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Friday, December 31, 2010

To everyone...

Have a happy, healthy and prosperous new year!!!

cheers

Market Thought... consolidated?

When I look across the indexes, and various stocks I see an internal market that has somewhat consolidated.

Its weird. Or maybe we find ourselves in a scenario where everyone 'knows' something is going to happen, so that 'something' will not happen.

Throughout the week I kept hearing the chatter that the market will pull back in January. (I, for one, was/am holding this thesis.) But when everyone on CNBC agrees to the thesis, and I mean everyone, I have to re-question the thesis. (Despite the general bullish thesis on the market.)

My VIX/current-market-rally overlay chart saw a mini spike earlier this week. I thought the strength in the week would cause it to re-test the low, but it has not. IMO, this means too many players are betting the same way: protection for an early January pull back.

Basically, the chances of a pullback in early January have declined.

With that said, I am still protected, but with the addition of AAPL and ATI, I am not as protected. (And I am about to add to my AAPL call position if it keeps declining today.)

I was planning on adding to the protection when the VIX retests the lower line on this chart.

Thursday, December 30, 2010

new link... forward PE

At the top right corner I added a link to a forward PE analysis. (I got tired of continuously calculating it, so I created a spread sheet on it.) I will use it for stocks I can assess via PE. For now, I am using it for AAPL and IBM.

I use this concept as one way to gauge a base as to where the stock should be trading from one quarter forward.

For example, AAPL and IBM, when they report next quarter, their trailing PEs should stay around current levels. With that assumption, when they report next quarters earnings, the stock price should be at specific levels.

(I put it up there as a quick link for me to use and reference.)

some trades... ATI, PBR

I purchased common shares of ATI today. (I am not familiar with the way their options trade, so I stuck with the common shares.)


This is a play on the boom in aerospace manufacturing. Regardless on who makes the planes, the manufactures will need products from ATI. (see previous reference)

It has consolidated from a breakout, and I think now is a good initial entry point.

NOTE: To do this with ATI common, I decided to unload the position of PBR I wanted to around 38 to maintain a comfortable risk profile. PBR is currently trading in the mid 37s. To me, it is close enough. I still own a position PBR.

AAPL... quick trade

I have been purchasing some AAPL every time it tests its 10SMA, and then selling that position when it pops. (But keep a position until 330 or higher is seen.)

AAPL is now testing the 10SMA again, so I added a light day trading position.

Also, if AAPL breaks down from here, as it might with a potentially correcting market, the down side is fairly limited.

I think its down side would be correlated with AAPL's trailing PE. A trailing PE between 19-20 should be a low for AAPL's stock, which would correlate to a price between 318 to 330, when incorporating next quarter's results. So I will add if it breaks down to 320.

Wednesday, December 29, 2010

Technicals... PBR

The last few post on PBR I indicated I do not want to sell until 38, but for a fair analysis, 38 is not the first level of resistance. We are currently near the first true test for PBR.


The daily shows PBR is smack at the 200SMA, and the weekly indicates the next SMA resistance is at 36.97.

Due to the magnitude of 'overbought', and the potential resistance present, if anyone needed to sell PBR for portfolio reasons or conservative trading practices, now would be the time to do it.

I indicated I would wait to around 38 (which is the test of the 200SMA on the weekly), so I will wait.

Tuesday, December 28, 2010

smells funny

Back in mid November, Goldman Sachs issued a stock replacement strategy for some large tech stock. (link) Basically it was strategy to sell stocks, and replace the common with call options.

When I read about it that day, my ears peculated, cause IBM was one of the stocks highlighted by the report.

It caught my attention because the cynic in me always thinks of new risks. Goldman's call has been dead wrong because since their call, the lack of volatility has caused IBM's premium to get sucked away.

IMO, this smells funny.

I am a believer in the market's efficiency over the mid/long-term, but I know it can be grossly inefficient in the short-term. The inefficiency can be from many things, one of them being a pseudo manipulation.

It is just too convenient that a 'strangling-option-strategy' (at least that is what I call it), is fucking with Goldman's call. By sucking away call premiums, the pure-long call strategy is losing a ton of money, especially if in the Jan calls. (If you sold calls or puts, you would be making the lost premium.)

Leads to a ton of questions: Was the Goldman call the green light for the strategy? Are Goldman traders involved? Are the market makers facilitating the lack of movement? etc.

I am a guy who does not give a shit. I am a trader. I take advantage of these inefficiencies, so it is hard for me to get too pissed off, even though it is costing me right now. This is one of the reasons I was glad I pushed out my calls from Jan to April 2011. While funny activity can take hold within a low volume, lack of news environment, it will not last long.

It may last until the Jan 2011 options expire, or near that date, as the strangling unravels. But I will smile, if IBM produces some sort of news, to up their earnings profile or something that will fuck the strangling strategy and return the premium into the calls. The closer the year ends, and 4th quarter earnings are to be reported, this risk increases for the stranglers.

Or until some smart/independent-first-moving-heavy-handed mutual/hedge fund manager sees how consolidated it is, and how inexpensive it is, and starts buying a shit load of it in anticipation of the increased earnings profile, which can lead to multiple expansion.

Monday, December 27, 2010

oil's tight supply

The tight supply of oil is here again. I noticed this article last night, and it is making me question whether or not to sell a position in PBR at 35. (article)

If the demand is approaching the supply, crude will be past 100 throughout 2011, and that means PBR is very very inexpensive. PBR should be trading around 38-50 instead of current levels.

My portfolio risk tolerance is very tolerable right now, hence the addition of AXPW just now. If it remains, as I think it will. I will wait to sell a position of PBR at 38, and sell the rest above that level.

stop-start cars production announced!!!

Ford announced that their North American production for stop-start will begin in 2012. This is significant, and adds nice clarity for AXPW.ob. (Frankly, I am surprised at the market's inefficiency here, this is really good news for the stop-start technology.)

The PR focuses on Ford's engine, but the real challenge for stop-start is the battery. This is where Axion's PbC technology shines.

A lot of things can happen in a year, but the lottery ticket that is AXPW.ob, has just increased its large chance of success. (Albeit, it is still a lottery ticket, just not as much of one.)

update: I purchased another 1,000 share to take advantage, of what I think, is market inefficiency. (I only own 2,700 shares.)

Thursday, December 23, 2010

Cramer's take on IBM

Last night I noticed Cramer's bottom's-up approach to the Dow reaching 13,000. I agree with a lot of it.

He of course mentions IBM, and the one thing I just wanted to point out was that his eps-growth-est-to-PE does not make sense. He states:

17.IBM (:IBM) :When this company talked about lofty EPS for 2015, initially the street was skeptical especially after IBM reported a blah quarter soon after the expectations were laid out. I now think the company has $20 earnings per share capabilities out three years and that $13 is doable for 2011. You keep the multiple the same and you get a $169 stock. I think it does just that. This one's cheap, way too cheap and it will be cheap next year, too, but on a bigger earnings base which is how it can get to my price target.

Now, he is obviously being conservative here, as he should be. But if IBM grows EPS to 20 w/in 3yrs, they will have an EPS growth rate of +24%!

There is no way their multiple will stay at 13. Their trailing PE will start rising again to reflect the growth, and added revenue coming out of this consequence. (Think of IBM's multiple as a "U". They had years of multiple compression, they hit bottom, now they will see expansion.)

If we really want to get theoretical, as to what PE IBM will trade at with a growth rate of 24%, history will tell us. Over the last year IBM traded with a PE/EPS growth% ratio of around 30%. (ie trailing PE of 10/15% = 0.66) This being the widest margin. If we solve for X (.66 = X/24) the minimum expected multiple will lead IBM to have a trailing PE of 16.

Which means, IBM is more of a $200 stock over the next year.

Wednesday, December 22, 2010

protection

I increased my protection. We are in a pretty solid overbought conditions, and the VIX is very close to a rally low.

Usually I would be selling long positions, as many position are overbought, but they are too inexpensive still. (Also, if a melt-up happens, these overbought positions will not matter. Since we are making rally highs, a melt up is very possible.)

I refuse to sell IBM below 150.

I refuse to sell AAPL below 330.

I refuse to sell PBR below 35 (one position). I would like to sell the second position at 38.

I would like to sell MF near 9.

Monday, December 20, 2010

Market Thought... control the fear

Today I kept seeing more and more articles regarding the low VIX and 'complacency'. Not to mention, new power players on wall street (that emerged strongly after the crisis then correctly turned bullish), Barry Ritholtz and Doug Kass, started to turn their backs onto the current market rally. Although Doug Kass incorrectly started getting bearish much sooner.

I am annoyed when these (and other) commentators are 'turning-their-back' because there is no legitimate reason to do so. On top of being contrarian for the sake of being contrarian, they will take a known issue, and try to justify why the market "should" go down. Instead, they should be assessing the validity of the reasons, but they do not. (Maybe because some 'technical trigger' is over powering their sense of judgement, I do not know.)

The other day I indicated to protect, but that does not mean I am turning my back on this market. I am as bullish as they come, and the fundamentalist in me thinks we have a multi-year bull market on our hands. (Hence the reason I have a 'timeless portfolio'. If I was not bullish on a multi-year thesis, I would not be executing such a strategy for a timeless portfolio!) Obviously I do not trade via multi-year, I am a multi - minute/hour/day/week/month trader.

This is why I assessed the fundamentals a few weeks back, in anticipation for this very moment via the Market Thought post 'maybe, maybe not'. (I did not include state and local gov. financial woes because actions were taken very early on, and this is a work in progress, not a turn-on-a-dime kind of a fix. But as I have already pointed out, many issues are exaggerated.)

The thought of protection (short-term market protection) was triggered by a technical signal, nothing more.

I did not sell any long position because the VIX can linger for a while before over-bought conditions, within the market, triggers a sell-off.

And if/when the market is too over extended, around 1290 before the next quarter earnings, I will start selling my longs and add to my market short. (Although selling a specific position, for me, is more dependent on the individual stock.)

I will be a buyer as things correct. (I highlighted potential market support via the market thought post 'recap'.)

Friday, December 17, 2010

Market Thought... protect

The first time I was able to observe my charts was a few minutes ago. I noticed a sizable decline in the VIX. So much so, that my trigger to protect has approached.


Today's move is a bit odd. There should be a stronger market push upward with such a Vix decline. This makes me think the decline could be to do re-pricing of the Vix index.

Regardless, I took on some protection via the SP500 127 Feb Puts. I did not sell any positions.

Thursday, December 16, 2010

Oh Oracle...

When I first saw the Press Release for Oracle's earnings, my original plan was going to write a post ripping into its claims, on server speed, and attempting to bracket HP in the same sentence with IBM. But I had to go to a Christmas party. Afterwards, I listened to the conference call, and noticed this nice summary excerpt provided by AllThingsD that gives a more realistic picture.

He gives credit to IBM, and the rest is sales talk.

The one thing Ellison conveniently forgot to mention was that HP's sucky inferior product sucks because the suckiness is a direct by-product of HP's former CEO, who is now Oracle's President Mark Hurd. The reason the product is inferior is sitting next to Ellison.

I personally view this as a dangerous thing for Oracle, but the market seems to like it the theatrical sales pitch.

some thoughts

First...

I bought PBR today. Not extremely optimal conditions, but a higher probability suggests the 20 SMA is acting as support. Along with its consolidated stance, via the oscillators, the conditions drove me to take took action. (I am prepared to add at the 32 support if need be.


Second... the lack of volatility within IBM has sucked/ing the premium out of the call options. Since Nov. it has seen a 4 point swing, but since December its swings are literally within 2 points. (This is my largest position, so I can't avoid noticing :)

Wednesday, December 15, 2010

Market Thought... patient

The market is still playing out the anticipated thesis. Here are a few updated charts to suggesting the thesis.

1. SP500-Vix overlay, in relation to the current rally dynamic (starting on March 2009)


There is more complacency to go. The market's trading dynamic says so.

(Also, the VIX chart is not oversold, and does not suggest a spike. At least not yet.)

2. The 10yr chart. Does this chart look like the bond market is punishing or that US GDP is entering a growth of higher than 2-3%?


If I am wrong, so be it. But I will not hesitate to add on a decline that place sooner then my thesis indicates.

Tuesday, December 14, 2010

IBM is new tech

I got the sense from yesterday's technology report from Goldman (putting AAPL on the buy list, and HPQ on the sell list), that IBM was on the 'old' technology list, given the target price they gave. (The report's target price was 150, where as I think IBM will see and surpass 150 w/in the next three weeks.)

Anyone who views IBM as 'old' technology did not do a good job researching the company. The company is transitioning, and transitioning very well, but the aspects that are viewed as 'old' (best example is mainframes) is really not accurate. Large companies still need sophisticated mainframes, period. Only so much can go to the cloud, but it just so happens IBM is also a cloud play.

Regardless, the most obvious example of IBM as a leading technology company is Watson. The Jeopardy challenge should highlight IBM's edge to those too lazy to take the time to understand the company. (Warning, when you start digging in the company, it will be hard not to be impressed :)

Sunday, December 12, 2010

Market Thought... recap

Looks like there is gonna be a slow and steady climb, fitting into market valuation. The thesis remains from recent Market Thought posts 'conundrum' and 'normalcy'.

If we see a slow and steady climb, the previous SP500 resistance (1220-1225) should act as support.

Thursday, December 9, 2010

AAPL and IBM reminder

Seeing their 'blah' performance today, I just wanted to point out the obvious.

AAPL's year end estimate is 19.02. (They will most likely surpass this, but lets be conservative.) If you were to slap an 18 trailing PE (again, conservative thinking here) on the 19.02, AAPL will be trading at 342.

IBM's year end estimate is 11.44. If you were to slap a 13 trailing PE on the 11.44, IBM will be trading at 148.

No genius thinking needed to figure out my point...

The only thing needed to get these stocks higher is time. (No multiple expansion, no blow away earnings/guidance.) They just have to perform like they always do. Then the market will realize the above fact.

Wednesday, December 8, 2010

Timeless Portfolio update

In February I published 'Timeless Portfolio'. I keep the list via a shared Google Doc link to the upper right hand corner of this blog, under 'Links'.

I wanted to update the Portfolio by replacing NAT with BGCP because NAT has been seriously under performing the rest of the picks.

I will officially document 2010 performance on 12/31/2010, but NAT is now officially documented as a 5.9% decline. (When accounting for dividends.)

Here is a performance update on the rest of the portfolio w/today's closing price, including dividends:

KMP: +17%

BKE: +27%

IBM: +15.6%

F: 42.2%

NAT: -5.9%

Currently the portfolio is on track to do about 20% its first year. (Surpassing the high-end estimates. Guess I can be a relatively good long-term 'buy-and-hold' investor, so far ;)

What the???

Since 9:51am, the 140 April IBM Calls had an out of whack Bid/Ask ratio. The Bid is actually higher than the Ask. It is now 9:55am, and the Bid has ranged from 9.10 to 9.20 while the ask has stayed at 9.00.

Could be that the real-time ticker is frozen for the Ask, but everything else is working so I don't think that is it.

Just weird.

PS... IBM will have a year end eps of 11.44. With a conservative PE of 13, IBM will trade at 148.

(The market is so freaking undervalued.)

Tuesday, December 7, 2010

Market Thought... normalcy

The 10 yr pushed up today, despite the market loosing the floor at 2:50pm.

As I mentioned yesterday, 2010 SP500 earnings will be north of 86eps. The SP500 usually trades with a multiple of 15, putting a target of 1290 on the SP500. (I am also using 15 because end of the year we look forward to next year earnings potential. So the multiple should be higher, but I will settle with the historical average PE.)

2011 SP 500 earnings will be around 93-94 eps. A multiple of 14-15 will give an SP500 trading range of 1,302 - 1,395.

So, if the market consolidates this go around, I will be a buyer.

Monday, December 6, 2010

Market Thought... conundrum

There is a consistent theme across many of the +150 charts I follow, overbought. But the 2010 SP500 earnings will be +86. Slap a 14-15 multiple on the earnings, and we have a market range of 1,204-1,290.

Here is my conundrum. The conservative technical trader would sell due to the overbought conditions. But the fundamental trader/investor can not sell due to the inexpensive level.

So my compromise was to transition from Jan 2011 calls to Apr 2011 calls, and continue to wait for until the VIX hits the 2010 low before selling and adding SPY put protection.

Sunday, December 5, 2010

Kindler quits

Talk about unexpected. The CEO and Chairman of the largest pharmaceutical company in the world, Pfizer, Jeff Kindler announced an immediate retirement.

I can certainly speculate endlessly about this, ranging from:

He quit because he feared the market effect of the potentially non-productive short-term pipeline.

or

The board let him go because within in 5yrs the stock went from a high of 23 to 17. A 26% decline. (The further one goes back, the uglier it gets.)

Having a lot of cash, and a very nice cash flow, can fog up an investor's judgment quite a bit. Pfizer bought Wyeth to make up for its potential cash-flow issue due to patent expiration. Instead of innovating itself out of their hole, they took a strategy out of their predictive play book. Acquire, and reduce. (Anyone that has studied these types of M&As can attest that 'acquiring and reducing expenses' is not an efficient strategy.)

The problem with certain acquisitions is that they do not work when both companies are projected to lose a substantial amount of revenue w/in the next 1-2yrs. Synergies will simply not cover high revenue losses, especially biotech/pharma synergies. (This is simply fact, and the nature of the specific-product-dependent driven pharma business.)

There is no question Pfizer is an efficiently run company, and I am sure Kindler facilitated in creating the efficiency, but it has been lacking the proper strategic vision. Unfortunately, under Kindler's leadership, the company has talked a big game, but its actions were not innovative and seriously questionable.

Friday, December 3, 2010

Jobs...

Non Farm Payrolls are pretty shitty. Really no sugar-coating it. The Employment Situation was about 100K below estimates.

Looking at the break down, the employment situation is still relatively healthy with respect to the valuation of this market. (take a look at the link)

Break down:

- I am pretty surprised by the 28k loss in retail, especially in this time of year.

- Temp employment is up from the previous two months, which is a good sign.

- Ave. weekly hours worked is flat from previous month. Could be due to the holidays, not sure. So I will rate it a neutral at best.

- Ave. weekly earnings is still growing month over month. This is good. (Albeit not at the pace we have seen from previous months, but growth none-the-less.)

This report is so-so. It certainly does not merit the SP500 breaking the 1220 resistance today. The report merits a pull back in the market.

A pull back to which I will be adding positions I day-traded around. I will re-enter IBM 140 Apr 2011 calls, look to re-enter AAPL 300 Apr 2011 calls, AXP and others.

Wednesday, December 1, 2010

Market Thought... stay calm

Bears are fucked.

First, really really good economic data came out today, again.

Second, Goldman raised their GDP estimate to 2.7% for 2011. (Which should mean the 10yr yield trades around 3.7ish. IMO, further enforcing my thesis that with a 10yr above 3 will bring an SP500 w/a more normalized PE. Which means IBM is disturbingly inexpensive.)

Third, today's move was technically nice. The really really nice economic data allowed for the SP500 to melt through multiple SMA's. (These SMA's were giving many many wall street chartists heart burn, but no heart burn from this pseudo chartist/fundies whore ;)

PS: Don't get me wrong, if you would like to take profits, take them. But my thesis is very much in tact. (fundies, technicals)

Prediction...

The perception of the dollar strength will morph from 'flight to safety' (due to Europe and war) to US economic strength.

(I have always had the perception of the latter, but once the majority of the street traders realize this, it will further facilitate a more normalized PE for the SP 500, along with the rise in the 10yr.)

Tuesday, November 30, 2010

some charts...

GOOG - Upon the open today, GOOG broke from the 10 SMA on the weekly and 50 SMA on the daily support. Unfortunately, with these supports breaking, there was a technical cliff to the 550 area.

I do like GOOG, despite it biting me in the ass over-and-over again, every time I trade it. I will wait for the dust to settle, and re-enter around 550.



IBM - Sitting on the daily support and oversold, I added.

Its trailing PE is 12.86 with a 15% 5yr eps growth rate. (ORCL, the IBM wannabe, has a forward PE of 12.26, while IBM has a forward PE of 11.24.)

some trades...

1. I took a hit on GOOG. Sold in the AM, and am looking to purchase March 2011 calls near 550.

2. I rotated out of Jan 2011 AAPL calls, and into April 2011 calls. (remove the accelerated time decay)

3. Adding to IBM when I can via Apr 2011 140 calls.

Monday, November 29, 2010

Market Thought... nice comeback

The market had a nice turn around today. Believe it or not, but my market thesis still has not changed from my last market thought post 'nothing new'. (Hence the political blabber, but seriously Julian Assange and the government leakers should be prosecuted for espionage :)

There were a few interesting developments since Nov 22 (the 'nothing new' post):

1. Economic data the week of 11/22 was simply kick ass. I mean kick ass!!! (Has anyone seen a chart of Monster.com, MWW? Its kick ass because of the data released.)

2. California subsidizes other state economies, just like Germany will have to do in Europe. That is Germany's cost of a unified currency. And Germany's all time high confidence indicates the Germans do not mind this position. (p.s. the Euro will not fail. Too many powerful people want it to succeed. They will figure it out. They are and have been adjusting economies accordingly to make it work. If anyone did not realize that in May 2010, they are fooling themselves.)

3. The market has been consolidating for 4 weeks, and it is approaching an interesting spring board.

The light support around 1174 is about to get complimented by the 62SMA. Not to mention a spike in the VIX, which is overbought.

A few notes:

1. IBM selling off today?!? Big boys, grow a pair. Seriously. With a trailing PE of 13, IBM will be trading at 148 by year end. That is at a MINIMUM.

2. AAPL - I read this article about Apple having a minimal presence in Brazil. Considering Brazil is my favorite Emerging Market, if true, I am pretty speechless by this. AAPL better get their ass in Brazil, ASAP. I mean, why wouldn't a company want exposure to a rapidly growing-economically healthy middle class?

Sunday, November 28, 2010

WTF Wikileaks?!?

What corruption has the most recent Wikileak shed light on? Nothing.

I fail to understand what is motivating Julian Assange to release this information. After reading the points from Politico, there is nothing on here of substance to the average citizen of any country. There is only information that can cause ripples in a relationship.

I am all for transparency, especially when it is dealing with acts of theft or illegal activity that is otherwise corrosive to a functioning society. The information that Wikileaks released does not shed light on a corrosive aspect of society. As such, the documents published are irrelevant to citizens of the respective societies.

Instead the leaks were merely back room conversations and dealings which are obviously a necessity in any form of government. They do nothing but compromise those dealings.

Julian Assange, and those leaking these documents, are compromising a functioning society, especially a democratic one. And if their objective is to compromise it, they are against it.

The only people that would care for the type of information Wikileaks has released are other governments. Where is the benefit to the average citizen?

Basically, Wikileaks is conducting espionage with no value added information to society.

Friday, November 26, 2010

Do your Homework

I am listening to CNBC continuously talk about Portugal, and am simply getting too frustrated to not post about this.

Do not just listen to commentary. All qualitative commentary is bullshit, including blanket statements made on this blog. (Although I make statements because I do the homework, but when I do not state the fact to which I derive the statement, the statement should be questioned.)

The best example of this is by Brentt Arends from Market Watch who got so frustrated by an analyst Chris Whalen making bullshit statements about California that he set out an article that laid out the numbers and truth. (I wish there were more articles like this from investigative reporters, but it is just easier to provide commentary.)

Portugal is not Greece. Ireland is not Greece. Spain is in no way even in the same concept of Greece. There is no such thing as PIGS, except for the 'G'. (Ireland had a lot more flexibility than the very lightly traded CDS market projected.) IMO, Ireland did not need the bailout, but the EU did it simply to preempt and market perception.

I have personally seen Greece mascaraed as a 2nd rate country when I witnessed its 3rd world character year after year visiting the country.

Look up economies of Portugal, Ireland and Spain via the World Factbook (from the CIA website), and you can blatantly see the differences between all three. Look at their debt ratios, their revenues verse expenditures. Clear differences exist. SEE FOR YOURSELF!

Obviously there are some issues, as there are ALWAYS issues to address, but actions are being taken and the economic measures to trim waste is happening. The cost savings are very good steps in the right direction.

aerospace boom

The other day Cramer was pushing multiple American manufactures, and he mentioned the concept of an 'Aerospace Boom'. He stated that aerospace booms last for 7 years, and we are on the verge of it.

I found that statement to be interesting. But his voice is only one aspect of the 'chatter', and I needed verification before I can start taking his word seriously. (He provided no numbers to justify the claim.)

This morning I got the verification while combing the web. Both Boeing and Airbus are seeking increase production from their suppliers. Blatantly bullish verification.

Cramer mentioned HON and BA, as the American manufactures to take advantage of the boom. I agree with him as they are really good companies and stocks. However, I find ATI to be the best leveraged to this manufacturing cycle. They took a bit of a hit this quarter due to a miss, but I have been keeping them on my radar for years. (I think they are one of the best, if not the best, in speciality alloys specifically geared to aerospace, oil and defense.)

Technically, they look interesting. The set up is not overly bullish, but does merit a light entry point.


The top end resistance is around 56, while the low end is around 40. But when, I see articles indicating increase in production, I do not expect to see 40 again and expect a new trading dynamic.

At the moment ATI is being supported by the SMAs, and off the top-end resistance, it is enough to merit an initial light entry point. I say light entry because ATI is overbought, and the chart set up indicates a higher probability of it testing between 46-48. Around 46 I will get very bullish, and enter a heavier position.

Thursday, November 25, 2010

Tuesday, November 23, 2010

J. Crew... shame

One of my favorite growth stories has told the market to go fuck itself today. They went private, at a still-relatively-inexpensive valuation. I guess management got tired of the depressed valuation, and took advantage.

The market is inexpensive!

here is a 'blackswan'

North fires at South Korea.

This reminds me an awful lot of the Israel skirmish mentioned in my 'maybe, maybe not' post. This too will end as suddenly as it began, and the market will push upward.

The logical, and very sinister, person in me tells me this is purely economical.

North Korea can not wipe its own ass without China's permission, let alone fire artillery shells at a island off of South Korea. Just so happens some instability is in China's favor at the moment. Instability creates discounts in market prices, and will help China cool some of its inflation issues. (Obviously a short-term thing, but in conjunction with the Hedge Fund probes and already stated price capping on food items, it helps.)

I know this is conspiracy talk, but if China wanted/needed stability, this would not be allowed. Or severe punishment would be pushed on to the North.

Or maybe there is another reason they allowed this to happen. But if this attack was caused by a rouge aggressive state, then China's actions should be very severe.

Very curious as to China's reaction via actions, not words.

Monday, November 22, 2010

Market Thought... nothing new

Gobble Gobble week is not the best weeks to gauge the market. I was expecting there to be very short-term weakness to allow the market to rest, which would re-assure a rally. Seems like this is happening, although there was nice strength toward the end of the day today.

In this short-term negative, the market may retest the 1074 mark seen a couple of days ago. It already tested the high end of that support today. Although, to add a bit of a contradiction, names like AAPL, IBM and GOOG do indicate a short-term push upward.



I still very much believe the market thesis presented in the Market Thought posts 'maybe, maybe not' and 'upside'.

Thursday, November 18, 2010

Market Thought... upside

In previous Market Thought posts I provided the fundamental, macro conditions that will facilitate upside. To date, I only pointed out the 1oyr treasury as the most important indicator to a year end rally (which is supported by the fundamental thesis).

Here is a second technical indicator for a year end rally.

IMO, the VIX over the SP500 for the current market dynamic tells the story. March 2009 to present represents the current rally, so from a current rally perspective we should expect the VIX to hit new lows before the end of the year.

At the start of 2010 the VIX bottomed at the indicated level. Months later the SP500 moved to a new rally high, and the VIX saw a new rally low. After this, the Euro mess facilitated unusually high VIX activity. (Normal VIX activity should be the mid teens to the high20s/low 30s, when omitting the credit crisis and threats of instability.)

Currently, the market is near a new rally high, yet the VIX is still slightly above the start of 2010 mark. With the stability justified via my fundamental thesis, and still very inexpensive market valuations, a very interesting set up has developed where I think the market will make new rally highs until the VIX approaches the April/May lows for the VIX.

Wednesday, November 17, 2010

some charts... AAPL, AXP, GOOG, IBM

AAPL - Its price is right, and I did enter on this decline. I will add more if 295 is seen or when I feel the market has finished correcting.


AXP - The name is consolidated, with a trailing PE historically trading at 14, I have a limit order at 41.30.


GOOG - Its oversold, and told us their emerging businesses (mobile and billboard) is kicking into high gear. The weekly chart indicates 575 can be seen, but I like it here so I purchased, will add more at 575. (Do not think it will retrace its pre-quarter price, 550. Too much news of re-acceleration in the last quarter to justify that.)


IBM - I am such a fan of this company. It now trades at a trailing PE below 13, while having a 5yr growth rate of 15%. (I know Goldman issued a caution note due to gov. spending, but IBM is no CSCO. IBM's services reduce costs, CSCO is capital intensive costs. Two very different expenses.) I already added, and will add more at 140.

blind to the tic-by-tic

I am blind to the tic-by-tic quotes right now. My work computer needs to be upgraded to Java 6, but I only have access to Java 2, and my work computer does not let me upgrade independently. I need to find a system administrator to do it on the D.L., or quit my job.

When working in an environment knowing there is no upside or motivation, and your passion is else where, makes everyday more and more frustrating with the petty things I have to deal with. Trading eases that frustration, its an intraday escape to that passion.

The escape is closed off to me right now. So I officially made a decision today. I will quit once I have the legal and technical (web-site) side of my partnership up and running.

Tuesday, November 16, 2010

Market Thought... maybe, maybe not

Anything can happen, after all, life is a probability game whether you realize it or not. Some guy writes a book about it, calls the worst-case-scenario probabilities (with a bit of some of society's complexities mixed in) 'black swan', and BAM!, now everything is a 'black swan' to cause the market to go into a whirl-wind free-fall.

Fortunately, life does not work that way. Low probability events are low probability events, and do not happen often. What many perceive to be a 'black swan', is not really a black swan. From the nine years combing the web, listening and reading the chatter, I can safely say, there has always been soft chatter prior to a major event. Whether that chatter comes from the obvious sources, ie media/blogs, or numerical indicators, chatter always exists. (I literally only recall two times in 8 years, where chatter was not present before a major decline. One major one day market decline was caused by Greenspan during a speech in Asia. The other was caused in the summer when Israel retaliated against minor boarder dispute. Common occurrences, but the market decided to sell off. The dispute ended as suddenly as it started.)

While on the honeymoon, at the time the SP500 met the 62 SMA on the monthly SP500 chart, I started to think about how the market would act after the end of the year. To understand that, we have to know what the chatter is, and its potential future effect. They include...

1. A breakdown in corporate earnings. After Cisco reported, this one became obvious. The big caveat here is that CSCO is still a very solidly profitable company, reducing growth expectations by some 2%. CSCO is now trading at a PE and forward PE of 12-10. Not exactly a place a smart player would liquidate shares.

Regardless, the vast majority of earnings are stronger or very solid providing very good stability. I have seen 2011 SP500 estimates to be in the range of 87 (imo, too low) to 93 (reasonable). Slap a 14 multiple on the SP500, its potential range of 1218 to 1302. (A normalized SP500 multiple is 15, so I am accounting for sluggish CSCO like reports.)

2. EU Stabilization. I really do not like hearing about Ireland or Greece anymore, especially when Portugal and Spain bond auctions do very well. The 3yr monetary program is still very much in play, and slow but steady progress is being made in Greece. The program started in April/May of 2010, so we have a lot more time to go. Also, if the EU needs to, they will most definitely extend the monetary facility. (The dissenting voices are merely political theatre, nothing more.)

3. Employment. The weekly jobless claims were really good these past few weeks, and the increase in private sector employment is continues to be encouraging (event when temp. retail is backed out). This mitigates the risk in housing, non-performing loans and banks. (AXP is currently my favorite play here.)

4. The treasury rapidly rising. The negative chatter is that the rapid rise is a bad omen to come. I have serious reservations to this thesis. (Just like the reverse, when everyone sold off the market when the 10yr breached 3% fearing a deflationary cycle.) The 10yr typically trades between 1-2basis points above GDP. My interpretation is that the rise in the yield is due to a better GDP growth. With better GDP growth, the market PE will see more normal levels.

The list can go on, but above represent the increased chatter I have been hearing that can potentially snowball into something bigger. Although, I indicated why the snowball effect will not take place. The conditions are in place for a continued stable rise in the market, and once over extended (via PE multiple) a correction will take place. (Or whatever drummed up fear gives an excuse for a sell off.)

With this current decline, I have been a buyer of AAPL, GOOG, MF and IBM. I have wanted to get more of each, and enter AXP but decided to be disciplined and wait. Will add more AAPL near 295, GOOG near 575 and IBM near 140. I want to add AXP at 41.20.

(NOTE: China's inflation and potential regulation of food prices also was talked about today. I am not as concerned about this because strong economies have inflation. This is why market rates rise as an economy improves. They will take the steps needed to handle their economy. And history has shown, they have been pretty good at it.)

trades...

1. Covered the market protection

2. started entering IBM, MF

3. looking to enter GOOG, AAPL and more IBM amongst others

Facebook is an f-n tease

(I got my new computer, set up wireless access in 'our' home and got my apps and contact info for my iPhone 4. I feel whole again. But after completing my homework on equities and charts, i'm too tired to start uploading pics and typing an intricate post. But I do have time for a quick post on Facebook.)

There 'Project Titan' announcement today is a complete and ytter joke. It is bullshit. All facebook did today was to repackage and re-brand 'Facebook' as a social inbox. Facebook, at its core, is a communication tool. Nothing more, nothing less. All its services are predicated on informing 'your friends' of something. Whatever that 'something' is is up to the user who decides to tag and project the information. Its past, current and apparently its future method of communication is purely text-based messaging. Except in the future, you will be sending a message from Facebook with a cute 'bow' on it. (sarcasm)

During my Honeymoon I realized the true power of certain web-based communication tools. All free. Skype, iCall and Whatsapp (or Kik, similar service) allowed me to communicate, via wifi seamlessly for free. All I kept thinking about was how great these services were, and how awesome would it be if someone put them all together.

Skype offers great voice connectivity free when making Skype-to-Skype calls.

iCall offers a very decent free voice connectivity to any phone via your contact list due to a brief 10-15sec ad that must be heard prior to the call.

Whatsapp offers free cross platform (mobile OS systems) text unlimited messaging to another phone with the app. (The app cost 1.99, but Kik is the same service and it is free.)

Here I was using 3 services to do all my needed communicates, internationally, for free. The average person is not going to realize how to do this, but if Facebook just embraced who they really are (a communication tool), they could apply all these services under one roof, and make serious cash.

Facebook's critical mass gives it such leverage for such services, along with their traditional text-based messaging.

It would be so awesome if I could call a Facebook friend, facebook-to-facebook, for free via the facebook app. Or call a phone via facebook mobile app (after I listen to a short ad). Or txt via the facebook mobile app. Make the service app-to-app, so that it is cross Android, iOS or Blackberry platform.

This is what 'Project Titan' should have been, not some bullshit-repackaged set of services they already provide.

Sunday, November 14, 2010

Market Thought... many thanks

Had a great time at the wedding, along with a fantastic time exploring and relaxing on the honeymoon. This post was going to be much more involved with some pictures of the honeymoon, but I ran into some computer hurdles upon my return. I purchased the iPhone 4 on Sat, but the Mac I use for my iTunes needed an upgrade. (iTunes needs to go to the cloud!!) Originally, I planned on purchasing a new computer in September, but with the chatter about the new Mac Air and wedding expenses I decided to wait until I returned.

Long-story-short, I bought the Mac Air, gave the Genius' my old one so they can sync the old w/the new, and am left with no computer to upload my photos or sync my new iPhone. (I have an iPhone with none of my apps, and no contacts.) I feel so naked :)

Once I get the new computer, I will post what I wanted to on Saturday.

Now for the market...

I had a ton of limit orders in place prior to the hiatus. My market thesis was dead on, and all the limit orders to sell shares/options got executed.

The market approach the weekly and monthly resistance points. (An area, if not on my honeymoon, I would have shorted the market heavily. As I was telling my wifey over breakfast the day it was happening, coincidentally putting her back to sleep :)



Regardless, the question now is how much can the market correct?

A look at the daily indicates the market will see the 28 or 32 SMA in its next leg down. But if the big boys get scared again, I can see a scenario where the SP500 approaches a very strong support is at 1150. (The market will not break 1150.)



Although automated triggers sold off most of my holdings, I maintained a light market protection I took on before I left. (It lost a lot of value, but overshadowed by the gains.) I will cover this protection between the 28 and 38 SMA.

As the market approaches the SMA support, I will begin re-entering names. (ie, AAPL, IBM, AXP, PBR, MF, etc)

I am still bullish on the market because one of my conditions for a year end rally is playing out. The 10yr has broken its negative down trend, and this will facilitate the equities markets. (IMO, QE2 is a farce, and will not happen as we do not need it. Although the fed keeps the market in check by dipping its toes in and continuously touting it.)

Friday, October 29, 2010

the big day

Every now and again there come some very big days in a man's life. One of those days is coming on Saturday. I will be receiving the smallest handcuffs. j/k :)

My wedding day is tomorrow, and there-after will be on my honeymoon :)

Past couple of days I have been too busy and unfortunately missed some day trading opportunities (ie AAPL as it approached 300, etc)

The rate of posts will be light for the next two week. I come back Nov. 13th.

(Knowing my passion for this stuff, I will most likely be checking on the markets in the wee hours of the night, as my soon-to-be wifey is fast asleep, and may sneak in a few posts :)

My market thesis has not changed since the Market Thought posts starting from 'giddy' (Oct 7th onward). Best of luck!

happy trading

Tuesday, October 26, 2010

Market Thought... round bottom

girls, you make the rocking world go round :)

The 1o year yield is acting interesting. IMO, it is developing a bottom, and looks to want to break its down trend.

In a previous Market Thought post 'always thinking', I suggested this development was needed to facilitate an upward push for the market into year end.

At this time, I am not as giddy as I was when I indicated the continuous market push upward due to entering the initial area of weekly resistance, but I am looking to purchase on a pullback.

Hard not to really like IBM

IBM authorized an additional 10B buy back, and issued their dividend today.

Seeing how they only have $2.3B remaining from the previous buyback, IBM is a rare company that actually buys its shares when they say they will. But with a such a discounted PE (12.63) in relation to its earnings growth rate (15%), and with respect to the overall SP500, I can see why they want to buy back as many shares as possible.

IBM has the right product mix. The correct transformation strategy. The correct cash allocation scheme. With all these things, it is really hard not to like IBM as an investment, regardless as to where the market may or may not go.

Monday, October 25, 2010

Market Thought... getting interesting

To my friend going into surgery tomorrow, my prayers are with you and I wish you well.

The market is getting interesting here. A strong case can be made to start protecting against an SP 500 correction. But on the other hand, there can still be room to run to 1210 or so.

The weekly SP500 charts indicates to begin capturing profits or start protecting.


The SP500 is very near the 200SMA.

However, when looking at the monthly, the 62 SMA indicates the resistance is closer to the weekly 320 SMA.


Regardless, we are near a point to ease up on the giddiness, and add some caution.

The daily chart needs to thrust past its current area to get a move near the upper end of the weekly/monthly resistance (ie 1200).

A look at the pre-market (at 12:40AM eastern) indicates a strong open. China is up +1%, so there must be really good China data out. If we can get the thrust past the daily resistance, we may get 12o0 on the SP 500.

With this potential thrust, I am looking to take some profits and add a protective position via the 120 SPY Puts.

(Keep in mind, any potential correction IMO is very limited due to valuations. I am hard pressed to find a scenario to which the SPS500 breaks through the 1150 level.)

Saturday, October 23, 2010

A quick word on AAPL

Any metric you look at AAPL, one can see it is not in a bubble. In relation to EPS growth, throw any metric you want, they are all very reasonable, and when backing out the unproductive cash, very inexpensive.

A recent article in www.seekalpha.com used free-cash-flow (FCF) and market cap as a means to justify a bubble status.

FCF is defined by 'net income+amort/depreciation-working cap.- capital expenditures'. AAPL's trailing 12 FCF is (14.013B+1.027-1.212-2.121) 11.707B.

AAPL currently has a market cap of $280.89B. They have about $51B in cash total. So basically, their market cap, as a business and excluding unproductive cash, is worth $229.65B.

They are generating a 5.1% FCF on the worth of the business (11.7/229.6). With treasuries well below 3%. That sounds pretty good. Especially when you compare it to IBM. IBM's FCF/market cap is 7.9%. (I did not back out the cash for IBM because they have a very heavy cash allocation scheme, and does not sit unproductively for them like AAPL.)

Point being, even on a FCF basis, in relation to AAPL's Market Cap, AAPL is very reasonable. Especially considering the type of product mix and demand they have. And just looking out a few years, their product cycles and respective demand can last at least 3 years, with the enterprise space and Verizon entering as their customer base.

(Albeit, this metric proves IBM is a disgusting and substantial value here.)

Wednesday, October 20, 2010

Market Thought... :)

Is this real? Will the SP500 keep rising? etc

These are the questions hedgies not expecting this move are pondering. They do not know what to do, except follow the tape. Its nice to be one step ahead of these people.

The SP500 bounced off the 14SMA, and looks to want to test the 1200 level.

Play it smart. Take profits on the way up (between 1195 to 1210). Buy into the eventual correction. (That's the trader in me. But many many stock are still awesomely cheap.)

Monday, October 18, 2010

Market Thought... scared?

Look in the mirror, and say 'No'. AAPL and IBM are taking a hit in AH. Take a step back, and assess the situation.

AAPL has major support via the daily 10SMA and 295 level. Also, valuation is on their side now. With the current AH decline, AAPL at 300 is trading with a trailing PE of low 19. LOW 19!!!!!!! They have the product with the fastest consumer adoption EVER! (The exclamations are not from me being upset, I indicated to take some profits, and I am very happy w/my trading.)

IBM simply had a kick ass quarter. The company is so big that analyst can target any aspect of the report to justify a sell off. This is exactly what analyst are doing right now. Justifying the decline with the service contract decline. (They apparently like to overlook the kick ass numbers, and inexpensive aspect of the stock.)

The obvious support are the SMAs, and various support anywhere from between 134 to 138. IBM now has a trailing earnings of 10.99. Slap whatever multiple you want on it, and defend it, because that is all that analysts will do to justify a target price on IBM. Prior to the crash, IBM has been trading with a trailing PE between 14-16. They keep proving themselves over-and-over again. (Oracle now wants to mimic them.) I think IBM is a premium name and deserves a 16 multiple, but I will settle for the 14.

When I was thinking about the market tonight, I just kept thinking of the above. If I feel the way I do above, I can not possible think the market breaks down here. It would be a contradiction.

Tonight's earnings obviously takes some juice out of the market, but that gives credence to the light resistance we are still in. I still think the 'always thinking' post is still in play.

If anyone is nervous, use the 120 Jan 2011 SPY puts for protection. The market support is the 14SMA. IF that breaks, the 1150 is strong support.

IBM and AAPL number... nice

They rocked.

I will be saying 'thank you' tomorrow. (yes, I will definitely be adding.)

(Can't find the entire AAPL release, yet but the only thing I can see analyst hating the 36% margins. They will want more clarity on this. But, imo, that should have been expect when selling a tablet so inexpensively.)

Keep in mind... IBM, AAPL

AAPL and IBM report today. They have had tremendous moves, but what the stock did, and what it is about to do are very different things.

AAPL - With today's report AAPL will have a trailing earnings of 14.54 (assuming the est. 4.03 for this quarter, along with the three previous: 3.51, 3.33 and 3.67).

If AAPL takes a hit for the report, and approaches 300, its PE will be 20.69. Too low for such growth. I will be a buyer.

If it rallies, great. I will let the remaining ride until AAPL hits a trailing PE of 22 or the SP500 approaches 1195. (Will look to buy back after the market consolidates.)

IBM - Will have a trailing earnings of 10.92. (assuming the est. 2.75 for this quarter, along with the three previous: 2.61, 1.97 and 3.59).

If IBM takes a hit for the report, and approaches 138 or so, its PE will be 12.63. With the market multiple approaching a normal level, IBM's low end multiple is 14. I will be a buyer.

If it rallies, great. I will let the IBM position ride until it hits a trailing PE of 14 or the SP500 approaches 1195. (Will look to buy back after the market consolidates.)

Friday, October 15, 2010

Market Thought... always thinking

Its nice to be right, so far, but gotta keep a few step ahead. The daily chart shows us at the 'light' resistance area I pointed out. We can clearly see the market hesitate at the bottom-end of April/May top.


We are seeing the light resistance, arguably acting far stronger vs some economic data points we have seen. Many people/analyst want to justify this rally due to QE2, I say 'HORSE SHIT!' The earnings we have see so far, w/the exception of GE's revenue, paint a fundamentally strong picture. But we have a lot more earnings to come, especially next week.

IMO, the real resistance will be from the weekly and monthly SP500 charts, near the 1200 level.








After this light resistance, I think we do push higher near 1200. The tricky part is figuring out what happens after we test the real resistance. IMO, we will see a correction at that point, I just do not know by how much. It could be to the 14, 28 or 32 SMAs. Judging by today's action in the 10yr note, I am beginning to believe the 10yr yield will act as an indicator to this.

If a round about bottom develops, this will trigger a sense of 'normalcy' within the big boys to justify a market multiple of 14 or so. Here is where the year-end rally would take place. Remember, SP500 estimates are for $87 a share ($87 x 14 = 1218). But these estimates were in the mist of market uncertainty, and companies IMO have already proven that 87 is too low.

Thursday, October 14, 2010

GA GA for GOOG... wow

Great numbers tonight. I am more interested with the announcement of non-search revenue via bill boards (aka double click/youtube) and mobile.

I believe they are materializing far quicker than many are thinking, and models will have to be readjusted to accommodate this development.

At 590 GOOG faces some resistance.

I will look to start playing GOOG again after a consolidation, and over sold position develops. (I will be patient.)

AOL and Yahoo

The news that came last night about AOL and private equity putting Yahoo in play interested me very much. It gave me more conviction on a potential AOL play. AOL is doing good things, and they actually have a strategy to make a legitimate, broad ranging, local news network. We just have to wait-and-see if their new Ad platform really works. (Considering the management team are very smart guys, with history on their side via the work done at Google, I give them the benefit over the doubt.)

But if AOL can synergies YHOO, the way they are doing at AOL, then this deal makes a ton of sense. YHOO is a mess, with no cohesive plan. (Are they search or social network or content provider or ????? What is Yahoo trying to be?!? It can not be all things to all people. This is why it is failing.)

YHOO passed up a wonderful buyout opportunity via MSFT a few years back at $30/share. Now that we know their business is not what it use to be, they will be foolish to pass up this opportunity.

Bottom line, AOL's team knows how to differentiate themselves from other web properties and focus on that differentiation. Something Yahoo so desperately needs.

Wednesday, October 13, 2010

blows!

The below is a pure venting post. If you don't care, stop reading and ignore this one.

The place of my current employment has officially announced the site's closure back in May. Since then, I have made it very clear to the powers-that-be that I wanted to get a package. I want to get laid-off because I want to focus my energy toward creating an investment partnership, and trade full time.

The plan was going well, until the strength of the job market fucked me. The job market is too strong, and people are leaving too quickly. So the option of a lay-off has now greatly diminished.

Now I have to adjust. I will now have to play the negotiation card, and see how I can maximize the stay. (Although it is very hard to get out of bed in the morning.) While working, set up the desired investment partnership structure, then walk away when the structure is ready and start trading full time.

this blows

IBM... new numbers

With the normalization of IBM's valuation, I believe it will start seeing its minimum trailing PE multiple of 14 again. (Especially given it 20 eps by 2015, giving the company a 15% yr-over-yr growth rate.)

This leaves IBM room to approach 148. Then there is earnings on Monday the 18th, where I think they will kick ass due to 1. new major product release 2. new financing to take costumers away from competitor and 3. HP facilitating #2.

If IBM produces 11.29, its year end price should (11.29 x 14) be 158. (But I think they will do 11.50.)

Market Thought... nice

The move in the market is nice, and info from JPM bodes well for the financials to help this market. (Hence my liking of AXP :)

Keep in mind, this is a probability game. No harm in taking some profits. If there is a market level to do it, its now at the light resistance at 1170-1175 SP500.

I took some (stress 'some') profits in AAPL. But I am not actively shorting this market. I will do that around 1200.

The 'still giddy' thesis is still in play.

Tuesday, October 12, 2010

the jumping bean... AXPW

AXPW.ob jumped today. Through my searching I found a few articles last week and this week that may have instigated the move.

Reuters reported this article on 10/07/2010, where numbers were provided, allowing investors to better estimate the potential market. Then it was echoed via the IBT today w/a copy of the 10/07/2010 article. The article also highlights AXPW.ob as a take over target.

If AXPW is a takeover target, management I am sure knows its worth. Especially when looking out to Grid Storage potential. Grid Storage is a potential trillion dollar industry. AXPW's technology allows for some serious improvement in lead-acid batteries, at minimal cost. It is proven for 'stop-start', but I have not seen data for grid storage. (Although one can infer if the technology can handle itself that well under a harsher condition via 'stop-start', it should do well via grid storage.)

If the potential market is a trillion, why shouldn't PbC tech be worth a billion?

(Still very speculative with out data in hand.)

AXP... the more and more i think

The more and more I think about AXP the more I like it, especially here. It was upgraded this morning by an analyst. I always try to view an analyst opinion without bias, and happen to agree with the thought of the upgrade here. (Valuation and its technical position is why I purchased it last week.) Basically it is an upgrade due to valuation.

By the end of the year, AXP will have earnings of 3.30 (as per consensus Yahoo estimates). If we assume a trailing PE of 14, AXP should be around 46 by year end. AXP has been consistently trading with a trailing PE of 14-15 since the crash. (I verified this myself.)

The chart looks interesting here. AXP is clearly in a mid-term negative trend, but near its bottom end support.



If valuation means anything, AXP will see 46. If it sees 46, it will breakout technically and potentially go higher.

I was originally planing on selling at 41, but with the above assessment, I will sell at 46.

(If AXP decides to re-test 37, I will double down.)

Monday, October 11, 2010

rant on CHK

I caught Cramer's rant on CHK today, and the eye-brow raiser was when he did his quick valuation on CHK. Basically, his valuation indicated the stock should double, even triple. Since I am a fan of CHK, I wanted to look into this further, and see if the charts were indicating such a move.

The charts aren't saying much. The weekly clearly shows the aura of a breached bubble, and the bearishness of oversupply of a commodity.


Thirty looks to be a big barrier via the 200 SMA. But to get to 30, the Daily needs to show more conviction.


I am a fan of CHK, and indicated to get in if 20 was breached downward back in August (before it touched the 19s). Since then it has had a great move.

I fundamentally agree with Cramer, CHK is undervalued. But a few things he left out that worries the street, and causes a discount are: 1. trading and 2. a threat to their shale drilling.

The concerns are overblown, but causes uncertainty none-the-less. The massive hedges seem to be the right thing to do, but investors will get better clarity on it as winter approaches. As winter prices set in, and Nat. Gas does not breach 4.5 or 6, then I think this uncertainty starts to get mitigated.

The concerns highlighted via their shale drilling are real, and the cost of extraction will increase with needed increase in oversight and regulation. However, its a issue that can be resolved a few years out as Nat. Gas increases in value.

Sunday, October 10, 2010

Market Thought... still giddy

The thesis of the Market Thought post 'giddy', imo, is playing out.

Thinking a few steps ahead, a scenario where I will look purchase SPY puts will be when the SP500 is around 1200 via the weekly resistance. I am also looking at the VIX/SP500 overlay as confirmation. As the blue (vix) line approaches the red dotted horizontal line, it would indicate to me to add protection as complacency w/respect to this rally would be setting in.


Side note, food for thought: If Oracle is trying to be like IBM, then Oracle acknowledges IBM as a leader. If IBM is a leader the stock deserves a premium valuation, as IBM is years ahead of Oracle (especially in hardware/software optimization). Oracle has a forward PE of 12.27. IBM has a forward PE of 11.22. If IBM is the leader, it deserves the premium. I think the forward PE of both companies are too low, but IBM has earned the higher multiple over Oracle. Which means IBM's stock is still inexpensive. (Even though IBM will grow EPS approx. 15% yr-over-yr until 2015, which makes IBM still inexpensive relative to its own growth.)