1,440 – Again.
That's right, we have made not one inch of progress since we had the same exact title in last Wednesday's post, when I said: "This is the part where the MSM begins to realize that Manufacturing is slowing down, stimulus won't create jobs, earnings are not going to be as good as expected, Europe is not fixed, housing is not as strong as expected andthe stock market is being manipulated. Yep, all the stuff I've been telling you for months." Our plan was to buy into the dip and that's what we've been doing the past week as our short-term virtual portfolios are now much more bullish than they were a week ago.
As you can see from Dave Fry's weekly SPY chart, we're still in an uptrending channel and still over the major support line at 1,420 and we tested 1,430 at the end of last week but have, so far, held 1,440 this week.
Last week we were all worried about Spain because they were rioting in the streets and this week we are all worried about Spain because they haven't requested a bail-out yet. "Plus ca change, plus c'est la meme chose," as they say in the country next to Spain…
In Member Chat last Wednesday, we took advantage of Oil Futures (/CL) testing $90 to go long and by the end of the week it was back to where we liked to short it at $93 and this morning, ahead of inventories, oil is at $91.22 but we're not long today as we don't expect the bulls to have much to get excited about but, if we get a dip to $88.50 that holds – we'd like to go long there. As you can see from this USO chart – we're pretty well stuck in the channel but the bottom is about $89 so I'm thinking a build this morning takes us just below the $33 line on USO.
AAPL was at $666 last Wednesday and they closed at $665 yesterday but we've worked ourselves into a more bullish position there (we had several long-term bullish trade ideas on AAPL in Member Chat that day). XLF was holding $15.50 and we went longer there – now $15.69. We added QQQ Oct $70s at .30 and yesterday we had the chance to add them again after having cashed out that batch at .50 (up 66% in a week). We took $9 and ran on the PCLN Oct $595 puts in our $25KP and that nailed the high for the week, TLT was at $125 (now $124.19), the VIX was at at 15.70 (now 15.71) and my comment on HPQ hitting $16.50 to Members was "WTF?" and I reiterated our reasons for being long on that one (now $17.15).
Annoying as the past 7 days have been, as you can see from our Big Chart, it's really just a bullish consolidation along our resistance lines as we wait for the Dow to build up enough steam to hit 13,600 – which our Tuesday analysis of the Dow components ("Still Waiting for the Dow to Show Some Strength") determined should be possible but we're only expecting a 600-point run at most (4.4%) from last week's 13,559 as long as earnings hold up.
That, we determined, is why the Dow was and is having so much trouble getting over the Must Hold line at 13,600 and we were so harshly rejected there on Monday that we fell all the way back to 13,400 yesterday before turning back up.
This morning's ADP Report came in better than expected, with 162,000 jobs added in the private sector. Of those 162,000 jobs, just 4,000 were manufacturing and 18,000 "goods producing" with all the rest coming from the service sector. When I was in college 30 years ago and we used to talk about transitioning to a "service economy," I don't think anyone ever imagined it could get so extreme….
That shifts the focus back to Friday's Non-Farm Payroll Report, where we're expecting about 120,000 jobs to be added but last month was surprisingly weak at 96,000.
Tonight jobs will be a big topic of discussion at the Presidential debate but, as you can see from this chart, it's amazing that it's an issue at all. Obama took office pretty much at the dead bottom of that trough and the improvements made since that time have been nothing but stunning but, for some reason, the Democrats allow the Republicans to take control of the narrative and act like coming into office with an economy that was losing 800,000 jobs a month was somehow Obama's fault – ridiculous!
Also ridiculous is the Romney plan to cut tax rates by 20%, which will reduce taxes paid by households with incomes over $200,000 by $250Bn a year. According to the Tax Policy Center, If you leave preferential tax rates for savings and investing (e.g., long-term capital gains and dividends) untouched, as Mr. Romney has said he would do, that leaves only $165 billion of available tax expenditures that can be eliminated from this same group of high-income earners once their marginal tax rates fall.
That means there’s an $86 billion shortfall — the difference between $251 billion in tax cuts and $165 billion in potential tax increases on this high-income group — that needs to be accounted for somewhere. By process of elimination that somewhere must be the rest of the population, the 95 percent of households earning less than about $200,000 annually. No wonder Pinocchio Ryan said he didn't have time to do the math!
We're not expecting much of a move in the markets until after the debate because fiscally irresponsible nonsense like this scares a lot of investors – and rightly so. We also face headwinds from the BOJ having a Yentervention as they try to weaken the Yen by buying Dollars this morning. Already, at 8:45, the Dollar is back over 80 and the Yen is at 78.39, up from 78 yesterday and we assume they'll target 78.50 today and 79 tomorrow, which could bring the Dollar back to 81 if they are successful.
That will put pressure on commodities and the good news there is that gasoline is plunging below $2.80 (/RB) and weak demand evidenced in the inventory report (any kind of build) could send us all the way back to re-test $2.70, where they'll likely make a good long. Meanwhile, if the 2.80 line holds pre-market, /RB Futures make a fun bullish play over that line with tight stops below it as we don't expect the Dollar to go much higher from here (now 81.05) today.
Tomorrow is a big data day with Jobless Claims, Factory Orders and FOMC Minutes while we wait for Friday's NFP report. Earnings are not very exciting but next Tuesday is AA & YUM and then we're off to the races but today is most likely a watch and wait kind of day as we wait to see what nasty things Romney has to say about our "failed" economy – the one that's no longer losing 800,000 jobs a month with a stock market that's gained an average of 25% a year since Obama took office…
Stjl
If sanctions worked maybe we can give peace a chance! Should give Obama a boost.
HPQ down 3%…
FU HPQ!!!
HPQ Meg talking down the stock
http://allthingsd.com/20121003/liveblogging-meg-whitmans-remarks-from-the-hp-analysts-meeting/?reflink=ATD_yahoo_ticker
HPQ – I'll start to nibble around book value (16)
HPQ now down 6%… The 2009 low was $16.65 and we are now below.
And now tough guidance for 2013…. That turnaround is going to take more time than they thought I think. Changing CEO 3 times in 2 years is probably not helping.
HPQ / Phil – Will it make sense to look at rolling our HPQ puts in the Income portfolio? Based on what they are saying, 2013 will be a struggle so we might need to revise our Jan 2014 target.
Phil, had a decent amount of HPQ plays getting destroyed today. How low do you see them going and was thinking of doubling down so curious what are bullish plays you like? Thx
Sanctions/mild rant warning…..Those may be working against Iran, but sanctions are still war. They largely affect civilians, and can include things like medicine and food. An example where they aren't working is the food sanctions against North Korea, to get them to drop their nuke program. The government and the army don't go hungry – with shortages it's the civilians who starve. And there's a Korean cultural attitude called "han" (http://en.wikipedia.org/wiki/Han_%28Korean_culture%29) which essentially means Korean will endure through tough times hoping that the next generation will have it better. Han is a lot of the explanation behind the development of South Korea from the 50s till now, and it's also the reason sanctions won't work against North Korea.
Hello All – Anyone follow/invest in L? Any thoughts? Thank you.
Poor HPQ – Back in the '00s I used to consult directly for HPQ on disposing of their excess real estate; natch, we rezoned most of it residential. At this rate, they're going to have a lot more excess real estate again. At some point, this is going to turn into another Eddie Lampert Sears real estate play. They owned a lot of property in Silicon Valley.
Homebuilders going parabolic for all those that cannot afford a home at 3.5% rate and moving in with their parents. Makes sense.
ZLCS – DD again in here, yes.
CRM/Wappler – I never liked the package much but, as you say, leader of the pack – I wouldn't bet against them.
Thanks Lionel.
Ratings/StJ – Yes but only if they get elected. However, the voter fraud thing is very disturbing.
Sanctions/StJ – Remains to be seen but yes, they can be crippling if enforced properly.
AMZN/$25KP, Hemas – I'm pretty sure we'll collect 100% on those.
HPQ at $16 – WTF? This is so silly. 2013 outlook they just gave is for $3.40-$3.60 per share so 5x p/e is $17 – even Dell gets a 6, IBM is at 15… This is just a stock to hold onto long-term until it comes back in favor.
HPQ/Jrome – As above, they need more time and best thing to do is wait for 2015s to come out and then make adjustments.
Sanctions/Snow – Good point but you can still make it difficult for them to acquire certain things although, without China's cooperation, nothing works anyway.
L/Ink – They have an interesting mix of business (insurance and oil) and are a nice, steady company. Not particularly cheap at $41 but QE is good for them. From an options standpoint, they are not very liquid and don't have long contracts so no fun to play with.
HPQ/Rdn – That's interesting. At just $31Bn for the whole company, it may actually be a factor now.
Builders/Pharm – Wow, HOV back to $3.81. Damn and I was just looking at them the other day at $3.30 and decided to wait and see what happens this week!
Oil cannot get back over $89.50 (now $89.30). Gasoline back at $2.80 after bottoming at $2.7538.
Pharm – did you have any SRPT?
Pharm/ did u see the question about buying Zalicus on the dip?
my long term investing beats my short term all to hell. I just sold KBH Jan13 – 10 calls at 5.50 and I paid 0.75 for them.
david … see above…. yes….I am DD, again. My position was a smaller one in the beginning, so my basis is now 81c.
A vote of confidence:
12:51 PM Corning (GLW) declares $0.09/share quarterly dividend, 20% increase from prior dividend of $0.075. Forward yield 2.72%. For shareholders of record Nov 16. Payable Dec 14. Ex-div date Nov 14. (PR) (Read the comments on this)
Site that will buy your old Iphone
http://www.gazelle.com/iphone
I have no idea if they will buy your old Bose system. But, you can ask!
CRM – crazy, but January earnings, last year, they changed their accounting methods. This January, they face that obstacle and MSFT hitting them on the low end, and ORCL hitting them on the high end. But hey, they can go to 200 before Jan. Before shorting, check out their YouTube Channel. Customers (CNBC included!!) absolutely love them.
Phil
Then it might be the perfect time to put pressure on China. Their situation is way worse than they admit. Supply can't be China and demand USA, not even half the world. What has the world shown in the last 5 years? We must have balance.
THanks Phil!
Why do sanctions sound alot like austerity when describing the effects on civilians?…..
10:00 AM On the hour: Dow -0.21%. 10-yr +0.01%. Euro -0.14% vs. dollar. Crude -1.94% to $90.11. Gold +0.23% to $1779.75.
11:00 AM On the hour: Dow +0.02%. 10-yr +0.04%. Euro -0.14%vs. dollar. Crude -3.26% to $88.89. Gold +0.26% to $1780.15.
11:40 AM European shares erase sizable opening losses to close mixed. Stoxx 50 -0.1%, Germany +0.2%, France -0.3%, Italy +0.3%, Spain -0.6%, U.K. +0.2%. The euro -0.1% to $1.2904.
12:00 PM On the hour: Dow +0.30%. 10-yr +0.01%. Euro -0.08%vs. dollar. Crude -3.08% to $89.08. Gold +0.34% to $1781.55.
EIA Petroleum Inventories: Crude -0.5M barrels vs. consensus of +1.7M. Gasoline +0.1M barrels vs. -0.4M. Distillates -3.7M barrels vs. -0.3M. Crude futures -2.26% at $89.81.
Sep ISM Non-Manufacturing Index: 55.1 vs. 53.5 expected and 53.7 prior (>50 denotes expansion). Prices index rose to 68.1 from 64.3. Employment fell to 51.1 from 53.8. New orders rose to 57.7 from 53.7.
Earnings season is just around the corner, but roughly four of every five companies that have already pre-released Q3 results have been negative, according to Strategas, "nearing levels last seen immediately preceding the 2000-01 tech-wreck recession." Will the striking comparison cause investors to question the justification for why stocks are near all-time highs?
Flows into ETPs totaled $43.3B (with equity funds garnering $34.7B) in September, the highest monthly amount since December 2008. Following the ECB's OMT announcement, average daily flows jumped to $2.7B from just $800M prior. The Fed's QE∞ announcement mid-month provided a booster shot, and thus far has had a far bigger effect on inflows than QE2 did.
Net dividend increases totaled $8.8B in Q3, according to S&P, apparently a new record. 439 firms bumped their dividends, up 25.4% Y/Y, vs. just 53 lowering. Of more import, the payout ratio remains near its low of 34% vs. a long-term average of 52%. A strong rise in share prices reduced the average yield to 2.66% from 2.77% 3 months earlier.
Talk of easier monetary policy for Singapore grows ahead of next week's release of the central bank's half-yearly policy statement. The economy shrank 0.7% in Q2 and likely slipped into official recession in Q3, say economists. Thus far this year, shares don't seem to mind the slowdown. EWS +24.3% YTD. – Yeah, because they're ONLY up 23% this year so, of course they need MORE FREE MONEY! What is this World becomming?
Finally! The Obama administration gives a green light to the first section of a proposed 146-mile transmission line, calling it a critical upgrade to the faltering Northeast power grid. The high-voltage line is capable of carrying up to 500 kilovolts and will replace an existing line carrying 230 kilovolts. PPL (PPL +0.3%) will build the 101-mile Pennsylvania portion of the line.
EV roundup: 1) General Motors (GM +0.7%) widened its lead as the top electric vehicle seller with September Volt sales of 2,851, while the Toyota (TM -0.1%) Prius line doubled sales Y/Y to 18,932 to pace hybrid sellers. 2) Israeli EV infrastructure player Better Place replaces CEO Shai Agassi with top exec Evan Thornley as financial difficulties at the company mount. 3) The DOE wants Tesla (TSLA -1.3%) to pay back its government loans at an accelerated rate when it begins making payments in December.
Miss Countrywide? It's back, writes Steve Gandel, in the form of PennyMac (PMT), formed 3 years ago by Countrywide alums. Last month, PennyMac opened its first retail branch. Heading the office is Stephen Brandt, who reportedly ran Countrywide's "Friends of Angelo" program. "There's free money on the table and you don't have to work that hard to get it," says a Stifel analyst covering PMT.
Airline stocks post strong gains as oil prices swing lower with crude inventory data coming in below expectations. Leading advancers: LCC +5.7%, UAL +3.6%, HA +4.0%, DAL +3.6%.
With the Consumer Staples ETF (XLP) at an all-time high, trader(s) really get bullish with 254K January 38 calls purchased yesterday, tripling the typical open interest on the contract. The 38 strike is about 5% out-of-the-money and cost $0.15.
Lazard Capital downgrades Mosaic (MOS -1.3%) and Potash (POT -2%) to Neutral from Buy, warning investors not to consider yesterday's dip in MOS a buying opportunity. The firm expects potash prices to drift lower despite strong crop fundamentals which will support fertilizer demand, and doesn't see any catalyst that would lead to meaningful stock price gains.
A taco too far? Shares of Chipotle (CMG) recover more than half the ground lost after David Einhorn unleashed his short thesis on the company yesterday. Though the argument on valuation and commodity costs resonate, Einhorn seems to have lost the investment community with his take that Taco Bell's (YUM +0.3%) refreshed menu will steal significant market share from Chipotle. The counterpointbeing bandied about is that CMG's brand equity and Taco Bell's long history as an unhealthy fast-food stopping off point make the two chains too far away for direct comparisons.
3M (MMM +0.3%) unveils a restructure in which it will cut the number of business groups from six to five. The segments will be: Consumer (2011 sales of $4.2B), Industrial ($9.6B), Healthcare ($5B) and two new groups: Safety & Graphics ($5.5B), and Electronics & Energy ($5.7B). (PR)
Shares of gun makers Smith & Wesson (SWHC -4.2%) and Sturm, Ruger (RGR -2.8%) fall today on the back of cautious comments out of Benchmark. Analyst Mike Greene suggests that the growth in applications for handguns slowed last month to just 14.7%, down from the 20%-plus growth levels seen from May – August.
H-P (HPQ -5.4%) dives as its analyst day gets underway (live blog, webcast). Meg Whitman has declared FY13 to be a "fix and rebuild" year that will see a broad-based profit decline (centered around enterprise services), and has again made cautious remarks about European and Chinese demand (previous). Analysts currently expect H-P's FY13 EPS to rise slightly. Streamlining H-P's product line is named a priority: the company plans to halve its printer SKUs next year.
More from H-P's (HPQ -7.5%) analyst day: H-P establishes FY13 EPS guidance of $3.40-$3.60, below a consensus of $4.18. Enterprise Services will see a $0.29-$0.35 EPS drop thanks to an 11%-13% revenue decline, and enterprise hardware a $0.05-$0.12 drop. Software and printing earnings are expected to grow, and PC earnings are seen as flat to slightly down. Meg Whitman admits there have been execution issues. The Street isn't happy. (live blog,webcast)
Dell (DELL -1.7%) and AMD (AMD -3.1%) slump as investors mull the implications of H-P's analyst day commentary andguidance. The companies, who have been hit hard by worries about tepid PC demand, are both making new multi-year lows.
Brightcove (BCOV +3.9%) trades higher after announcingDiscovery Networks will use the Brightcove App Cloud mobile app development/hosting platform to provide interactive, dual-screen, TV services. Brightcove appears to be finally breaking out of a trading range it has been stuck in since mid-August.
Netflix (NFLX +6.5%) roars out of the gate with a solid gain as Citi backs the Buy-rated name on the strength of their survey that shows improving customer satisfaction for the first time since last year's "Apocaflix" PR disaster. The Citi take in a nutshell: NFLX can be bought by investors at 10X P/E as its U.S. operations generate $5.50 in EPS, with a free call option on the company's international business. (Also: Whitney Tilson pitches the bull case on NFLX)
More on MetroPCS/T-Mobile: A CC is underway (live blog,webcast). The combined company will retain the T-Mobile name. $6B-$7B in cost synergies are targeted. T-Mobile USA CEO John Legere will head the company, and Deutsche Telekom will nominate board members. MetroPCS, which is announcing a 1:2 reverse stock split, will receive a $250M termination fee if the deal falls through. T-Mobile and MetroPCS have 42M combined subs right now, though that number is declining. PCS -4%.
More on the MetroPCS/T-Mobile USA merger: MetroPCS shareholders will get $1.5B in cash and a 26% stake in the combined company (MetroPCS closed with a $4.9B market cap yesterday), and Deutsche Telekom (DTEGY.PK) the remaining 74% stake. The deal is expected to close in 1H13. The WSJ notes the deal's reverse-merger structure could allow DT to gradually sell its stake and exit the U.S. market. PCS -2.1% after yesterday's big gains. LEAP +3.4%. S-1.2%.
"I would like to have done better," says Nokia (NOK +0.2%)Stephen Elop regarding the company's early Windows Phone (
Phil
Author
October 3, 2012 1:12 pm
Damn, I hit submit by accident… will try to fix..
Phil,
I have no position in HPQ…….Would you recommend 2014 Sell $13 Put for 1.75 if I can get it 20 contracts maybe.??
Thanks in advance
Nope, it's shot….
Thank you Sir…..
Phil, HPQ buy some stock and sell the Jan $16 p&c?
KBH/BDC – Very nice and you don't have to go through all that daily drama to get there…
GLW//Rain – Nice dividend at .36 (2.5%).
Old IPhones/Occam – In the pop-up stores in the mall they offer $150 for a 4.
China/Shadow – Pressure China to do what?
You're welcome Ink.
Sanctions/1020 – Forced austerity on someone else's population. So pretty much exactly like what Germany is doing to the rest of the EU.
You're welcome Jasu.
HPQ/Rpme – I kind of like the above spread. Worst case is you own them for net $13.45.
Good Afternoon—missed my favourite /RB play—Phil is 2.80 still a good line to play off?
thanks
I love being right on predicting this, I wonder if real investor class ever backed Romney, I don't count super pac super donators for anything but haveing too much money.
http://finance.yahoo.com/blogs/the-exchange/romney-next-problem-donor-apathy-160413971.html
AVEO – Jan 13 10/12.5 BCS for 85c. Few, the proud, the ones I am buying. I will sell Jan13 7.5 P for 50c if I can get it.
Is BP's Deepwater Horizon leaking again?
http://www.stuarthsmith.com/breaking-news-new-oil-sheen-near-site-of-deepwater-horizon-disaster/
Phil China
Create balanced trade by imposing penalties for unfair trading. Personally tarriffs come to mind but there are lots of ways and they have to include the rest of the world. It will bring back jobs and taxes collected. In the long run new powers need to switch to comsumption and services because the US and Europe can't buy everything and yes European powers need to get on the same boat.
In the end this will help China, India, and the rest. Should take a bite out of multinational corp control. Think world gets to move up together instead of the rich get richer. All currencies devaluing together is a start. This is the bottom up together, equality everywhere can work like it did in the USA a long time ago.
Not sure what all this sudden weakness is about but it's not good. Dollar the same at 80.05.
Romney/Shadow – How ironic if he runs out of money.
BP/Rexx – That would suck.
China/Shadow – We chose to make them our factory floor – it's not really their fault. We are their sales arm and we offloaded all the transportation infrastructure needs and all the pollution and all the labor issues to China – quite happily too over the last 30 years. Now you want to punish them for being what we made them? What we really need is to educate people to stop being such psychotic consumers of junk – that's going to take decades but life was a lot better when people shopped locally and took pride in owning things that were made in America. Simplest thing in the World to look for the union label but oops, I said unions…. that's commie talk!
Pharm/AVEO – you earlier recommended the 10/12.5 Oct spread, would you roll this to the Jan spread?
Phil / transmission line — I've been debating if more of this sort of project will be pushed by Obama if he is reelected. He can either make waves and get things done without worrying about reelection or sit back and protect his post office income stream by keeping status quo. I'm glad to see at least this little project and hope there is more on the way. We needed a new deal yesterday. I'm sure he could jam it down the throats of congress under the guise of national security if he really wants to. And no, this is not a political debate, this is an economic issue.
IWM has been over trendline resistance since about 12:00, now it is back to the line and will it become support? This is the 83.78 and 50% fib line, a multi make or break point. /TF has been over all day but futures traders don't buy the stock and so far have not convinced anyone to put up.
Thanks Phil
box ap (did they steal this idea from dropbox?) is offering 10 GB free storage if you sign up before Oct 31. Funny a very similar storage service and very similar price competition developed and died 10 years ago. bandwidth and storage is much cheaper now though.
Phil ,
Damn….sold the 2014 15Put for 2.73 by mistake….Liquidate or let it ride with a new BCS that you recommend?
Thanks
Phil
It isn't punish them. I think it is show them the way to the next level but without teeth they won't listen. My idea will mostly punish the big corps the exploited the poor wherever they are. less than a billion can't consume what the rest produce. If the world became consumer based by making a viable world mid class. then all we would need is population control. The people need to be educated on sustainable population and moderation of all things.
AVEO/jro – I thought it was November BCS with the sale of the Oct 10s? Humm, I think you can uncover and leave the calls and puts as is. Jan is a new one for me.
New Deal/Rain – That's what he should have done from day one. He'd probably be running unopposed now.
IWM/Shadow – See any reason for that sudden drop?
You're welcome Savi.
Storage/Occam – Now you can buy in bulk from AMZN and others for such low cost that the models make more sense. No equipment to buy or maintain – just add more AMZN space as the users come in – what's not to like in that model?
HPQ/Jasu – It's more aggressive than I'd like but you're only going to roll to 2015 anyway if it's not working so I wouldn't pay the round-trip fees for no reason.
Population control/Shadow – Well China is the only nation on Earth that is actually practicing population control but now their demographics are shot and that will be next decade's problem. China does try to promote internal consumption but they have the same problem we do, the top 1% don't pay the bottom 80% enough to give them any disposable income. We have a big trade imbalance with China but it's only $338Bn from them while we send them $71Bn. Overall, China exports about $1.5Tn and we export $1.4Tn globally. Our problem is we import $2.2Tn but that's not China's fault other than their 15% – we, as a society, need to change. China imports $1.2Tn – they're balanced – do you want to specifically jam our goods and services down their throat? No, WE need to change our own ways and stop blaming the China boogie man for our troubles.
Wow, I just think this debate is freaking people out…
LOTS OF APPLE INSIDERS ARE SELLING
Phil
My bottom line is make and buy American, take down the mega whoever. Did I not say it will hit the mutinaional powers, they are the problem. I am mot blaming China or anyone but the 1%ers or acctually the .001%ers of the world.
The choice is equalize the world or start wars.
Shadow – I am sure that one or two universal laws will eventually reassert themselves.