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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Zero Hedge

Schiff: Negative Interest Rates Are "Boneheaded"

Courtesy of ZeroHedge View original post here.

Via SchiffGold.com,

Donald Trump has been badgering Federal Reserve Chairman Jerome Powell for months, begging for lower interest rates. This week, he took things to another level, saying that the “boneheads” at the Fed need to push rates into negative territory.

In his podcast, Peter Schiff said negative interest rates are boneheaded. ...



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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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Phil's Favorites

Black Hole Investing

 

Black Hole Investing

Courtesy of John Mauldin, Thoughts from the Frontline 

Scientists say the rules change in a cosmic “black hole” at what astrophysicists call the event horizon. How do they know that? Not by observation, since what happens in there is, by definition, un-seeable. They infer it from the surroundings, which say that the mathematics of the universe as we understand them change at the event horizon.

Or maybe not. One theory says we are all inside a black hole right now. That could possibly explain a few things about central bank policy. ...



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Insider Scoop

The Street Reacts To Kroger's Q2 With Mixed Takeaways

Courtesy of Benzinga

Kroger Co (NYSE: KR) reported second-quarter results that came in better than expected. The earnings beat may have been overshadowed by management's decision to remove its prior guidance of $400 million in incremental EBIT by fiscal 2021.

Q2 A Mix Of Positives And Negativ...

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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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Lee's Free Thinking

Nonfarm Payrolls Not Seasonally Adjusted Tell the Real Story - Unspinning Wall Street™

Courtesy of Lee Adler

Not seasonally adjusted nonfarm payrolls, that is, the actual numbers, give us a truer picture of the jobs market than the seasonally adjusted garbage that Wall Street spews.

Friday’s seasonally adjusted nonfarm payrolls jobs headline numbers disappointed investors with slower than expected growth. But was it really that bad?

Here’s How The Street Spun It – Wall Street Journal Modest August Job Growth Shows Economy Expanding, but Slowly

Employers added 130,000 nonfarm jobs, jobless rate held steady at 3.7%

U.S. employment grew only modestly in August, suggesting that a global economic slowdown isn’t driving the U.S. into recession but has dente...



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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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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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