Archive for March, 2009

Tempting Tuesday

Wow, talk about a round-trip.

All that work last week and here we are, right back at last Monday's close with Tuesday's open looking like last Tuesday's open – which was a gap up that led to a flatline of a day with a sell-off into the close.  In our first alert of the day last Tuesday, we were watching for breakouts at: Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420 – the same levels we blew yesterday.  We were also cautious of a possible retrace to the downside, our 10% (off the non-spike bottom) levels of Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402.  That sure does make today easy as we're right between the two again as our stock market roller coaster makes another loop around the tracks.

My additional commentary in that same Member Alert was: "As usual, the Russell is going to be our best indicator, so over 425 is good, 420 is dangerous and 402 is very bad.  Also, note in the morning post that if we adjust our breakout targets (which were set two weeks ago) to compensate for the 7.5% drop in the dollar we still have a ways to go before we can relax and go long:  That's going to be Dow 8,000, S&P 847, Nas 1,585, NYSE 5,321 and Russell 456."  Keeping an eye on those levels last week allowed us to get out right at the top and flip bearish, where we rode out the 7.5% pullback (so far).  We went into yesterday's close 55% bearish - after enjoying the ride down, we're ready for a change but not yet willing to throw caution into the wind.  The adjustment to bullish is easy, we simply sell more short puts against our long puts and we hope to have good reason to add to our 1/2 covers this morning but it will take more than the 1% bump I'm seeing in pre-markets (7am) to get us to saddle back up.

As usual, we made our bullish plays yesterday, while everyone else was selling.  We once again got our $5 FAS entry and selling the naked $5 puts for $1 means our worst-case scenario is FAS is put to us for net $4 – that's something we can live with long-term!  We were too early trying some SPY calls but we got a nice entry (we hope) selling X puts, a…
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Geithner’s Plan Can Succeed

This is an excellent article, though upsetting.  Mish has pulled together information showing why Geithner is confident his plan will succeed. It is a matter of realizing how success is measured, and it is NOT measured by what good it can do for the vast majority of people in our country. – Ilene

Geithner’s Plan Can Succeed

Courtesy of Mish

I am changing my tune. Geithner’s plan can succeed. Before anyone collapses on the floor or starts screaming that I have lost my mind, it’s important to define what success means and what the plan is.

What Success Is Not

  • Getting banks to lend.
  • Having a fair bidding process.
  • Arriving at a fair market value of bank assets.

The first is not going to happen and it would be a bad thing if it did, even though Geithner is foolish enough to actually want that. Rather the idea is to make it appear as if there is a fair bidding process so that a fair market value of bank assets can be determined.

The key word in the above sentence is appear.

Geithner does not want a fair bidding process, nor does he want to arrive at a fair market value of assets. Rather, Geithner does want to avoid a hit to bondholders, at seemingly any taxpayer cost.

Putting Off Hard Choices

On March 23, John Hussman discussed the bondholder writeoff situation in Fed and Treasury – Putting off Hard Choices with Easy Money (and Probable Chaos).

From early reports regarding the toxic assets plan, it appears that the Treasury envisions allowing private investors to bid for toxic mortgage securities, but only to put up about 7% of the purchase price, with the TARP matching that amount – the remainder being "non-recourse" financing from the Fed and FDIC. This essentially implies that the government would grant bidders a put option against 86% of whatever price is bid. This is not only an invitation for rampant moral hazard, as it would allow the financing of largely speculative and inefficiently priced bids with the public bearing the cost of losses, but of much greater concern, it is a likely recipe for the insolvency of the Federal Deposit Insurance Corporation, and represents


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Dave’s Daily

MARKET COMMENT

Dave Fry at ETF Digest, March 30, 2009

I could have easily have posted “Reality Bites” again but I just did that early in the month and this image works well enough.

So, which will it be? Back to a dreaded trading range, another leg down, or just more profit-taking? It’s too soon to say.

Volume was light on the sell-off which is not a great sign for bears while breadth was highly negative.

Maybe we just went too far too fast and some profit-taking was in order. Sure Dave, but the news totally sucks. Yep, it sure does.

The president is flying to London with 500 plus staff on the taxpayers’ dime. That doesn’t set such a great example when there was plenty of bitching about auto execs (who he just fired) taking jets to DC for testimony. But, this administration has plenty of hubris.

The only good news is that volume was on the light side so maybe it’s just a weak Monday. The week is young and there’s plenty of corporate news and economic data for investors to chew on, especially the employment report on Friday.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, XLF, XLI, XLY, GLD, DGP, DBP, DBB, DBC, USL, EFA, EEM and FXI.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.

 

 





Under a Fluourescent Moon

Here’s another exquisitely-written article by James Kunstler describing a bleak future as the law of inertia holds us on our present course.

Under a Fluourescent Moon

Courtesy of Jim Kunstler at Clusterfuck Nation.

      Mr. Obama heads to Europe now where official hostility is rising against the Anglo-American method of pounding monetary sand down the rat-holes of “non-performing” debt, bankrupt enterprise, and bubble-levitated bonds. Our poised and charming Prez may escape personal obloquy from the quaint old-world street folk, but most of the other G-20 policy players take a dim view of the shell-and-pea games being played by the custodians of the world’s reserve currency, including front-end-loader bank bail-outs, the shuffling of worthless securities under TARPS and TARFS, the desperate efforts to prevent the sane re-pricing of real estate, the cannibalizing of treasuries by the Federal Reserve, the now-notorious hijacking of public “liquidity” injections by third parties like Goldman Sachs, and most generally the perceived sacrifice of everybody else’s greater good for the sake of maintaining Lloyd Blankfein’s cappuccino machine.

    What’s going on now is nature’s way of telling you that America’s standard of living has to be reduced by something between 20 and 50 percent.  You can have it in the form of a compressive deflationary depression, including widespread bankruptcies… or you can have by way of inflation, in which money loses its value.  But there’s one basic qualification to this: the way down is not symmetrical with the way up.  That is, it’s really not just a matter of ratcheting down to a standard of living half of what it was, say, in 2006, because in the event all the various complex systems that support everyday life enter failure mode before our society re-sets at a theoretically lower level of equilibrium.

    By this I mean our methods for getting food, for moving about the landscape, for deploying capital, for trading and manufacturing, for schooling, doctoring, and running public services all destabilize and, to some degree or other, fail to deliver their contribution to normal daily life.  Banking (capital deployment) is already mortally wounded.  It remains to be seen how this will affect the food supply half a year ahead in the harvest season.  Capital is as big an “input” for our method of farming as diesel fuel or fertilizers


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Broadcom bears use put spread and call sales

Today’s tickers: BRCM, BNI, EMC, RIO, GM, VIX, XLF, BAC & ARNA

BRCM Broadcom Corp. Class A – Shares are currently off by 3% to $20.01 for Broadcom, which is engaged in semiconductors for wired and wireless communications. Options activity was largely contained to the May contract. One investor established a put spread by purchasing 7,500 puts at the May 20 strike for 2.00 each, and selling 7,500 puts at the May 18 strike for a premium of 1.15 apiece. The net cost of the trade amounts to 85 cents and yields a maximum potential profit of 1.15 if shares fall to $18.00 by expiration. Further evidence of investor bearishness on BRCM came in the form of 5,000 sold calls at the May 20 strike price for a 2.00 premium per contract. Apparently investors agree that, at least in the near-term, the current $20.01 share price is due for a decline. Option implied volatility has jumped from Friday’s reading of 64% to the current value of 70%.

BNI Burlington Northern Santa Fe Corporation – When you need your share price to rise in the face of a 4.3% equity market decline you could do one of two things. First, have Goldman Sachs upgrade the company or second, find someone to suggest out loud that your shares might be bought by legendary investor, Warren Buffett. Sadly, neither seems to have worked for the operator of one of the largest railroad networks in North America, which has seen its shares dip slightly by 2% to stand at $60.71. BNI was upgraded to ‘buy’ from ‘neutral’ at Goldman Sachs amid rumors about a possible purchase of the company by Berkshire Hathaway. Option traders reflected the bullish upgrade by purchasing calls in the April contract. At the April 65 strike price 3,300 calls were scooped up for an average price of 1.50, while at the higher April 70 strike more than 3,200 calls were bought for a 55 cent premium. In order for the April 70 calls to turn profits for optimistic traders, shares would need to rally by 16% to the breakeven share price of $70.55 by expiration.

EMC EMC Corporation – The IT support company has experienced a share price decline of about 3.5% to $11.17. EMC edged onto our ‘most active by options volume’ market scanner after some large volume trades were initiated in the April and May contracts. It…
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Falling Silicon Prices Rearranging The Solar Market

Jay Yarow explains that declining prices for refined silicon arrived as demand for solar cells fell. First Solar and Energy Conversion offer less expensive thin film panels, but with falling prices for silicon, the demand for low price alternatives also suffers.

Falling Silicon Prices Rearranging The Solar Market (FSLR, ENER)

Courtesy of Jay Yarow at ClusterStock

The price of silicon has fallen through the floor and now the solar industry is in a state of flux, reports Barron’s this weekend:

A year ago, refined silicon for solar cells cost 450 bucks a kilo on the spot market. You can have it today for closer to 100 and if you wait a month it may be cheaper still. Thanks to the workings of international capitalism, the 90% margins available in last year’s market spurred silicon-factory expansions around the planet. But the new supply arrived just as end-market demand for solar panels got eclipsed by faltering government incentives, lower oil prices and the world financial freeze.

As the price of silicon lowers, the companies that offered non-silicon panels are suddenly facing a trickier propsition. First Solar (FSLR) and Energy Conversion (ENER) are particularly highlighted as they offer thin film panels which are a lower cost alternative to silicon based panels.

A key selling point of thin-film panels is their reduced use of costly materials like silicon: a 97% reduction, in most thin-film technologies. Now that silicon is cheaper, First Solar is hustling around to investor conferences explaining how it aims to fly under silicon’s descending cloud ceiling (see the bottom chart to the left). Some silicon panels have already become cheaper than the products of Energy Conversion. Sadly, First Solar’s margins and its premium stock multiple of 22 times this year’s estimates seem fated to decline. Energy Conversion will likely revert to the losses that dogged it for almost 50 years, leaving little solid value in the 15.77 stock except its net cash of $3.30 a share. Neither company responded to our repeated inquiries about cheap silicon.

…First Solar panels convert less of the sun’s energy to electricity, roughly 11% compared with 20% with the best silicon-crystal panels from SunPower. But a developer can afford to buy more of the cheaper First Solar panels. After factoring in the higher hardware expense for its…
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Mortgage Crisis Over? Please, It’s Just Beginning

More mortgage crisis excitement on the way -- the majority of resets have not yet occurred. – Ilene

Mortgage Crisis Over? Please, It’s Just Beginning

Courtesy of Henry Blodget at ClusterStock

Now that all those sub-prime loans have defaulted and folks who couldn’t afford their houses have been evicted, the foreclosure crisis is over, right?

Wrong.

Why?

Because subprime loans aren’t the only loans that began with a couple of years of fantastic teaser rates that made houses seem affordable.  And over the next few years, all of those other loans will reset.

Now that interest rates are low, the folks who still have jobs and equity in their houses will refinance. Others, however, will be stuck paying higher rates--or they’ll walk away from their houses.

Fund manager John Hussman of the Hussman Funds explains:

If there is any good news at present, it is that the capital infusions of late-2008 have temporarily stabilized the banking system, and that the U.S. economy is presently enjoying a brief and modest reprieve from the financial crisis. This is largely the result of an ebbing in the rate of sub-prime mortgage resets, which reached their peak in mid-2008, with corresponding mortgage losses and foreclosures a few months later. Since this crisis began, the profile of mortgage resets has been well-correlated with subsequent foreclosures.

reset game match

Unfortunately, the reset schedule above depicts only sub-prime mortgages. As the recent housing bubble progressed, the profile of mortgage originations changed, so that at the very peak of the housing bubble, new originations took the form of Alt-As (low or no requirement to document income) and Option-ARMs (teaser rates, with no required principal repayments).

A broader profile of mortgage resets is presented below (though even this chart does not include the full range of adjustable mortgage products).

Loan Resets

This reset profile is of great concern, because the majority of resets are still ahead. Moreover, the mortgages to which these resets will apply are primarily those originated late in the housing bubble, at the highest prices, and therefore having the largest probable loss. Though many of these mortgages are tied to LIBOR, and therefore benefit from low LIBOR rates, the interest rates on the mortgages are typically reset to a significant spread above…
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SP500 Fails at Confluence Fibonacci Resistance

Message from our TA expert friends: the rally of last week may be over for the time being, watch levels, stay defensive.

SP500 Fails at Confluence Fibonacci Resistance

Courtesy of Corey Rosenbloom at Afraid to Trade

Last week, the S&P 500 rallied into a Fibonacci Confluence zone which was met with resistance.  At present, this zone is proving to be a significant resistance zone which halted the recent strong rally.   Let’s see this confluence resistance zone on the daily chart.

The main take-away is the following:

Drawing off the significant recent March swing low to two recent highs (namely the January high and the November high), we arrive at the following confluence:

837 is the 50.0% retracement off the November highs
835 is the 61.8% retracement off the January highs

Both these levels converge to form a simple Fibonacci Confluence Price (resistance) at 836, which recently served as resistance.

As of Monday morning, price had also broken through a weak confluence zone about the 800 level.

This could be the birth of a retracement swing down which we’ll all need to watch closely as it develops.

Corey Rosenbloom
Afraid to Trade.com

 




Trendlines Broken

Technical analysis of the market today, courtesy of Brian at Alpha Trends.

Trendlines Broken

The uptrend lines since this rally began have been broken today, the markets are below the flat/declining 5 DMAs and the VWAP* (purple MA) since the rally began is now coming into play. A bounce from these levels will give good indication as to the conviction of the buyers of the recent rally. Be very defensive.

 

 





Peering into the Abyss

We can’t print our way out of an abyss, but could we produce our way out?

Peering into the Abyss

Courtesy of Peter Schiff at Lew Rockwell.com

For a few fleeting, horrifying moments this past week the fault lines that underlie the global economic crisis erupted into plain view. With deft and quick effort leaders in Washington, Europe and Asia papered over the fissures and fears largely subsided. But the shock of plain truths which resulted in violent currency movements are the latest reminder that the 21st century economic order will bear little resemblance to the world we now know.

The tremors began in Beijing, where an essay from the governor of the People’s Bank of China seemed to favor the creation of an IMF currency to replace the U.S. dollar as the world’s reserve. In Europe, the rotating president of the European Union, outgoing Czech Prime Minister Mirek Topolanek, characterized America’s plan to combat the widening global recession as the “road to hell.” At the same time, British Member of the European Parliament Daniel Hannan made headlines the world over with his stinging rebuke of the inflationary and debt-focused policies of the current UK government.

As a result of these clearly voiced frustrations, the U.S. dollar suffered a drubbing. However, Treasury secretary Geithner and his ministerial counterparts in Berlin, Paris and London did their best to convince everyone that the world is pulling together as one to combat the economic crisis. The charm offensive was effective in restoring calm.

Given the size and scope of the remedies that the Obama Administration is cajoling the world to adopt, it is likely that the unease will grow until many countries emerge in open revolt to America’s plans.

President Obama and the majority of our leadership on both sides of the aisle are confident that the right mix of monetary and fiscal policy can restart the spending party that defined America for a generation. And as the bleary-eyed revelers wisely reach for a cup of black coffee or stumble into a rehab center, Obama is pouring grain alcohol into the punch bowl hoping to lure the walking zombies back onto the dance floor. Europe and Asia fully understand that Obama will ask them to lend the booze.

Washington is telling us that our problems result from a lack of
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Phil's Favorites

Rogue science strikes again: The case of the first gene-edited babies

 

Rogue science strikes again: The case of the first gene-edited babies

Chinese scientists led by He Jiankui claimed they used CRISPR to modify human embryos that eventually were born as twin girls. AP Photo/Mark Schiefelbein

Courtesy of G. Owen Schaefer, National University of Singapore

The idea of scientists tinkering with the genes of babies was once the provenance of science fiction, but now it’s apparently entered the realm of reality: On Nov. 26, Chinese scientist He Jiankui reported the historic live births of ...



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Zero Hedge

Trump Administration Considering Issuance Of 50, 100-Year Treasuries

Courtesy of ZeroHedge View original post here.

The last time the US was seriously considering issuing ultra-long dated bonds - those with a maturity of 50 and 100 years - was back in late 2016 and early 2017, when yields were near the record lows hit in recent days. As we reported back in November 2016, shortly after Steven Mnuchin was confirmed as US Treasury Secretary, the former Goldman banker proceeded to roil the bond market when he told CNBC he would look at extending the maturity of future Tr...



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Insider Scoop

Heavy Volume Drives Low-Float Stock Plus Therapeutics Up 200%

Courtesy of Benzinga

Plus Therapeutics Inc (NASDAQ: PSTV) is the latest and one of the most extreme recent examples of the powerful combination of low float and heavy trading volume.

Plus shares traded higher by more than 215% on Friday. The biotech stock more than tripled after the company reported ...



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Lee's Free Thinking

Long Term Stock Market Chart Perspective

Courtesy of Lee Adler

After a big day like yesterday, I like to get a little long term stock market chart perspective. (Yes, this stilted verbiage is for search engine optimization ).

We do that with a monthly bar chart, which I update when relevant in Lee Adler’s Technical Trader. That’s in addition to the regular daily bar/cycle charts covering the past year, and a weekly cycle chart covering the past 4 years.

I wrote on July 14, in reference to the price and indicator patterns on the weekly chart:

The market has overshot a 3-4 year cycle projection in terms of both price and time. There are no long term projections. A 4 year cycle high is ideally due now. A 4 ye...



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Kimble Charting Solutions

S&P About To Decline 14%, Catching Up With The Crude Oil Declines?

Courtesy of Chris Kimble

This chart looks at the performance of the S&P 500, Crude Oil and the Yield on the 10-Year note over the past 4-months.

Crude Oil has declined around 14% more than the S&P during this time frame. Yields have declined, even more, around 36%. The is a huge spread between these assets over this short of a time period.

A few importa...



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Chart School

Bitcoin 2019 fractal with Gold 2013

Courtesy of Read the Ticker

Funny how price action patterns repeat, double tops, head and shoulders. These are simply market fractals of supply and demand.

More from RTT Tv

Ref: US Crypto Holders Only Have a Few Days to Reply to the IRS 6173 Letter

Today's news from the US IRS has been blamed for the recent price slump, yet the bitcoin fractal like the gold fractal suggest the market players have set bitcoin up for a slump to $9000 USD long before the IRS news hit the wire.

Get the impression some market players missed out on the b...

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The Technical Traders

Global Central Banks Move To Keep The Party Rolling - Part III

Courtesy of Technical Traders

This section of our multi-part article regarding current and past central bank actions, we are going to attempt to look at key elements of the past and present to highlight what we believe may turn out to be an incredible “setup” in the global markets. 

This setup is almost like a complex chess game where two skilled players battle for control and near the end of the game, one player is left with the King, a Rook, and a Pawn while the other player has a dramatic advantage with stronger chess pieces.  Yet, as the game continues, the weaker player is able to remove one or two of the stronger players key pieces and move his pawn to his opponent’s side to r...



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Digital Currencies

New Zealand Becomes 1st Country To Legalize Payment Of Salaries In Crypto

Courtesy of ZeroHedge View original post here.

Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.

The ruling by New Zealand’s tax authority allows salaries and wages to b...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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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.

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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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