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Saturday, July 31, 2010

Market Thought... don't know

Right now we are at a point at which the market can go either way. I see hints of bullishness via the VIX, as I still think it will break down from the 200 SMA. Also, the market acted well in the face of a declining 10-yr yield.

When I do a bottom-up analysis, I still see very inexpensive multi-nationals, and am waiting for the big boys to realize the IBMs of the world (ie GS, AAPL, MSFT, INTC etc) are not held hostage to the American economy, and are very much levered to the growth of the BRIC countries. Hence the stronger earnings. Larry Kudlow brought up a good point Friday with the GDP report, private sector investment spiked 22%. That is some really good news, which implies the +$1 TRILLION on company balance sheets is making its way into the system.

I did take action the other day with the decline of the names mentioned via my previous post. Although market action for the very short-term is cloudy, and may be hostage to the labor report on Friday, the market seems very inexpensive. (Here is an interesting read regarding market PE and valuation.)

Wednesday, July 28, 2010

actions i will take

Tomorrow, if we get a negative market due to the Claims number, I will be adding to AAPL, IBM and GS.

I already stressed the fundamental story with all three names, but just to recap:

1. All their technicals looks really really good.

2. IBM has a trailing PE of 12.14. Even if we are to assume it should have a trailing PE of 12.6, the stock will be trading at 133.

3. AAPL has a trailing PE of 19.6. (The company growing EPS north of 25%.)

Gonna play each with options. Looking to grab the options when IBM is at low 127, AAPL is at 258-259 and GS is at 144ish.

Tuesday, July 27, 2010

Market Thought... downward?

For all practical purposes the market should be going down over the next few days and the talking heads agree to that direction. Here is what I see...

The SP500 near the 150/200 SMA resistance, while overbought.

Then there is the 10yr yield approaching resistance (38SMA) while getting overbought. (The move of the yield is somewhat indicative of the market.)

Then we have key data points Thursday (payroll) and the jobs number next Friday, as the talking heads tout to be negative.

On the flip side, some key internals (via the 'either way' post) are still nice. Some have gotten somewhat overbought, others have not.

The market is bi-polar, no doubt about it. Its just that, when ever everyone expects it to act a certain way, that is when it doesn't. So if the talking heads are saying it will go down, maybe it won't.

Some light protection is a good idea, in case we do get a bi-polar move downward. But I still think this market should be trending higher.

Monday, July 26, 2010

Apple catalyst

The trailing PE is at 19. Forward PE is at 15.

Considering unit sales figures, and financial numbers Apple is producing, I truly think that is all that needs to be said. But there is more, the technical set up is very interesting right now. AAPL is consolidated, inexpensive and technically sound.

The trends are intact via the longer-term SMA and the short-term SMAs are swooshing upward or on the verge of.

This set up, including PE value, is very reminiscent of a few months back. At the time I got very bullish on AAPL and posted it. (post 1 and post 2)

My previous posts did not include the 90SMA in the chart, so here is what it would have looked like.

The set up in this chart (focus on Feb to March) was a bit more adventurous, but the similarities remain via the area on consolidation and PE level. The most striking part, was after the consolidation. The rally kept going north of 240, obviously.

Here we are with AAPL around 250 with very similar conditions, if not better prospects of future growth with the iPad and iPhone 4 announced, and I obviously have a very similar bullishness.

Saturday, July 24, 2010

Market Thought... either way, detailed

The below post is a chart filled orgy from the brief 'heads up' post on Friday. I think the images speak for themselves, so I will keep my explanations to a minimum.

Market charts showing some potential Resistance:

On the flip side, there are the internals that suggest a continued rally via the VIX wanting to break down from its current support and strength from key individual names. (charts not in order, blogger is not user friendly with this many charts)

On top of these charts, take a look at any small/mid cap index or ETF, they appear to be breaking out from a multi-month consolidation.

To me the signs point upward.

Also, here is an interesting video that illustrates the decline in the 10yr, and the lack of relevance quite nicely. (video)

Friday, July 23, 2010

Market Thought... brief heads up

Interesting set up is taking place within the market. The SP500 is at its 62SMA. Historically I can argue its a resistance point. On the flip side, there are internals (key individual stocks) that would suggest we break through this point.

I will have a more detailed post over the weekend, but wanted to give a heads up. For the cowboys out there, position long. For the non-cowboys, wait and see with some profit taking to re-enter any decline from the 62SMA.

(I am already relatively heavy long, and took my positions. So now I am just waiting and watching.)

more details and clarity to come.

Thursday, July 22, 2010

Nice rant

I agree so much with Cramer regarding his 'Great CEO Leadership Rant that I wanted to post it. (Although he left out IBM's leadership :)

Economic picture... UNP, UPS

No one can deny the macro-economic picture regarding job losses, and the slow job recovery, but UNP (Union Pacific railroad) posted some impressive numbers.

Summary of Second Quarter Freight Revenues:

Automotive up 105 percent.
Intermodal up 35 percent.
Industrial Products up 30 percent.
Chemicals up 19 percent.
Energy up 17 percent.
Agricultural up 13 percent.

UPS also had an impressive showing.

The data supports things are moving, at least for the 90% of the employed out there. Hopefully the Green jobs and enterprise spending kicks in soon too support job growth and increased confidence.

(Washington will need to provide a policy catalyst to unleash more of the $1T sitting on company balance sheets. Not all companies are like IBM, and maximize their cash positions.)

Wednesday, July 21, 2010

interesting set-ups... AAPL, GS

1. AAPL - I gave my two-cent about earnings the other day, and all I can say now is that their numbers speak for themselves. The decline in the day I view as an opportunity. Hopefully we get an initial decline in the AM, where-by testing 250-253 and I will add.

2. GS - As it test the 150ish resistance, it may see between 142-145. I will probably add at 145.

Tuesday, July 20, 2010

Com'on Cramer...

Cramer gave his two cents into IBM's decline. (video/article) While listening to his thesis of over-promising-and-under-delivering, I could not help but think, 'Are we that desperate to find a reason for a market move?'

His thesis may hold some merit, however it is a purely subjective thesis. When we look at the stock objectively, the numbers for IBM simply do NOT corroborate his thesis. Here is the break down...

1. IBM has consistently traded with a trailing PE between 12-13 post Lehman credit freeze.

Since May 12th (analyst day), the stock popped due to the '20EPS in 2015' announcement reaching the high-end of the channel it has been consolidating at (for 9 months), and has come down testing its low 120 support shortly there-after. Since the projections, not once has the trailing PE exceeded 13.

Does this wreak of a stock with high expectations? To me, the action says no. I would at least expect the trailing PE to reach 15 if that were the case.

2. The intra-day chart for IBM paints a different picture then the closing price for IBM.

Although the strong initial decline, intra-day gained strength with the market turnaround.

3. The dollar move was fairly intense this quarter (03/31-06/30). From trough-to-peek swinging approx. 13%. So to say 2% (500M/23.7B) of revenue was affected is not a stretch.

4. IBM's management is arguably the most transparent large cap tech company, maximizing their cash/cash flow. They do not let cash sit on their balance sheet, and they tell you exactly what they are going to do. And they do it.

5. Across the current market tape, solid earnings beats have been met with punishment of the stock. (Intel as an example.) Today was the only day since earnings market psychology acted differently.

Management accomplished and surpassed their projections to 2010, and they simply gave investors new projections for 2015. Maybe institutional investors got carried away, and were secretly expecting more from IBM for the quarter. But the stock certainly did NOT trade like expectations were high after May 12th.

When we look at the situation objectively, via the above, at best the stock got crushed for producing a modest quarter to IBM's own road map to 20eps-in-2015, and got knocked for it. With this bipolar market tape, that is the most likely scenario.

This does not call into question management's credibility, and Cramer makes a big leap from the data to come up with that conclusion.

(His leap is no different then me stating that his opinion is derived from conversations with a few institutional investors, and he is merely repeating their thesis. No proof or measurable data to support the claim, but a hunch that calls his credibility into question.)

Then again, he can simply be talking his book as he owns Accenture, and he wants people to sell IBM. I too can be talking my book as I own IBM (but I am not telling anyone to sell Accenture :). Regardless, I am just trying to view it objectively.

AAPL simply crushed

Any way you look at the report, AAPL crushed it this quarter.

But the street's estimates were for 9.5M iPods, and they sold 9.4M. This could be enough for the bears to knock down the price. (sarcasm!!!) Because it is reasoning like this that brought down TI and IBM today. Ignoring the general positives and focusing on the one negative.

Seriously, this was a great quarter. If it does not continue its march upward after this, then the sellers are blatantly ignoring reality.

Monday, July 19, 2010

thumb suckers ;)

IBM's numbers are not that bad. Earnings beat, although revenue was light due to currency issues. They also increased their low end guidence to a minimum of $11.25 eps.

Since the street has them at consensus at $11.27, I guess the traders are bearish and selling it hard after hours.

I thought the qauter was pretty good. And it showcases that IBM would have beaten EPS more-so if the currency was not a factor, but this operating leverage is obviously lost on the street.

Regardless, IBM remains inexpensive. At $11.25, minimum, with a trailing PE of 12, stock price merits at least a $135 price ($11.25 x 12). Keep in mind that 6 months ago the low minimum was to have an eps of $11.00 for 2010.

I will be a buyer tomorrow into this weakness.

(I would have sent this post out sooner, but got stopped out of internet access again.)

Saturday, July 17, 2010

Market Thought... bipolar battle

Yesterday's action makes me think of my 'touch and go' post. But we can not ignore the obvious, earnings are in place, and look really good for some (ie INTC) and okay for others (ie BAC, C).

The market can retest the 320SMA, as it comes down from its overbought condition.

Regardless of the market action, I purchases some IBM on the decline and going to purchase INTC soon. The earnings thesis for multi-nationals with disturbingly low PEs are very much intact, and the technicals set-ups are too interesting to ignore.

I pointed out the other day that INTC's weekly set up is primed to break from its long-term negative trend line. Now the daily chart is indicating a support around current levels. (I would look to sell around 30)

Now for IBM. Everyone here keeps hearing me bring up IBM, and I present the fundamental case far too many times to bring it up again. (just type in IBM in the search box, and you will see my posts) Technically, IBM is in a situation where it has consolidated earnings beat after earnings beat for 9 months. That is 3 quarters of consolidation. With IBM projecting 15% eps growth yr-over-yr to 2015, and the street to look at next year's estimated eps, I think we get a pop up after this massive consolidation.

The last few quarters IBM declined after good quarters, and if the market is in a bipolar thought of negativity, it could decline after earnings. But with a report that even produces expected numbers, the stock will still be inexpensive.

(Remember, with a trailing PE of 12, year end EPS of 11.27 we have a price of 135. But I think they do more like 11.50, and if 2011 eps are taken into account in the 2nd half, the trailing PE should expand to 13-14.)

Friday, July 16, 2010

Trade - GS

just an fyi... i sold 60% of my options in GS (i kept accumulating at the 500SMA and near 135).

The remaining I plan on holding into earnings or sell around mid 160, at the weekly 200SMA.

Thursday, July 15, 2010


Nice to see a major overhang lifted. As GS pushes upward, the stock will see some resistance around the 150-160 level, but a stronger resistance to breach will be low 170/high 160 (via the weekly). Although I really like the swooshing the daily chart has created.

What will earnings do? That is obviously the next question. What we do know...

1. The street has very little expectations on earnings.

2. The last few earnings (they crushed) the stock was punished.

3. Do to uncertainty of FinReg and the SEC, the stock is under-own by the big boys.

Maybe, just maybe, GS does not crush this go around and the stock rallies to the mid 160s thanks to the certainty that has and will be entering the name.

JPM's number look good

I must be missing something others are seeing.

When I look at the $4.795B net income, back out the $1.5B (removed for loss reserves), we have $3.3B. In relation to EPS, ($3.3/4.0B =) this equates to $0.82. This still handily beats consensus of $0.70.

I must be doing something wrong cause a lot of people (including Bove) are saying its a bad quarter.

Wednesday, July 14, 2010

interesting set-ups

Here are some interesting technical set-ups...

1. INTC - Today's decline after earnings may have been a gift. Longer-term, the weekly is setting up for a breakout of its long-term trend. When it first was testing the resistance, I indicated a consolidation was in order. During the recent market decline, nice buying opportunities were presented. The set up suggests a break from the negative trend may push it into the 30s or so. (There is a decent dividend to get paid while waiting.)

2. GS - A few days ago it was on the verge, and the other day it broke the resistance. Now it has to show conviction to the breach. From media reports, I get the sense the perception is shifting more toward the positive, and if this WSJ article is accurate about the broad settlement, GS could get the fuel it needs.

3. AAPL - The more and more I read about this antenna issue, I think of my friend laughing in my face when I asked him if he would return his iPhone 4. (I'm still waiting for one to come in.) Too many blog reports and opinions disputing the Consumer Report test, and general negativity on the device. Also, the 90sma appears to be holding. The Friday press conference may provide enough clarity to push the stock to 270 again.

Tuesday, July 13, 2010

Market Thought... intel crushed it

Psst, here is a secret... (cause I know anyone reading this blog has been consistently one step ahead of everyone else, even the big boys, and writing that does feel good :)... these type of earnings merit larger multiples.

If these are the type of beats we are expecting from specific large cap companies, these type of companies (the Intel's of the world) deserve a slightly larger multiple. Instead of a forward PE of 10, why not 12? (Okay, enough pseudo arrogance, lets tone it down and get serious).

In all seriousness, these numbers are intimidating for a bear, especially a bear blindly selling two weeks ago.

An awesome truth to anyone already positioned long, is that the big boys are terribly under invested for these type of earnings. But again, I do not want arrogance to blind me here, and believe it or not, after a series of good calls, it can.

I will look to take on some short-term market protection soon. I will look to take it on when the SP 500 is around 1110-1120.

Weakness in AAPL

Interesting weakness in AAPL. More interesting to me is that the market is not responding to it. Must mean the Quants stopped pegging it to the market.

The stock is at the 90SMA, and typically that is a buying opportunity.

I do not know if that will be the case this go around. There seems to be too much weakness on a strong day.

On a weak market day, AAPL may be pushed to 236 or so, and that is where I would like to add to the name.

I am already in the name, hence my desire to wait. But now is a nice entry point for a small initial position.

(And for those that think AAPL is expensive, you are wrong. Work out the numbers, back out the cash, do not just superficially look at the trailing PE. The current trailing PE is a false indicator of valuation.)

Sunday, July 11, 2010

Market Thought... nothing new

My market thought remains the same since the 'touch and go' post. The SP500 is on the 14SMA, and the VIX is sitting on the 200SMA. If there was a scenario for the market to go down before the brunt of earnings, its this one.

My thoughts and thesis to the current market has stayed the same, and have done very little change to my portfolio. (I just closed a few IBM call options I bought when it was around 122 to beef up on some cash, but still remain very heavy in the name.)

On a related note, a few key banks are looking interesting. C and GS are set up very nicely. C already appears to have broken key resistances, and GS is on the verge.

Friday, July 9, 2010

Interesting take on Green Jobs

Since job growth is now presumed to be a leading indicator (at least to some), obviously I am paying close attention to it. Here is an interesting article from the Port of Seattle CEO Tay Yoshitani.

The gist, he thinks green collar jobs will be sufficient to replace approximately 4.1 blue collar jobs lost. He provides a relatively detailed look at where the numbers come from, and it is interesting and optimistic.

(I planned on doing more homework on the figures he provides to see how viable his claims are, but his accomplishments merit attention. Especially for this topic.)

Wednesday, July 7, 2010

Market Thought... touch and go

Interesting action today, but obviously things are and will be dicey. Just too much bi-polar thought, and action on the pi-polar thought by the big-boys, to expect other wise.

I liked the move today because when I see this type of strong burst, it bodes well. Here is a previous example...

This chart, from 2006, shows a break of the 320SMA then a strong burst to take it above (twice). Obviously painted with consolidation, and choppiness, with the 14 and 62SMA as the resistance points. With today's strong burst, the SP500 may see similar moves.

Today's market is in such a different trading dynamic then 2006, so a strong argument can be made as to why the chart I posted is ultimately meaningless. Although, I do think it provides an interesting reference of activity.

Earnings session is soon upon us, and I think plenty of large caps are at steep discounts to their earnings capabilities and growth. Hence the market inefficiency. The SP500 may see some resistance soon via the 1060 level or the 14SMA. If not, it may see it at the 1100 level or the 62SMA. Too soon to tell.

I do agree with El-Erian, that Jobs is a leading indicator. (The thesis of jobs as a leading indicator I think is a big reason why we are not seeing capitulation in the charts at low points. In other words, an oil tanker does not turn on a dime.)

The earnings story will be enough to push the market this summer, but the private jobs growth will tell the market how high it can go. As the Manpower CEO indicated, growth will be there, but it looks to be slow and steady.

With slow and steady jobs growth (or lack there-of), some large cap stocks will not see an earnings hit from subsided job growth and a slower economy. Like IBM, MSFT, GS, AAPL, F etc. Their vulnerability is in a contracting multiple from fund managers that will blindly sell everything, and not focus on an individual story. Or benefit via an expanding multiple if solid private job growth is present.

Monday, July 5, 2010

Market Thought... epitome

I have a problem. Its more of a mental issue really. Whenever something does not jive with my understanding I tend to keep thinking about it, boarder line obsessive. Its an issue I dealt with all my life, and find it most useful for getting to the reason behind things, its especially helpful for trading.

On Friday, I read this article regarding well known Hedgie Barton Biggs selling most of his technology stocks. When I read it I was in serious disbelief. His firm manages $1.4 Billion dollars, and he was aggressively selling over the last week. Here is a man who was bullish two weeks ago, indicating he would buy on the dips, then did a complete 180, and sold most of the funds equities AFTER the bulk of the decline. It is the epitome of what I thought would happen w/the 10yr yield going below 3%.

Lest we not forget the market was trading at over 1200 just a month or two ago, and range bound since. Near 1120, during the recent rise was the time to unload, and I indicated the retest. Then mentioned the perceived negativity due to the 10yr yield declining. Since then, the Biggs' article indicates to me my correct assumption of how the big-boys would act.

So here we are, now staring into the abyss.

I do not know if the hedgies are looking at any specific new data set that the rest of us are not seeing, hence the late trigger. Or if in fact my reasoning behind the market action is correct, and they are selling out of pure unadulterated fear of deflation.

I look at the futures this evening, and it indicates we will continue to stare into the abyss until the 10yr is above three and rising moderately.

There is one fact I do know. Austerity measures do not equate to depression. Especially when it is mixed with stimulus and massive liquidity. It can very well equate to a slow down, not a credit freeze, but a general run-of-the-mill slowdown. But when I look at a company like IBM who projected year-over-year eps growth of 15% from 2010 to 2015, consistently outperform and are now trading at a 2011 PE of 9.9. I seriously question the blind selling.

(I am tired of trying to justify and argue the point, but those that question IBM's projections, or any other large cap tech, just look at how they previously projected, look at how they performed during the 'post-Lehman-credit freeze'. Just look it up for yourself. Although I am sure, if you are selling blindly you do not care.)

Friday, July 2, 2010

can not back away

While I value technical analysis, and use it quite extensively (as everyone knows), I ultimately guide myself on fundamentals and my understanding of them.

Right now, my understanding of macro-events is such that we will probably have a slow down. But, certain stock are being priced for a credit-freeze like situation, and that is not going to happen.

So I can not back away. Not with such extremes baked it. Not with such oversold conditions. Not with such value present.

I am heavily invested now. Do not plan on buying anything more unless I see certain conditions that make the hairs on my ears perk up :)

Happy 4th everyone.

Jobs... not bad

IMO, the private sector number supports the already declined market.

(Would have liked it to have been more kick ass, like north of +100k but based on the video I posted yesterday this could be the steady, but slow, numbers to be expecting.)

Thursday, July 1, 2010

Interesting interview on jobs

FT interviewed Manpower's CEO. It was interesting to me, and wanted to share it. (The video may take a longer than usual loading, it did for me.)


GS vs AIG... fustrating

This whole tit-for-tat with Goldman and AIG is annoying as hell. The testimony from AIG is ridiculous, while the testimony from Goldman shows a very disciplined firm following the mark-to-market rules of the time.

To me the testimony went like this...

AIG: Goldman marked the assets too low.

Goldman: We followed the mark-to-market principal. We offered to sell AIG at the lower prices, but they did not purchase the assets.

AIG: We did not have a price mechanism for the assets until later that year, but we just knew they should be higher.

WTF?!? - when anyone is on a margin call, you know what happens, your broker sells your shit. They do not ask you permission or to renegotiate, they sell. Yet AIG thought it deserved something different?!?

Goldman was following their consistent conservative mark-to-market principals (and the mark-to-market LAW at the time), called AIG on the margin, AIG refused to pony up and even did not take the lower marked assets they perceived as being too low of price.

And somehow, again, its Goldman's fault?

I am getting really tired of watching the people who fucked up and over-extended themselves get off with out any punishment, yet the ones following the rules and managing risk get blamed. Sick of it.