Technical Tuesday – 1,360 or Bust on the S&P – Again!
by Phil - May 15th, 2012 7:05 am
Here we go again!
It was only last Tuesday we were watching that 1,360 line on the S&P but, at the time, we were looking for it to hold as we finished last Monday at 1,370 – in a totally fake pump into the close. Even early Tuesday morning, the Futures were being pumped up to reel in the suckers but I warned in the morning post:
There is no particular reason for the move, other than this being Tuesday in a manipulated market. Neither oil ($97.38) or gold ($1,628) or copper ($3.71) or silver ($29.73) or even gasoline ($2.97) give any indication of consumer demand for commodities. "Fixing" the charts does not mean you have fixed the economy!
We all know what happened next – we failed to hold that 1,360 line on the S&P as the Euro failed to hold $1.30 and Greece was unable to form a coalition government (we also had disappointing Retail Sales numbers) and this morning (6:45) oil is $94.74, gold is $1,558, copper is $3.53, silver $28.23 and gasoline is STILL $2.97.
The last thing we should do is complain about gasoline prices – we still pay 1/2 of what Europe does and even China is paying $5.31 a gallon – 25% more than the US average $4.19. At this point, gas prices are the only commodity not falling down and that's because they are the easiest to manipulate – the last bastion of the speculator – if you will.
With that mythical summer driving season on the way, even we stopped shorting oil at $94 and gasoline is now a joke at $2.97 as that's $124.74 per barrel – a 33% per barrel mark-up at retail. At the pump, $4.19 a gallon means you are paying $175.98 at the pump – that's an 87% mark-up! Actually, we shouldn't look at it as 87%, that's misleading – when oil was $60 per barrel, gasoline was $1.85 at the pump and that was $77.70 and the refiners were making very good money. Why would it cost $81.98 to refine and retail a $94 barrel of oil when it only costs $17.70 to refine and retail a $60 barrel of oil? See – it's a rip-off! Somebody, somewhere is massively screwing you over – that much should be obvious to even a Republican Senator.
This 400% increase…
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DiggSabrient Risers – 5/15/2012
by Sabrient - May 15th, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| AIG | BUY | The long term projected growth rate for AIG is rising, and this is happenening at a time when historical earnings have already increased significantly. | ||
| ELX | BUY | An increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a few weeks ago make Emulex a company to watch. | ||
| HLF | STRONGBUY | Herbalife has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings. | ||
| TA | STRONGBUY | TravelCenters of America has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings. | ||
| HOG | BUY | Harley-Davidson has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
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Sabrient Divers – 05/15/2012
by Sabrient - May 15th, 2012 12:00 am
Top 5 Divers |
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| Stock | Rating | Analysis | ||
| AVP | STRONGSELL | We project an unfortunate decrease in value for Avon, and we’re not alone in this opinion as other analysts are also reducing expectations. | ||
| APL | STRONGSELL | Recent earnings changes for Atlas Pipeline are troublesome, as is a sinking projected valuation. | ||
| CYMI | STRONGSELL | A consensus is building that Cymer is showing weakening near term and long term prospects. | ||
| AZN | STRONGSELL | We project an unfortunate decrease in value for AstraZeneca, and we’re not alone in this opinion as other analysts are also reducing expectations. | ||
| XPO | STRONGSELL | Recent earnings changes for Express-1 are troublesome, as is a sinking projected valuation. | ||
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What the Market Wants: Six Weeks, One Day . . . and Still Counting
by Sabrient - May 14th, 2012 9:21 pm
Courtesy of David Brown, Chief Market Strategist, Sabrient
A weekend of more election surprises in Europe, as a socialist candidate won a key state vote in Germany, threatening Prime Minister Angela Merkel‘s stance on austerity in the Eurozone. The Greek “leadership” has all but abandoned hope of forming a new elected government, likely requiring yet another vote.
Those European issues combined with new concerns about China’s growth didn’t do anything to mitigate the JP Morgan embarrassing announcement of a new $2 billion trading loss. Unsurprisingly, the market performed poorly yet again today as the S&P 500 fell more than a percent to 1338, its lowest level since early February, extending the streak to six weeks since our last new high.
Market Stats. The worst style/cap last week was Large Cap Growth, losing -1.05%. The best was Small Cap Value, gaining a tiny +0.19%. Utilities and Healthcare, classic flight-to-safety sectors, were the only positive sectors, with each gaining about +0.5% or less. Basic Materials dropped a whopping +2.7%, followed closely by Energy which dropped more than 2%.
Today, not a solitary sector gained anything while the Dow lost 125 points and Nasdaq, 31 points. Financials writhed in the fallout from JP Morgan’s massive trading loss as well as the weakness in most European banks due the Greek impasse and the German election surprise.
Economic Releases. Retail Sales from April will be announced tomorrow but are expected to be only a +0.2% increase compared to a +0.8% increase last month. CPI and Business Inventories also will be released tomorrow but are unlikely to create much stir. Wednesday, we get New Housing Starts, which are expected to be up sharply over last month.
The important Industrial Production release will also be on Wednesday and could generate a little optimism if it is up as expected. Initial Jobless Claims will arrive on Thursday and could spark or spook the market. Finally, Leading Indicators will end the busy week of economic releases, but is unlikely to help much if the earlier announcements haven’t already got the market engine running.
Fortunately, valuations are still attractive in many stocks (see a few below), and our European ETF hedges—IEV, EWP and VGK—were all down nearly 5% or more over the past week and should continue to serve us well as long as the European scene is so muddled.
4…
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Put Options Eye Fresh Lows For Groupon
by Option Review - May 14th, 2012 1:48 pm
Today’s tickers: GRPN, DLTR & CHS
GRPN - Groupon, Inc. – Shares in Groupon are up 11.11% at $11.00 today on expectations the company may report better-than-expected first-quarter earnings after the final bell. Options on the stock are quite active as well, but not all of the positioning is looking for a positive earnings surprise tonight. Fresh interest building in the June expiry puts portends potential fresh record lows for the shares in the near future. One-by-two June $7.0/$9.0 ratio put spreads purchased this morning position traders to profit from limited bearish movement in the price of the underlying during the next five weeks. Of the more than 3,300 put options in play at the June $7.0 and $9.0 strikes, the largest blocks of options changing hands are the purchase of 486 $9.0 strike puts spread against the sale of 972 $7.0 strike options, done at a net premium outlay of $0.33 per contract. The ratio spread may be a profitable strategy should Groupon’s shares drop 21.1% to slip beneath the effective breakeven point at $8.67. Maximum possible profits of $1.67 per contract are available on the positions if shares in the name drop 36.4% to settle at $7.00 at June expiration. Groupon’s shares on Friday traded down to an all-time low of $9.63.
DLTR - Dollar Tree Stores, Inc. – Bearish options are in play on Dollar Tree, Inc. this morning ahead of the discount consumer goods retailer’s first-quarter earnings report on Thursday. Shares in Dollar Tree are currently down 1.5% at $101.05 as of 12:50 in New York. It looks like the investor buying a sizable debit put spread on DLTR this morning paid an average net premium of $3.31 per contract for a roughly 3,000-lot June $85/$100 spread. The position makes money if shares in…
ETF Periscope: Dreams of QE3 Dance through the Heads of the Bulls
by Sabrient - May 14th, 2012 12:42 pm
Reminder: Sabrient is available to chat with Members, comments are found below each post.
Courtesy of Daniel Sckolnik, ETF Periscope
“Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.” — Johann Wolfgang von Goethe
If Wall Street was looking towards the first quarter earnings season for a sign that it should resume the same sort of optimistic stance that it had taken earlier this year, it is likely that its gaze is now resigned to look elsewhere.
There is definitely a trend resuming, but it appears to more resemble the tendency to be defensive and sell, rather than to view dips as prime buying opportunities.
Though the majority of companies reported earnings that equaled or exceeded expectations, the bar seemed, based on investor reaction, to be set towards the low side. However, with the resumption of instability emanating from the European sovereign debt crisis, and unspectacular data emerging from the domestic economic front, investors seem to be slumping back into fear and uncertainty as evidenced by increasing levels of volatility in the market.
Global investors seem, to a certain degree, only to be finding cheer when they see and hear signs of various forms of quantitative easing and other versions of stimulus. For the U.S. market, the most recent Fed intervention, in the form of its bond-buying program oddly referred to as “Operation Twist,” was embraced by investors as a poor cousin of the QE3 that was hoped for, but greeted as a relative nevertheless.
Whatever its lineage, that particular source of Fed largesse is due to expire relatively soon.
For the Eurozone, where forms of stimulus are a bit more constrained due to the charter of the European Central Bank (ECB), the brilliant idea of ECB’s current president Mario Draghi to goose the region’s flailing banks with the clever liquidity solution known as the LTRO was successful beyond general expectations.
In fact, it could have been just enough to stem the serious downtrend that hit Wall Street and the European bourses for much of the second half of 2011, and may have been the single strongest ingredient that contributed to the stellar performance of the equity market in early 2012.
Even China has embraced the game heartily, announcing this past weekend that it will loosen its own monetary policy, a…
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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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