Archive for October, 2006

SpookyTuesday

Ah, Mrs. Jones is such a tease!

She entices the shorts to jump in with weak data reports and slowing consumer spending, only to spurn them each afternoon! Today she came down soft and slow, dipping enticingly below the 12,030 mark around 1 before getting all giddy and staging a 70-point rally at 2:30So unpredictable!

And the bears are so anxious to get in! Every day since Thursday’s top, they pile on with each dip yet all they have done it taken 80 points off the top in 3 days. Since August 14th the market has gone up from 11,100 to 12,200 (10%) after having paused ever so briefly at 5% on 9/28 where it pulled back 170 points in 3 days before making another 600 point run.

We talked about what a real pullback could look like earlier in the week and this is certainly not it! It may not be over at all, and I’m not feeling very bearish yet.

The S&P didn’t look too negative with a penny gain today! You may laugh, but a penny saved back in 1776 (when Ben Franklin suggested it) would have compounded to $1,000 today in a passbook account. Had we added just one more penny a day we would have $7M today! So start making excuses now for your great, great, great, great, great, great grandchildren about how you were too cheap to put a penny a day aside for them!

Anyway so that’s a 2-point gain in 2 days from the S&P, still just under 1,380. The NYSE was even surer of itself with an 8-point gain while the Nasdaq added 3 points with a quick retest of 2,375

The SOX held firm with a one point gain but the transports acted like a groundhog that had seen it’s shadow when they fell back 40 points as oil poked back over $58.

Oil gained .37 in one of the most shameless, fake pumps I have ever seen perpetrated on the NYMEX floor! After drifting down all day to just under my $57.14 target price (our final 5% level from 9/25) oil shot up one dollar in just 30 minutes of frenzied buying into the close. They didn’t want it at $57.05 at 11:45, they didn’t want it at $57.05 at 12:15, they didn’t seem to want is at $57.20…
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Tuesday Morning

Well the stock market limbo game was a bust, just a quick duck under the pole so we’ll see what games the market makers want to play today.

I’m in a good mood, Mrs. Jones is waking up on the right side of bed in pre-market so let’s see if we can make some progress with just 181 points to go for yet another Dow record.

Asia had a PMA (Positive Mental Attitude) today with the Nikkei taking back 47 points but, more significantly, the Hang Seng came back from a day off without even bothering to sell off. This, despite a real slowdown in Japanese consumer spending.

LPL, who made us 143% earlier in the month, is back on the move and I like the Dec $15s for .90 for a quick play.

Europe seems ready to play as well despite a huge disappointment from UBS and SNY. One thing hurting banks is a British law that allows a forgiveness of debts outside of bankruptcy. In an interesting turn of events, Ireland is actively seeking skilled US labor to come and work there as Europe’s best expansion economy booms along.

We haven’t liked BP for a very long time and now the investigators are catching up with them as well. A Democratic victory on Tuesday should sent these guys back below $65 so I like the $65 puts for .45.

As we made no progress yesterday we can just cut and paste yesterday’s level watches but I’ll be looking for more upside indicators that we are getting back on track.

Dow over 12,100
S&P breaking 1,380
NTSE over 8,800
Nasdaq 1,375

The markets will need to overcome disappointment from P&G, who did well but, as I warned yesterday, not well enough to match expectations. ADM beat expectations and EK was, as expected, so-so. To me all that matters is CMI had a great quarter despite weakness in the auto sector, indicating that other parts of the economy are doing very well!

Any positive movement by the SOX is good but they have a long way to go to impress us while the Transports are just 7 points shy of a real breakout.

Oil should help the transports to roll today as it slides down below $58 as a conga line of full tankers heading our way makes any OPEC action
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Monday Mop-Up

Still down, check Seeking Alpha in the AM for post.

Monday Wrap-Up is posted on Seeking Alpha (thanks Eli!):

http://seekingalpha.com/article/19571

I wish I paid to have this blog hosted so I could at least have the pleasure of cancelling the service!





Monday Morning

The newest post will be up on Seeking Alpha at:

http://seekingalpha.com/article/19492

Sorry for the hassle, I will be trying to get a new site before the week is up but today I am booked up.

Have a good trading day, keep an eye on our levels and don’t panic!

- Phil





Continuing Issues

My housing article is up on SA at

http://usmarket.seekingalpha.com/article/19458

Much more readable there…

If you want to read October posts click on the month of October where, for some reason, the formatting remains intact.

I will give it a shot tomorrow but I am done messing with this thing for the day, if you don’t see my post up by 9:30 definately check http://seekingalpha.com/by/author/philip-davis for the latest update.

Well, we had lots of fun looking at how we COULD get a soft landing but there are still a lot of bridges to cross and one major toll coming up is cancellations.

Cancellations of pending home orders had caused the last 3 housing reports to be adjusted downward with an implied margin of error of 15% or more. That means that what has been reported as a 17% drop in new home sales this may end up being a 30% drop in new home sales next month. Of course, it may also be a 2% drop but, really, which do you think is more likely?

Don’t even read this if you’re trying to be bullish – Biodeiselchris points out that David Walker, the US Comptroller, considers the economy such a crisis that he is getting a bunch of economists together to go on tour so they can explain it to the American people who, when asked, consistently fail to rank our $8,500,000,000,0000 deficit as one of the top 10 problems facing our nation.

If you think you had a tough year, check out Vega Asset Management’s performance bad enough to warrant a letter of apology from the Mega Hedge Fund.

LOW is one of the few calls I kept (because it was so bad it wasn’t worth selling!) with the Nov $32.50s down at a dime (down 75%). Earnings are not until the 20th but Cramer just jumped on board so, if the market isn’t dying on us I will add to that position but with the December $32.50s at .45, giving it more room to run.

Cramer also agrees with me that YHOO is indeed too cheap to stay at this level and represents a takeover opportunity for a big media company. Amazingly our Jan $27.50s are back to $1 (up 20%) already as the initial play in which we sold the calls worked out just right! The Jan ’08 $25s are now back
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Test Again

This is totally annoying.

Wasted the whole weekend on this nonsense!

Sorry guys, now they seem to have destroyed the formatting…

I will try to accellerate getting us onto a pro site – even if it’s not quite done yet, it’s still going to be better than this!

If the site doesn’t come back, check for updates at:

http://editors.seekingalpha.com/by/author/philip-davis

They actually have a subscription (free) for my regular posts but not (that I know of) for my rants and raves:

http://seekingalpha.com/by/type/options





Mister Softee

Money, money, money!

Where does it come from? Where is it going?

For the past 3 years, a lot of America’s money has gone to just 2 places – Oil and Homes!

As we discussed last weekend, over $2.5T has poured into the commodity markets in the past 36 months but that’s nothing compared to the $12T that been added to the value of US homes in the past 3 years alone.

The median price of a US housing unit has climbed from $143K in 2003 to $239K at the end of 2005. With close to 7M homes a year turning over, that’s 1.9T in 3 years of new money that has worked it’s way into housing and, unlike the oil we bought, we still have the house!

If housing “stock value” drops 25% over the next 3 years, that would mean that 21M new homeowners would have lost $500Bn of the capital they invested (assuming they aren’t forced to “close their positions” on the homes) while a 25% drop in commodity stocks wipes out over $1T in real value since XOM, for example, turns over all of its 5B shares in 227 days of average trading.

According to the 2005 US census 17% of our country’s 125M housing units (including rentals) were occupied for one year or less (roughly 30% are rentals). Assume a similar number in 2004 and 2003 and that’s a turnover of almost half the US housing in just 3 very expensive years!

I think if you look at it from that perspective you could say that pretty much everyone who wanted to move has done so by the middle of this decade (page 90). From 2000 to 2004, 9M new units were built (pg 17), a far cry from the 14M that were built from 1975 to 1979 – that was real overbuilding!

In fact, from 1970 to 1980 an average of 2.5M new units a year were built compared to just 1.8M per year from 1995 to 2004, the current “Housing Bubble.”

What kind of slump that hit us after that development boom? In the next 5-year period, from 1980 to 1984, just 7.5M (1.5M/yr) new units were built! Now that’s a correction!

The slowdown started in 1979 and 1980 was the last year of Carter’s term in office, the Iranians were holding…
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Test

Test





Friday the 13th Plus 2 (weeks)

Well I don’t know if that was a top but I sure am glad I cashed out! Just 20% in at this point and barely a call in the bunch!

If I’m being overly cautious and we’re going to 15,000 then we have a long time to play (unless the Dow adds 1,000 points a day next week). If I’m right there will be lots of things to play on the way down…

Appropriately, the markets were simply frightening today with a sharp drop at 1:15 that seemed to be some sort of programmed selling kicking in that hit the Nasdaq very hard but spared almost no one.

On the whole we are still up about 1% for the week, nothing to complain about but it’s the first late day drop we’ve had in a long time so I was in no mood to ride it out.

There was lots of good news in the GDP report today:

  • The Price index (1.8%) was much lower than expected (2.8%)
  • The Core PCE (Bernanke’s favorite indicator) was 2.3% vs. 2.5% expected.
  • Consumer spending was up 3.1% and, since it wasn’t being spent on gas and homes, it went into useful parts of the economy!

One thing I like that companies don’t is that wages were up 4% over the past 12 months, with corporate profits at 17% it is the very least they can do!

So why did that suddenly matter?

Because it was only 1.6%!!! That’s a low number!!! Very low. Home prices are down 10% and the only reason residential prices aren’t down 10% is that people aren’t as realistic as builders about the price of their homes – that’s why they’re not selling!

The Auto Nation action has snowballed because they effectively pointed out that the Big 3 auto makers have been making cars that nobody wants for the past quarter. Take out the surge in automobile manufacturing and you are looking at a .9% GDP!

Treasury Secretary Paulson’s pals at Goldman Sachs decided today was a good day to give us a Halloween scare by telling us that chip makers are manufacturing motherboards that nobody wants either. [cue very scary music]

Mr. Jones finished the week at 12,090, 90 points above Monday’s open and still in magic 12,000 land but there’s trouble in paradise and we’ll see…
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1.6% GDP Friday

It hardly seems worth writing anything ahead of the GDP report but, seeing as I have nothing else to do for 3 hours, I guess I’ll take a stab at it!

Despite a warning from CAT, general expectations for the GDP remain around 2.2% and it is possible that Caterpillar’s heavy exposure to US housing has made them overly bearish.

All of Asia was on retreat today ahead of the GDP report but the Hang Seng got a boost from ICBC first day of trading as the mega bank rose 14%, making Goldman Sachs incredible amounts of money. ICBC is now the 5th most valuable bank in the world.

MC (Panasonic) doubled their profits on huge sales of flat screen TVs but Sony warns of a price war brewing so I have no taste for this industry.

Europe is flat ahead of our open with a mixed bag of earnings.

Mr. Jones will let us know if the economy matters today but I’m going to enjoy the morning while I can. John Farmer says that the economy is like the Titanic and we just don’t see that the iceberg is much bigger than the pretty white tip that sticks out of the water! We will put our hands over our ears and ignore all that “thinking” – we’re trying to have a party over here John!

Analysts are still uber-bullish on the markets and this may well be the last hurrah for the shorts if we get yet another positive move today. You don’t often get a parabolic weekly chart but the Dow has clearly fought off gravity and “looks” ready to achieve escape velocity. As we all well know, there is a critical juncture, right before you leave the earth behind, when a loss of fuel can lead to a critical failure – so let’s make sure we have the right stuff today!

The same goes for the S&P, NYSE and the Nasdaq – if the GDP doesn’t matter then nothing will and we are off to the races but we may get a severe case of gravity of it looks like the soft landing scenario is off the table.

8:25 Futures: Dow down 19, S&P down 1.7, Nasdaq down 3. Gold down $3 Oil up .08, 10-year note at 4.71% Dollar flat. FTSE down 21 DAX up 10.

8:30 1.6%! Oops! 10-year…
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Phil's Favorites

Coronavirus: the blow to the Chinese economy could be felt for years

 

Coronavirus: the blow to the Chinese economy could be felt for years

Courtesy of Chusu He, Coventry University

Investors are still being fairly complacent about the novel coronavirus. After the number of new daily cases suddenly shot up to more than 15,000 on February 12 following more than a week of decline, there were some jitters in the markets. With Chinese authorities saying the increase was due to a decision to broaden the definition for diagnosing people, there were falls in the region of 1% in European markets, and smaller retrenchments in Asia and North America.

It is...



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Biotech & Health

Coronavirus: the blow to the Chinese economy could be felt for years

 

Coronavirus: the blow to the Chinese economy could be felt for years

Courtesy of Chusu He, Coventry University

Investors are still being fairly complacent about the novel coronavirus. After the number of new daily cases suddenly shot up to more than 15,000 on February 12 following more than a week of decline, there were some jitters in the markets. With Chinese authorities saying the increase was due to a decision to broaden the definition for diagnosing people, there were falls in the region of 1% in European markets, and smaller retrenchments in Asia and North America.

It is...



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Zero Hedge

China Adopts 'Cultural Revolution-Style' Social Controls To Crush Outbreak As Death Toll Nears 2,000

Courtesy of ZeroHedge View original post here.

Summary:

  • Taiwan reports 1st coronavirus death
  • Hubei reports 1,933 new cases, 100 deaths
  • Hubei health officials report 1,933 new cases, 100 new deaths
  • Taiwan taxi driver who died from virus carried passengers from mainland, Hong Kong, Macau
  • Singapore reports 3 more cases
  • Total cases aboard 'Diamond Princess' climbs to 355 as US prepares to evacuate citizens
  • Indonesia says 6 passengers from Westerdam cruise ship tested negative
  • There are now at least 68,500 cases worldwide, and at least 1,665 de...


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Members' Corner

How to Stop Bill Barr

 

How to Stop Bill Barr

We must remove this cancer on our democracy.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

...



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The Technical Traders

Is The Technology Sector Setting Up For A Crash? Part I

Courtesy of Technical Traders

One thing that continues to amaze our research team is the total scale and scope of the Capital Shift which is taking place across the globe.  For almost 5+ years, foreign investors have been piling into the US stock market chasing the stronger US dollar and continued advancement of US share prices. It is almost like there is no other place on the planet that will allow investors to pool capital into such a variety of strong assets while protecting against foreign capital risks.  Yet the one big question remains – when will a price reversion event hit the US stock
market?

So many researchers, even our team of researchers, believe we have found the keys to unloc...



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Kimble Charting Solutions

Joe Friday Says Germany (DAX) Could Rally 30%, Happy Valentines Day For The Bulls!

Courtesy of Chris Kimble

German DAX Index “weekly” Chart

The German DAX is one of the more important global stock market indices, as it represents the largest economy / market in the Euro Zone.

So it would be a real treat for the bulls to see this stock market index breakout as we celebrate Valentine’s Day.

The facts, Ma’am. Just the facts; The German DAX looks to have formed a bullish ascending triangle over the past 3 years and it is currently attempting to breakout above the top at (1)....



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Insider Scoop

Nissan Shares Tumble To Decade Low After Q3 Earnings Miss

Courtesy of Benzinga

The shares of Nissan Motor Co. Ltd. (OTC: NSANY) dropped to a decade low on Thursday after the company missed third-quarter earnings estimates and significantly cut its annual forecast for the financial 2019 year.

What Happened

Nissan, on Thursday, reported a net loss o...



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ValueWalk

Russell 2000 Index (RUT) hits an almost one-month high

By Gorilla Trades. Originally published at ValueWalk.

Ad the Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, commenting on today’s trading Gorilla Trades strategist Ken Berman said:

Q4 2019 hedge fund letters, conferences and more

Russell 2000 Index (INDEXRUSSELL: RUT) Outperforms Large-Cap Benchmarks

While the overnight session was nothing short of scary stocks held on to most of yesterday's gains and small-caps even extended their winning streak. The Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, finishing higher for the fourth day in a row while outperforming the large-cap benchmarks, and since the Volatility...



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Chart School

Dow theory warning from the Utilities Index

Courtesy of Read the Ticker

Charles Dow died in 1902, and the investors should thank him for his ever lasting Dow Theory Analysis.

Carrying on this blog theme looking at the Utility stocks. Previous post.
Dow Jones Utility index could trade like the FANGs
Formula for when the Great Stock Market Rally ends



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Digital Currencies

Bitcoin Price May Hit $27K All-Time High By Summer, Predicts Fundstrat's Tom Lee

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Bitcoin is primed for average gains of almost 200% over the next six months, one of its best-known supporters has told mainstream media. 

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Promotions

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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.

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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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