Toppy Tuesday - Happy Anniversary Bull Market!

by Phil - March 9th, 2010 8:26 am

It’s hard to believe that just one year ago today investors thought the world was ending!

Well, not all investors - we were BUYBUYBUYing at the time, as I recapped back in September whan we did our "Market Crash - Year One Review."  Click on Cramer’s picture for the Daily Show’s March 4th, 2009 review of the magical moments that led us down to the bottom and here’s another great video from the evening broadcast on March 9th and, of course, there is my own legendary appearance on LiveStock from March 6th, but that’s summarized in the crash link, so save yourself 3 hours, although the first 10 minutes are worth it for people who want to learn about our buy/write strategy as I explained the logic of it as I recommended FAS at $2.41 using those hedges. 

And what a wild year it has been as we’ve made an epic recovery.  The only question is - have we come too far too fast?  Should we be up 75% from our March 9th lows?  We are still down 25% from our highs but let’s keep in mind that we made those highs thinking AIG was MAKING money, that FNM and FRE were great stocks for your retirement portfolio, that Kirk Kirkorean was going to rescue GM, that BZH wasn’t some kind of scam, that BSC, LEH et al were "the smartest guys in the room."  I urge you to click on Cramer and listen to the idiocy of the analysts who would tell you everything is all right even as it was all falling apart around them - why does everyone suddenly trust them again?

How could we not love this market?  Markets do this sort of thing all the time don’t they?  It’s all part of the "efficient pricing model" that always lets you know what a stock is truly worth like when GE was "worth" $30 in 2008 and "worth" $6 in 2009 and is now "worth" $16.  This is not some biotech folks - this is GE, they’ve been around for 100 years and they have $170Bn in global sales.  Did they really drop 80% in value in 2009?  No.  That’s why it was easy to pick a bottom - the valuations got ridiculous and, as fundamentalists, we siezed on the opportunity to BUYBUYBUY despite the negative sentiment. 

Now, we are in a very different situation.  Now we have the MSM telling us to BUYBUYBUY…

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Cisco Call Options Fly off the Shelves

by Andrew Wilkinson - March 8th, 2010 4:06 pm

Today’s tickers: CSCO, DRYS, CIGX, AES, V, MCD, BIIB, SNE, GME & VALE

CSCO - Cisco Systems, Inc. – Bullish call-buying dominated options trading patterns on Cisco today on news the firm is slated to “make a significant announcement that will forever change the internet and its impact on consumers, businesses and governments.” Cisco’s shares jumped 4.15% to a new 52-week high of $26.25 during the session on a target share price upgrade to $28.00 from $26.00 at JPMorgan Chase & Co. Bullish traders purchased approximately 15,800 in-the-money calls at the March $26 strike for a premium of $0.33 apiece and coveted 9,300 calls at the higher March $27 strike for an average premium of $0.10 each. Uber-bullish individuals bought 4,000 calls at the March $28 strike for just two pennies premium per contract. Investors long the closest-to-the-money March $26 strike calls are positioned to accrue profits if Cisco’s shares trade above $26.33 ahead of expiration day. The surge in demand for options on the stock as well as uncertainty surrounding tomorrow’s announcement lifted the reading of overall options implied volatility on Cisco by 17.5% to 22.85% in afternoon trading.

DRYS - DryShips, Inc. – Dry-bulk shipping company, DryShips, Inc., experienced a short-lived dip in the price of its shares in morning trading, but regained its footing this afternoon, rallying 7.77% to $6.10 with about forty minutes remaining in the session. Call-buying action flooded DRYS today with approximately 22,300 now in-the-money calls picked up at the near-term March $6 strike for an average premium of $0.22 apiece. Nearly 12,000 calls were coveted at the higher March $7 strike for $0.05 premium per contract. Optimism spread to the same strike prices in the April contract, as well. Investors secured roughly 11,600 long in-the-money calls at the April $6 strike for an average premium of $0.39 each. Traders bought another 4,000 call options at the higher April $7 strike for $0.16 per contract. Options traders exchanged more than 130,000 contracts on DryShips during the session, which represents about 27% of total existing open interest on the stock of 480,443 contracts. Options implied volatility jumped approximately 34.8% this afternoon to 60.26%.

CIGX - Star Scientific, Inc. – Shares of the maker of dissolvable smokeless tobacco products surged 6.70% to $1.12 today, inspiring one investor to establish a bullish risk reversal on the stock in the August contract. The trader appears to have sold roughly 7,200 puts at the August…

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The Oxen Report: Its Time to Get Our Short Sale On!

by David Ristau - March 8th, 2010 8:57 am

Hope everyone had a nice weekend. Today, we are starting off with a chart of the Dow Jones. This shows you that we have a market that, in the short term, is extremely overvalued. RSI is above 60, the average is moving towards the top of its bollinger bands, and it is overbought on stochastics. All this is showing to me that the market is toppy. That chart is how I want to start this week to show you that I think we are going to be looking at some short sales and inverse ETFs unless we have reason to believe the market will rally. Today, I do not see any major reason to believe that will happen. Also, be sure to check out my Weekend Wrap-Up and Portfolio Update, which shows how we have increased our Buy Pick Portfolio 129% in one year.

Buy Pick of the Day: Ultrashort Proshares Real Estate ETF (SRS)

Analysis: As I have been saying this morning and in my weekend post is that I think we are looking at an overvalued market that will need something to boost it to keep it going. This morning, we got some slightly bullish news in the form of an AIG sale to Metlife, but it is short lived. As of 8:00 AM, futures on the Dow were up 20. As of 8:30 AM, they were at 10. As of 8:45 AM - 2. It is a slow decline because the market is in a position to fall, and the news is not great enough to keep it moving. There is no economic data to sustain the market, and earnings were non-existent. The only even slightly important company to report was Yingli Green (YGE), who we will get to in our short sale. 

For that reason, we can position ourselves well today in an inverse ETF for a buy. We want to avoid the financials and energy, however, because we had a major deal with Royal Dutch Shell and Australia Arrow Energy that could confuse the oil ETFs and oil market. AIG is in that financial sector. Therefore, I turn my attention to the under the radar Ultrashort Proshares ETF (SRS) for our Buy Pick of the Day. This one should be a bit of a slipper in the market today. It is sitting neutral in pre-market, but it is a volatile ETF that can really take off at the…

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Monday Market Movement

by Phil - March 8th, 2010 8:27 am

Asia exploded out of the gate today! 

The Hang Seng is up 2% at 21,196, gaining 408 points on the day along with a 2% gain on the Nikkei (216 points), taking them over the 10,500 mark to 10,585 as they play catch-up to the Dow, which topped out at 10,566 last week.  The BSE keeps going higher, adding 0.6% for the day, back over 17,000 at 17,108 and the Shanghia added 0.7%, finishing the day at 3,053. 

The Hang Seng’s incredible morning gap up and 100-point follow-through, though impressive, is only a "good start" to getting that index back on the road to recovery as they had topped out at 23,000 in November and flirted with 22,500 in early January so we’ll need some sustained conviction before we get all bullish on China but, for today, we can just say "WOW" - it’s amazing how much a market can move when it’s closed!  

We’re closed as well but our pre-markets are looking strong although Europe is kind of flat-lining.  They are all upset because the 300,000 people who live in Iceland took a vote and decided they didn’t have $5.3Bn to bail out failed Icebank, which kind of leaves the EU investors, who deposited money into an internet savings account that promised 8% returns, in a bit of a lurch becuase (surprisingly, I’m sure) it turns out the bank took a lot of risks to get those returns and (even more surprisingly) THEY BLEW IT!   Even more surprisingly to European investors, 93% of the voters said: "No thank you, we will not agree to pay $17,666 per person (about $58,000 per family) to make foreign investors whole."

What I find most funny about this is that the UK and the Netherlands had the nerve to ask Icelanders to repay this money.  $5.3Bn is 1/2 of Iceland’s GDP - that would be like countries who lost money in the Lehman collapse asking US taxpayers to kick in $6.5Tn to make them whole.  What do you think our vote would be?  Sure we are numb to our own debt level but are we that numb?  Possibly so as we seem to be happily buying oil at $80 a barrel again - sending $321Bn American dollars out of the country in exchange for a product we burn up and need again the next day.  I wrote about this disaster over the weekend so no need to re-hash it…

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Fear and Loathing on the Campaign Trail 2010

by Phil - March 8th, 2010 7:54 am

I’m in a cynical mood this morning. 

I just watched a presentation by Republican National Committee Finance Director, Rob Bickart, which includes the question for RNC fundraisers: "What can you sell when you do not have the White House, the House or the Senate?" and the answer is "Save the country from trending toward Socialism."  This is kind of like Pepsi launcing a new advertising campaign called "Coke is rat poison!"  Is this really what our country has come to?

In neat PowerPoint pages, Bickart’s presentation lifts the curtain on the often-cynical terms of political marketing, displaying an air of disdain for the party’s donors that is usually confined to the bar-room conversations of political operatives.  As this is now blowing up into a "thing," RNC Chairman Michael Steele (who wasn’t at the meeting) is distancing himself from the comments and RNC Communications Director, Doug Hey excused the matter in an email. “Fundraising documents are often controversial.

 

In the set of 6 slides that are headed "RNC Marketing 101,"  The presentation divides fundraising into two traditional categories, direct marketing and major donors, and lays out the details of how to approach each group.  The small donors who are the targets of direct marketing are described under the heading “Visceral Giving.” Their motivations are listed as “fear;” “Extreme negative feelings toward existing Administration;” and “Reactionary.”  

 

Major donors, by contrast, are treated in a column headed “Calculated Giving.”   Their motivations include: “Peer to Peer Pressure”; “access”; and “Ego-Driven.”  The slide also allows that donors may have more honorable motives, including “Patriotic Duty.”  Also of note, there is list of "Top Senatorial Targets" including Reid, Lincoln, Bennet and Specter.  

 

Looking at slide 69, it’s very nice to note that the RNC is already working to establish a "Recount Fund" to challenge the next election and on slide 70, the RNC points out that the Supreme Court’s Jan 21st ruling mean (to them) that "Access and Gratitude" no longer equals "Corruption."  Corporations and Unions can contribute (according to the document) "Unlimited, Directly from Treasury, With disclosure."

 

So happy Monday to you!  I guess, on the whole, this is going to be good for the markets because the Republicans are on a roll and they are going to take back the Government and this brief experiment with Democracy will come to an end.  Oh and by Democracy, I mean the Democrats being in charge - I wouldn’t want anyone to think I was saying the Republicans don’t believe in Democracy.  Of course they do, it says right…

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Shocking Market Move, But Will It Continue?

by markettamer - March 8th, 2010 7:28 am

 Courtesy of Market Tamer

Shocking Market Move, But Will It Continue?

Improve Your Market Timing:  The Cup & Handle Chart Pattern

• The Cup & Handle is a bullish continuation pattern that starts with the stock pulling back after a bullish trend and forming a rounded bottom that resembles a cup.  It then ascends to form the backside of the cup and consolidates into a flag or handle.  The handle should ideally form at the level of the beginning of the downtrend on the front side of the cup but it is still a valid pattern even if the back lip of handle of the cup forms lower than the front lip.
• The entry point is the high of the handle and the upside potential is usually measured by the depth of the cup added to the breakout point.
• After pulling back and trading in a relatively tight pattern and forming a rounded bottom and then ascending to the consolidation handle, profit taking begins to appear as the stock flattens on deceasing volume.
• The continuation of the bullish move occurs when the stock breaks above the high of the handle with increasing volume.
• An astute trader will realize that the bearishness is temporary and the breakout represents the investment communities’ continuing participation in the longer term upside move.

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