Archive for January, 2006

Tuesday Wrap-Up

It’s Google time!

Who cares what the Fed did anymore, that’s old news – Google will make or break the market for the rest of the week. Greenspan didn’t listen to me and he hiked another .25 and, of course, the markets were not too pleased (even though they knew it was coming).

The oil inventories are tomorrow but the big remaining indicator is Fridays Job number. New unemployment claims have been very low for the past two weeks which may indicate a stronger than desired (0ver 280K) job number that will signal more Fed moves ahead.

A combination of worries that the new Fed will be the same as the old Fed plus the anxiety over job growth sent the markets down in the afternoon.

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I am just sitting here waiting for the Google numbers, it’s been 5 minutes, seems longer – this is very exciting!

And it’s a Miss! Oh no, run away!!! A huge miss, $1.54 vs. $1.98 expected. I knew I should have kept those puts… Oh well, the real trick is how will the rest of the market react. This should be great for Yahoo, since this will prove Google is not taking their market share but Yahoo is selling off in sympathy. These are all preliminary reactions and may be straightened out in the morning so we will have to wait and see. Nobody knows how to read an earnings report.

I think they halted the stock… That’s bad! I will give my 4:30 impression: If the growth curve is blown, this stock can go well below the 40 week ma of $360, it will take a lot to figure the new value, not to mention a move like that will wipe out $25Bn of wealth from the market so there may be real hell to pay tomorrow.

Funds that stand to lose hundreds of millions of dollars will be sure to try to prop this up overnight so there may be a great shorting opportunity in the morning. On the other hand, further reading of the report may show some strength that is being missed at first brush.

It is possible that this is just the result of options expensing since I’m sure Google has a lot of that to catch up with.

I will check it out in the morning to see if there is still a trade to be made.…
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What Will Greenspan Do?

Today is the day. Mr. Greenspan’s last Fed meeting.

CNBC has been making much of the fact that when Volker handed the reigns over to Greenspan, the dollar crashed and the markets quickly followed. Hopefully things won’t go to hell quite so fast during this transition but, if the dollar does start falling, get out of everything!

Greenspan is faced with a little conundrum today. If the Fed raises rates and they’ve overdone it (they may have already overdone it) then his legacy will be a mess. If they stop suddenly, the markets may see that as a sign that we are already in some sort of crisis and it will have the opposite effect.

My solution is simple: The Fed ends today’s meeting with no rate increase but Allan says: As the data at this moment is inconclusive, we will leave rates unchanged but with a bias towards another rate hike at the next meeting should Mr. Bernanke feel that the additional data mertits a change at that time.

This would let Greenspan step down and graciously leave the final hike or two decision in the hands of his successor. It would be a vote of confidence for Bernanke and a huge boost for the markets as clearly the end is finally near (which, ironically, would be better than if it were already here).

So far, Allan isn’t returning my calls but he does have all morning to get in touch with me so we can hammer out his farewell address…

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My thanks to Trader Mike for running down this nugget:

According to the NY Post, Google’s long-simmering click-fraud problem could explode into a billion-dollar headache for the Web giant, some Web marketing experts are warning. In fact, a growing number of Google-watchers claim the search giant is ignoring the click-fraud issue because it’s so large.

Click-fraud happens when surfers click on Goggle advertisers with no desire to get to the advertiser’s site. Knowing Google charges advertisers based on how many surfers click on their ads, the fraudsters click on the ads simply to drive up the advertiser’s costs.

The fraud also falsely inflated Google’s revenues. The estimates on the Street, if even close to being true, could rock the stock market darling, set to announce fourth-quarter results Tuesday.

“If Google were to implement a method for stopping click fraud today, it would lose 30
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Monday Mop-Up

OK, that went pretty much as expected.

What else could you expect though with oil at $68? Once again, if you take out the tremendous gains in oil stocks then you do not have a very pretty market at all!

There were many individual signs of strength, most encouraging was a fairly strong showing from Apple (my major concern of the morning), which gained 4% for the day and stayed strong against a declining Nasdaq rally in the afternoon. After sweating my decision to buy in for a few days, my AAPL $80 calls rocketed to $1.25 for a 50% gain today!

The Dow is resting at 10,900 and needs just any excuse to move back to 11,000 while the other indexes are rolling right on to new highs as long as the Dow doesn’t pull their chains down.

Gold finished at $567, looking strong all day. Don’t forget gold poker rules and be ready to sell at any moment but ABX and BVN are both being held back and are acting like horses at the gate, ready to fly up at the slightest provocation.
http://finance.yahoo.com/q/bc?s=GLD&t=3m&l=on&z=m&q=l&c=abx
http://finance.yahoo.com/q/bc?s=GLD&t=3m&l=on&z=m&q=l&c=bvn

I am fairly confident that things will go well this week but also happy I have cash ready to go either way because we can’t control the economic numbers in case they are determined to surprise us.

Another thing we can’t control is Greenspan, who is quoted as having said: “If you think you you have a clear idea of what I said then you must have misunderstood me.” I want to say he won’t be missed but Mr. Bernanke could always screw up so badly that we pine for Uncle Allan so let’s not jinx it.

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Yahoo sat the day out, a bad sign with the upgrade but there is no reason to get out yet. If you are bored with the leap you can sell the $35 call for $1.05 for a quick 15% but it makes it a little complicated if the stock takes off on you.

EBAY was down all day and the $42.50 puts ended up at $1.65 for a 120% gain in just 8 hours!

I got out of the XOM calls for $2, more than double as soon as it turned down at 10am, as I often say, greed is not good and the options finished the day at $1.55. Often the…
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Directionless Monday

The Nikkei is up moderately (90 pts is moderate for them) and the Chinese markets are closed for their new year. Europe is flat to down a bit so there is certainly money that can head this way if it was meant to.

The market of the year should be India, the government is pushing very hard at Davos and around the world to be counted among the world leaders and a lot of the other Asian investors are seeing India as the value play of the region.

There is too much going on data-wise this week for the US market to be able to do much today. As long as the Dow holds 10,900 today I have no reason to sell.

Today we have Personal Income and the more important Personal Spending Reports. Both should be up a bit from last month (reflecting Christmas season).

On Tuesday we get 3 major reports, the Employment Cost Index (ECI), the Chicago PMI (which needs to be above 60) and the Consumer Confidence Report which needs to grow from last month’s 104 (which is a very good number and tough to beat). Even more important is the 2:15 FOMC Meeting where we will finally get to hear the rate decision buried in the tea leaves of Greenspan’s final statement.

I am begging Mr. Greenspan one more time to pause and let the markets fly free!

Tuesday will be capped off in the evening by the State of the Union address which does make me a little nervous as I doubt Mr. Bush has any real plan that will give the markets confidence. No matter what Bush says, all that people will be talking about on Wednesday morning is Google!

On Wednesday we will have our usual Crude Inventories but we also have the ISM Index which needs to at least remain above 54 or we will start worrying about those GDP numbers we ignored on Friday. Also by Wednesday we should have a sense of what OPEC is doing in their meeting this week – my guess is for a nice drop after an uneventful meeting and another round of builds in inventory.

Thursday will be a day off from data with just Jobless Claims but Friday is a very big day with Non-farm Payrolls (that needs to get back over 200K), the Unemployment Rate, Hourly Earnings, Average Work Week, Consumer Sentiment…
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Weekly Wrap-Up

What a way to end the week!

We quickly blew through my 10,850 target and never really came down so all trades were on and I hope you put that cash to good use…

I got very nervous at about 1pm when oil spiked and the markets turned down but then very happy when they bounced back up before 2pm. The oil price is still based on fear rather than fundamentals and it seems that the markets are getting used to the fear. As I said earlier, the oil producers (oops I mean rebels over whom they have no control) have to take it up to the next level and actually disrupt production or the jig will soon be up.

This is a very odd rally and can easily be derailed by the rash of economic news coming down the pike next week. Traders chose to ignore the declining (and possibly erroneous) GDP in favor of a 2.9% increase in new home sales, although the builders didn’t seem to get overly excited about it.

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PFE was hot all day and even got additional good news at the end with an approval on inhaled insulin which I think will lead to magazine covers that say Pfizer’s back so I’m only 30% out so far with my double.

MSFT was a home run today! The March $27.50s have gone from .25 when picked on 1/25 to .75 so far. If I only got this one trade right all month I would feel that I had done my job!

Yesterday’s suggestion to at least take the MSFT Feb $27.50s for .15 actually did better with a 400% gain in one day. The best thing about big cap options is they are so liquid when you trade them so you can lock in profits at any point.

Gold did not hold $560 today and the sector was flat but 11/22 TOTD MRB went up 23% and is now close to a clean double! NAK picked up another 6.6% as well so don’t knock these little stocks… ABX showed how excited it can get at $562 as the stock ran up 5% in the morning peak but it immediately gave it back when gold dropped.

CY dropped off a bit today but I already halfed out of that so I’m holding on to see if it gets good press on the weekend.

11/17 not…
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Friday Morning

WOW! I just lost my whole blog for the day!

Don’t even ask how stupid I was but I just can’t do it again right now so I will give a down and dirty summary.

Things don’t look as strong as I would like. Japan is on fire (up 569 pts) and I do have some concern as to how much of the world’s money will be left for US equities.

Also, the GDP was much lower than expected which is good if you want the Fed to pause but bad as it could signal a real collapse in housing.

Today is the day to get all those things we’ve been tracking this week if the Dow breaks and holds 10,850 (yes, I raised it) against this semi-bad news. Unless that happens – stay in mainly cash!

This could be the start of a Japan-style rally if we can get the press on board although they will probably cry bubble the second the Dow crosses 12,000.

The difference between the US and Japan is that, in Japan, they call a 40% rally a “recovery” and they say that 2-3% inflation is “healthy.” When the Japanese Fed raises rates, consumers say “oh great, now I will make more money on my savings account!

http://finance.yahoo.com/q/bc?s=%5EN225&t=1y&l=on&z=m&q=l&c=%5Edji

Oil going over $68 will hurt us so watch out for that.

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BYD and MGM look very hot.

Steel stocks are in play. X has a p/e of 5, what’s not to love?

Stay away from builders until we know what the fed is doing although many are ready to take off on any good news.

PFE should have an amazing day. This was a 1/13 TOTD. If you are not in it you can take advantage of some early confusion about an approval to pick up the March $25s.

All that glitters will be our gold stocks if we hit $565. BVN is still the best looking if it can break up from $28. I think the whole group is being manipulated down at the moment. NAK is a great buy and hold even though it has run up a lot since we picked it.

XOM is already talking down oil prices. They sandbagged earnings last quarter to keep them down to “just” $10Bn but I think the number this quarter are going to give the anti-oil folks conniptions. I’m going to take the $62.50
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Thursday Wrap-Up

The Dow did exactly what we expected today, bouncing twice off the 10,825 mark but finishing right against it. As I said, the other indexes are ready to rock and roll and just need the confirmation from the Dow to head back to their highs.

Tomorrow might be the day – we will have to wait and see.

Oil stayed up all day which really confused the sector who opened as if it was going to plunge.

Gold hugged $560 and will have to make a decision soon.

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My personal intraday trade of the day is a great example of using the Valero rule to maximize profit. At 10:30 the gas inventories came out and Valero obviously liked it so I quickly checked the sector for the most beaten down company which was BTU. I picked up the calls and exited at about 1:30 when VLO turned down for a huge profit.

http://finance.yahoo.com/q/bc?t=1d&s=VLO&l=on&z=m&q=l&c=BTU

Although all of the potential trade of the days held their own today, you can see the negative effect that the 12pm rejection of 10,825 had on them. TIE took off so fast that I missed it so I bought ATI, who is pretty much in the same place but less well known.

AIR had a terrible day because they are raising capital with convertible notes. This is ridiculous as they need money because they are growing at warp speed. I will be looking to pick these up when they settle down. This is what happened to PLAY back in October and became a great opportunity to buy in.

MSFT came in a little light on revenues but in-line for earnings so it will all be up to the conference call to see where this will go but I think guidance will rule the day and the stock will go up.

OXPS gained an amazing 10% for the day! There is some merit to buying what you use.

AAPL is taking on water from all sides, now they say Google will have a tunes site and Microsoft will be coming out with an IPod-like device. This is what happens when you are number one but I couldn’t take it any more and I picked up a small batch of $80 calls for .80.

TXN is firmly on the mend. I think that MSFT just not having a disaster signals that all is well in tech-land.

SNDK…
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Thursday Morning

Wow, the pre market is what Cramer calls “En Fuego” – one can only assume that things are going well in Davos. Today our world business leaders are discussing video games. Perhaps they will discuss the Trillions of hours of lost productivity they are causing (I know the Chinese are actually concerned about this).

Europe had > 1% gains across the board and the Nikkei grabbed another 250 pts so we will get a strong open. China is slowing down a bit which is a very good thing on the whole and lots of speculative money may begin to migrate back here.

Gold is going to have a critical retest of $560 today. Is it a floor or is it a ceiling? GFI announced a 6x increase in earnings but they are already up 50% since we pointed out the potential on 12/6. GFI is not a good stock at all, trading at 500x earnings but this should lift the whole sector as analysts (other than me) missed this by a mile.

Oil is seeking the market’s comfort zone (Shieks own stock too!) and seems to be finding it at $65. This is still a ridiculous fear driven price that has no foundation but what can you do?

Interest rates, unemployment reports and durable goods orders are the data of the day. Last month the durable gains were entirely from Boeing so AIR and TIE may be in for another nice pop.

Speaking of durable goods, CAT just raised guidance 10% – that is uber bullish! That should assure some upwards Dow movement today, but I refuse to get excited until we test my 10,825 target successfully.

Remember, holding over 10,825 will be a rally cry for all the markets, in a perfect world we will hit that todoay and follow up that with an upside surprise from MSFT tomorrow that will propel us right back to where we were 10 days ago before this sell-off started!

But that’s not going to happen. 8-(

Nobody bought our notes this week! This is the first sign of the apocalypse. Oil is still above $65 and, worst of all, Bush is speaking at 10:30 – that guy is stock market poison!!!

Cash, cash, cash and cash. Day trade some picks but be ready to sell – please!!!

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Selling the DIA puts and keeping the calls was my play of the week!…
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Google Watch

I guess we need to do this every day as it is so volatile…

Google is very unlikely to beat earnings since the mean estimate is for $1.76/share and the whisper # is $2.

How they can possibly do this when the projections for revenues are less than last quarter is beyond me anyway since they “only” earned $1.35 last quarter, and that was a blow-out number.

Yahoo only earned .68 per share of Google so even if Google took Yahoo’s entire profits and added it to their 3rd qtr they still wouldn’t beat the whisper number for this quarter.

Google is suffering from expectation inflation with about another penny per month being added to the estimates.

Check out the Analyst Estimate section in Yahoo: http://finance.yahoo.com/q/ae?s=GOOG

and look at the Earnings History Surprise row. Notice the narrowing trend downward? Yahoo went from a 14% surprise up last quarter to a -5% miss this quarter – If Google does that the Titanic will look unsinkable by comparison.

Here’s the real problem. Earnings for the first 3 quarters were: $1.29, (+4%=) $1.36 and (+10%=) $1.51 yet we expect a 33% jump in the 4th to get to $2.

Google doesn’t do traditional advertising so they don’t get a “Christmas rush.” In fact, it could be argued that the average person spends LESS time clicking ads on Google during the holidays and more time on Amazon or Ebay.

Maybe holiday advertisers step up their Adwords fees to attract more people during the 4th quarter and that will save them but it’s hard to see the driving force for growth that will equal last year’s buzz (they only went public that September) that will give them the same kind of kick this year.

On the bright side, the trend I noticed back in November continues as Google is leading CME around by the nose. If GOOG goes up, buy CME, if GOOG goes down, sell CME – it’s ridiculous but it works! Also, CME earns more per share today than Google is projected to earn for 2006…

http://finance.yahoo.com/q/bc?s=GOOG&t=3m&l=on&z=m&q=l&c=cme





Wednesday Wrap-Up

The bond sale went badly today. That is the real story of the day.

Money is flying into copper and gold which both hit new highs today.

Homebuilders got trashed by a weak housing report and oil sold off on inventory builds.

This was a great day!!!! If you had told me all that was going to happen today, even though I said some of it was going to happen this morning, I would have predicted a 50-100 point drop in the Dow and other indexes following down. The fact that we were a little under flat all day was a very pleasant surprise.

Tomorrow will be Telling Thursday (I need better alliteration) but a couple of good earnings reports could make for some real excitement.

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Don’t say I didn’t warn you about Google! I came up with an interesting play today. I took the March $490 calls for $15.60 and I sold the Feb $480 calls for $12 to cover my $410 puts which are nicely up from $12 I came in at. My logic is that the worst case is the stock tanks and I lose the calls but only $3.60 on the spread. On the other hand, if it goes up the March will hold it’s value and give me a lot of leeway no matter what the price. Best case scenario is that Google goes up but can’t break $490 until after expiration…

Wasn’t cash a great trade today? Isn’t it relaxing to have actual money when the market is all over the place?

The gamble of the day – BNI, paid off in less than 30 minutes and gave us a nice 20% return. We can do that one again tomorrow if the market recovers.

BVN did not disappoint with a 1.5% gain, but NEM and GG actually did better. PD was the real star of the commodity stocks with another 2.5% while PCU is still lagging behind.

We await GM earnings, I am blown away by all the people who put money into this company today! Kirkorian bought 12M shares this week, which probably accounted for 25% of the buys so I think that’s a top, although he may actually know something coming into earnings tomorrow…

NFLX finished the day up 15% as expected – there was no way into this stock though as it stayed high all day long.

You would think…
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Zero Hedge

Explosion Hits Russia's Largest Virus Lab Which Houses Plague, Smallpox, Ebola And Other Deadly Viruses

Courtesy of ZeroHedge View original post here.

A sudden explosion at a Siberian virus research center on Monday reportedly left the facility engulfed in flames, according to several Russian news outlets. 

Firefighters and other emergency personnel were dispatched to the "Vector Institute" located several miles from Novosibirsk - an emergency which was upgraded "from an ordinary emergency to a major incident," a...



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Phil's Favorites

The future of work will still include plenty of jobs

 

The future of work will still include plenty of jobs

Even though the future is unknown, Canada’s employment rate has risen steadily from 53 per cent in 1946 to more than 61 per cent today. (Shutterstock)

Courtesy of Wayne Simpson, University of Manitoba

There is now widespread anxiety over the future of work, often accompanied by calls for a basic income to protect those displaced by automation and other technological changes.

As a labour economis...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Insider Scoop

New Relic Cuts 2020 Sales Guidance, Announces Changes In Management

Courtesy of Benzinga

New Relic (NYSE: NEWR) has reaffirmed its second-quarter guidance and cut its sales guidance for fiscal year 2020 from $600 million-$607 million to $586 million-$593 million.

The company’s chief technology officer, Jim Gochee, and chief revenue officer, Erica Schultz, have resigned. New Relic also named board member Michael Christenson as its chief operating officer. Christenson joins from his ...



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The Technical Traders

Metals are following downside sell off prediction before the next rally

Courtesy of Technical Traders

It is absolutely amazing how the precious metals markets have followed our October 2018 predictions almost like clockwork.  Our call for an April 21~24 momentum base below $1300 followed by an extensive rally to levels above $1550 has been playing out almost like we scripted these future price moves.

Now that the $1550 level has been reached, we are expecting a rotation to levels that may reach just below the $1490~1500 level before attempting to set up another momentum base/bottom formation.  And just like clockwork, Gold has followed our predictions and price is falling as we expected. Just look at our October 2018 chart where we forecasted the price of gold...



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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...



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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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