Thrilling Thursday – Japan Jump Juices Futures
by Phil - December 3rd, 2009 8:29 am
What a morning we are having already!
At 5:49 I posted to our Members: "Nice opportunity to short the RUT at 600.50 in the futures..." We had two plays running and the Russell was kind enough to drop all the way to our $599 target, which may not seem like a big deal but it’s $1 per penny per contract on the futures so that more than pays for breakfast already. 600, if you recall, has long been our watch level on the Russell and we get very interested in the action around that level. 10,500 was a good short on the Dow too but we missed that one by an hour but maybe we’ll get another poke at both this morning as Jobs are very likely to sound bullish.
What Phil? You may ask. How can you suddenly believe jobs will be bullish? I don’t, but I do believe the MSM lies to you and that no one will mention the fact that the jobs numbers are based on models that give added weight to prior years and now we are comping against the Lehman collapse of last year when 610,000 jobs were lost in November (unadjusted), which was the first November decline since 2001 and the worst monthly decline since 1939. So we have a situation in which idiot economists (who apparently have no clue how these numbers work) are estimating 125,000 job losses in tomorrow’s NFP, but there will be an offset of at least 75,000 jobs from last year that can bring that figure down to 50,000 or less. Today’s weekly number will be similarly affected.
The same seasonal adjustment will affect October as well and we may get a downward revision there as well so beware of "spectacular" jobs numbers this morning, as I said to members yesterday – that is excitement we are going to want to sell into. Also on today’s sunshine economic calendar is revised Q3 Productivity (if you liked the numbers the first time, you’ll love them when we act like they are new today), ISM Services and Retail Sales. Obama convenes his "jobs summit" at 1:30 and then says something probably right at the market close like "we have a plan" and then we can rally off that.
Officially Cyber Monday sales were up 5%. Unfortunately, on-line sales make up just 6% of all retail sales so 5% of 6% is 0.3% and that’s…
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DiggFriday: Dell Misses, Is Goldman Sachs Stupid or Evil?
by Phil - November 20th, 2009 8:18 am
How can a firm that never loses money be so totally wrong?
Just this Monday, Goldman Sachs helped to gap the markets higher at the open in low-volume futures trading with the following pronouncement: "Goldman Sachs resumes coverage on Dell Inc. (NASDAQ: DELL) and gave DELL a Buy rating at a 12-month price target of $19. Goldman believes that DELL will benefit from a corporate PC refresh cycle and will show better earnings as DELL is trying to optimize its cost structure. Goldman believes Dell will report better than expected earnings and beat analysts’ expectations. Goldman expects DELL to report earnings of $1.09 for CY2009 and $1.37 for CY2010 from their previous estimates of $1.07 for CY2009 and $1.35 for CY2010." Fact is, they missed by a mile.
That report took Dell up 2% for the day and the Dow gained 150 points and we were dumbfounded by the move, both in DELL, who were swallowing a difficult acquisition of Perot Systems and of the market, which acted like $31Bn DELL is the same kind of bellwether that $120Bn HPQ is, even if Goldman’s report had been even close to accurate. As it was, they couldn’t have been more wrong if they were playing "opposite day." How is it that a firm that has only 3 losing trading days in 6 months can be this amazingly wrong on crucial analysis?
So is Goldman actually stupid and, as many have implied, simply cheating to rack up their amazing market gains or are they intentionally manipulating the markets. Former GS-employee Jim Cramer jumped right on the bandwagon on Monday afternoon and told viewers that "obviously," since DELL is going to do so well (because GS says so) that INTC and MSFT must be buys too.
This is how manipulative stock pumping works – start a rumor, push it out through the media, extrapolate the rumor out to affect market-moving stocks that don’t even have upcoming news events and then tell people they are missing an opportunity, even after the train has left the station (by Cramer’s 2:30 spot on Monday, the Nasdaq had already hit the high for the week, peaking out exactly at the moment Cramer told his retail investors to pile into the market).
Were the beautiful sheeple only buying what Cramer’s buddies were selling? Is that how GS makes their money, buying low on Friday, making…
Jobless Thursday – Get Ready for the Next Million Layoffs
by Phil - November 12th, 2009 8:21 am
"California tumbles into the sea."
Yes, Steely Dan predicted it in 1973, when Ronald Reagan was still Governor but we thought they were talking about earthquakes at the time. This year it’s clearly California’s 49.3% budget gap and 16.2% drop in state revenue that has them leading a list of lemming states to their doom. Over 1M state and municipal employees may be getting their last checks this Christmas as 9 states face budget issues on par with California.
According to The Atlantic: Nine more states are "barreling toward an economic disaster" according to a new Pew poll that sees deep service cuts and temporary tax hikes to avoid fiscal calamity. Some of these states will be familiar to Atlantic Business readers. I’ve been leading the funeral cry for the united states of MichiCaliFlAriVada (that’s Michigan, California, Florida, Arizona and Nevada), and all five states are on Pew’s list. Rounding out the ten are Illinois, New Jersey, Oregon, Rhode Island and Wisconsin. Here’s the graph from the Pew Center on the States:
| Six Factors | Revenue change | Budget gap | Unemployment rate change | Foreclosure rate | Need supermajority? | GPP "money" grade | Score | ||||||||
| United States | -11.70% | 17.7%5 | 4.4 | 1.37% | 17 yes, 33 no | B- 5 | 17 | ||||||||
| California | -16.20% | 49.30% | 4.6 | 2.02% | Yes | D+ | 30 | ||||||||
…
Toppy Tuesday Morning
by Phil - November 10th, 2009 8:05 am
That was some day yesterday.
We even had to flip bullish in the afternoon (slightly and reluctantly) but, when push came to shove and they asked me for my opinion on TV, I had to tell them I still thought we were toppy. I said that despite the Fast Money crew sitting in the studio right below me actively advising their viewers to chase the performance and, right after them, our friendbuddypal Jim Cramer told his viewers that no news is good news and the market is in a "a positive and delicious void" where we don’t have to worry about any pesky facts interfering with our buying premise.
To that end, Cramer suggests chasing AAPL, GOOG, GS, BAC and WFC and anything else that is not nailed down. "There are only 35 days of trading left in the year," Cramer says, "so we can expect money managers to pile into these companies when they realize the 2010 numbers are too low. Retail investors should be sure they aren’t left behind." Yes, we should blindly follow the money managers because they’ve never steered us wrong before (end sarcasm font).
Does it bother me to have be on the other side of the trade from "the finest minds on Wall Street"? A little, to be honest. As I pointed out yesterday in reminding you about what happened in 1999 and as John Maynard Keynes reminded us all decades ago: "The market can remain irrational longer than you can remain solvent." We discussed this logic back on October 12th, when I warned the bears that you can’t keep supporting the wrong team when they are clearly losing the game.
We had stayed about 55% bearish into the weekend but quickly covered up in the morning after all that stimulus talk against the declining dollar. In my 9:43 Alert to Members I said: "If we break over 10,120, then the selling the DIA $103 puts, now $2.55 are a great momentum play if you have the longer covers to protect you." Those puts finished the day at $1.70, a nice, quick 32% gain on the day and that’s how fast you can rebalance using index covers and those profits came AFTER buying back the Dec $99 puts we sold for $2.50 at $1.80 – 28% from Friday to Monday.
In the morning post, I had set up a chart for the week and added our 25% targets of Dow 10,250, S&P 1,100,…
Testy Tuesday – Topping or Popping?
by Phil - October 13th, 2009 8:15 am
I told you yesterday would be fun!
Will today be funner? Is funner a word? As you know, I have been determined to get more bullish and our Watch List is growing every day as I add more and more undervalued companies that still have room to fly if we are truly going to run the S&P back over 1,100 this year. We remain skeptical but you can be skeptical and still make money, as you can see from Corey’s (Afraid to Trade) very nice S&P Chart, you can do very well in this market buying the dips OR selling the tops – we kind of like to do both…
Despite the low volumes, buyers are clearly in control of this market and, in Member Chat yesterday, I compared the situation to having a bet on the Raiders, who lost 44 to 7 on Sunday. You can start out with a bet on the Raiders (in this case, the Bears) but there’s a certain point, perhaps when the 3rd consecutive possession by the Giants (Bulls) ends in a TD, that you have tgo admit you aren’t going to win.
You have a few choices at that point: You can be a perma-Raider and keep betting more and more on your team (not smart); You can swallow your losses and leave the stadium; You can swallow your losses and stay on the sidelines and watch the game; Or you can switch sides and start betting on the Giants, maybe even recovering some of what you lost. You can keep some of your useless-looking Raiders bets, just in case a miracle occurs but what’s the sense of not betting on a clear winner when it’s right in front of you? Even if you are skeptical, that can be useful as it keeps you out of trouble as you should be wise enough to take your profits off the table.
I never understand the "fan" behavior of market players. If you see the market going up and up and up and up – perhaps it’s time to make a few up bets. Bears don’t earn loyalty rewards or get frequent-complainer points from the market so, if your "team" is getting trampled, it’s OK to switch sides – at least for a while – no one will think any less of you. In the case of our bull-market bets, we have a great opportunity to switch sides at a very significant…
The New IPad Is Here!
by Phil - September 11th, 2009 7:26 pm
Finally I’m getting my IPad!
It was almost a year ago when I said to members on Dec 30th: "AAPL just announced a deal to do Ebooks on IPhones and ITouch and that is the intermediate step towards the IPad, which should be a 2-3x size version of the IPhone that takes the place of a Kindle or a laptop or a notepad or…"
At the time AAPL was trading at a paltry $86 a share and we were BUYBUYBUYing. The context of that chat comment was AAPL had been under attack on the Steve Jobs health concerns and Jim Cramer was "fomenting" a rumor that AAPL was going to issue a warning on Q4, which I referred to as "typical pre-holiday BS…. Day before a holiday, little chance of getting a confirmation or denial from AAPL as key execs aren’t reachable." As AAPL continued to fall, we continued to buy because IT DID NOT CHANGE OUR FUNDAMENTAL OUTLOOK ON THE COMPANY. I went on to say:
Notice the timing of this article that hit the Mac Daily News at 12:09, just ahead of the rumors. This way, the hyenas who plant the rumors cause GOOG to bring up a "legitimate" news story concerning Jobs’ health to make the whole thing seem legitimate. Don’t forget MacWorld is next week and these attacks often occur ahead of AAPL events.
Here’s some real news on AAPL, IPhone browser share jumped 36% Christmas week. 57% of all mobile browser requests came from IPhones, up from 42% the week before Xmas so either a lot of people opened up IPhones under the tree or they are just so darn usesful that people who are home for the holidays use their IPhone like a computer.
If you want the real lowdown on the Cramer conspiracy, don’t take my word for it, Apple Insider got the goods on him by March 13th of this year but, by then Apple was back at $95 and on it’s way back to $170 already. As fundamental investors, you just have to know when to put your foot down! Apple Insider is a great read but here is the part you MUST know if you want to understand why we love to go against what the Crookmeister General says to his sheeple on TV. This is a great view of how the guy "who…
Monday Market Melt-Down
by Phil - August 17th, 2009 7:33 am
Yee-haw!
We love the smell of pullback in the morning. It smells like – victory! After extensively reviewing our bearish positions in this week’s wrap up and after calling for cashing out our bull plays last week and after taking a whole bunch of short positions – I would have been in a very bad mood this morning had we gone up 150-points instead of down so forgive me for being pleased with myself.
Although we called the stick-save at Friday’s close, even when I predicted it at 12:40 I said that: "getting back to there would be fake, fake, fake and failing there would be very bearish going into the weekend." In my closing Alert to Members at 4:04 I said: "12:42 targets were: Dow 9,350, S&P 1,005, Nas 1,990, NYSE 6,540 and RUT 570. We got 9,321, 1,004, 1,985, 6,537 and 564 so let’s hear it for the 5% rule and Mr. Stick, who’s program is playing our tune. This was, of course fake, fake, fake, so we still expect our sell-off next week." See, this stuff isn’t too hard to follow – targets set at 12:42, targets failed at the close, stay short into the weekend…
Speaking of targets, our first downside targets, which we went over in last Wednesday morning’s post, should be tested this morning at Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550. As that post was an extensive discussion of levels and ranges we expect and is still fresh, I won’t get back into into it here other than to say how mean you are for not using THIS LINK to get a free trial of the PSW REPORT (just 2 weeks left on summer offer) and then using THIS LINK to refer 2 friends and lock in your own discounts. We’re starting a new $100,000 Virtual Portfolio this weekend and only members will get those trade live and I’ll also be continuing the $5,000 virtual portfolio and it’s a great time to start following now that we are back to cash there.
While we are nowhere near as bullish as Cramer (seen here in Thursday making fun of us for being too cautious), we are also not perma-bears. A nice sell-off here is not only long overdue but it’s also healthy and, if we hold 80% of the move up since March, we’re going to be thrilled to go long with…
Digging in the Mud for Green Shoots – How Did We Get Here?
by Phil - July 11th, 2009 5:26 pm
I’m digging for green shoots but you have to sift through a lot of manure to find them this week!
A few weeks ago I complained that the MSM was irrationally exuberant and I couldn’t find any negative articles (outside of PSW, of course, where people thought we were too negative calling for a correction) and now, less than a month later, you can hardly find anyone who doesn’t think we’re going back to the March lows. I stand by my statement to Members in yesterday morning’s Alert where I said: "It’s ridiculous for the Dow to go back to 7,500 and ridiculous for the S&P to go back to 800. While it’s easy to make squiggly lines on a chart show 10% drops ahead (which seems like a normal 50% retrace of the gains overall) I just think it’s dead wrong from a valuation perspective so I’m not inclined to play it, especially when those valuations are about to slap you in the face over the next few weeks. Maybe I’m wrong and maybe earnings will suck and Q2 will be a miss and guidance will be lower but right now I say – Show me the misses."
So I said Cramer was an idiot to be herding his sheeple into stocks when the Dow was at 9,000 and now I am saying Cramer is an idiot for stampeding the herd out of stocks at 8,000? Am I that fickle? Not really, I just believe we are in a fairly tight trading range. On June 17th I warned on June 24th, as the market "rallied" back to 8,500 I warned we were simply in the midst of a "dead cat bounce" – using the following, very descriptive graphic:
We played oil to top out at $70 for a whole month before it finally fell and I had warned people to stay out of the USO oil fund on June 6th (20% higher than here), but perhaps the last straw was when I pointed out that China was buying oil in bulk for $16 a barrel and even that was a ridiculously expensive price that more sensible buyers would not pay. Not long after that, Iraq had trouble with their own oil auction, again, no one in the industry had any real faith that $70 would hold and now, not even $60 is holding. They talk…
Which Way Wednesday?
by Phil - July 8th, 2009 8:28 am
This is going to be a short post as I ran a $109,729 virtual portfolio update for members this morning.
Yesterday was "Testy Tuesday" and the market certainly failed that test, breaking below our "must hold" levels early in the day and then just getting weaker and weaker. As we already had our USO puts and our long DIA puts, we took some pot-shots on long plays, none of which are working so far of course and we took a quick stop out on Russell calls but stuck with a GOOG vertical, ABX longs, our AA spread, and DIA $84s at an average of .60 overnight. Our big winner of the day was ICE puts, which we jumped on at 10:15 with the Aug $120 puts at $16.65, which is a synthetic short on the stock as they have little premium, those jumped almost 50% and finished the day at $23.85 but we got out at $24 after flipping to the Aug $95 puts at $6.20, which we got 1/2 out of at $7.20 already. So all in all, a mixed day but that’s what bottom fishing is, we take the easy money as the big guys fall and try to pick the winners for the possible bounce.
Asia is not looking at all bouncy this morning with the Nikkei diving to the 2.5% rule at 9,420, now down 6% off last weeks failure to break 10,000, which we knew would be trouble. The dollar fell to 94 Yen and exporters did not like that one bit. India also fell 2.8% and the Baltic Dry Index fell 4.7%, testing the 3,200 line. The Shanghai was relatively subdued at -0.28% while the Hang Seng dropped less than a point to 17,721, also down 6% from June 30th’s high of 18,900. "These are knee-jerk reactions to the moves last night in the U.S., probably not unfounded," said Andrew Sullivan, a sales trader at Main First Securities in Hong Kong. "I suspect that the general trend is lower, and the fact that the Hang Seng Index didn’t manage to regain the 18000-point level yesterday is probably a crucial thing."
Oil and commodity stocks were hit very hard in Asia as the drop in commodity prices seems much worse priced in strong Asian currencies. Crude prices were likely to keep falling, said Citi Futures Perspectives analyst Tim Evans. "We simply lack any physical tightness that would cushion a decline." …
Which Way Wednesday – For Oil?
by Phil - June 17th, 2009 8:20 am
Boy this is fun!
I love it when a plan comes together and all that tedious waiting has finally paid off as our bull trap has sprung and we are enjoying the ride down with all of the "wheee" and none of the nasty gnawing off of legs in order to get our money out. While Jim Cramer decides to shamefully deflect the issue by CELEBRATING his call of a June housing bottom, his poor sheeple are getting hammered as wave after wave of sellsellsellers hit the wires.
It was, in fact, the BS housing data (sorry Jim but read past the headlines before you make a fool of yourself) that led us to get MORE bearish yesterday morning as it was reported RIGHT ON CNBC, that analyst Ivy Zelman said the following:
50 percent of sales in May were on spec. She says we’re seeing a lot of spec homes now because, “today’s consumer wants to touch and feel the house.” The positives are that cancellations are down, sales are better and there’s less negative pricing, although discounts are still prevalent. “The patient was without a pulse in the fourth quarter,” Zelman notes, “and now the patient’s in ICU.” So why all the spec now? Because builders are trying to jam all these homes into buyers’ pockets before the expiration of the $8000 first time home buyer tax credit. It turns into a pumpkin November 30th.
So 50% of the sales (which were up 17%) were not sales at all! That means that sales to ACTUAL people declined 33% in May. We shorted the Qs right out of the gate and made our target 30% for the day trade and we had the usual fun with our oil shorts but, otherwise, all our bearish bets were working and there was little to do. I called almost the exact finish for the day in my 2:58 comment to members where I said: "… since we need to sell off 5% and since NOT selling off more than 1.5% today would make it very unlikely we sell off 5% overall, then I think we need to finish lower than our lows so far. Of course, Mr Stick knows this too so they will likely be fighting like hell to make sure that doesn’t happen while Mr Fund who wants to move to cash may take advantage of…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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