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Wednesday, July 6, 2022

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Chart Art and Market Manipulation, CNBC Style!

We have a new section at Phil’s Stock World, it’s called Chart School.

We will be featuring Technical Charters and Analysis from some of the top people on the web.  If you are interested in contributing or know someone you think would be a good contributor, contact Ilene@ our .com address (I don’t want her getting spam by putting her email in a post!) and let her know who you think would make a good addition to our roster.  We’re looking not just for nice charts, but also for people who are skilled in explaining them.  A good chart person needs to be a little bit of an artist, which is why I’m not one – my drawing skills make my daughters laugh, and not in a good way!

Like all good art, charts are subject to interpretation and different people will see different things, and come to different conclusions – from looking at exactly the same thing.  That’s why I like to look at lots of different charts and try to check my bias at the door and let art speak for itself.  Here’s a few that caught my eye this morning, starting with this interesting S&P chart by Ichimoku, who uses the SPX Price/TRIX daily divergence to catch a possible correction brewing just ahead of us (something I agree with for fundamental and technical reasons):

Interetsing stuff!  Of course, I will caution members (as I had to when everyone was getting "Head and Shoulders" fever) that these are unprecedented market moves and "normal" charting techniques will often fail you here.  We have record amounts of cash on the sidelines in proportion to the size of the market, which itself is trading on low volumes, which means it doesn’t take very much to override a bearish chart.  It also would not take much of a panic to wash out the relatively small number of people who buy into the market every day. 

As I mentioned in yesterday’s comments, just 20M out of 1.3Bn of IBM’s shares were exchanged yesterday at prices that averaged $112.50 per share yet that $2.25Bn worth of rangey trading upped IBM’s total market cap by $6.5Bn.  Should the other 98.5% of the shareholders decide they’d like to get the $115 closing price for their shares, they may find the "value" isn’t quite what the chart says at the moment.  This is nothing against IBM, they are worth about $115 – as long as not too many people want to sell it at once or then, like the entire market in November and March, when IBM was trading at $82 and hit our Bargain-Basement Buy List, a stock is just worth whatever you can get for it at the moment.

For example, what does this IBM chart tell you?  Certainly it’s not telling you that IBM will be making a new high in 10 days…  We did pretty much bottom out at $99.50 the next day but the move from $100 was 100% this week and IBM hit $110 (up 10%) before the earnings were announced.  Market sentiment can turn charts on a dime and market manipulators tend to time their "news," like Meredith Whitney’s much publicized bullish call on financials, that was timed perfectly for Monday’s open or Nouriel Roubini’s "bullish" comments that were also used to goose the markets on Thursday.  I’m not saying that Whitney was herself manipulating the markets but think how easy it is for GE/CNBC to SCHEDULE her for the date and time they wanted in order for her announcement to have the desired effect.  While Whitney is thrilled to be taken seriously and credited for moving the market, Nouriel Roubini cried foul, citing CNBC as using him for their own agenda as they took his words entirely out of context.

Why would the fine broadcasters at CNBC do such a thing?  Well perhaps because parent company GE knew they were going to have a stinker of a quarterly report and wanted to garner some favorable market conditions to drop their bomb in to cushion the impact.  Beleaguered CEO Jeff Immelt faced down a lot of angry shareholders in March as the stock dropped to less than 20% of the 2-year average.  Still hovering around $12, what do you think the impact would have been if GE had announced mediocre results in an unfavorable market?  As it was, the company dropped 8% on Friday but that was only giving up 1/2 of the Whitney/Roubini rally that was led by 5 days of pom-pom waving on GE’s financial network

Now Immelt himself only owns 1.7M shares of GE stock but I’m sure he has just tons of options that are underwater.  If that’s not motive enough, he has $123Bn worth of shareholders who will certainly want to know what happened to their other $300Bn and are losing their patience, so there’s some serious motive.  The means is CNBC and the opportunity is the ability to filter the news in order to create an environment that allows you to add $20Bn in market cap over 4 days ahead of an earnings report that shows you should have gone $20Bn the other way.  Case closed, book ’em Danno!

Does that sound too conspiratorial?  Maybe I am being a little unfair.  After all CNBC did report that Barclays Capital analyst Jason Goldberg lowered his estimates on a number of banks (not GE) Monday but he also projected the second quarter will show a continuation of several positive trends seen in the first quarter, including a strong capital-markets environment and a solid mortgage-refinance backdrop. Goldberg also expected an improvement in service charges and for market-related write-downs to continue declining so, generally, a positive report.  On Tuesday afternoon, when the markets were flagging, CNBC reported that Barclays had raised their 2009 target for the S&P 500 to 930 from 875 saying: "Looking ahead, we think the market will break through the midpoint (850) of its recent range (1000-700) this summer before enjoying the second leg of the ‘recovery rally."

It is interesting to note that Barclays is the single largest shareholder of GE, something I must fail to overhear in the disclosure statements when the guests come on CNBC, and that their 424M shares jumped over $400M in value this week.  I’m sure things are on the up and up at Barclays as they just appointed Bush’s Under-Secretary of State for Economic Affairs, Reuben Jeffery III, to the Board of Directors.  Mr Jeffrey was a managing partner at Goldman Sachs and was also the chairman of the Commodity Futures Trading Commission under Bush during the biggest commodity rally in history before being promoted to Under-Secretary for all his good work there.   

Yes charts can be very useful in giving you a picture of developing trends but what’s been killing traders lately, and especially the poor bears last week, is the way those technicals have been snapped for seemingly no reason at all.  When Disney owns ABC and GE owns NBC and CBS is owned by the World’s 86th richest man ($9Bn) and Fox is owned by 132nd richest man ($4Bn), who also now owns the Wall Street Journal – WHAT DID YOU THINK WAS GOING TO HAPPEN? 

Ned Beatty explained this all to us in Network, way back in 1976, when he told us:

There is no America. There is no democracy. There is only IBM and ITT and AT&T and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today…  One vast and ecumenical holding company, for whom all men will work to serve a common profit. 

What do you think the Russians talk about in their councils of state — Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do.  The world is a business. It has been since man crawled out of the slime.

chinainc.jpg image by siggy_06Well it seems to me we are still stuck in that slime.  It’s a new age of market manipulation where all of your news comes from the same corporations and every wave of consolidations drives the wealth of this nation into the hands of fewer and fewer people.  As pointed out on Boston Legal recently, not only are we losing our choices in news sources, banks, car companies etc. but now our nation is once again getting bought up by foreigners.  In the ’80s it was Japan, now it’s China.  Japan ended up getting hosed because they bought at the top but China is sitting pretty, having stockpiled over $2Tn in dollar reserves right when our few remaining corporations are desperate for cash

I wonder which network will be sold to China first?  Rupert Murdoch (who is already very tight with China) already opened the doors to foreigners taking over US media interests.  Our stock markets have already started trading like those crazy Asian markets.  Why?  Manipulation is why.  Control of the media by government and business allows focused messages to go out to the people so investors can be stampeded in and out of the markets at the will of the people who control the message.  Heck, maybe it is time to give China a turn after the way we’ve messed things up over here.

Now that China has Africa on track, I’m sure they can come over here and straighten things out!

 

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Cool.  Ok, Phil.  I’m boning up this weekend – and want to follow up on a couple things.  With regard to the $100K portfolio hedge strategy, I’d like to share my core positions in my main IRA portfolio and share what I’m thinking.  Then perhaps you can comment on same.  Shall I do that here or in the comment section of the last $100K post?

Collars.   Having a good time digging into your ebook.  I get the collar ideas.  But before "collaring up" this weekend or moving on, a couple basic questions:  if I use LEAPs to take advantage of comfort (and pre-defined primary and secondary exit points – which I love), am I missing out on monthly income opps (ie by selling calls each month)?  [Understanding I will adjust the collars as stock moves require or call for]  Most of my core stocks are income producers – and fairly stable over time – collars still smart?  [Also want to build my positions in most of the stocks – many the same as the ones I’ll list re $100K review]  Let me know best way to pursue this discussion/chat.

Tech Issue.   I love the look and structure of ur site when I’m online.   While you can’t tweak ur tech site to suit my needs, access and viewability suck on my Blackberry Bold tho.  I now realize it led to some miscommunications on my part in chat last week.  The site loads very slowly (even on wifi) on my Blackberry (tho I hear I-Phone usability is good) and the need to constantly reload/refresh as I move around makes it a weak platform for me.  I like your twitter-like ideas on the $5000 plays – but theyre avail to all anyway.  Any thoughts on making the site more mobile friendly?  For whatever its worth – and I’m down with you and not with their Pro program – Motley Fool’s stuff is all-around mobile friendly – maybe some tech/design stuff to cop from them!  Sorry for the long wind.  Viva la weekend!

Per ur preference, I will continue this thread in $100K land if u want.  But before I jump in car, here are my underlying long stocks (liking them for dividend yield and stability – I have other ports for playing with diff kinds of stocks for cap growth etc.) – most if not all are buy-writes when I enter or bulk up – and I try to sell calls every month – tho its tricky on those where my price still lags from previous price drops and before I knew what a collar was.  OTM calls in volume generate cash and I wont get called – more valuable near money calls are risky (of course) unless I’m in the green on the stock anyway. So:
EPD (up 10% overall), WMI (up 8% overall), CAT (-2%), DEO (up 1%), HMY (-10%), PGH (up 1.8%), SO (up 1%), WMT (- 8%), INTC (-17%) – adding KO or PEP and JNJ for sure.   Again, all long plays for me (maybe not HMY) where I dollar-cost in as much as possible (using buy writes).  I allocate by $ %, but for the sake of discussion, lets assume I hold or will hold at least 1000 of each now or inside the next 60 days.

No rush. Thx.

Phil,
On Thursday you asked me to remind you to post a writeup about the 5% rule on the website under the education section. I remember reading something you wrote about it last month but I cannot find it now. Thanks.

Phil,
Reviewing the DIA call/erosion play- I am stil in it- I rolled the July 86 short calls to the Aug 89’s while retaining the long Aug 90’s. So I am down approx. .40 on the spread. (down .75 on the shorts; up .22 on the longs)
Some questions. Are you still in this and what, if so what did you do?
Second, if you got out, How and why?
Third, how can I imporve my position?
Assuming a bearish bias (logic/ fundamentals say we need to correct after the run-up); then one choice would be to close the long; take my profit against the short; go naked on the short and 100 pts down gets me even there abouts. Very risky and not my preference.
Another choice- it seem I need to move the long both out and up to improve my delta. Say , roll to the Sept 90’s ? This raises my cost basis on the longs so again , not my preference.
Looking for some help here.
Thx

PD – These are all fairly new positions (as u can prob tell by gains/losses) – less than year for all I think. 

Good discussion on black swan unemployment numbers and how the current seasonality adjustment may not apply correctly this tine around (based on auto layoffs). Also, the "factoring" and commercial real estate is discussed.
 
Next week the first outside funding for my company is expected to hit. Finally!!!  (knock on wood, throw salt, pet a black cat, etc etc). It only took 2 years ….
 
I’ll post next week if/when it does hit.  I’ll have some time to get back to some more morning trading if it does.

Thanks.  Lemme review and holler back.  Re CAT – yes, got that from you and played it the way it was laid out.  Love the analysis here, PD.  Re collars tho:  ur not a big fan generally?  The ebook calls it "a relatively conservative strategy … that should be the foundation of your trading approach.  It ensures that your principal is always quite safe … Correct application … will allow you [to] profit consistently in any market…"
Whether my SEO IRA stocks are these or others with good return prospects, what I want from them and any hedges is to NOT have to watch them much.  Collars seem to fit the bill at first glance.

Roth IRA:  I’m asking my CPA and atty this week too, but want to toss out a question.  Since 2010 allows me to rollover a big regular IRA into a Roth (which probably makes sense on its face – rather pay tax now than when Obama and Goldman get done with us), if I have a useless paper loss in my regular IRA (can’t use it for tax break), can I/we roll the loss over too?  Meaning the loss upon rollover to Roth gets used to offset the entry tax hit. 

Again, just reread, I love your tight and sharp analysis on the stocks you looked at for me.  Really sweet, man.  Thx!

Re I-Phone versus Blackberry.  Just remember the real players are on the Berry!   The marketing stylistas are all about the I-Phone.  In fact, while I was taking my daughter to Harry Potter Wednesday nite, I saw a lot of them in line diddling about on their beloved I-Phones.  While I, the lone Berry dude, was dutifully trying to read at your site and set up trades thru the ETrade app.   I’m sure they were too tho.  (You can borrow my programmer to design an app for the Blackberry store if want.)  lol

Ur DEO take is brilliant!

Phil,
Thanks for posting the 5% writeup under the scaling in article. I posted some basic question on 5% rule there but have copied them here. I don’t know where you would prefer to answer them. Thanks a lot.
– Does the 5% rule apply to stocks as well as index ETFs?
– In the daily chart that you publish, why are the 2.5% increments based on the close of 2 days back and not on the close from the previous afternoon?
– As you described the 20% retracement that you might expect from the various levels reached, does that mean that you recalculate each time that an index reaches a new high or low for the day, week or month?

RE Dstillewe : I work with retirement plans, 401ks and IRAs regularly and you cannot roll a loss from a rollover/traditional IRA.  Most companies will let you roll in kind so you take 1000 shares of XYZ stock and convert them to an IRA. They are probably worth less now than you paid for them, you have to pay taxes based on value at time of conversion not your basis.  The only way to take a loss on an IRA is by selling and cashing it out *IF* you have after tax money in the account meaning you make a contribution and didn’t get the tax write off.  Obviously you also have to have an after tax basis which is higher than the value of your IRA.  In 2010 you will be able to do a roth conversion and split that taxable event over 2010 and 2011.  If you plan on doing the conversion you’ll want to make sure you have other money set aside to cover the taxes, if you pay any of them out of the IRA itself that portion going to taxes will also get the 10% penalty.  Obviously if you are going to do the conversion the longer you plan to leave it the better, but you’d want to make sure it was at least 5 years.
 
This may help if you are considering it. 
http://www.dinkytown.net/java/RothTransfer.html

EP. Thx. I run my own business, so, right now at least, my SEP IRA is under my control. I’m at a ballgame right now, but would like to chat further. Let me try later or morn? I will check out the link too. DS

Dstillwe,
I think you mean selling a strangle every month as opposed to a collar. I find sellng strangles every month to be incredibly profitable and quite reliable. Also, they are pretty easy to manage. Remember, we want to be selling premium every month not buying it.

As far as iPhone v blackberry, I use both etrade and TOS. Many times I do all my trading and PSW viewing in the car on my iPhone and I find it to be quite spectacular. The TOS app is incredibble and I find it better than the computer version for doing some things. The etrade app is not as good for doing anything with options.

Also, I made this post from a hot tub using my iPhone 🙂

Phil
Bought Aug 90 @ .78
Sold July 86 @ .77
Bought July 86 @ 1.259
Sold Aug 89 @ 1.309
I recalculated the numbers including commissions/vigorish  and using  the closing prices ($1.01/$1.39(  I am up .23 on the longs and down .58 on the shorts-net down .35 .

Thx PD and Craig. But please please please don’t make me get an I-Phone – what will RIMM do without me? My programmer will be on alert tomorrow! (Sent on my Blackberry from an undisclosed and somewhat gross location.)

Phil,
Thanks for the reply.
Your response pretty much confirmed what my intuition was telling me (great minds tend to think alike after all): i.e., move the long up and out to improve the delta in my favor. However, my "great mind" is not quite up to your par on options. So, let’s say on Monday and / or Tuesday indications are for a correction. then would it not makes sense to roll the caller down to say, the the Aug 87’s to improve my delta now? I am trying to work through the scenarios in my head to have a plan either way. Any problem with the logic on this?
BTW, are you still in this trade? Did you get out and if so, how? If not, what is your plan? Picking your brain.

Blackberry-
I switched to Verizon Blackberry Storm about a month ago and it is great. I am on the move alot during the day and following the comments, etc is  a pain. So, count me in for a Blackberry App for PSW!
For what its worth, I find the WSJ and Bloomberg Apps for Blackberry work well. Less so for my local paper, Chicago Tribune. The Weather Channel has a neat app providing an hour by hour local forecast which I find useful making last minute decisions on outside work scheduling.

Own a calendar spread of three each Sept RIMM 75 calls at 4.5 and Sept  65 puts at 5.5. Have sold Aug 70 calls at 3 and 70 puts at 3.7. Made $2 each from my July 70s. Starting to get worried about my Sept 65 puts, which are down about 3 dollars. Agonizing over next step. Obviously too tight a spread for volatile stock over 3 month span. What is recommended or should I sit tight. Thanks

Phil- general question re: DIA insurance positions:
I am just getting onto these positions and learning how to manage them . What are your thoughts on taking profits on the shorts/longs and if/when?

Practicing….  😉 :)> :() :O

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