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Tuesday, November 29, 2022

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Monday Market Movement – Trying to Get Bullish

We are still trying to get more bullish.

Over the weekend we set a new, higher set of levels for our Big Chart on the assumption that our breakout levels hold up and our new Must Hold lines become Dow 13,600 (not there yet), S&P 1,360, Nasdaq 3,000, NYSE 8,000 and Russell 800, which means it's now up to the Dow and Nasdaq to continue to show leadership if we're going to be having a rally good enough to get us to add our next 10 bullish plays.

I already added 2 aggressive upside trade ideas on XLF and SPY in the weekend post and last week we already looked at WFR, X, BAC, GLW, BBY, CHK, AAPL, AA, and BA but we also added a new Long Put List (Members Only), which had 19 stocks that we thought were good downside horses to ride if, per chance, we fail to hold 3 of our 5 breakout levels.  

It shouldn't be too much to ask – IF this is a real bull market.  We've been extremely skeptical up to this point and, Fundamentally, I still have my doubts but Technically, we can't keep fighting the tape so were drawing a line in the sand for Mr. Market to cross and, if it does so, we're happy to play along.  If it fails to do so, however, well – we've already made those bets!  

Our aggressive take on the Dow is the result of analyzing the 5 components that were replaced since the crash with MO and HON thrown out for BAC and CVX in Feb of 2008, AIG replaced by KFT in Sept 2008 and C and GM replaced by CSCO and TRV in June 2009, causing a massive distortion in the index, meaning 16,000 is the old 15,000, possibly even lower:  

The Nasdaq is similarly distorted by AAPL, who are up 500% since 2009 and when a stock that is 11.5% of an index is up 500%, that stock alone causes the index to go up 57.5%, which is why we now call it the AAPLdaq.  The AAPLdaq itself is "only" up 100%, which means the ENTIRE rest of the index is lagging with a 42.5% contribution – those who tell you that tech is somehow loved again are fooling themselves – or perhaps just you – in order to spin a market story that simply is not so.

In fact, if we removed AAPL suppliers from the AAPLdaq along with Big Daddy AAPL, we'd have an index that is every bit as pathetic now as it has been since the great crash of 2000.  The largest potential for a market catastrophe is AAPL selling off and that's why SQQQ is one of our primary hedges and QQQ July $61 puts ($1) are on our Long Put List – because the AAPLdaq without AAPL is just "daq" – and no one wants to buy daq.  

This morning AAPL went against my advice and announced a complete waste of cash dividend of $10.60 per share, which is roughly $10Bn out the window in order to give their shareholders a 1.8% dividend.  Just to prove that, perhaps, they are truly out of ideas and SHOULD have their money confiscated, they also announced a $10Bn buyback, which also works out to 1.8% of the company (at the all-time highs) and you know the Jobs era is dead when AAPL can't find something better to invest in than their own stock.  As I said to Members in the weekend post:  

AAPL investors (real ones) should be FURIOUS if AAPL pays a dividend.  Who gives you a better return on capital than AAPL?  Why would you want them to give you money – you'll only blow it on some stock that's not AAPL!   That $100Bn cash everyone is salivating about was $5Bn 5 years ago, when AAPL stock was $85.  Now the stock is $600 and they have $100Bn in cash – THAT'S GOOD!  Why would you want to take money away from them?  Did you turn $5Bn into $100Bn in the last 5 years?  Did you turn a $85 stock into a $600 stock in the last 5 years?  So who has a better chance of taking $24Bn (a 4% dividend) and doubling it in the next two years – you or AAPL?  

AAPL giving out a dividend and buying back their own stock is a vote of "no confidence" from shareholders and their own board and a black spot on the new management, who couldn't come up with a better plan to grow AAPL than this.  Sure they still have lots of money left but $20Bn to goose EPS 1.8% and give $10.60 back to shareholders one time?  What else could AAPL have done with $20Bn?  I'm glad you asked:

  • How about buying TWX ($35Bn market cap), which pays a 2.9% dividend ($1Bn) and drops $3Bn to the bottom line.  That's 10% back on your money per year and gets AAPL into the cable Biz and gives them a well-known publishing platform, ownership of music content as well as marquis TV and film content like HBO, Cinemax, TNT, TBS, Warner Brothers, New Line Cinema, etc.  
  • The CBS Corporation is exactly $20Bn and they drop $1.3Bn to the bottom line with a $200M dividend.  AAPL should love them as they bought $1Bn of their own stock last year (5%) and should help boost their EPS in 2012.  
  • DWA is just a $1.5Bn company, AAPL could have bought that by just paying out $9 in dividend instead of $10.60 and what announcement would you like better – that AAPL is giving you $2.65 a quarter or AAPL is giving you $2.25 per quarter and just bought Dreamworks?  While not as successful as Pixar, clearly it's a business Steve Jobs wanted to be in and he drove the value of Pixar up to $7.6Bn when Disney bought it from him in 2006.   

Those are just 3 quick ways, off the top of my head, that AAPL could better spend their money than paying out dividends.  They are a media company and being able to pick up media assets at depressed prices is a far better use of funds than handing it back to shareholders who don't understand the basic value of having a moat of cash around a company.  Just ask Warren Buffett what he thinks about dividends….

We'll see if AAPL declaring itself out of ideas takes the wind out of the market's sails or if it (like everything else that happens) becomes yet another reason for the market to take off to new highs.  This week's calendar has a lot of housing data, beginning with today's NAHB Index at 10, followed by Housing Starts and Building Permits tomorrow at 8:30, then the Mortgage Index and Existing Hime Sales on Wednesday, the FHFA Home Price Index on Thursday topped off with New Home Sales on Friday.  

If you're determined to be bullish this week, HOV at $2.80 is a good play as we're either going to get good housing data that pops them over $3 or the whole market is going to pull back on negative reports because, without housing coming back – this rally is definitely getting ahead of itself.  

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Good Morning:   AAPL news of the day is……..a 9 a.m. announcement of something, perhaps related to how they are going to manage their cash surplus.  As noted in some articles on line this morning, this is very strange timing.  Unlikely to be 'bad' news, which would more likely be announced after a market close, so AAPL is up premarket  in expectation of something favorable.  As noted by Phi and others , however, a dividend would not necessarily be favorable to stockholders.   So, we will wait and see. 

Premarket AAPL trading halted, and 2 new upgrades:   Tech Trader Daily   8:32 a.m.

Apple To Offer $2.65/Sh Dividend by Q4, Repurchases in FY13

AAPL – Whoever bought calls on Friday is going to make a killing!

APPL announcement
 
ALWAYS sell into the initial excitement, no?

AAPL just resumed trading and down by $5.. this is definitely strange action.

Trying to get up…..er….bullish as well, but I woke up on the wrong side of the bed, so, no, not gonna happen.

Got your trade information lflan and have updated the portfolio. I'll post the update position as soon as the market opens. We can correct after that if needed.

AAPL has been swinging between $582-592 pre-open!

But that KU win last night was SOOOO sweet!  Rock Chalk….

Nothing really happened last night and oil lines are really tight!

R3 – 108.31
R2 – 108.15
R1 – 107.98
PP – 107.82
S1 – 107.65
S2 – 107.49
S3 – 107.32

R3 and S3 have already been breached today so not really that reliable as usual for Monday!

anyone ib wont let me short april oil future contract do i just short may instead or is there a disconnect
 
thanks

Another reality check regarding the unemployment figures….

http://economistsview.typepad.com/economistsview/2012/03/public-sector-payroll-jobs-bush-and-obama.htm

A big difference between Mr. Bush's first term and Mr. Obama's presidency has been public sector employment. The public sector grew during Mr. Bush's term (up 900,000 jobs), but the public sector has declined since Obama took office (down 590,000 jobs). These job losses are at the state and local level, but they are still a significant drag on overall employment.

I'd say…. Also not likely to show up on Fox News! We have been slicing through the public sector like crazy and that has to have an impact on the economy. If we had added 900,000 good paying jobs in the last 3 years, where would growth be today!

AAPL- Ho hum. A bit of cash back for the widows and orphans is good. Some buyback to limit dilution. This is what maturing companies do.

Germany – Joachim Gauck, a pastor-turned-dissident in the former East Germany, was elected Germany's head of state on Sunday, ending a political drama that nearly split Chancellor Angela Merkel's center-right coalition government.   The 72-year-old Mr. Gauck, an outspoken advocate of civil rights and personal liberty, was elected as Germany's federal president by an overwhelming majority…

Sex-deprived male fruit flies turn to alcohol….now that is a post for us Phil!

scottmi
Gauck Don't worry will be in Frankfurt tomorrow having lunch with him!!!!!!

Good morning,

 

IWM      81.41,  81.61,  81.96,  82.12,  82.34,  82.67,  82.94,  83.18,  83.33,  83.58  and  83.74

 

Also trend line support at 82.64 and the P-Bars to 82.34; good hunting !!

oil future/have to switch to may on IB

Bush public sector employment
 
Weren't most of those people TSA bomb checkers at airports?

WTF PCLN???

I believe the cost basis for the DIA puts is $0.64 as we DD and the original cost was $1.03 after the first DD.

stjeanluc…I only have 50 of the 575s, all covered.  I only bought 30 of the contracts at 42.75.   Thx. 

Employees / Jmm – Remember, these are employees at all levels of government (states and local as well). But a big difference!

OK lflan, I'll correct the spreadsheet then.

BTW, if we can break through IWM 83.34, we will likely see 85.85 !!

I guarantee you this woman will vote for Rick Santorum, who she probably thinks is pro choice and for gay marriage:
 
http://www.youtube.com/watch?v=Qhm7-LEBznk&feature=share

tommy…april expiring..go to may cl (front month)

Updated spreadsheet based on lflan's correction.

Guess that Bradly turn means up (since it does not give direction), JRW….

1st target met !!  (IWM 83.74)

Speaking of housing, KBH reports on Friday for Q1 2012… Estimates for a $0.23 loss. That could give us an indication.

So sick of this oil bullshit…. If any of you get bored turn on cspan this week, Gen Allen (top CC in Afghanistan) will be briefing congress. A small % of his time will be devoted to defending the CERP, AIF, and ARP budgets using reports I wrote…. Sigh… Superstar desk jockey…it’s all good, by the time I have grandchildren my war stories won’t include the FM or PowerPoint stuff I did… I’ll be the guy who killed Osama! Lol

Good article about tax rate disparity between capital gains and ordinary income:

http://economix.blogs.nytimes.com/2012/03/16/capital-gains-vs-ordinary-income/

 

But if encouraging capital formation is the argument in favor of the capital-gains tax preference, why not include in “capital formation” the formation of “human capital,” that is, the personal investment required to produce well-educated and well-trained individuals? Corporations and nations thrive economically on the strength of their human capital, which is arguably their most valuable asset.

A neurosurgeon, for example, who restores a stricken individual to good health and a productive life most assuredly represents a form of human capital capable of building yet other human capital. So, as I have argued, do conscientious parents, high school teachers and, yes, even college professors.

If the partners at Bain Capital are granted a low 15 percent tax rate on what basically is an earned commission for hours smartly worked, rather than a return on their own invested capital, should not the return on the neurosurgeon’s own investment in his or her human capital be granted the same preference?

Tragic / Phil – And don't forget, Obama has been raising taxes as well (even though he has cut taxes more than Bush – well not on the top 1% so it doesn't count).

Tragic indeed…

JR

 
Are you long or short?

WTF is going on with TNA today?

Yes, numbers from China are really reliable….

http://www.thereformedbroker.com/2012/03/18/a-billion-bernie-madoffs/

But can we really take any of these data points seriously given the way in which they're collected?  Over dinner one night last fall, Jim Chanos suggested that China be called "The People's Republic of Madoff," having gotten a close look at how they "make" their numbers over there.  At a recent conference I attended, Gary Shilling, a noted bear said this:  "China has areas of the country that are accessible only by oxcart and event then only when the weather is dry – yet they still manage to put out a GDP number 21 days after the close of the quarter.  Someone high up says 'We’re gonna have 8% growth this quarter, right?' and the statistician says 'Coming right up, boss!'"

Scalping TZA–been trading TZA intraday–buying into weakness selling into strength.  Scaling into positions after the first 30 mins of trading in 1/3 lots.  seems to me, one day, tza will make a good turn around and i'll be there when the big trend reverses….hopefully 🙂  Anyway its a nice intraday trader. 
Like phils put suggestion.  
 
happy trading…

The TVIX has now been up 4 days in a row and tracking recently it has been a great leading indicator.  When the market was heading down, it was barely up and on some down days was down indicting a rally coming, now it's been opposite.  It's up about 1.5-3% a day.

North Korea may launch "a more vicious attack" on the Korean peninsula's east or rear areas after drawing attention to the Yellow Sea on the peninsula's west, citing an interview with South Korea's navy chief. South Korea is seeing a lot of North Korean activity and is preparing for provocation, Admiral Choi Yoon Hee said.

The Australian:
Japan May Shoot Down North Korean Rocket. JAPAN is considering shooting down the rocket North Korea has threatened it will launch next month if the missile, or parts of it, falls into Japanese territory. The move comes as the US all but declared the recent food-for-denuclearisation dead if the North went ahead with the launch. Even China, the north's sole significant political and economic supporter, said it was concerned by the plan. Japanese Defence Minister Naoki Tanaka revealed on the weekend that his ministry was considering deploying ground-based Patriot missiles and Japan's Aegis-equipped destroyers to activate its missile shield.
http://online.wsj.com/article/SB10001424052702304459804577281233569546496.html
market will start pricing this in around mid-year

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