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Thursday, May 27, 2010

Market Thought... resistance?

From what I can gather, via the media reports, there are plenty who are still very cautious. IMO, the reason being, simply, the technicals are very nasty.

The 'perceived negativity' is fading quickly with the austerity measures passing country-to-country, and the uniformity of the EU objective is crawling through. As my previous Market Thought posts stated, with the 'perceived negativity' fading, the hedgies (who are not as invested as they should be) will begin to model the market on company/economic fundamentals, not on a model based on 'what-if negative geo-political' scenarios.

Here are the technicals: The SP 500 has support, but look at the sea of resistance via the SMAs it has to climb out of. (This is causing the hedgies, and me too, reason to think a churning market is likely.)

The SP500 weekly chart, has a similar issue.

However (there always is a 'however' :), the internals (key individual stocks) are a mixed bag. Some are not broken at all, or appear broken but are not. And the ones that are, an individual justification can be made. This supports an underlining strength that many are not seeing or ignoring. The real kicker is that the transports are very much intact. (This is why I am not looking to short this potential market churn, and just be a buyer on weakness and seller of over-extended names.)

Combine the internal strength with the economic fundamentals and reduced 'perceived negativity' the market can go through these potential resistance points with little difficulty.

And just as a teaser, here is an example of a stock that looks broken, but is not as bad as one would think.

Look how GS has held its 500SMA. Forget the 200SMA with GS. The real long-term support/resistance is the 500SMA w/respect to GS. (As highlighted in a previous post.) It is holding beautifully, and look how the 14SMA is curling up just above the 500SMA. IMO, it looks juicy, and believe it will go to 160 sooner-rather-than-later.


There was very little, to zero, call option correlation to the markets move. (or at least to the Jan 2011 options I have)

Do not know what to make of this. Maybe due to volatility declining, and premium gets sucked out. (But multiple point moves in all the stocks I have creates the high beta, and should have increased some of the premium.)

Its is very abnormal to see IBM up 2 points, and in the money call options not move at all. (I can make a case for the abnormal correlation with my other options as well.)

Wednesday, May 26, 2010

Choppiness, to say the least

Have to hold my stomach after that ride.

A take away I wanted to highlight: Saw this report toward the end-of-day, and could explain GS' turn around intraday. (GS to not settle) The market wants GS to settle, but they will not if they are labeled with fraud. (I do not blame them.) However, this maybe causing its volatility.

I am not a fan of such rumor driven action, but it does reveal how weak this market still is.

Still not backing away. I am looking to purchase on weakness, not run away.

Tuesday, May 25, 2010

Market Thought... oh baby, baby

First the really good news: My future sister-in-law gave birth to a beautiful baby girl :)

Second, the SP500 was interesting to say the least. Before reading below, I want to remind everyone of the concept displayed in the previous Market Thought post "if,then"...

Ultimately the action today was consistent with the previous posts. The SP500 came in contact with the weekly 62SMA, and bounced. Then on the monthly chart, there is a series of support around the 1050 level as well.

Earlier in the day I stated there were internal interactions that indicated to me strength coming into the market. That indication came from the multiple real-time tick-by-tick action from a collection of what I think are core equity market leaders. Then, GS just started to blatantly outperform everything, and did not look back.

Clearly there was strong buying going on at the 1050 level, and this most likely defined our low. I still believe there should be a churning, but if European issues begin to fall in place, or the 'perceived negativity' subsides, we may just rally. The economic data and earnings are really strong, but I am not ready to let go of the churning thesis.

Market Thought... oh baby

When I watch the tape, something is going on internally that I really like.

GS' action is really nice despite the market collapse, and it leads me to believe the 1050 level will not break.

I added to my IBM position because of it, still waiting on the rest.

More later...

Monday, May 24, 2010

hmmmmm... GS

Not going to pretend to know what is going on today in the markets. All I know is what I see, and what I see are the Tech leaders leading.

This could be good, or it could be nothing. In this market they could collapse tomorrow or any minute now. I don' know.

But seeing the set-up, along with Friday's action, and the reasons why Goldman up'd Citi today, GS looks really interesting on this intraday weakness.

(Reading the reasons for Citi's upgrade by Goldman basically told investors how Goldman was doing too. AKA they are kicking ass.)

If anyone wanted to get into GS, now is the time. At least for a small initial position.

Saturday, May 22, 2010

Market Thought... if, then

The reason why computers are being used to trade equities is because a ton of the decisions are 'if/then' functions, no different then how computers decide.

The action on Friday is making the hedgies think twice, and kicking in an 'if/then' scenario.

The 'flash crash' low was breached, and a nice capitulation upward took place. The action made Friday interesting, and the set up is making traders think. 'If' we bounce off this level, 'then' that level maybe a bottom.

What is adding to that second guessing is the fact that banks lead on Friday. (Not to mention that the 'flash crash' low is also near a very very strong SP500 monthly support level.)

So, if we have leadership from the financials, and political leadership continues to emerge to reduce the 'perceived' negativity, then the hegdies will shift their current uncertain view and begin to model the market on company fundamentals. (Which will cause the markets to rise)

My assessment from a vast amount of media reports indicates political leadership is emerging and we are near a bottom of a churning process.

To excel at this game, we must look to the 'correct' functions (or indicators), a few steps a head before the 'if/then' decision takes place and what would be the trigger to change big-boy psychology. This is what I try to do, and that was my thought process with my 'i don't see it' and 'insomnia's a bitch' posts. It ain't easy, and takes a big set of balls, especially when there is so much negativity. But without real negativity, there is no real correction.

With that said, I still have a heavy cash position, but my largest positions currently are financials in C and GS. And with no uncertainty do I say this next statement: when the SP500 approaches its daily 320SMA I will go very very long equities. (Buying a shit load of call options, most likely in GS, AAPL, IBM and others of my favorite names.)

Thursday, May 20, 2010

A good take on the action

The other day in Cramer's Stop Trading, he had a very good take on the current market action. (video)

There were two very good take aways from this video:

1. Cramer pretty much sums it up correctly... the markets will continue their negativity until there is no shoe that drops, and the market will have no choice but to go higher.

That is what happened at the bottom of 2009, and a similar bottom should develop. IMO, fundies are sound, and we are just dragging through perceived negativity. (But I still believe in my thesis via the "i don't see it" post.)

2. Mandy Drury is freaken sexy :)


Yeah. So I purchased a bunch of stocks related to my 'timeless portfolio' (link is to the right, under the picture).

KMP is yielding 7%, and is all US based.

F at 11 is too tempting, but it may see mid 10s.

NAT just announced a 0.60cent dividend. If you didn't own it yesterday, you will miss out on it, but NAT is on tract to yield very nicely.

Outside of the portfolio, AAPL looks really interesting. It is appoarching a PE of less than 20 again.

Tuesday, May 18, 2010

Market Thought... i don't see it

I just do not see where this consistent fear is coming from. I hear the noise of potential threats, I see the uncertainty, I understand we are in need of a market correction, but I do not see a legitimate fear. The fear seems too manufactured. (Remember, when everyone is expecting something to happen, usually that 'thing' does not happen.)

With the above stated, I do not have an inside eye as to what is going on internally in Europe. My assessment is purely based on media reports. Maybe there is a real concern, but the reports I see do not corroborate the threat. I see ton of opinion, but it all lacks substance. Given that I am under the thought that European countries will get their houses in order, and the $1T will be sufficient to facilitate the change. Just like the US state and local municipalities are cutting back as well.

My market thesis has not changed from my "insomnia's a bitch" post. Below are the charts that back up the thesis. The daily indicates the 200SMA support level at about 1100.

The weekly indicates the support around 1050, which is supported by the daily 320SMA.

I do not think the 1050 level will be seen unless there is a legitimate threat. If there is a real reason to fear, then the VIX will rise sharply. This should correlate to the SP500 declining to the 320SMA, and the VIX reaching the most recent SP500 peak via the VIX-SP500 multi-year chart overlay.

Sometimes, I hate when I'm right

When Pfizer sold off their Consumer Health division a few years ago, I knew they were going to purchase Wyeth. The buyout got delayed due to the Credit Crisis, but after the Credit Crisis, they did.

Because of the nature of what I do for the company, the cross-network access that I had, I knew what other sites were capable of (I fixed a lot of their problems). Once the buyout came to light, putting the pieces together was not difficult. I started warning my closest friends of the trend and trajectory... our site had about 2 years, and the site would probably stay on for spare capacity. But it would mean the department work force would be cut by more than half.

Well, today, the time frame was basically confirmed, but with no expectation for spare capacity. The manufacturing goes dark.

I've been preparing for this for a while, and looking back at what I accomplished here, I am proud, on the personal and professional level, but I will be praying for the one supporting families.

Monday, May 17, 2010

Market Thought... insomnia's a bitch

Tired all day, yet with the head on the pillow I'm as awake as a 5yr old on a Coca-cola binge...

The futures indicate the markets are heading down. We are testing the weekly SMA supports (via the 28 and 32 SMA). These have acted as support before, but judging by the sheer negativity I do not know if the support will hold. This has had me playing out scenario after scenario in my head.

With no support, the SP500 will most likely test the 200SMA again.

The SP500 can find itself range bounce, having massive volatility induced churning (fancy for channel trading) from approximately 1050 or so - to - 1150 or so (or maybe even 1220ish).

With valuations to where they are, and knowing that hedgies are under-invested, I can realistically see the SP500 churning from 1100 to 1200. This can also be supported by the charts if the 200SMA is not breached downward. (The final churn will come when the 320SMA reaches the low point of that channel. This would indicate the rally after the 320SMA touch would signal a buy and hold as the upper part of the range will be breached.)

Friday, May 14, 2010

Market Thought... don't know

If there is a theme for this week, "don't know" pretty much sums it up.

There is still little clarity regarding the market, and that is causing this discount. The DMI (or ADX in the chart below) indicates a large negative attitude.

Many internals (individual stocks) seemingly have this negative attitude. From the media reports I hear and read, imo, this is due to hedgies getting under weight thanks to their uncertainty. This can be bullish, cause they will become bullish very quickly when perception change.

However, there are key stocks that do not express this negative view. Or rather, show some strength. An example is GS, IBM or NAT. Superficially, GS looks negative, but past the superficial there is strength. (And added to the names today because of the strength.)

Because this uncertainty can make the market do crazy things, I just want to be prepared to try to take advantage. If the market collapses next week (as the traders on CNBC are saying), I will add to my AAPL, IBM, GS and other positions.

Although there is talk of a capitulation via Fast Money today, I just do not see that happening. We shall see.

legal shakedown

Curious how much the government will make from the settlement from this legal shake down of the banking industry. (nyt article)

They will probably get a number in the billions from settlements.

The one positive from this shakedown, the banks (or bankers) have become humbled. Even Llyod is helping to keep a bank primarily in small/mid siz loan business open. (article) The cynic would say this is just a PR ploy. I would agree, but the effort is taking place none-the-less, and that can not be ignored.

was away... good thing for 3G and iPhone

I love the iPhone, seriously. I was away from a computer these past few days dealing with some personal issues, but the iPhone kept me in the loop and allowed me to trade and book profits.

With today's decline I bought back AAPL calls I sold (from my mobile), added to IBM and took a position in NAT.

If anyone wants to get into Citi or GS, imo, now is the time.

Will try to post a more detail look at the market tonight or Sunday. (Have a weekend wedding Sat-Sun.)

Tuesday, May 11, 2010

Quick note on GS

Have no time to really get into this, but a quick note on GS.

Goldman's trading accounts for approximately 76% of revenues. If proprietary trading needs to be separated, which I do not think it will be since one of our top regulators (Blair) spoke out against it very publicly, GS will probably divest the Asset Management and Prime Brokerage businesses. (Benefiting companies looking to get into the business, like MF.)

It makes no sense to divest their cash cow. But again, I still believe a common sense regulation will take hold of these banks, and trading will be limited due to capital requirements. (Which is a good thing!)

I also think Lloyd did a 180, and I am in his camp now. I do not want to see him go.

NAT - nice dividend

NAT issued their dividend for the quarter, and its a nice one: $0.60 for Q1. (article)

If anyone is looking for a dividend play, look at NAT. Its a part of the 'timeless portfolio' for that very reason.

The dividend is not as safe as KMP, and can fluctuate. But given the current global recovery and stable suezmax tank market spot prices, continued high dividend seems stable.

Monday, May 10, 2010

Market Thought... :)

This ride has everything, from fear-to-fun in less than a week.

I think a major uncertainty is off the table for a few years. I am also a believer in countries changing their ways, since the IMF has history of shifting country policy and witnessing American state and local municipalities reduce spending. Longer-term I believe we are setting up to be on the right side of the track.

The bullish thesis appears to be the name of the game (at least this week :). However, I need a few days of trading to pass to get a handle on what the new market dynamic will be. There was simply too much chaos, within a very short period of time, to understand the dynamic going forward with any sense of confidence.

The one interesting piece of information I heard about reviewing my media sources was that European banks are under-capitalized, which will hinder their ability to lend. I think this scenario is very bullish for Citi. With its large exposure abroad, and their well capitalized structure, they maybe in the best position to capture market share. With Citi's current price, despite the market move, I really like the name. (But continue to believe in the trading thesis.)

Saturday, May 8, 2010

Market Thought... assumptions

With all the negativity, lets talk some negative assumptions for a bit.

I have been hearing a target low for the DOW to be around 9000 from Cramer and Jim Rogers, two people with a large soap-box that can potentially drive sentiment, especially with so much uncertainty. Since I do not follow the DOW, I try to relate this to the SP500. Either way its massive decline, and that would mean all stocks will decline. So how severe would the SP500 decline? The chart indicates to around 1000.

There is a very distinct history of the SP500 using the 320SMA as support.

With this, I must stress we have still not broken the 200 SMA, and there are many individual names that are at strong buy targets, technically and fundamentally right now!

Ultimately the long-term trend appears intact, but to test the trend is another 100 SP500 points.

So now we have to re-evaluate target prices for your favorite stocks. Here are mine:

1. IBM - Although they just increased their dividend, authorized an additional $8B buyback and showing interesting growth, current prices should be mouth watering to a value investor. However if the SP500 declines, it will see 105ish.

2. AAPL - It sold $1B worth of the iPad in a month and a half, and is sold out of its 3G version. A good problem to have, to say the least even with all this craziness. With markets declining, this high beta name will go with it, and am expecting it will see 205.

3. GS - Although I think it is at a major technical buy point right now, if the markets decline I must expect it to see 90.

4. MF - I want to buy this one around 7. This is an interesting turn around story with Corzine at the helm, but the macro events are obviously presenting an opportunity to enter this sucker lower. Corzine's package is predicated on MF stock valued at the 9 level. Even at current levels, you are basically getting it lower than he is, right now. Properly managed the firm could be in the high teens/low 20s.)

5. KMP - I managed to get some the other day with the massive decline. May sell it if it rallies to 64-65, cause with such a market decline it will see low 60s/high 50s again.

6. F - It is already nicely profitable, well ahead of schedule. With their awesome leadership intact, this earnings trend will continue. It currently has a single digit PE, but negativity sees no PE justification, and it may see the 9s.

Let me be clear, I do not agree with these assumptions, but we can not ignore all possibilities either. I knew we were going to correct, but not with these levels of negativity. I thought the SP500 correction to the 320SMA would present itself a few months out or early next year.

As for the above names, I do not believe we will see those levels. But then again, I am far more rational then most in times of uncertainty and stress, so I have to present myself with the 'fear' scenario to be prepared.

Also, points to note: The package was approved and an intervention unit controlling 70B Euro was created by the EU. Will this be enough? We will find out Monday morning.

Friday, May 7, 2010

Call me Crazy...

but AAPL is approaching a PE of 19, as it just made north of a billion dollars in record time, with the iPad.

This company is not on a slowing trajectory, yet it is getting hammered.

I was forced to buy the common. Discipline made me do it.

Thursday, May 6, 2010

Market Thought... clusterfuck

Too many things went wrong today, obviously.

On the technical front, the markets are not broken yet. Despite the massive move, the computer issues negates much of what happened. It caused too much of a domino via the black-box-boys. (Exchange regulators need to adopt NYSE rules, period.)

In fact, the VIX indicates a low point for the market. The VIX is trading at its upper band range.

On the fundamental front, stocks are not badly priced via earnings. They simply are not.

State and local cuts at government levels, globally, were already taking place before this decline. These cuts will continue to occur, but there is a business capital expenditure cycle that is ready to kick in. Basically, I do not think this 'sovereign debt' risk will impact earnings as this market suggests.

The ECB did jack-shit today, but Andy Busch did indicate on Kudlow that the ECB should act after the German vote tomorrow. (video, last two min) I tend to pay attention to him regarding global affairs.

If the European Union and the ECB want the Euro to be dissolved, then they need do nothing. But if no leadership develops in Greece, someone will take it, as Hitler did. IMO, this is the worst case scenario, but a possible one if nothing happens. I think/pray Europe ultimately will prevent that.

As uncertainty continues, especially when there is uncertainty at the big-boy level, stocks will continue to be discounted. (And there is HUGE uncertainty at the big-boy levels, just turn on the TV and listen.)


In my no nothing anonymous opinion, the bottom appears to be in.

I will post charts later. I started buying.

more to come tonight

Hedgies... WTF?

You don't like reading an anonymous blogger?!? :)

A list of blogs hedgies frequently read

(I read none of them frequently, but do read Rithholtz from time to time. Surprised Blodget is up there. Can not stand his commentary. To me its worthless.)

mixed messages

Apparently Jim Rogers is short a bunch of stuff.

This adds to the growing list of people 'who really know what they are doing', and are negative.

His shorts are obvious plays and understandable, but what got the head line was him being short a 'major western bank' due to its currency exposure. The linked article apparently did the readers a favor and only listed major US banks, and not European banks. (sarcasm)

IMO, the threat is mostlikely with a major European bank, not the US banks.

Updated: found the list of Western Banks he is probably refering to... BNP is up there. (article)

This has not changed my opinion yet, but it does make you think. I will continue to actively trade around this negativity.

Tuesday, May 4, 2010

Market Thought... what will Germany do?

I do not care. Seriously.

The more I hear and read about the 'contagion', the more I do not believe it. There really is only one pig in the PIGS, and that is Greece. They have serious structural flaws in their social-economic fabric, which will take years to fix. The fix will be slow, but it will happen. Who helps them get there? I do not care. If the Germans do not do it, the IMF will. Quite frankly the social-economic fabric of Greece is and has been that of a 3rd world country, so the IMF should help them. (That comment comes directly from experience.) The IMF has had success. Despite some controversy, particularly in Latin America, decades ago being viewed as economic terrorists, their record through out the 90s to present day has been fairly good.

I would not blame Germany for not saving Greece. The IMF is more suited for the role, and I believe they will step in and force change.

All other chatter today, to me, was just noise. A market secret regarding the 'noise': if everyone is expecting something to happen, that 'thing' will not happen.

(Sharp catastrophic events are not always the answer. If fact these type of events are very rare. There will be spending cuts made at the Gov levels, globally. But cuts will be gradual, and funnel through the system. If you live in The States, it is hard not to witness these cuts in real-time at the municipal level.)

To put my opinion bluntly, ignore the noise as this correction was suggested way before today. #2 is obviously playing out.

The daily and weekly suggest 1150 level will be the low point for this correction.
Admittedly, I already covered my protection and started adding. I even added more IBM just before lunch, and AAPL before the close.

Also, INTC looks very good here, so if you are in Cramer's camp about INTC doubling, get off your ass and add some shares. There are countless other names that I like here too.

I have free cash to put to work, and plan on using it if the markets go lower.

Active morning

Interesting morning to say the least.

Covered the market protection, repositioned some names with selling TBT and buying more IBM calls and C.

Going to buy some F and PBR, but waiting for the dust to settle.

Monday, May 3, 2010

Buffett, Blair and the charts

Strong support for Goldman are coming from out of the abyss. Albeit, I do not think Blair is specifically helping GS here, but her comments surrounding not separating derivatives and the big banks certainly helps Goldman.

Buffett is more blunt about his support throughout the weekend, and continuing today on CNBC.

Then there is the 500SMA support. GS did not hit it, but was very close.

With the 'close enough' aspect on the chart, and the above pillars of the financial community coming out and supporting Goldman and their biz model, it is hard not to be a outright buyer here. Especially given a PE of its peers would make GS trade around 170.

Oh, and add to the fact that on Friday Blankfein specifically stated on the Charlie Rose show that he will be participating much more within the financial media to convey and explain more readily what GS does, it is had not to be bullish on GS at these levels.