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
Friday, October 29, 2010
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.
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.
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.)
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.)
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.)
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.
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.)
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.)
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.
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.)
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.
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
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.)
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.
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.)
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.)
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.
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.)
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.)
Friday, October 8, 2010
Jobs
The number was not exciting. The private number was at 64K, which is below consensus. The one thing I did like was the Average Weekly Earnings increased a bit again. (see data)
It was a 'so-so' report, which plays into the thesis of a rising market. I will purchase a light position in IBM options, and close out my protection.
It was a 'so-so' report, which plays into the thesis of a rising market. I will purchase a light position in IBM options, and close out my protection.
Thursday, October 7, 2010
Market Thought... giddy
I am getting a sense of giddiness. When I look across my (140 or so) charts I see a distinct theme with many of them: a transition.
One of the best ways to describe this is via IBM. IBM is very over bought, and has been overbought for about a month now. (I made very good money in the name, and did not hesitate to sell.) But when I combine this consistent fact of being overbought (which is nothing more than very consistent buyers), and the formation of the current market set up, I find a very interesting conclusion. The market is entering a period of price realignment.
Let me explain.
When looking at the SP500 on a technical basis with respect to the current market dynamic, I see little to no resistance until the 1190s.
The only real resistance was 1150, from the March 09 rally's trading dynamic. An argument can be made that there is resistance around 1170-1175. However the SMAs played such a major role as support/resistance during April and May, IMO, this current run should give no relevancy to those levels. With out those resistance levels, the only road block left is the weekly SMA's. And the lowest one is the 200SMA near 1197.
With this potential market move, many equities are terribly under priced. And, again, the best example of that is IBM. A look of the trailing PE before the crash was 14-16 for IBM. Post crash, it was 10-12. As of today, the trailing PE is 13.11.
Since payrolls and jobs are now viewed as a leading indicator, the pay roll number is being watched closely. If the number is horrible, then the markets will sell off, technicals be damned. If the number is average, then the markets may sell off some, recover but be boring. (But this scenario allows for the above to play out.) If the number is good, watch your head.
Basically, I took on a light short before the end of the day just in case there is a morning sell off. What ever happens, the only way I am not going to be purchasing stuff tomorrow is if the number is really really bad. (I will still cover the short, but wait for the dust to settle before buying stuff up.)
One of the best ways to describe this is via IBM. IBM is very over bought, and has been overbought for about a month now. (I made very good money in the name, and did not hesitate to sell.) But when I combine this consistent fact of being overbought (which is nothing more than very consistent buyers), and the formation of the current market set up, I find a very interesting conclusion. The market is entering a period of price realignment.
Let me explain.
When looking at the SP500 on a technical basis with respect to the current market dynamic, I see little to no resistance until the 1190s.
The only real resistance was 1150, from the March 09 rally's trading dynamic. An argument can be made that there is resistance around 1170-1175. However the SMAs played such a major role as support/resistance during April and May, IMO, this current run should give no relevancy to those levels. With out those resistance levels, the only road block left is the weekly SMA's. And the lowest one is the 200SMA near 1197.
With this potential market move, many equities are terribly under priced. And, again, the best example of that is IBM. A look of the trailing PE before the crash was 14-16 for IBM. Post crash, it was 10-12. As of today, the trailing PE is 13.11.
Since payrolls and jobs are now viewed as a leading indicator, the pay roll number is being watched closely. If the number is horrible, then the markets will sell off, technicals be damned. If the number is average, then the markets may sell off some, recover but be boring. (But this scenario allows for the above to play out.) If the number is good, watch your head.
Basically, I took on a light short before the end of the day just in case there is a morning sell off. What ever happens, the only way I am not going to be purchasing stuff tomorrow is if the number is really really bad. (I will still cover the short, but wait for the dust to settle before buying stuff up.)
Heads up...
Wanted to give a brief heads up before the end of the trading day so people can take note of a few things. (My post later in the day will be more detailed.)
1. There is no resistance on the SP500 until 1197 (or so).
2. The pay-roll number can cause a pull back if it is really weak.
3. Jobless claims are a leading indicator to the pay-roll numbers. (They have been good, except for one +11k week.)
4. If the market does not react negatively to the pay roll numbers, there is no market resistance until 1197.
Keep this in mind if you are short. BUT, with that said, I will look to take SPY Put protection before trading stops. I will cover it if we get morning weakness, and cover if we get morning strength.
1. There is no resistance on the SP500 until 1197 (or so).
2. The pay-roll number can cause a pull back if it is really weak.
3. Jobless claims are a leading indicator to the pay-roll numbers. (They have been good, except for one +11k week.)
4. If the market does not react negatively to the pay roll numbers, there is no market resistance until 1197.
Keep this in mind if you are short. BUT, with that said, I will look to take SPY Put protection before trading stops. I will cover it if we get morning weakness, and cover if we get morning strength.
Wednesday, October 6, 2010
Market Thought... interesting
The market obviously had a nice move the other day, bouncing off the 14SMA.
The only problem is, the short-term thesis regarding a sell of from the 10yr was waaaay off. The 10yr is hitting its low, despite the market move.
I do not know what to make of it. My over all longer-term thesis (stock are inexpensive in relation to global economic activity) is still in play. There are many stocks that are still inexpensive, and with solid global economic footing the estimated SP500 earnings of 87/share is going to be too low. But economic data will need to be present itself to convince the bond market other wise.
We will need to see a better than expected payroll number on Friday. Regardless, I am playing specific names, for specific reasons. Case in point, AXP. The third largest card processor, by a mile, did not settle. Personally, I can see why. There are 4 major card processors: V, MA, AXP and Discover. Visa and MA being the clear winners. Arguably a duopoly, although AXP has made great progress. Yet the DOJ is attacking the competition of the duopoly. Makes little sense to me, but I understand the DOJ's complaint is not about market share and about 'terms'.
As AXP declined, it became inexpensive with respect to the improving loan quality and technically has approached the bottom end of its trading range while being oversold. So I became interested.
The only problem is, the short-term thesis regarding a sell of from the 10yr was waaaay off. The 10yr is hitting its low, despite the market move.
I do not know what to make of it. My over all longer-term thesis (stock are inexpensive in relation to global economic activity) is still in play. There are many stocks that are still inexpensive, and with solid global economic footing the estimated SP500 earnings of 87/share is going to be too low. But economic data will need to be present itself to convince the bond market other wise.We will need to see a better than expected payroll number on Friday. Regardless, I am playing specific names, for specific reasons. Case in point, AXP. The third largest card processor, by a mile, did not settle. Personally, I can see why. There are 4 major card processors: V, MA, AXP and Discover. Visa and MA being the clear winners. Arguably a duopoly, although AXP has made great progress. Yet the DOJ is attacking the competition of the duopoly. Makes little sense to me, but I understand the DOJ's complaint is not about market share and about 'terms'.
As AXP declined, it became inexpensive with respect to the improving loan quality and technically has approached the bottom end of its trading range while being oversold. So I became interested.
forgot my lunch :( PBR, AXP
I made some nice burgers (or at least I thought they were good) last night, and planned to bring two for lunch today. Completely forgot.
Sucks. But you know what else sucks, a downgrade of PBR by MS. They say the secondary dilutes. Talk about geniuses, No shit. They just had the largest offering in the capital markets, ever! (Even though Brazil's gov. swallowed up about 2/3 of the offering. Which means they are not selling at current price and will not sell for a while. Basically the stock should trade at a premium because those 2/3 are not in play.)
The downgrade is obviously not letting it rise, as it seems it wanted to. Regardless, as oil rises so does the asset value in PBR. Let the stock settle, but the 35 price target they put on it is too low. The low end support is 33ish. If the market is stupid enough to take it there, I will double down.
I also entered AXP today. I think it will be range bound due to the improving fundies but DOJ overhang. Can go to 37, but will look to unload at 41 or so. (more on this later)
Sucks. But you know what else sucks, a downgrade of PBR by MS. They say the secondary dilutes. Talk about geniuses, No shit. They just had the largest offering in the capital markets, ever! (Even though Brazil's gov. swallowed up about 2/3 of the offering. Which means they are not selling at current price and will not sell for a while. Basically the stock should trade at a premium because those 2/3 are not in play.)
The downgrade is obviously not letting it rise, as it seems it wanted to. Regardless, as oil rises so does the asset value in PBR. Let the stock settle, but the 35 price target they put on it is too low. The low end support is 33ish. If the market is stupid enough to take it there, I will double down.
I also entered AXP today. I think it will be range bound due to the improving fundies but DOJ overhang. Can go to 37, but will look to unload at 41 or so. (more on this later)
Tuesday, October 5, 2010
IBM
IBM is kicking butt! They report on Oct 18th, and I think they will see a consolidation prior to that. (Or at least I hope they see one.)
I think their quarter will be really good thanks to the HP mess, release of their new hardware and financing options announced this quarter to facilitate the transition of business from names like HP.
I am not in IBM right now, but am looking for an entry. Due to the break out, I am no longer playing the 120 Jan calls. Instead I will be playing the 130 Jan 2011 calls.
My initial entry will be around 134.
I think their quarter will be really good thanks to the HP mess, release of their new hardware and financing options announced this quarter to facilitate the transition of business from names like HP.
I am not in IBM right now, but am looking for an entry. Due to the break out, I am no longer playing the 120 Jan calls. Instead I will be playing the 130 Jan 2011 calls.
My initial entry will be around 134.
Monday, October 4, 2010
Market Thought... up or down?
The SP500 is sitting on its 14SMA. IMO, this is the first line of support. Will it hold? After the strong Sept. move, and potential uncertainty due to the Jobs number on Friday, I don't know. There is no harm in being cautious. (This is not stopping me from buying when I see an opportunity, ie AAPL, but makes me keep a hedge.)
To add credence to the 14SMA support is the 10yr yield. It is near a bottom, and with all the media chatter these past few weeks regarding the low yield (along with today's Goldman note of peaking 10yr), this should be bullish for the market.
That does not mean the market can not go lower, but I think the down side is limited (to 1120is), barring a horrible jobs number Friday.
UPDATE 10/05/10: FDIC's Bair indicated there 'may be' a bit of a bond bubble. This plays up the thesis above. She may cause a sell off in bonds and migration in stocks today.
To add credence to the 14SMA support is the 10yr yield. It is near a bottom, and with all the media chatter these past few weeks regarding the low yield (along with today's Goldman note of peaking 10yr), this should be bullish for the market.
That does not mean the market can not go lower, but I think the down side is limited (to 1120is), barring a horrible jobs number Friday.
UPDATE 10/05/10: FDIC's Bair indicated there 'may be' a bit of a bond bubble. This plays up the thesis above. She may cause a sell off in bonds and migration in stocks today.
AXPW - battery play
I took the plunge into AXPW. I have been following this name for a long-time now, thanks to the consistent mention within John Petersen's articles. (I follow his blog, and the man knows about alter. energy.)
This is a purely speculative play. PURELY SPECULATION. I do not want lead anyone into my research thesis on the company, as I do not want to persuade anyone to put money into a pink sheet name. (If your interested, read up and come to your own conclusion.)
I am a fan of the data points regarding its PbC platform, and I have been waiting for a while for an entry point. Last week indicated to me to go after some, and I got my limit order today.
I purchased it, and have no illusions of grandeur. (I only purchased $1,000 worth.)
As per the chart, its an interesting entry point, but fundamentally, a name like this will not run until there is legitimacy in what they are doing.
Things to look for fundamentally:
1. The lab studies conducted by Ford and BMW for stop-start technology is impressive but will be legitimized a few years out. The closest hope for them to see a pop is if production deals start getting announced within the next 1-3 years. (With the data in hand, this can happen anytime.)
2. Utility size energy storage will not be viable until the smart grid gets built out, and that's a ways off.
(I do not think lead/acid batteries will be powering electric/hybrid cars. They will most likely be utilized for stop-start engine use and and utility energy storage.)
Do your homework on this one. I can loose the entire amount, but if conditions line up right I will assess when to sell via the potential projections, after deals are announced. (How much they bring in via the potential for 'stop-start' within vehicle production.)
This is a purely speculative play. PURELY SPECULATION. I do not want lead anyone into my research thesis on the company, as I do not want to persuade anyone to put money into a pink sheet name. (If your interested, read up and come to your own conclusion.)
I am a fan of the data points regarding its PbC platform, and I have been waiting for a while for an entry point. Last week indicated to me to go after some, and I got my limit order today.
I purchased it, and have no illusions of grandeur. (I only purchased $1,000 worth.)
As per the chart, its an interesting entry point, but fundamentally, a name like this will not run until there is legitimacy in what they are doing.
Things to look for fundamentally:
1. The lab studies conducted by Ford and BMW for stop-start technology is impressive but will be legitimized a few years out. The closest hope for them to see a pop is if production deals start getting announced within the next 1-3 years. (With the data in hand, this can happen anytime.)
2. Utility size energy storage will not be viable until the smart grid gets built out, and that's a ways off.
(I do not think lead/acid batteries will be powering electric/hybrid cars. They will most likely be utilized for stop-start engine use and and utility energy storage.)
Do your homework on this one. I can loose the entire amount, but if conditions line up right I will assess when to sell via the potential projections, after deals are announced. (How much they bring in via the potential for 'stop-start' within vehicle production.)
Saturday, October 2, 2010
money never sleeps
Last night I saw Wall Street: Money Never Sleeps, and I have to say, I liked it. My little sister thought is was really good. (She is not a market freak like me, and she said they did a good job telling the story.)
Oliver Stone did a good job portraying the ability to spark a rumor, and the consequence it can have in the market, in layman's terms. The level of communication is so fast, and interconnected, that inside information is no longer needed. Wanna make easier money, start a rumor. There are enough idiots out there to take action on them. (There are 3 kind of investors: innovators, imitators and idiots)
Look at AAPL. On Sept 28th (in the early morning trading hours) a rumor was circulating that AAPL's COO was going to go to HPQ. Any sane investor knows how utterly stupid, and unrealistic this concept is. Yet, the idiots, and maybe some imitators, sold and allowed the stock to decline to 275ish.
When there is this level of control with respect to rumors, there is no need for inside information.
Many think this deters people from being in the market. And I can obviously see why. Some shadey mother fucker just made a nice gain in less than 10minutes by telling lies. That annoys the hell out of me, and hope the fucker(s) gets caught.
But, it also provides an opportunity. And this is why it is important to know the fundamentals. To take advantage.
Rumors are a consequence of any market driven entity. The only way to fight it is to know the story better than anyone else. And educating yourself on a story is not that difficult to do.
To trade honestly, takes a lot of hard work. Risks can be drastically mitigated, but tough decisions still have to be made. For instance, take a look at Goldman Sach, from Thursday to Friday.
On Thursday, the chart of GS did not look good at all. It looked like shit. Along with the media and analysts pounding the hell out financials, especially the ones focused on capital markets due to trading volumes.
Here we have a scenario that discipline tells me (the honest trader) to sell. So as Friday comes about, the stock rallies. So much so, it approaches the downward sloping SMA. So I recouple losses, and sell. But the interesting aspect of Friday, was that the SMA resistance only lasted intraday. The stock closed above its resistance levels. And the sentiment of the chart is far different today.
Now it looks good enough for a pop to 151, maybe to the 155 level, pending overall market activity. (Cause all those traders who were short the name are now second guessing their thesis, and will cover their position on a solid open on Monday. Allowing for the juice to pop.)
My point is, trading is hard.
Nothing fundamentally changed from Thursday to Friday. The stock is still inexpensive, but the decision to buy/sell/hold (for a trader) had to be made. Many fuckers out there would rather bypass this difficult process, and put the energy in creating a rumor.
Oliver Stone did a good job portraying the ability to spark a rumor, and the consequence it can have in the market, in layman's terms. The level of communication is so fast, and interconnected, that inside information is no longer needed. Wanna make easier money, start a rumor. There are enough idiots out there to take action on them. (There are 3 kind of investors: innovators, imitators and idiots)
Look at AAPL. On Sept 28th (in the early morning trading hours) a rumor was circulating that AAPL's COO was going to go to HPQ. Any sane investor knows how utterly stupid, and unrealistic this concept is. Yet, the idiots, and maybe some imitators, sold and allowed the stock to decline to 275ish.
When there is this level of control with respect to rumors, there is no need for inside information.Many think this deters people from being in the market. And I can obviously see why. Some shadey mother fucker just made a nice gain in less than 10minutes by telling lies. That annoys the hell out of me, and hope the fucker(s) gets caught.
But, it also provides an opportunity. And this is why it is important to know the fundamentals. To take advantage.
Rumors are a consequence of any market driven entity. The only way to fight it is to know the story better than anyone else. And educating yourself on a story is not that difficult to do.
To trade honestly, takes a lot of hard work. Risks can be drastically mitigated, but tough decisions still have to be made. For instance, take a look at Goldman Sach, from Thursday to Friday.
On Thursday, the chart of GS did not look good at all. It looked like shit. Along with the media and analysts pounding the hell out financials, especially the ones focused on capital markets due to trading volumes.Here we have a scenario that discipline tells me (the honest trader) to sell. So as Friday comes about, the stock rallies. So much so, it approaches the downward sloping SMA. So I recouple losses, and sell. But the interesting aspect of Friday, was that the SMA resistance only lasted intraday. The stock closed above its resistance levels. And the sentiment of the chart is far different today.
Now it looks good enough for a pop to 151, maybe to the 155 level, pending overall market activity. (Cause all those traders who were short the name are now second guessing their thesis, and will cover their position on a solid open on Monday. Allowing for the juice to pop.)My point is, trading is hard.
Nothing fundamentally changed from Thursday to Friday. The stock is still inexpensive, but the decision to buy/sell/hold (for a trader) had to be made. Many fuckers out there would rather bypass this difficult process, and put the energy in creating a rumor.
UNG
While listening to Fast Money, I heard one of the traders say during his diner with a major oil executive Natural Gas, the executive indicated natgas will not exceed $4.50 in America again. (min 5:20-6:05) Bold statement to say the least, but when you think of the action that CHK took to hedge Natural Gas (selling billions of dollars worth of calls against NatGas basically betting the commodity will not exceed $8), it seriously adds to the bearishness of Natural Gas. Then Joe and Karen indicated that if NatGas does not exceed $4.50, UNG will trade to $1.50.
The above adds to the general thesis that the supply of NatGas in this country is plentiful. (That is the only qualifying fact provided in this post, keep that in mind.)
Because of this, I will be looking to purchase UNG puts on any NatGas spikes. For instance, we may get a jump if the Job number is good next week, and if it pops, I will look to short. (I will indicate when I do.)
The above adds to the general thesis that the supply of NatGas in this country is plentiful. (That is the only qualifying fact provided in this post, keep that in mind.)
Because of this, I will be looking to purchase UNG puts on any NatGas spikes. For instance, we may get a jump if the Job number is good next week, and if it pops, I will look to short. (I will indicate when I do.)
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