Archive for 2006

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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Thursday Wrap-Up

Hey that was fun!

Mr. Jones gave us a little scare in the morning with another test of the 12,100 mark but that was quickly established as the low of the day as we moved on to yet another record close in a big volume day. That’s 4 straight days of higher lows, higher highs, higher opens and higher closes!
Dow 3 Month Candle Chart

The S&P and the NYSE did even better than the Dow with the S&P testing 1,390 near the close and the NYSE coming to a rest well over 8,800.

The Nasdaq had the scariest drop of the day followed by the greatest recovery as it spent all of 40 minutes around 2,350 before tacking on a 25-point gain to finish the day at 2,377.

The SOX were a big help, showing strength all day while the transports put in an iffy but solid performance on GDP fears.

Oil gave up half of Wednesday’s gains, falling back to $60.36 after making a day high just 1 penny above my $61.69 target. The Valero rule kept us from taking any oil calls, especially watching LNG’s awful open (and awful day in general).
http://futures.tradingcharts.com/chart/CO/C6

As you can see from a group chart, we got some mixed signals from the group but never from LNG, which lost 3% for the day. This is why we always have guest stars in our group; certain stocks tap into key sentiments at any given time!

December gold broke $601 during the day but decided it didn’t like it there and closed at $599.80. Now it is tightly squeezed between a declining 50 dma and a rising 200 dma so we will look for a breakout in either direction, most likely tomorrow!

All this commodity action came as the dollar gave up half a point. All the other CB’s are on inflation watch and raising rates and while we may swallow this rubbish at home, the world markets do not consider $60 oil to be a sign of inflation being “contained.”

====================================

We had a very nice run on the day’s picks but a monkey with a dartboard can make money on calls in this market so I’m not particularly proud of myself…

AMGN gave us a nice open with the second round of $75s coming in at $1.50
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Thursday Morning

Another day, another record open.

That’s how it looks early in the morning with the Nikkei up 100 points and the Hang Seng up 200 as high oil prices don’t matter in Asia either.

Another thing that doesn’t matter is Sony’s 94% drop in net income. That’s right, SNE made just $14.3M on a $429M cost of a battery recall as well as a 21% loss in the gaming division on the delays in the release of the PS3. For the year, profits at Sony are expected to be $673M vs. the $1.1Bn that was forecast just 3 months ago.

Devastating for Sony’s stock? Uh-oh, that sounds like you’ve been thinking! Of course not! SNE gained .28 for the day as traders chose to focus on strong TV and camera sales and not on the $129M loss in the movie division, even with 12% more sales.
http://stockcharts.com/gallery/?sne

It doesn’t matter to South Korea that their unfriendly neighbor went nuclear, SoKo’s economy grew 4.6% this quarter (hmm, maybe we should give Mexico the Bomb!).

Europe was also in a forgiving mood with a strong open this morning, as investors were undeterred by RDS.A’s 34% decline in profits and a widening of Russia’s probe into their $20Bn Sakhalm project. Poor Shell, only a 4% gain for them today.
http://stockcharts.com/gallery/?rds.a

Airbus won a $9.6B contract for 150 A320 planes from China, who chose to balance their trade with Europe since they made a little noise about it. Our government is far too busy to help non energy-related companies succeed!

Our own Fed has told us that the worst housing data since 1989 doesn’t matter and the bounce in oil prices doesn’t matter and a falling dollar just does not matter! Now we have some shocking data from a study that tells us the Fed doesn’t matter!

I don’t even know why I look at downside levels anymore, I don’t think we’ve hit one since late September! The Dow will next break through 12,200, hopefully this afternoon as 12,000 becomes just another signpost in the rearview mirror.

We need to start taking a serious look at S&P 1,400 and think about what that psychological level will do for the markets as we break towards a 7-year high.

The NYSE is posting new records every day as well but the media tends to ignore…
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Wednesday Wrap-Up

Well we got our “ho-hum”, another record day!

Not even the Fed can stop this market (although I bet they would have had there not been political pressure against it).

Mr. Jones put up another 6 points pulling out of a tough mid-day slump below 12,100. He loved the Fed, then hated the Fed, then decided he loved the Fed again making for a very exciting finish that the VIX just slept through.

The S&P had far less doubt, never getting too negative on the day and adding 5 points to finish above 1,380, yet another breakout!
http://stockcharts.com/gallery/?spx

The NYSE also had no doubts today and even took a brief look over 8,800 at the close. Even the Nasdaq showed some spunk with early day leadership and a strong finish above that pesky 2,350 line.

The SOX put in a strong performance with a 2.5% gain, flying over the 50 dma to finish at 455 while the Transports, beyond all reason, decided today was the day to break back up!

The transports were extra impressive as oil gained $2.05 to finish way up at $61.40, still below my $61.69 danger zone but not enough to keep us in November oil puts.

I was lucky enough to call for a cover on XOM $70s at $1.40 as VLO flew up on the inventory report, which was a surprising build, but not smart enough to ride out the full day’s rise to $2.10 (up 55%). I took a quarter and ran as it lowered my basis on all those dreadful November puts and that was good enough for me.

We’ll do a post mortem on them later but there was no choice but to surrender as XOM flew up $1.50 for the day – earnings tomorrow!

Gold did nothing impressive, up $3 for the day as a weak Fed led to a weak dollar.

The Fed gave an almost identical statement to the September 20th statement that kicked this current rally into high gear as the Fed told us things that just didn’t matter! It should be noted that the day AFTER that statement, the Dow began a 2 day drop that shaved 100 points off. Did it matter? Of course not!

Tomorrow we get Durable Goods at 8:30, New Home Sales at 10 and the Money Supply at 4:30. By the…
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Whipsaw Wednesday

Oh great, just when I decide to adopt a “don’t worry be happy” market attitude the Wall Street Journal tells me to start worrying!

Asia looked a little worried this morning as the Nikkei pulled back as Honda’s profits fell 4.3% on higher costs, but they boosted full-year earnings on strong US sales. Samsung was a disappointment as well. Wal-Mart and GE are partnering with China’s Shenzhen bank to launch a credit card, so now we know why WMT did so well this week!

Europe seems neither worried nor happy this morning. STM reported a 133% rise in profits but guided very cautiously and spooked the chips. IFX also traded down as they took a big hit from BenQ’s bankruptcy. On the whole, NOK is wrecking the industry with a flood of low-cost phones and a seemingly limitless ability to provide them in mass quantities.

Mr. Jones does not worry about Europe or Japan or making new highs for that matter. In case you’ve forgotten, the old record was 11,750, a record that has fallen 10 times in the past 14 trading days as we added another 375 points. So will it be “Ho-hum, another new high” or “Hasta la vista 12,000” after the Fed?

The S&P remains the reliable indicator and sits just under 1,380 and should have good support at 1,370 after spending 6 sessions using it as a ceiling.
http://stockcharts.com/gallery/?spx

The NYSE has been pacing the S&P step by step and has the same benefit of a firm floor being formed at 8,700 up 300 points since the Dow made it’s ATH.

I so want to say the Nasdaq is forming a flag and getting ready to break out above 2,350 but the pathetic SOX just aren’t letting me. Not only that but Microsoft is pulling some shenanigans with their Q2 earnings, but this “coupon” concept is just another way of saying that holiday computers will not ship with Vista and there is no way I’m buying a computer with a coupon that “allows” me to install an entire operating system “some time” after I buy it.

I’m pretty sure that explains HPQ’s disconnect from the market yesterday as Dell took a pretty big hit as well. The DELL Jan ’08 $27.50s got stopped out on the drop at $2 (up 54%).

A lot of the commodity action we’ve…
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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

This Is The One Chart Every Trader Should Have "Taped To Their Screen"

Courtesy of Zero Hedge

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

As Nomura&...



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ValueWalk

The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

http://www.insidercow.com/ more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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:

 

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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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