted-In: CNETNews Rumors

...

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Phil's Favorites

"Insatiable" Idiocy from the Economist on What to Do About Russia; Warmongers Can't Think

Courtesy of Mish.

In "Insatiable" the Economist says "The cost of stopping the Russian bear now is high—but it will only get higher if the West does nothing".

Economist: Mr Putin has used the Ukrainian crisis to establish some dangerous precedents. He has claimed a duty to intervene to protect Russian-speakers wherever they are. He has staged a referendum and annexation, in defiance of Ukrainian law. And he has abrogated a commitment to respect Ukraine’s borders, which Russia signed in 1994 when Ukraine gave up nuclear weapons. Throughout, Mr Putin has shown that truth and the law are whatever happens to suit him at the time.

Mish: What a bunch of one-sided hypocritical nonsense. The ...



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Market Shadows

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

Two guest authors, David Stockman and long-time contributor John Rubino, write about the current state of Abenomics. 

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

By  

This one matters a lot. Abenomics was predicated on a lunatic notion—namely, that the economic ills from Japan’s massive debt overhang could be cured by a central bank bond buying spree that was designed to be nearly 3X larger relative to its GDP than that of the Fed. Yet anyone with a modicum of common sense and market...



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Option Review

Wild Ride For Chipotle

Shares in Chipotle Mexican Grill Inc. (Ticker: CMG) opened higher on Thursday morning, rising more than 6.0% to $589.00, after the restaurant operator reported better than expected first-quarter sales ahead of the opening bell. But, the stock began to falter just before lunchtime on concerns the burrito-maker will increase menu prices for the first time in three years. The price of Chipotle’s shares have since fallen into negative territory and currently trade down 3.5% on the session at $532.89 as of 1:50 p.m. ET.

Chart – Shares in Chipotle cool by lunchtime

...

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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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Sabrient

What the Market Wants: Positive News and Stocks at Bargain Prices

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%.  Large-caps faired the best, losing only 2.7%.  That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine. 

But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%.  While autos led, sales were up solidly overall.  Business inventories were about as expected with a positive tone.  Citigroup (C) handily beat estimates to add to the morning’s surprises.  As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%.  NASDAQ had a less...



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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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OpTrader

Swing trading portfolio - week of April 14th 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, comments are found below each post.

Here is the new Stock World Weekly. Please sign in with your user name and password, or sign up for a free trial to Stock World Weekly. Click here. 

Chart by Paul Price.

...

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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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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

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

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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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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