traveling...

I'll be traveling until Tuesday, and won't be around a computer. Will be following market activity periodically, and will continue to post on Tumblr via my iPhone. (Its just so easy to post on Tumblr via the iPhone app.)

I will have 'daytrader' withdrawal, as I have been really active these past few days.

Happy Trading.

quick note...

Cause I am starving, and was doing nothing but running around in the AM. (Fires to put out)

1. I repositioned IBM call to the 160 July strike. The re-position effectively increases my exposure, as IBM declined below 160.

2. Decided to sell into PBR today. I still think it is undervalued based on its assets, but it is very overbought. And the current trading is predicated on Libya. Once a consolidation takes place, regardless of where the price is, I will re-enter a position.

Market Thought... acceleration

The change in the Vix was too high for a two day period given the macro economic back drop.

We have a situation where:

1. The most credible economic threat, Saudi Arabia, is trying to get ahead of any protest.

2. The oil concern is not really a concern, and priced in.

The VIX increase is predicated on the severity toward a systemic risk. IMO, that risk is not there right now. As such, a severe spike in the VIX is what typically indicates a market dip buying opportunity.

Market activity is always predicated on 'what ifs'. But these 'what ifs' have to be reasonably assessed.

What if Gaddafi steps down? Awesome. Today was the buying day.

What if Gaddafi stays hard-line and keeps killing his own people? Causes continued, but known uncertainty. Maybe enough uncertainty for the market to simply drift. Personally, I think the market has some really good value here, but with a drawn-out uncertainty it can drift sideways for a while or drift down.

If the market decides to drift down, instead of sideways, there is very strong support at the 62SMA. (However, almost everyone on CNBC is projecting this decline, and if everyone thinks some thing will happen, it usually doesn't.)



Something to keep in mind, if Gaddafi maintains his hard-line approach and continues on his killing spree, there will be a multi-lateral coalition to force Gaddafi out. President Obama's speech tonight, with the unison global voice of rejection of Gaddafi and his actions, was a message to stop the killings and get out asap. (Personally, I do not think America should take a lead role here. We should provide all the support and resources we can, but let the Arab League take the lead in removing him.)

AXPW.ob

Nice jump in AXPW.ob today. I can not find any particular news worthy articles (in english) that would have cause today's jump. There was an article by John Petersen today, but he has writen about it before but Axion's stock movement has been pretty immune to his write ups, rarely reacting despite the positive sentiment.

The move could be a combination of factors, a perfect storm if you will. With Libya causing oil to rise, market players are probably looking to alternative energy names, especially ones that will facilitate fuel-efficiency. Hopefully the players are realizing what some of us already know.

quick FYI

The VIX is up some 37% in two days. Barring outside systemic risks to the global economic system, the acceleration is too high. (more on this later)

some trades... IBM, ATI, F, PBR

I entered some other names as well.

1. added to IBM, will add a more if 160 is broken downward

2. added to Ford

3. entered ATI

4. Have a limit order at 8.00 for MF

5. Sold some PBR, but still have a position. (Plan on selling the remaining shares around the 43-44 area.)

(Been day trading some AAPL calls, but maintain a some long positions that I purchased yesterday.)

re-positioned... AXP

I sold out of AXP due to the technical set up. It could not hold the 76 SMA support, so I wanted to position that cash to enter ATI or more MF.

(ATI and MF are approaching very interesting levels. And since I play both with their common shares, I needed to free up cash to maintain a proper risk profile to the portfolio. AXP is the most likely to fail technically, so I sold out of that one.)

Market Thought... balls

If a man or woman has the real facts, they have the balls to do what they got to do :)

I did not think I would have to highlight the details regarding the fundamentals of Libya, but given the absolutely horribly negative media coverage I figure I help the big-boys grow a set of balls.

I mentioned that the 'spike in oil price' argument the bears will use is bullshit already via the 'there will be pain' post. Here is why.

Libya produces about 1.8 million bbl/day. Lets be optimistic and assume they raised their production levels and its more like 2 million bbl/day. In contrast the global oil production, as of Oct 2010, was at 86.8 million bbl/day. So Libya produces about 2.3% of the worlds oil supply.

That's 2.3%. A slight increase in production from OPEC nations, non-OPEC nations, along with the crude from tankers coming online, there is plenty of capacity to handle 2.3%.

I know Cramer's biggest fear tonight was a rise in oil prices. But the facts simply do not justify that fear. I am glad to see I am not alone in this, commodity focused trader, Dennis Gartman agrees.

Market Thought... covered

With this lunch time spike downward, I closed out my protection. Multiple stocks are at places my mouth is watering over, and I have already entered some names. Instead of going gang busters, I closed out all my protection.

If stocks go lower I will begin to add. (FYI... I did add to AAPL. It is in the 330s. The 330s.)

Do not bitch about the market's inefficiencies, take advantage of them.

another day, another revolution

What a day for great news and rumor-mongering. lol.

Gaddafi vows to fight to the death, instead of shifting his policies toward a 'people-centric' society. And Apple is getting hit harder than usual for apparent delays in products. However I find this to be funny because Apple does not give guidance on product releases, so I do not understand how the products (iPhone 5, iPad 2) will be 'delayed'.

Also, for you political folks out there, this article on Gene Sharp ("who?":) is really really interesting.

Times-they-are-a-changing. Leaders that offer limits to their people are obsolete. The Russian president does not seem to understand this either. There is no turning back for these countries. Changes must be made, the best the threatened leaders can hope for now is to either adopt very quick and sweeping changes or get the fuck out of the way.

Market Thought... there will be pain

Okay, a bit dramatic :) I do not care what the futures are indicating because I will play the the market accordingly.

The reports from Libya are acting as a catalyst. Gaddafi's son warns of civil war, and the actions taken by Libya over the weekend IMO crosses that line of humanity. The people of the countries that are protesting want to live in a world of opportunity. The leaders of these countries can either get on board or get out of the fucking way. People are fighting for their opportunity, and they will get it one way or another.

Now for the potential market damage. Libya has a GDP of $89B, from an economic perspective its irrelevant. If the market wants to use the threat of civil war as a catalyst to bring down the market, so be it. But the created market discount will be an opportunity. The global economy can handle a certain level of instability. (ie the Iraq war or better yet, just research market performance during wars and try to extrapolate what a civil war in a country with a GDP of $89B would do. In a few words, not much.)

A more extreme bear would point to the oil market, and with the disruption of Libya's supply, crude would skyrocket causing gas prices to rise crippling the consumer. Hence, the global economy and markets will suffer. That argument is bullshit.

While a rise in oil prices works really well for my PBR position, lets be realistic. Oil production and demand has approached tight levels, which merits an elevated (80-90 handle) price for crude. But there is plenty of stored supply to handle a short-term disruption like this. Lets not forget, during the recession years one of the greatest trades was to buy up as much oil as possible and store it in tankers. Well, I am sure, now, the traders/investment banks making this trade will allow this supply to enter the market. (If they don't they are horrible traders, and their firms should fire them.)

To me, I see very little systemic risk here. But this could be an excuse for the big-boys to sell. There are multiple SMA supports from 1300 to 1320, and ultimately the 62SMA.

From a valuation perspective I am comfortable adding position with a decline to the 14SMA, but from a technical perspective I have to see the velocity of fear.

If the VIX approaches 21ish over an act of people wanting to give themselves more freedom and opportunity, I will cover all my protection and start adding to names I wanted to add.

a new Link... shit happens

I have a new link under the "Links" section. I call it 'shit happens' :)

I joined Tumblr over the weekend. Tumblr is basically a blogging platform geared toward the social graph of the web. (I have no interest in developing the social graph of 'echotoall' right now, if ever.) The main reason I joined is because Tumblr has a very kick-ass mobile platform that will let me post interesting things/trades very quickly and easily.

I read a ton of news articles everyday and many of them are 'pieces-of-a-puzzle' toward forming a market, economic or equity thesis. So I figure I can use Tumblr when I see a potential 'piece-of-the-puzzle' info to quickly share it and store it.

Market Thought... still confused

There is still plenty of confusion in the air. Since the 'trading dynamic' post, the market kept rising, but my expectation of complacency was/is not realized. This only adds to my confusion. It can be viewed in a few ways:

1. As an indicator. (I pointed this out the other day, but I have seen multiple media reports on this symptom after I posted about it. This now makes me wonder as to its affect. When too many people 'know something' that 'thing' no longer matters. The masses will contaminate the indicator as they pile-in, and render it worthless.)

2. Wall of worry. People have seen the chatter, and are buying up puts instead of selling shares just to be hedged. But again, with no real systemic risk, and the indicator getting contaminated this is a reasonable assumption.

As I pointed out the last few days, some names have come down and merit entry. I did enter names last week, but my sense of caution did not elude me either. Although it looks like we keep climbing this wall-of-worry, I added to my market protection as I added to my positions.

I will use this example again, many will think AAPL seems rich, at this time, at 365-370. But as AAPL approaches the 340s, it is a steal considering what they will earn next quarter.

some charts... AXP, DNDN

AXP - Although Buffett has been selling AXP, technically it looking interesting here. With this pull back, it has eased from its overbought condition. A lot of the political issues with AXP were priced into the stock in December. The only perceived threat (but at the same time a mutual benefit), for all the credit card companies, is the NFC (near field technology) that will be implemented in smart phones, primarily the next version of the iPhone. Apple's iTunes, with NFC technology, allows for centralized, secure and very user friendly payments. If this type of payments mechanism gains mass adoption (out side of the registered iPhone users) is at least 1-2 few years out. But its a double edge sword as credit card companies are still the back-bone to the majority of electronic payments.

DNDN - I still follow this story, and the only reason I mention it now is because of its technical set up. It is oversold and sitting on a low-end support. The probability of a bounce is high. (I did not enter a position on Friday, and probably will not because of the history/scars I have from this stock :)

some charts... AAPL, IBM

AAPL - It is sitting on its 10SMA, and the decline is causing an ease from its overbought condition. In the 350s it is not as inexpensive, but by no means over extended on a valuation basis. (I was selling as AAPL was approaching 365, but today I was buying.) I will buy again if it goes below 355, and an aggressive buyer if it sees the 340s.

If the 10 SMA is broken, a lot of momentum whore traders may sell and cause a drop below 355. But technicals be damned when I think they will be trading at 370-390 toward March/April. (see forward PE link)

(P.S. anti-trust action on Apple due to the subscription model is complete and utter bullshit. Apple is not preventing any company from pursuing subscription services out of the app, and using an iPhone App to take advantage of the subscription. None of these companies even need to have an App for fuck sake. Nor do they even need to use the App Store. They can use Google's Subscription service. Although, the concept is far too new and unproven to even be considered seriously by law makers. I am annoyed my tax dollars are being wasted for a market that has not developed yet, and very big competition already exists.)

IBM - It is consolidated, holding SMA support and just proved to the world it made one of the most significant advances in computer science. (IBM should of made Watson's voice Sean Connery, and added a 'mother' joke at least once in the three days :) We are witnessing the market begin to respect IBM more, giving it a higher multiple. With continued innovation, strong/growing cash-flow and growing revenue we are seeing the "U" shape multiple expansion. The last 10 years IBM has seen a trailing PE contraction, flatten out through the credit crisis and is now fundamentally positioned to see the upswing. I just think a trailing PE of 16 is very reasonable for a company with a fortress balance sheet, awesome cash-flow, very shareholder friendly cash allocation and making monstrous innovative advances in technology.

Market Thought... interesting.

Today was Wednesday. I highlight that because usually the VIX re-positioning takes place on Monday. That sometimes leads to the VIX acting weird. Weird in the sense that it is up when the market is up. But today is Wednesday.

When the dynamic of the index can not explain weirdness, it is an indicator. When the VIX and the market are up together, it makes me seek short-term protection, especially when it is a day other than Monday.


Keep in mind, I very much believe in the 'trading dynamic' post. And this set up has not prevented me from entering new positions (ie WFC and IBM as it was consolidating these past few days).

The high frequency trader in me believes there will be a brief consolidation here, and I plan on covering this protection very quickly. (Probably around 1315.) The decline can be intra-day or multi-day, but I am not expecting a decline below 1300 or so.

(PS: Originally, I confused today for Tuesday, but its really Wednesday. Thank you anonymous commenter :)

WFC

Ever since the contraction of consumer credit started to flat-line I had WFC (Wells Fargo) on my radar. They are one of the best, if not the best, to take advantage of a large yield curve as consumer credit expands.

I was waiting for one of these negative-Nancies to downgrade the stock or do something that would cause it to decline. Today, my wait has been answered. I hold Mr Whalen's opinion in very low regard, as I find him to be more of a sensationalist and media whore instead of an analyst. Obviously he makes a very real negative point, and something to keep in mind. I just think the macro-economic trend is in WFC's favor, and will overshadow these negatives.

Now is a good initial entry point. If it breaks this support, I will double up at the 62SMA.

good write-up on Apple's Sub. model

Here is a thoughtful assessment of Apple's subscription model announced today. If you can ignore the fact that the author is a known Apple-fan-boy, the assessment makes a ton of sense and is relatively non-bias. (With the exception of a brief uncalled for zing at Google.)

Although I do not see how AAPL's current enforcement would really hurt or affect services like Netflix, Sling, Hulu etc. Their apps do not provide the subscription, they are gateways to the service. For instance, the updated Netflix app would no longer be allowed to link to Netflix.com if not a member. Instead it would link to the App Store Subscription. Any new member can still sign up for a subscription from the website, then use the app. But if a new member signs up using the iPhone App, then Apple will take its 30% cut. So these services can either not promote new membership through their app or offer it and risk the 30% cut.

If you are invested in AAPL, it is a worth-while read.

AOL + Tim = love

Tim Armstrong purchased $10M of AOL stock after the market pushed the stock down. To me that looks like a big vote of confidence.

I was tempted to enter a position on Friday, only because of the chart set up. AOL saw its low end of what now appears to be a bottom-end range.

But its number's are so crappy, albeit improving, but crappy none-the-less. I want to see more clarity on their ad network performance, and particularly via their local channels like WOW and Patch.

I do really like where the company is headed, and I am a big fan of the direction Armstrong is taking. Whatever slogan he or his team wants to tout, they are positioning AOL to be a true Internet age content provider. I just want to see hints of it within their numbers before I start trading it.

A message for Watson and IBM

Please develop an iPhone App using Watson, if only as a novelty. I would gladly pay a few dollars to play with it.

There are so many applications and endless licensing potential for the core technology, but I really want to try this thing out.

This post is in hopes that IBM has a continuous bot trolling the Internet scanning articles and web pages :)

p.s. If you want to get into IBM, this weakness is an opportunity. (I mean, the company that has unveiled one of the most significant leaps in computer science is trading with a trailing PE of low 14. Oracle, a company that wants to be IBM but with out the innovation, has a trailing PE of 25. Bit of a joke if you ask me.)

Market Thought... confusion in the air

There is just so much confusion right night. Everyone thinks there will be a correction due to the velocity of the market or wants to see a correction to get in. I too am not immune to this confusion as per my 'say when?' post. So I repositioned all of my options to reduce risk while being exposed to an upward movement.

The problem with my 'say when?' post is that its based on the assumption that 88 is the SP500 eps. But what if the eps is really 90? And what if that leads to an 2011 SP500 eps of 96? A higher eps would give even more fundamental credence to the thesis of a new 'trading dynamic' to take place very soon. (And when we look at individual names, we still are not over extended yet. To say we are would mean AAPL approaches 380, or IBM approaches 180 etc)

My recent fear that Mubarak's stubbornness would of caused a tipping point was abated. Albeit, there is still a ton of uncertainty for Egypt, but now the 'systemic?' post still stands (there is none via Egypt).

So here is the gist of what I feel, barring the confusion this post created :)

We are in limbo, w/no systemic risk to the system, causing the big-boys to add positions as they decline. (Because AAPL in the 340s is a steal when you know its high-end range is 390 next quarter, or even 380 for its low end, via a forward trailing PE analysis.) This usually causes markets to rise, and we find ourselves with a new trading dynamic.

Fascinating Read

The secret of the Rally That Sparked an Uprising. Fascinating read on how the movement in Egypt snowballed.

Any repressive leader or government reading this must be shitting their pants. A group of people systematically picked away at the fabric of the what enforces a repressive leadership. Turns out, there are not enough people to enforce w/out igniting civil war. Who is going to flinch first?

(This is probably why China built out their internet infrastructure to restricts/monitors so much of their web traffic.)

The internet truly is an equalizer. Truly awesome.

Mubarak, WTF?!?

Among men, there is always a tipping point.

I fear Mubarak's selfishness may lead to a tipping point. At first I indicated this was not systemic. But as Mubarak continues to ignore the voice of Egypt, and keep proving to the protesters that he really is a dictator, the threat of civil war is very much on the table.

The protests have not subsided at all. If anything, with the release of the prisoners, the protesters are more energized, and now they are angry at the speech. I am concerned about the uncertainty Mubarak just created.

There are too many ways this can now play out. But the one thing I can be certain about, the protest will continue. I mean, why would the protesters trust a man to see a transition when that man is not listening to the people right now?

Something is gonna give.

With uncertainty comes a discount in markets. I used the weakness today to add to positions in AAPL, IBM and have SPY put protection.

potential trades... C, ATI

Here are some interesting technical set ups, that should produce interesting entry points with an easing market.

C - between 4.65-4.7 is very interesting to me because of the horizontal and SMA support converging. I will add an initial position at this level.

ATI - With any decline ATI seems interesting, but with an easing market ATI should near between 62-63. I would preferably like to add an initial position around 62, but I may have to settle for the dotted horizontal line.

Market Thought... say when?

While I believe a new trading dynamic is coming, the SP500 is now around the 15 multiple. (Assuming the 2010 combined SP500 earnings are 88.) This is also seen within the trailing PEs of a broad range of individual stocks.

I do not want to mince words. I am bullish, just not as giddy right now because of my trailing PE assessments. (Can't be with the market rising near 4% in less than two weeks.)

Basically I am pretty touch-and-go right now. I sold a bunch of positions to lock in nice gains, but am still exposed. For example, I repositioned some of IBM calls to 160 april calls freeing up cash, and sold some AAPL as it approached the 355 level. (I am still exposed to AAPL calls for the Verizon debut and new iPad hype. Probably unload this position around the high 360s.)

Although I am not as giddy, I am not going to hesitate to purchase positions. I added to PBR due to its consolidation, along with oil's decline.

I will add to MF if it breaks 8, AAPL 340 calls if any weakness is seen, IBM 160 calls if 162-163 is seen.

Market Thought... trading dynamic

I am getting the impression that there is a shift in trading dynamic coming for this market rally. The current rally started in March 2009 and is currently on going. The Vix/SP500 overlay has been an indicator of mine through out the years, and have posted about it quite a bit.

If we were to look at the market from this fairly predictable overlay, protection is merited, as the VIX is approaching the lower end horizontal line.

But the biggest challenge about observing patterns is to understand when these patterns are about to change. When other market factors are incorporated into the mix, I get a different impression. I get the sense of a new VIX trading dynamic developing, and a new phase of this bull market. (Perhaps the new VIX range maybe around 11ish-20ish.)

The some factors include:

1. The re-assessment of macro economic conditions.

2. The 10 year yield rising. Keep in mind, this rise has economic implications which would suggest stronger GDP, increased job growth, etc. (The fundamental thesis is solidified with the start of an expansion in credit as seen from the Nov and Dec, and interviews/conference calls by major players.)

3. Valuations are by no means over extended. At best, they are reverting to normal levels.

On the very short-term, I am still just chillin w/respect to my positions. The market is overbought, and a consolidation maybe in the cards. But its technical set up like these, along with supporting economic fundamentals, that trigger a change in trading dynamic.

AXPW.ob action

Over the past few weeks AXPW.ob has been trading in a very tight tight range. Basically not moving. Yesterday saw a change in that. The action was most likely from an article issued yesterday adding more detail to the potential size of the Stop-Start market.

I have been keeping my eye out for information that can give me a better sense of the size of the Stop-Start automobile market for a while. The article mentions a few key points:

1. Nearly half of autos produced in Europe next year will have stop-start capability.

2. Frank Frister, a product manager with auto parts maker Bosch North America and in position to see what technologies the big automakers are adopting, sees North America reaching the point at which 50% of all autos sold in the North America are stop-start capable. He recently said, “North America will reach that figure in 2016.”

I already posted Ford's press release indicating their production of Stop-Start in 2012.

The perfect storm is building for Stop-Start technology, and Axion's PbC technology is very well positioned to take advantage.

I do not know the component cost for the PbC or potential revenue from it. (I try to dig up some info.) But a none-thorough, back of the envelope guesstimate assessment indicates Axion market size in Europe and America alone is north of 10-12M units by 2016.

Jobs report

The report was ho-hum. But a few points that lean it to the side of bullishness:

1. The upward revision from last month was nice.
2. The average weekly earnings for all employees increased again, albeit it was more-or-less flat.

MF

MF reported this morning. I only had time to read the report, but not post about it. (Needless to say today at work was frustrating, but I am going to refrain from negative talk about Pfizer corporate geniuses as they ponder, 'why on earth would productivity decline so drastically after we announced the site closure?')

In my opinion, the most interesting revelation from today's report was the breakdown of revenue per employee:

"Net revenue per employee was approximately $86,400 for the third quarter compared with $77,800 for the same period last year. At December 31, 2010 the company had 2,857 employees compared with 3,227 employees at December 31, 2009."

This is very telling considering it was a huge priority as Corzine first came in. Looks like he is getting the compensation cost structure under control. More impressive are the caliber of top new hires while improving the cost structure.

The proof is in the pudding, and we are seeing some of that pudding. So I am still very much inclined to like this story.

Needless to say, today's report was not one that justifies a great move. It is one where I expect MF to trace below 8.0, find support around mid/high 7s and then push upward. The push upward is justified as we are out of the weak 4th quarter, and entered a much stronger trading environment.

Although the probability of weakness w/in the short-term is high, I have not sold any of my shares. I maintain the trading thought I posted a few days ago. I will add 1/3 of the position when if the weakness is seen, and sell 1/2 the position when 9.50 is seen.

Apple subscription model

The release of The Daily is interesting. The subscription model is $0.99/wk or $39.99/year.

When publishers compare the cost of print and physical distribution vs an electronic distribution, paying 30% works out better for them. And based on how Murdoch answered the question of cost, maybe the economics are far better justifying the 30%.

This will provide a better user experience, and adds to the lists of positives for Apple. I owe AAPL, and will start to ease up on some of the position when it is north of 350. (Even though it should be trading in the 370s as per my Forward PE assessment.) I will not sell below 350.

Market Thought... chillin

Cause there is nothing new going on. My market assessments via the 're-assessing' and 'systemic?' posts are playing out. The 28/32 SMAs acted as support for the market push upward.

As I indicated, I used the decline to add to my positions. Now, I am letting those position play out.