Posts Tagged ‘Beige Book’

Will We Hold It Wednesday – S&P 1,920 Edition

Yesterday was a close one!  

We briefly failed our first test of 1,920 (see yesterday's notes) but another low-volume rescue kept us from fulfilling the "Wave C" predicion on this Elliot Wave chart – for now.  

Not that I'm an Elliot Wave person, of course – my theory is that, if you are going to draw 5 points on a graph you can imagine all sorts of random patterns and SOMETIMES you will be right.  About half the time, in fact.  

I believe in bigger numbers and our own EXCLUSIVE 5% Rule™ says the S&P bottomed out at 800 (in 2009) doubled to 1,600 last Spring, consolidated there for a quarter and now has made a 20% move to 1,920 – just like it was supposed to since it bottomed in 2009 (see our many, many predictions over the years).  In fact, it was March of 2012, with the S&P at 1,404, when we set our new goals for the S&P to 1,600.  As I said at the time:

That's right, it turns out our +10% line is still pretty much right on the money, only now we switch our focus to our goal of 1,600 and begin running our numbers off there, rather than from 800.  I know I have been (and still am) Fundamentally bearish on the market at the moment – I just think we are making this move too soon – but that is not to say I think the move is unmakeable.  

SPY WEEJKY

Once we did get the dip in June that we expected at the time (down 10%, back to 1,278 and, fortunately, we had wisely cashed out our Income Portfolio before things turned ugly) we were happy to go gung-ho bullish with our Buy List – the same kind of Buy List we just finised assembling in yesterday's Live Trading Webinar.  In fact, right in that 3/17/12 post, I laid out this play to profit from our prediction:

For example, we expect the S&P to work it's way up to 1,600 and that's SPY $160 and the Jan (2013) $146/154 bull call spread is $3 and you can sell the $110 puts for


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Will We Hold It Wednesday – Weak Bounces and Beige Books

Are you buying the dips?

We're not yet.  Notice that we've now blown 4 of our 5 Must Hold lines (the Dow never did make theirs, which kept us bearish in the first place) and, technically, the S&P failed to hold 1,360 as well but close enough to avoid panic so far.  

Falling from 1,420 to 1,360 is 60 points so we'll be looking for a weak bounce (20% retracement) to 1,372 and a strong bounce (40%) past 1,384 would get us back in a buying mood but let's not count those chickens before they're hatched. 

France and Germany are bouncing 1.5% this morning as the Euro stages a recovery back to that critical $1.31 line and the UK is up 0.77% (7:40) with the Pound back at $1.59.  We noted in Member Chat that this seems like SNB buying to support that 1.20 line on EUR/CHF as we;re certainly not getting a move back up in copper ($3.65), Natural gas ($2.04) or gasoline ($3.24) that we'd expect if we had any additional stimulus or some sort of positive economic data.  Even gold is down this morning ($1,659) so I do not have a lot of faith in this early-morning market movement so far.  

Clearly we're not going to get excited about anything until our indexes can at least take back those 50 dma's (red lines) and the Dollar holding it's line at 79.60 is also bad news for the bulls.  To keep that 1.5% gain in perspective, it's 88 points – back to 6,695 and we're down from 7,150 so "only" 5 more 1.5% up days to go and Germany is back on top.  

SPY DAILYThis is always the tricky part about retracements – it's not so much what you get on the bounce (not even 20% on the DAX), but is the bounce going to be sustainable to get you to 6,850, which is the 20 dma (3% higher than we are now) and then to 7,000, which is the falling 50 dma – 5% over the current mark?  

Keep in mind that the longer it takes to retake the 50 dma, the more it curves down and then you are running into a declining 50 dma, which has a much better chance of rejecting you – especially as you are running out of gas after having to climb 5% just to get there.…
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THE MARKET IS FACING HEADWINDS

THE MARKET IS FACING HEADWINDS

Two businessmen kneeling on pavement, grabbing paper blowing in wind

Courtesy of Comstock Partners

(H/t Pragcap) 

The current market rally is not based on a self-sustained typical economic recovery, but on blind faith that the Fed can pull out a magic wand and cure everything with another round of quantitative easing (QE2).  As we pointed out last week, this a desperate attempt by the Fed to try non-conventional means to get the economy going again after a massive dose of conventional measures resulted in failure.  The members of the FOMC know this, but with further fiscal measures off the table, they are aware that they are the only game in town.  The Fed’s acknowledgement that the economy is in trouble is again highlighted by the latest Beige Book released yesterday.  The following are some excerpts from the report:

“National economic activity continued to rise, albeit at a modest pace..consumer spending was steady to up slightly, but consumers remained price-sensitive, and purchases were mostly limited to necessities and non-discretionary items..Housing markets remained weak..Most reports suggested overall home sales were sluggish or declining..Home inventories were elevated or rising..Conditions in the commercial real estate market were subdued, and construction was expected to remain weak.Reports suggested that rental rates continued to decline for most commercial property types..industry contacts appeared to believe that the commercial real estate and construction sectors would remain weak for some time..Hiring remained limited, with many firms reluctant to add to permanent payrolls, given economic softness..Future capital spending plans appeared to be limited”

So there you have an outline of the anemic economic picture in the Fed’s own words.  To be sure, they indicated some strong points as well.   But the weakness in consumer spending, housing, capital expenditures, commercial real estate and employment pretty much accounts for some 85% of the overall economy.

In addition some of the major problems that worried the market earlier have not really gone away.  The sovereign debt problems of the weaker EU nations have been papered over without being solved and are still lingering just beneath the surface.  The looming currency wars that were shoved down the road by the recent G-20 meeting are also a major threat to the global economy.

Furthermore the Chinese housing bubble previously highlighted by bearish investor Jim Chanos and others has now appeared on the front page of the New York Times.  A new district of the city of Ordos,…
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Jobless Thursday – America’s Infrastructure Crisis

What a disaster!

Not only are our students failing to keep up with the rest of the World but America is close to getting a failing grade in Infrastructure.  That’s right, what was once the World’s mightiest and proudest economy, this once great nation of builders has been given an overall grade of D in the American Society of Civil Engineers report on our Infrastructure.

The 2009 Grades include: Aviation (D), Bridges (C), Dams (D), Drinking Water (D-), Energy (D+), Hazardous Waste (D), Inland Waterways (D-), Levees (D-), Public Parks and Recreation (C-), Rail (C-), Roads (D-), Schools (D), Solid Waste (C+), Transit (D), and Wastewater (D-).  Awful?  Shameful?  How about DANGEROUS?  Deadly even…

For one thing, The number of high hazard dams—dams that, should they fail, pose a significant risk to human life—has increased by more than 3,000 just since 2007, when there were "just" 1,000 dams at risk and 3,000 to pro actively maintain but the administration refused to fund the project, now the costs have tripled as the situation deteriorates but that’s nothing compared to what happens if just a few of them break completely.  1,819 dams are now in the "high hazard" category and, with the current budget, for every one damn that is reparied, two more become an emergency.  

In urban areas, roadway congestion tops 40 percent.  According to the report, decades of underfunding and inattention have jeopardized the ability of our nation’s infrastructure to support our economy and facilitate our way of life.  At risk of catastrophic failure besides the dams (including levees) are things like our drinking water, sewage systems, bridges, waterways, rail lines, airports, roadways (especially elevated ones) and, of course, our entire electrical grid.  Additionally, 7 Billion gallons of clean drinking water is lost every day through leaking pipes – that’s 23 gallons per citizen per day WASTED for want of $11Bn in repairs – don’t bother worrying about it, the last Administration wouldn’t fund it in 2001 or 2006 so why bother now – 10 Trillion gallons later? 

The ASCE calculates a 5-year $2.2Tn investment is needed to address the situation, that’s $500Bn (25%) more than it was 5-years ago, when they released their last report and nothing was done by the previous administration.  So, rather than having invested in America, putting people to work and improving EVERYONE’s way of life, we spent over $1Tn fighting a war, another $600Bn a year on our regular military operations and gave over $1Tn worth of taxe breaks…
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SUMMARIZING THE FED’S BEIGE BOOK

Here’s Pragcap’s summary of the Beige Book. You can read Phil’s summary here.  - Ilene 

SUMMARIZING THE FED’S BEIGE BOOK

Here are the key takeaways from the Fed’s Beige Book:

  • Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods.
  • Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases, while activity in the travel and tourism sector picked up relative to seasonal norms.
  • Reports on manufacturing activity pointed to further expansion, although the pace of growth eased according to several Districts.
  • Home sales slowed further following an initial drop after the expiration of the homebuyer tax credit at the end of June, prompting a slowdown in construction activity as well.
  • Demand for commercial real estate remained quite weak but showed signs of stabilization in some areas.
  • Reports from financial institutions pointed to generally stable or slightly lower loan demand and noted some modest improvements in credit quality.
  • Upward price pressures remained quite limited for most categories of final goods and services, despite higher prices for selected commodities such as grains and some industrial materials. Wage pressures also were limited, although a few Districts noted increased upward pressures in a narrow set of sectors experiencing a mismatch between job requirements and applicant skills.

In sum, slow growth, increased downside risk, low inflation.  Read the full report here.


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Which Way Wednesday – Beige Book Edition

On June 9th we liked the Beige Book, which confirmed our bottom call

On July 28th, we did not like the Beige Book and I said to Members in my review of the report: "Housing drives the market and housing and commercial construction are dead.  How can commercial construction come back if we have less employees?  How can housing come back if fewer people qualify for loans and the population doesn’t grow?  How does anyone think that we can address these problems through capitalism (ie. without stimulus)?"

We got the GDP report that Friday (July 30th) and the low expectations there gave us the gap up we were expecting and Alan Greenspan went on Meet the Press that weekend and admitted I was right – both stealing my "Tale of Two Economies" economic outlook and blasting the Republicans, saying the party had "lost their way."   

We couldn't do anything about the Republican'ts but I was able to call a "Toppy Tuesday" on August 3rd and we drifted along that top until the next week, where we caught the action just right as we took our bullish money and ran on Monday and began grabbing downside hedges including the QID play I put up right in that Tuesday's (8/10) morning post, where I said:

Yesterday we knew that the move up was fake, Fake, FAKE and we acted accordingly in Member Chat.  We had a nice QID cover play right in the Morning Alert that was an easy fill as the Nas went higher and higher all day.  It was the Aug $16/17 bull call spread at .42, and the $16 puts sold for .29 for net .13 on the $1 spread with a nice 669% upside if the Nasdaq heads sharply down on us.  Our stops on the play were a combination of Nas 2,300, Dow 10,700 and Russell 666 and we got the Nasdaq and the Dow over their marks but, once again, 666 proves to be an ominous barrier for the Russell.

That hedge did, of course, return the full 669% as QID finished the expiration period at $17.80 and there was no doubt on the trade as we had a mild drop Tuesday morning, followed by a major drop the next day, where my opening comment was: "Wheeee - I told you this was going to
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Which Way Wednesday – Beige Book Boost or Bust?

Our last Beige Book was June 9th and we liked that one.  My comment to Members at that time was:

Wow, this is good stuff!  Ben was not BS'ing -  It's a slow, tedious recovery but a recovery nonetheless!  On the whole, a pretty good report!  Not enough to support $75 oil but a nice, not too inflationary recovery is in the works.   It's no quick fix though, as it will take 2 good Qs before corporations will be willing to add staff so I bet not much until next spring unless the government steps in (and they'd better)

At the time, the S&P was at 1,055 and we flew up to 1,120 on June 21st before the next market flip-flop, which we have just flip-flopped back from and yesterday we tested 1,120 again and here we are, back at the Beige Book.  So now, the market is about where it should have been based on the last BBook (and no government help so far).  I thought yesterday was too early to pop through ahead of the data and it turns out it was.  If anything, I'm a lot more worried that a deteriorating report tanks the markets this afternoon (2pm release). 

We'll get a clue this morning as we see Durable Goods at 8:30 and those are expected to be up 1% from down 0.6% in May.  Oil Inventories are reported at 10:30 and don't expect demand to be picking up and no one has even mentioned what a disaster this is during summer driving season (speculators are circling their tankers one more time as they pray for hurricanes to make their long bets pay off).  If we do survive the BBook this afternoon, we have a 10% upgrade to Q2 GDP to look forward to tomorrow morning (to 3% from 2.7%) along with Chicago PMI at 9:45.

We know that Leading Economic Indicators turned down 0.2% since the last BBook, the Philly Fed has dropped from 21 in May to 8 in June to 5.1 in July, Construction Spending fell 0.2% with Commercial far worse than Residential, ISM fell almost 6% with a 10% drop in orders leading the downturn and a very deflationary prices paid, Factory Orders in general were off 1.4% (which does not bode well for today's Durable Goods), Auto Sales
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Which Way Wednesday – The Beige Book Boogie

The last Beige Book report was on January 13th.

At the time the futures were flying and we were bullish but Dow was looking toppy and I thought we were going too far, too fast and called for caution – despite our "Meatball Market" at the time.  Just like yesterday, I was not happy with the fundamentals to the point where I felt it necessary to keep pointing them out while the parade of analysts at CNBC et al told everyone to BUYBUYBUY at the 10,750 top.  I don't like to be Chicken Little but sometimes the sky is actually falling!   The  January book had very little "good" news to report (see my analysis for Members that day) and we took our money and ran on the long side.  Although it wasn't until the next Tuesday that we actually went down – it was a doozy and we fell over 500 points in 3 days, all the way to 10,165 (our 5% rule) and we continued weakly through 2/8, when we bottomed out at 9,900.

 

Whoever said this charting stuff was complicated?  Just follow the 5% rule, draw some lines and PRESTO – we know what's going to happen!  Well, at least we hope we know what's going to happen because I've spent a good portion of my week so far telling Members NOT to trust the rally we've been having and to expect a downturn with today's Beige book a possible catalyst for a correction.  From experience, we know there is not generally an immediate reaction to what is essentially a collection of anecdotal evidence about the state of the economy but it does give us an overview of the nation and I haven't seen much news in the 6 weeks since the last report to make me think this one will be showing any great improvements. 

Housing CrisisIt's a tough call at the moment because there is clearly a determined effort to get the markets to move up but we are loaded up with bullish plays from our visit to 9,900 so it pays to be a bit more bearish with our short-term plays as we test the top of our MAYBE range.  We have had some good news this morning with MBA Mortgage Applications up 14.6% as rates fell back under the magic 5% mark and, of course, that's
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Which Way Wednesday – The Beige Book Boogie

The last Beige Book report was on September 9th.

At the time the Dow was looking toppy at 9,650 and we had poor consumer confidence numbers (just like yesterday) and poor consumer credit number (no change) and the book had very little "good" news to report (see my analysis) - Yet the market broke over 9,600 again that day and then took off all the way to 9,900 a week later.  At the time, we were looking for any excuse to go higher on the hopes that this earnings period will look like last one but have we now come too far, too fast?

It seems we are finally hitting the point of diminishing returns for earnings.  Expectations have finally gotten so high that even big beats aren’t enough to keep the momentum going. 

Last earnings Q, we were down from 8,900 in June to 8,100 on July 9th as companies began reporting and we had a nice, 1,000-point relief rally over the first two weeks of earnings.  This time, we went up an additional 500 points in the past two weeks, over our 9,600 line and that has been in anticipation of a repeat of last earnings but the circumstances are very different this time and it takes a lot to justify a 20% run off the July lows. 

Keep in mind that, looking at the sector charts, Energy, Materials and Tech are leading us.  Since semiconductors are simply another form of commodity – this is almost entirely a commodity rally in the midst of a recession with Consumer Staples, Financials, Health Care, Industrials, Telcom, Utilities and Transports all underperforming the rest of the S&P.  As I keep saying – if no one is shipping anything, how the hell can we be having a proper recovery?

The Beige book is an anecdotal view of the economy gathered roughly through the middle of October and we've seen no improvement in Jobs since the Sept 9th report, Cash for Clunkers ground to a halt and, just this morning, we got a horrific 13.7% decrease in the number of mortgage applications from the previous week.  That number includes "seasonal adjustments," without adjustments, morgage apps plunged 22.4% despite record low rates as government assistance begins to peter out.  The Refinance Index, also adjusted for the holiday, decreased 16.8 percent from the previous week and the
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Thrill-Ride Thursday – Playing the Patterns

Not much in the news today but the futures are way off at 7am.

I'm assuming that will, as usual change.  They are already boosting the pound back to $1.66 and the Euro is at $1.452 but getting stronger and the Yen ran back down to 92 for a dollar long enough to give exporters and excuse to lead the Nikkei back over 10,500 (in an amazingly fake-looking finish after a major gap up in their futures) while the Hang Seng managed to close before giving up more than half of their 400-point gap up, making them look nice and green with a net 218-point gain on the day (up 1%).

I know you don't want to hear this.  You don't want to believe that the markets are being manipulated and you don't want to think you can't rely on your charts or numbers you read in the papers (or the articles for that matter) as it might prove that you have as little ability to predict the markets as a soap-opera viewer had of predicting who will be the next character to have an affair.  Like a soap-opera, the stock market is written for television, has a regular cast of writers (the MSM) and makes little sense to people who come in late to the game. 

We, at Philstockworld, do not care if the game is rigged.  As long as we can figure out HOW it's rigged, we know where to place our bets and we can make money from it.  So don't take this as me being down on the market – we love this stuff!  Yesterday I told you, before the market opened (in fact our Newsletter title at 8:30 was "Beware the Beige Book Blues") that the FACTS of the Beige Book would override the hype of market.  We followed through with our plan to short the Dow into the BBook release and we were able to pick up the DIA $95 puts for .75 and sell them for $1.10, which is a 46% gain on the day.  Even if you play conservative and risk just 1% on a day-trade, that's still half a point added to your whole virtual portfolio's gains for the year – that's pretty good stuff!

Another conspiracy we drone on and on about is the good old "stick save."  Perhaps it's not a…
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Zero Hedge

Swedish Housing Bubble Pops As Stockholm Apartment Prices Crash Most Since June 2009

Courtesy of ZeroHedge. View original post here.

Even though Sweden’s property bubble is not the longest running (that accolade goes to Australia at 55 years), it is probably the world’s biggest with prices up roughly 6-fold since starting its meteoric rise in 1995.

Of course, as we noted last month when the SEB's housing price indicator, which measures the difference between those who believe prices will rise and those who expect t...



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Phil's Favorites

Fascism's return and Trump's war on youth

 

Fascism’s return and Trump’s war on youth

Courtesy of Henry GirouxMcMaster University

Donald Trump’s policies represent a particular attack on American youth and children, particularly those who are disadvantaged. (AP Photo/Pablo Martinez Monsivais)

Fascism is all too often relegated to the history books.

The word conjures up a period in which civilized societies treated democracy with contempt, engaged in acts of systemic violence, practised extermination and elimination, supported an “apocalyptic populism,” suppressed dissent, promoted a hyper-nationalism, displayed contempt for women, embraced militarism as an absolute ideal and in...



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Biotech

Designer proteins that package genetic material could help deliver gene therapy

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

 

Designer proteins that package genetic material could help deliver gene therapy

Courtesy of Ian HaydonUniversity of Washington

Delivering genetic material is a key challenge in gene therapy. Invitation image created by Kstudio, CC BY

If you’ve ever bought a new iPhone, you’ve experienced good packaging.

The way the lid slowly separates from the box. The pull...



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Chart School

Rallies Slow As Semiconductor Selling Eases

Courtesy of Declan

Markets experienced early gains but gave them back by the close of business. Given the mini-rally of the past five days, some of the indices are looking vulnerable to a new round of selling.

The S&P finished with a narrow inverted hammer on low volume but at new highs. A move back to the newly accelerated channel is looking favored.
 


The Nasdaq also finished with a narrow doji but wasn't able to make new highs.  It's already close to one channel but looks more likely to reach down to th...



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Insider Scoop

Earnings Scheduled For December 13, 2017

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Lightinthebox Holding Co Ltd-ADR (NYSE: LITB) is estimated to report quarterly earnings at $0.01 per share on revenue of $78.49 million.
Companies Reporting After The Bell
  • ABM Industries, Inc. (NYSE: ABM) is expected to post quarterly earnings at $0.49 per share on revenue of $1.49 billion.
  • ...


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Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....



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ValueWalk

Tax Bill May Spark Exodus From High-Tax States

Courtesy of FinancialSense.com via ValueWalk.com

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...



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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



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Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan 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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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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About Ilene:

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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