Archive for 2006

Weekend Wonderings

After coming off a no data week last week, we have an overload of information on deck for the next one.

Coming into the home stretch, with just 28 shopping days until Christmas, we will be hearing numbers, numbers, numbers all week to digest with the last of our leftover turkey.

Monday is relatively benign with the usual 3 and 6 month T-Bill auction but, with the M3 shenanigans on everyone’s mind, they will take on a very new significance.

Tuesday hammers us with the weeked UBS Store Sales report, Durable Goods Orders, the Redbook (before the bell), Consumer Confidence and Existing Home Sales at 10.  At 1pm we have the 2 year note auction and Bernanke speaking in NY.

More housing data comes Wednesday morning with the MBA Purchase Applications report but who will care with the GDP at 8:30 and actual New Home Sales at 10.  They are looking for just 1.8% on the GDP, which seems very low to me and I wonder how an upside surprise will be taken…

Just as we are trying to absorb that bit of news we get hit with a Petroleum Report at 10:30 followed by a dead serious 5-year note auction at 1 which will all be forgotten an hour later when we see the Beige Book.

Just in case Wednesday doesn’t leave us in a total state of data overload they are ready to hit us again on Thursday with Jobless Claims, Personal Income and Outlays, the Chicago Purchasing Index at 10, Natural Gas at 10:30, Farm Prices at 3 and the government’s spin on the Money Supply at 4:30.

Before you start thinking the Money Supply is just coincidentally after the market closes on Thursday – Uncle Ben is scheduled to spin speak about monetary policy Friday at 9am at the Fed.  At 10 we get Construction Spending and the ISM numbers and right at the closing bell we get Motor Vehicle Sales to mull over for the weekend.

Ben will be backed up during the day by Philly Pres Charlie Plosser and Richmond’s Jeff Lacker so we will get a pretty good view of the party line by then.  If the M2 is as bad as I think, expect to hear from Greenspan on Friday as well.

I forget where you find them but the play of the week next week may be on those VIX calls, because if…
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Fickle Friday

OK, first of all, why are you reading this?  It’s a holiday – go home, relax, spend time with the family!

So why am I posting? Addict that I am, I had to click on CNBC and the futures look awful.  I’m not particularly bothered by it as I cut back on everything before I left but I will be taking a bit of a cover on the remaining positions if we trend down.

You can’t put much stock into the movements on a very low volume day like today but the dollar is a train wreck (as we talked about) and (also as we talked about) only China can save us.

It seems we’ve gotten caught with our hands in the international cookie jar and the M3 (which we have talked about a lot), which the government stopped officially reporting in March,  has been going up very quickly since then!

 M3b_1

Tsk, tsk – sneaky sneaky US Treasury!  Naughty, naughty flooding the world with dollars while telling China to float their currency.  The annual rate of M3 change is currently 10%, that’s a rate of over $1T worth of dollars being shoved down the throats of international investors every year.

This is more than can sustainably be absorbed!

The situation is so dire that Paulson AND Bernanke are now planning to jet over to Beijing to beg for mercy.

The dollar is at 2 year lows and will rocket gold and oil today so we can go back to the ABX $27.50s as a momentum trade - Tuesday they made a quick 15% as we exited at $1.95.

MRB is back to $4.01 and is always fun but I think this may be a flush for gold shorts and dollar bulls so I’m not going to go crazy until I see what shapes up Monday and Tuesday.

NEM $45s also make a good momentum play at $1.50 but don’t go against the price of gold – get out/don’t buy when it pulls back on you!

These are virtual portfolio protection plays only.  Also, the DIA Jan $121 puts for $1.10 are good protection as they won’t kill you on the turn (as long as you maintain a 25% stop) but will be a reliable double if we drop 100 points.

Retail sales look good, better than expected – despite all the grinchy predictions but

So let’s not panic yet but let’s have some…
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Wednesday Morning

Happy Turkey Day!

The market is certainly no turkey as we race to new highs to close out the week.

Asia had good news/bad news with Japan’s economy much slower than expected but that means the BOJ won’t be raising rates so the Nikkei went up 180 points while the Hang Seng shot up 242 to a new record (not on this chart yet) of 19,250.79. 

Do not underestimate that .79 – it shows that they mean it!

My January choice for International Market of the Year, the BSE, is still ahead (up 40%) and it is doubtful they will be caught by 12/31 but next year is a whole new ballgame!

Here’s a very good article on Chinese growth and the widening income gap there.  I think they fail to take into account the millions of young people who have left the farms and joined the workforce that is skewing the results but the figures are very, very interesting.  This is why I’m teaching my daughters Mandarin!

Europe is up nicely ahead of our open with the FTSE making another run at 6,250, which it needs to take out next week if we are to get globally serious about a rally.  The DAX is well beyond serious as it tackles the 6,500 barrier with a 3rd consecutive record high.

Russia (kind of Europe) is raising the ultra-low natural gas prices it’s own people have benefited from as they are (surprise) wasting it!  Russia’s 143M people consume 244% more gas than Europe’s other Billion people - sure it’s cold but turn the thermostat down a notch Boris!  Perhaps Putin can get on TV in a sweater and…   no that didn’t work well for Carter.

I don’t even want to look down today, I’m going to keep a positive mental attitude about the markets but I will be cashing out ahead of the weekend on any weakness as I will just sleep better with more off the table.

Bear in mind what a great show of confidence it is if the markets are willing to go into a 2 day break at all-time highs!

  • The Dow will test 12,350 but anything over 12,300 is still very nice.
  • The S&P has drawn the line at 1,400 so let’s keep it there.
  • The NYSE is just a few points shy of a new high and closing above 8,925 would be


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Tuesday Wrap-Up

Today reinded me of my daughter’s favorite game.

One of these indices was not like the others.

That’s right, our pals at the SOX made a real mess of a good day, mostly due to a report that that the utilization rate at microchip plants fell from 91.2 in Q2 to 88.6 in Q3.

That was enough to tumble AMD (-1%), BRCM (-2.6%), INTC (-3%), LLTC (-2%), MRVL (-2.5%), NSM (-2%), NVLS (-2.5%) and TXN (-1.7%).  Since there’s only 19 total companiesin the SOX, it’s amazing it only went down 1%!

But say – weren’t we worried about excess inventory just about a month ago?  Ah well, it’s always something…

Who do we blame for this disaster?  Obviously Microsoft!  With Vista still a Q107 event it’s hard to get excited about Q406 and a hint of trouble, like low output, can spook the markets.

As I said on Monday:  “We must have our SOX, also weakening above 480, still miles below January highs of 559 so there is NO excuse for hanging out down here – we’ve been there, we’ve done that with a 120 point rally that began last October.  MSFT must set us free and give us the green light to love tech again!”

MSFT was less than helpful today as it struggled with $30 earlyand couldn’t get back all day.  The SOX have moved in lock-step with Microsoft all week.

Obviously with MSFT ($294B) and INTC ($124B) do poorly, it will be very hard going for the Dow, Nasdaq and S&P - all of whom list them as major components.

The Dow overcame a 5% drop by GM today to finish up at 12,321 while the S&P scratched out another 2 to close just under 1,403.  The NYSE had a nice 33 point gain with a strong 8,919 and the Nasdaq held on at 2,454.

Even the transports turned it around and gained 18 points to 2,688 but the SOX gave up 5 and closed at 486.

We got our oil rally today with crude shooting up to $60.17, about to run into the descending 50 dma at $60.70 but making a dangerously strong move today.

Our call this morning to take protective covers over $59.17 was well rewarded with most of the oil patch posting big gains.

Gold ran right up and tested the $630 level so we will watch this one…
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Take off Tuesday!

Is today the day we break orbit?

Hard to say, these space flights are tricky…  The last time the markets broke the laws of gravity was January 1995 when the Dow, after a full year of trying, finally broke 4,000 and went on to 5,000 in October, 6,000 a year later, 7,000 just 4 months later in February ’97, 8,000 that July (finally a pullback there), 9,000 in April ’98, one more pullback to 8,000 in September and then zooming right back to 9,000 in November ’98 and flying to 11,000 by May 1999.

Now you could argue that I’m being picky by counting that little blip of a pullback in 1994 and that our real takeoff point occurred when we broke 1,000 in 1981 which let to a factorial improvement in stocks over the next 20 years. 

That move came after a 15 year break in which we were range bound between 600 and 1,000 and forms the basis for most living traders understanding of the markets.  The prior factorial expansion came from the 20 year period from 1942 to 1964 and, while I’m not going to jump right on the Dow 100K bandwagon just yet, I think it’s important that we keep this little “rally” in perspective.

 

I always say ”If it’s a real rally we’ll have plenty of time to get in.”  As history shows us, we have about 20 years… 

So let’s get our Dow 12,500 rally caps on but perhaps the business we should get into is selling lots of Dow rally caps for the next decade!

I used historical charts to predict the current market move back on August 31st and nothing that’s happened since has changed my opinion.

I’m sure if I would have made such an outrageous statement in Japanese in October of 2005, when the Nikkei was at 12,300, I would have been told by an army of experts how unlikely that was to happen but here’s the Nikkei now, resting on the 5% rule, up from the breakout from 11,000.

 

Perhaps, like electronics, the Japanese markets are a couple of years ahead of us too!

Speaking of Japan, the Nikkei stopped falling today and the Hang Seng kept going up as Hong Kong got a great Q3 report card, back at 3.5% for just that quarter!  This is what they call in China, “moderate growth.”

Spending on machinery and technology was up 12.7%, the most…
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Monday Mop-Up

Hey, that wasn’t so bad!

We held our levels – that’s all we were hoping for but it was decidedly not easy.

The Dow dropped 23 points and tested 12,300 at the close but finished at 12,316 while the S&P had a real Indiana Jones moment but held on to the ledge to close at 1,400.50!

The NYSE was a little disappointing at 8,884 but nothing tragic while the Nasdaq actually turned a profit and finished at 2,452.  The Russell also helped out with a 2 point gain to finish above the critical 790 mark.

The SOX punched right through the 490 mark propelled up by our old friend MRVL, who gained 10% on the day finally breaking that $20 mark.  The transports were weak all day but held 2,650 and finished at 2,669 - we must watch this tomorrow as they gave us the best indication all day that there was to be no rally.

We broke in the January crude contract with an early sell-off that took oil all the way down to $58 but it bounced from there and finished the day down just .17 (after a .40 last minute pump) at $58.80.

While it was an admirable pump job the boys forgot something…  They forgot to boost the February contract!  The February, March and April contracts all lost more than the January todayand the Februarys lost .26 closing the $1.57 gap by 6%.  Why do we care about this? 

As contango shrinks, it becomes less profitable for traders to hold oil contracts as the cost of carrying the current contracts is no longer rewarded in the following month.  With storage costs rising contango can give way to backwardation, where current contracts are higher than closer ones, which can lead to wholesale dumping of crude.

Just like in any deflationary environment, it becomes cheaper for buyers to wait while those holding contracts and high priced commodity stocks find their investments evaporating over time.

We’ll start keeping tabs on thisas the nearest month of backwardation is currently December ’08, just a few pennies higher than Jan ’09 at $68.35 while just .50 separates August and September ’07 at $65.13. 

Oil never made $59 today as it peaked at $58.85 against a fairly flat dollar.  Gold picked up just .45 to finish at $622.

More of the same is in store tomorrow but we may have
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Merger Mania Monday

Leave it to Barron’s to splash water on our rocket party! 

They pointed out this weekend that bullish sentiment is at a dangerously high 56.4% vs. 22.3% bearish. 

Bearish sentiment is one of the main thrusters on our stock rocket and it is running dangerously low on fuel as we near critical velocity.  Now a perfect launch gives us just enough fuel to escape the gravity well without filling up with too much, which might weigh us down.

If you are in a space shuttle and your thrusters are just about expended and you are about to break orbit – it is not OK if you suddenly hear a big thump and you drop back into the atmosphere!  Think of where we are in the market that way – we MUST break orbit as we have little fuel left to overcome a problem at this altitude.

If we break free (Dow 12,500, MSFT $30s, AAPL $100, oil under $60) we can drift up here forever, giving us a chance to refuel, but if we get caught in a gravity well – then Houston, we have a problem!

Barron’s also points out that there has been a lot of inside selling in the financial sector.  How much is a lot?  In mid-October there were 24 shares sold by insiders for each share bought, again – maybe we are running out of fuel here…

But we are being given mixed signals as some people seem to think the markets are still very undervalued:

That’s a lot of faith in something!  It’s a funny day for it with the Nikkei falling 365 points, specifically on a sell-off of financial and commodity…
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.

...



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Phil's Favorites

A 2019 Earnings Recession?

 

A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

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

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...



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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 failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 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

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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.

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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