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Friday, September 30, 2011

China's official PMI

September reading was 51.2 versus August's 50.9.

Doesn't seem like a number that would show a drastic slow down.  But that was also confirmed by the HSBC survey.

Who knows, maybe next month the fear of the slow down will be realized, or the month after that or the next month after that. Or maybe the markets don't give a rats ass of what any number says, and will sell off again next week "just because".

Market Thought... recession?

Who to you believe, Warren Buffett or leading economic indicators?

Leading indicators:

Or Warren Buffett:

As if we needed any more confusion in this market environment. Its obvious the queues are being taken by the leading indicators. After all, there has to be a reason why everyone is so negative.

I have been pretty vocal that certain indicator were skewed by the Fed's 'twist'.  Which begs the question, are the other leading indicators skewed too?  I do not know how ECRI models their leading indicators, but this is a very legitimate question.  The Fed's twist effectively destroyed global inflationary pressures by exaggerating the dollars rally. If the leading indicators in the ECRI index are sensitive to the dollar move, commodities or certain leading inflation metric, then it too maybe skewed by the twist.

Over the years, I have been pretty good at seeing slowdowns from hints and clues with my charts and combing web chatter.  No doubt we were seeing a stall before August, as the market was consolidating due to relatively poor US economic data and geopolitical issues.  But we are in a situation now where the markets already collapsed.  So lets assume our risk.

Lets assume EU and US austerity cause a no growth environment. Facilitating a very slow global GDP.  The big boys will value equities for zero growth, which will mean the SP500 will trade at its low end multiple, around 12ish.

Lets assume current SP500 earnings estimates for 2011 are too high (even though estimates have not come down). From $96 to $86. (All indication suggest this earnings season will be good. So I am assuming a 10% reduction within a 3 month period.  That is a lot.)

For the market multiple to stay at 12, and not the more normal 14-15, we have to assume no earnings growth next year. (A multiple of 12 assumes an SP500 eps of around $86 too.) Doing the math (12 x 86) give us an SP500 target of is 1032.  But even in times of recession, market multiples are higher. If we are to assume a multiple of 14, the SP500 would be near 1200.

Although companies are still doing better than expected, and see decent clarity for business activity, we must assume the worst case scenario.  The current 2011 and 2012 SP500 earnings estimates are about $100 and $110, drastically reducing them, and projecting no growth, we find ourselves in a situation where the market will be trading between 1032 and 1200.  This range is where we currently are and have been violently trading.

Equities are already pricing in a recession.

And is it just me, or does it feel like everyone is already betting that way? Suggesting the risk is to the upside.  Maybe I am an optimist, but I try to be a realist.


Below is a few activities and some thoughts on the following stocks/positions:

FXE - I road the decline from 138 to current levels. With more certainty coming out of the EU regarding what they will do, there maybe a 'buy-the-news'.  I, like everyone else, knows the Euro will decline. (Its mathematical economics.) I am just taking profits. If it rallies, I will look to re-purchase 135 Dec puts if it sees 135 or high 134.

AAPL - Below 400 is too inexpensive for this name, considering the market the iPad and iPhone is seeing. I added today, and will look to add near the high 370s.

POT - If anyone just heard Buffett today on CNBC, his businesses do not indicate recession. But the crop reports were bearish because of better yields, and "rationing" by consumers. This could lead to a lower than expected Potash pricing, and with Mosaic's increased expenses, I am sure that is the pressure on POT.  But, POT usually trades with a higher trailing PE. There has been a severe multiple compression giving POT a trailing PE of 16, and single digits forward PE. The stock is pricing in a negative eps rate, but I think the discount is over done. It also retraced its "buyout" offer. It may take a quarter or two to wash out the assumed negativity on the potash market.

QCOM - If I traded this one intelligently (selling it at 52-53), I would be buying it back right here. (But I did think it was going to break from the negative trend and test its highs as AAPL and IBM did.)  Since I already own it due to its current product position, I am resisting additional entries. However, if the blind selling brings this to the 47 level, I will reposition my current options to the 47.50, and with the new options double the call numbers to the position.

Thursday, September 29, 2011

Market Thought... f-n big-boys

I don't know. I really don't.  The negativity is pervasive. It oozes out of CNBC and out of every facet of the media distribution.

Today there is no individual story to any stock. Most of the big-boys you see are just scared or selling. Even the bullish ones are saying to be patient. (Basically, their bullishness has a caveat so they will not be wrong.)

Its a fucken joke.

First the market was selling off on the US debt downgrade, then the fear of a credit freeze, now a massive global slow down.  Initially the global slow down was coming from Europe, but now its fear of China growth toward 5%. (Every week the story changes.)

Individual, company specific, stories be damned. Apple is entering a new product cycle with additional carriers (including Sprint, China Telcom and China Mobile) increasing their potential revenue by some $30-50B, while running on all cylinders, is to be shorted because ALL of technology must go down!?!?!?!

Or sell QCOM 'just because' all technology must go down despite having direct exposure to the iPhone 5 with expanded carrier base!?!?!?

I understand the psychology, but I think the logic is incorrect.

I understand why investors are on edge, especially because of the weight they put on copper. And I do not expect most of wall street to look past the obvious to look through the internals of the copper market.

Everyone is scared because of these indicators, and they are throwing away the baby with the bath water. Maybe they can bring down IBM to the 170 level or POT to 43 or AXP to 43 or AAPL to the high 370s or QCOM to the 47 level.

Market Thought... good news

We just got a string on of good news.

1st - Germany approved the amendment to the EFSF. What is more important, imo, is that two countries (Finland and Germany) with strong critics of the amendment approved it with very wide margins. (Suggesting to avoid the noise, and watch action. This action says that the leaders will do everything in their power to prevent a collapse.)

2nd - Good economic data. Jobless claims were really really good, below 400k. And GDP was slightly better than expected.

Keep in mind, a credit freeze is now completely off the table. The big boys have to evaluate stocks based on economic conditions.

For example POT. Even though I sold it because of the collapse in commodities, does anyone now think POT will see a 10% growth rate next year?  If not, why is it selling with a forward PE of 10?

The question for looking at stocks now becomes, 'will this stock see a negative eps growth to justify such a low multiple?'

Wednesday, September 28, 2011

interesting... yield curve vs copper

I saw this chart, overlaying copper to the SP500, from the SeekingAlpha news feed, but originated from Doug Kass.

Obviously does not look enticing, by any means. But what I found more interesting was when the correlation broke.  Around Sept 12th.  What is interesting about this date is that it is the same date the market started flattening the yield curve.  The below chart is a 5-yr treasury in relation to the 30yr-treasury yield.

It makes me think. The divergence we are seeing may have more to do with yields than economic forces. (Also exaggerating Copper's decline today is the increase in margin requirements.)  But I am not an economist, and I do not know the forces that would make the flattening of the yield curve correlate to lower copper. (Other than a strong dollar.)

lets speculate... AAPL, AMZN

Does anyone think AAPL will not have a strategy for low cost tablets?

Looking at history, my guess, is that they will, and anyone using "what ifs" to claim they will not is lacking in their analysis.

1. iPod - Apple continued to innovate the iPod, and after a period of time, introduced smaller, more inexpensive models that allowed consumer to buy-down, but be exposed to AAPL's ecosystem.

2. iPhone - While Apple did not formally announce a low-end phone, their 3GS is the second best selling smart phone (next to the iPhone 4), for about $50 (and only available on at&t's network).

Well, if they introduced lower-end versions of very successful products, the likely hood is high that AAPL will (or can) release a lower-end iPad competing with the lower-end segment, while lacking the higher-end features.

What if Apple decides to re-sell the original iPad (w/out cameras) with lower cost internals, while being a 10inch tablet?  What if it costs around $200 (and still be profitable)?

What if, what if, what if...

Point is, Apple can do these thing and have shown to do these things through a product's life cycle. To ignore this, is to lack a complete analysis on the company.

But despite all this 'what if' non-sense, Apple is about profitability. They learned to not sell products for a loss. They want profitable market share.

Tuesday, September 27, 2011

Market Thought... foregone conclusion

Seems like everyone is expecting the markets to go down from here.  Maybe everyone is right? Maybe every time the market approaches 1200-1220, the market should be sold.  Seems like its a foregone conclusion.

I don't mind predictability. I like living a drama free life. Maybe cause I am a relatively boring guy. But the market hates boring. The market will rip the face off of predictability.  The only thing we do not know is 'when' Mrs. Market will get her nails ready.  Like any vixen, she leaves us her clues with out telling us exactly what she wants.

We saw a nice move, but ultimately 1180 provided resistance.  However, I believe the markets are forming an interesting foundation here. Below are her whispers:

1. Individual stocks are leading the way.  The most obvious is AAPL and IBM.  AAPL already hit its all time high when the SP500 was testing its recent low.  IBM saw higher lows as the market declined, and higher highs as the market bounced. (IBM is near its all time high.)

IBM and AAPL are not alone. There is similar strength in other names as well. But this is just from the technicals. Fundamentally, we are getting confirmation that business activity did not fall off a cliff, and is actually doing 'okay'.  Oracle gave us the first of such indications. Today, Accenture and Paychex are confirming the business activity.

2. Related to #1, the semis are seeing higher lows with the market weakness, as the index broke from its negative trend.

3. The 10yr yield has pushed higher, and seems to want to breach from its down-trend. IMO, this is very good for equities.  Relatively higher yields suggests higher growth rates.  But the yield has ways to go before it signals to the big-boys 'all is clear'.  (Its got to get above 3%.)

All-and-all, there is a foundation building here.

I know the flip-side to this argument would be to look at the commodity complex or copper to highlight the economic weakness that is not yet suggested in corporate numbers.  But I hesitate when I hear this argument because each market is its own supply/demand issue.  If China is going to slow down construction then copper is going to take a bigger hit.  This does not mean China will allow their economy to grow below 7-8%. (Have investors completely forgotten that China was been stock piling Copper earlier this year?)

Another example is agriculture. Current crop yields have been good, leading to an ease in pricing.  The supply side of the equation over came the demand for this season.  However general demand is still very much intact. Inventories are still at very very low levels.  (Supply side price decline in food is a good thing for the economy.) 

Lets not forget the jump in the dollar, and how it shocked the commodities market.  That exaggerated the moves.

IMO, the commodity argument is corrupted by specific internals of their own markets, and the spike in the dollar.  (The dollar rise will play less of a roll once the appreciation of the dollar becomes normalized.)

All other negative arguments are "what ifs". For every negative "what if", I can produce a positive. (So I will just keep the "what ifs" in the back of my mind until I begin to see some legitimacy in anyone of them.)

fyi... ibm, axp, aapl, qcom, fxe

IBM - I sold out of IBM due to its solid move, and is its trading at the high-end of my expectations for the next quarter earnings. If we are lucky to see it come down toward 170, I will purchase 170 calls on it. For now it has moved nicely, and I do not want to be greedy with it. Took my profits, and will wait for an opportunity.

AXP - Sold out this morning with the move, and its relative weakness. (That was driven by my active trader side. I will look to re-enter.) By the end of the year, I still think it will be near the mid 50s.  All its businesses are doing well, except it suffers from no EPS acceleration for the next two quarters.)

AAPL -  With AAPL trading below 430, there is no established expectations toward the next quarter's results.  As soon as they report next quarter's results, Apple will have a trailing PE of 15.5 with a stock price of 429.  There is a disconnect. Not worth selling here.

QCOM - Will sell half at mid 53-54. But will let the rest ride to 56-57.  There is just way too much momentum going into the next 3-6 months.

FXE - Will like to add to the puts if FXE sees 137. I don't know if we will see it, but that is what I am looking for.

Monday, September 26, 2011

Market Thought... drift and aapl

Ignoring the noise, and just looking at the technicals, the SP500 should drift toward 1180.

It should not act as strong resistance, but it is a resistance point none-the-less. Anywhere between 1180 and 1220 the market players will be in the 'macro-economic' top-down debate of a potentially more aggressive slow down.

But as I have consistently stated before, if the market starts to close above 1220, the negativity will begin to shift, and the top-down aggressive slowdown argument will begin to shift.

And just a side not on AAPL. Looks like it managed to maintain its momentum support. Tomorrow and the next few days should be interesting.

AAPL trading dynamic

The unsubstantiated  claim of an iPad slow down from one analyst from JPM, which then got picked up by the major media outlets, has cause interesting negativity within AAPL.  This has caused AAPL to break from its very short-term trend.

Usually, with a potentially major announcement from AAPL, the stock would see continued momentum going into the announcement.  But with the heightened negativity, and on-edge investors, the markets are giving credence to the statements.

Remember today, because we are witnessing how manipulation within a stock happens in today's market.

The rumor acted as a catalyst, the media outlets simply passed along the report without questioning the findings and with market negativity taking hold, the 10SMA support does not hold, ruining the short-term trend, allowing for the momentum whores (ie quants or day traders) to flush out the stock.

Is the SEC really going to investigate this? Do they even understand this? Would anyone understand this, unless they follow the dynamic of a stock a closely as a day trader?

All I know is this:

As of last week, Brazil's factory was up and running. The report suggested a weak economy for the slowdown, and no where did it suggest business simply transferred from one factory to another. The only media outlet even stating this is the Business Insider. (The majors are not.)

The stock is near the 390 area support, and in a strong market, today's move would have been a great intra-day trade because AAPL would have come back from this attempt at manipulation. But since we are in a weak market, I do not know if it will act this way. Hopefully it does. (There are subtitles intra-day suggesting it might.) But come earnings, we will know the truth.

Sunday, September 25, 2011

Market Thought... a plan?

On Saturday, chatter of a "firebreak" plan emerged. The article states a solution will be unveiled in Cannes on Nov 4th.

On Sept 6th I highlighted what I was waiting for:

1. The amended EFSF that can be used to capitalize large EU banks.
2. Forced bank mergers, with re-capitalization, like what happened in Greece recently.
I will look to cover my SPY protection tomorrow, and with a potential Euro rally due to this news, add to the FXE puts.
On a side note: 
I keep hearing chatter that the current stock move is from a drastic slow down in earnings.  People can speculate all they want, but the proof is in the pudding. Right now, based on what we have seen, the data does not justify "drastic" slow down. 
For instance, Nike had a solid quarter, as did Finish Line. Also, rail traffic is good and a rising Baltic Dry Index indicate the macro is not as bad as some have pounded the table on.

Lets not forget the steps of easing from emerging economies, and the fact that growth is still taking place. For instance, South American economies are still projected to grow near 4%.  
And those preaching a drastic slow down in China need to ask themselves a serious question. Will a country with +$3trillion at their disposal, that politically needs to keep economic growth around 8-9% to maintain a level of stability amongst its people, allow for a debt crisis (with respect to their banks) get out of control?
As for the collapse in commodities, I think that has to do more with the dollar activity than a global slow down. I think a lot of commodity players were completely caught off guard as the dollar began to spike from the flattening of the yield curve.  (Prior to the market players positioning for a yield curve flattening, Gold and the Franc were the currencies to play for the EU crisis.)  Other commodities like Copper and Steel maybe taking a bigger hit because of the localized issue in China's real estate market.

Thursday, September 22, 2011

Market Thought... smells like Gyro

If it looks like a Gyro, smells like a Gyro and tastes like a Gyro, well then, it must be a Gyro.

The SP500 has decline over 100 points in 4 days.

The markets have also gone from removing the threat of a credit freeze, to begin to discount it again.  (Except the currency being used instead of the Franc or Gold is US dollars.)

In the AM, we also had a prominent big-boy investor (and potentially future boss ;) El-Erian tell the investor community that "we are on the eve of a crisis".

The SP500 does not go down 100 points in 4 days because of a "slow down". Individual stocks are already at single digit multiples. A big slow down is already priced in.  4 days ago, a credit crisis was not priced in.  Today, its baked in again.

This is the crazy market we live in today, and why I am so annoyed by our political leadership. They watch the world around them burn, as they ignore their Pledge to the United States of America, and squabble over ideology.

Moment of truth is coming. Looks like we will be having Gyros over the next couple of days. Hopefully, there is good tzatziki sauce!

our leadership has failed us

Our entire leadership, ALL, every single one of them have failed us.  Every time one of them speak on TV and simply spew their partisan bullshit, they fail us.

I did not vote for a politician to squabble and spew bullshit on TV. (Job creators on strike?!? The unemployment rate was LOWER under HIGHER fucking taxes, and the GOP wants to use this argument to not tax the wealthy?!?!?  Obama comes on TV to call for unity, and uses divisive words in the same sentence!?!?!)

Our current leadership seems like a bunch of assholes.

Here is a list of assholes: 

congress = assholes

senate = assholes

White House = assholes

I do not want to hear why "someone" else is to blame. I am sick of that talk.  Our leaders need to lead or get the fuck out of the way!

Once I heard the leaderless Boehner speak this afternoon, it just confirmed just how big of assholes all of them are. I become so disgusted, I sold off ITRI (for a 30% loss!!!!), and added to SPY put protection. Even though I think SPY protection here is ridiculous, and selling ITRI pissed me off at current levels. (This is a real investor taking real action because of their dickiness.)

I am in only a few names now, that are not dependent on US growth or leadership.

BGCP (for the yield)
AXPW.ob (as a pure spec play)
Short FXE
Short the SPY

My attitude will shift once I see signs of "assholeness" decline.

(I am not upset because I am doing poorly. On the contrary, I covered a lot of my losses since I was on vacation and I am near my highs for the year, despite the massive declines. My methodology and strategy is doing very well.)


All the traditional economically sensitive names (ie commodities) are really rolling over.  The dollar advance has a ton  to do with these moves, and the charts of some of these names show blind selling. Its just blind selling.

Things I did today:

1. Covered the light SPY put protection that I had coming into today. (I still have the FXE puts in play.)
2. Added to AAPL
3. Bought back IBM
4. Bought AXP
5. sold off SU
6. sold off POT

I am holding off on BAC because of the flattening of the yield curve. May revisit the trade after the dusts settles. Also, I will re-visit the commodity names when I cover my FXE puts or when the commodity stocks play off of their earnings versus their assumed negativity from the commodity.

Basically, with 'operation twist' the Fed effectively wiped out the inflation of the emerging markets. Hence the pressure on the commodities and related names. (Economically this is a good thing, and will allow Brazil, China and others to really kick start growth. But in the mean time, its a shock and a half for the stock market.)

Wednesday, September 21, 2011

Market Thought... the Fed and Colbert

I had a smirk when I heard CNBC say, "significant downside risk" as the Fed minutes came off the wire.  I smirked because the release was a very polite way to tell specific groups of people, "f- you" :)

The word "significant" was the Fed telling the ALL squabbling politicians to get their act together.  By not expanding the balance sheet they told the GOP, fuck-off.  By removing the yield cure, they told the banks to go fuck themselves too.

The only people the Fed didn't piss off was the American home owner.

I think I am the only one that actually liked the Fed's action today.  Even though I wanted to see no action by them, I really did like it.  The Fed knows the problems with the economy is no longer a monetary issue. Its not a bank lending issue, its not a need to expand their balance sheet issue, its a 'lack of plan, and too much bullshit for our elected leadership' issue. (As Jamie Dimon said last night.)

Since the banks are not lending to their capacity due to weak demand, the Fed took away the long-term yield to help the American home owner to save more money-per-month.  (This was done without expanding their balance sheet, and theoretically not adding increased pressure to the economy given the established 'weak' lending demand. But the loans made today will not be as profitable for the banks as they were yesterday.)

The market reacted fine to the minutes. Initially, the market started to break, but then started to move higher.  But around 3:07, well after the minutes were released, it just cratered.

IMO, the move was more technical. Unless Greece is defaulting tomorrow, and this could lead to our capitulation. Although there was some strong weakness in the transports today, from a perception that there is weak coal demand.  Even Cramer spoke up against that one.

I do not know why we broke down so hard toward the end of the day. From a technical perspective, the market was setting up to re-test the support it is currently on. (I thought it was take a few days, not less than an an hour.)

After the Fed minutes, the dollar rallied hard because the Fed's actions were not inflationary.

Maybe the dollar rally played a role, as the quants used this as a trigger to start selling, and exaggerated the decline. (Not a far-fetched idea considering the Euro-SP500 correlation lately. And the FXE broke-down after the fed minutes as well.)

Now, on a funny note: Here is Colbert's take on closing tax loop-holes and taxing the mega wealthy :)

The Colbert ReportMon - Thurs 11:30pm / 10:30c
The Word - Death and Taxes
Colbert Report Full EpisodesPolitical Humor & Satire BlogVideo Archive

Tuesday, September 20, 2011

Market Thought... interesting day

Last night, the futures were getting hammered because of Italy's downgrade. Interestingly enough, this morning a reversal took place, and we were trading much higher.  We maintained the strength up until 2:30pm.

Combing the chatter, there was nothing specific that I can legitimately correlate to the decline.  Although I do have my theories.

The strength in the face of EU negativity (Italy downgrade) highlights the divergence taking place between stocks and a potential crisis.  It is evidence to me the market is no longer pricing in a 'credit crunch', as I highlighted in the past at much lower levels.

The market is chilling at the 1200-1220 level.

To me this is very significant from a technical perspective.  This is the level that should have acted as long-term support for the rally that started in March 2009.

The support did not hold because of an avalanche of bad news, primarily the Standard and Poor's downgrade.  That improper downgrade cause about a 100 point decline on the SP500 in 3-4 days due to forced selling. (It was due to mechanics of the market.) Then, literally days later, a EU driven credit fear was spreading, adding to the deline.

In my opinion, the SP500 has pretty much removed the discount of an EU driven credit freeze.  I think the big boys finally got the message that the EU leadership (despite all their chaotic chatter) will not allow for a credit freeze to take place.

Now, the market is left with an artificially reduced multiple due to forced selling from the Standard and Poor's downgrade.  However, the long-term trend is broken, so the majority of the big boys will have a 'wait and see' attitude for earnings season.

We have already seen signs of bullish behavior with leadership forming (ie AAPL, IBM and the semis).  And there already has been action by emerging economies to ease instead of tighten. (Brazil, China)

All we need now, to change the negative perception by the big boys, is the SP500 to close above 1220. We get this, and attitudes begin to change.  I thought we were going to get that this week.  With the morning strength I thought we could test 1250 or the SP500's 62SMA.  If we can not get action in the market, then it becomes a 'show-me' story, and with earnings coming up, we will get the story.  Evidence to this is AAPL, IBM and others that moved hard. (Its not because of momentum, its because of real earnings with a strong story.)

In the mean time, I will maintain my hedge, via the FXE 138 dec puts, for when Greece finally re-structures its debt.

Neel Kashkari wanna hire me? :)

I just saw an interview with Neel Kashkari on Strategy Session on CNBC.

He indicated that he can not find portfolio managers that truly encompass global macro-environment risk toward creating and managing a portfolio. Well, he has not looked hard enough, or at least not at the 'little-fish' subsection of traders. (How can anyone ignore the little fish? :)

Neel, this whole blog is a resume of what your looking for.  Staying up-to-date on geopolitical and global macro-economic event/data, along with a deep understanding of individual companies associated with secular growth trends is what I do.  Just take a look at the 'markets' tag and go through them. (Recent favorites were my Listen to the Thunder  or Pricing a Credit Crunch posts.)

What say you Neel? :)

I figure a job with PIMCO would be a good plan B. But, something tells me I am gonna stick with plan A, start a fund. ;)

few notes... IBM, POT

IBM - Firm support near the 170 level has been established, along with the 175 level I was looking for. I doubt it goes below 170. If it does, the stock will not stay there for very long.  IBM usually run-up before earnings, then sells off, unless solid revenue growth is observed. (I will be looking to actively trade it.) It may trade in sympathy to Oracle's report. (Even though I think IBM hardware is taking share from them.)

POT - I purchased POT in the AM as it hit the mid 52 area. I am looking to actively trade it intra-day, but at current levels, with longer-term prospects of potash (the commodity), now is a really good entry point.


Monday, September 19, 2011


Trading is difficult, but forcing yourself to be patient is even more difficult.

I have to urge to start buying, but my targets have not been achieved.  I am trying to be patient, but will probably be very active on the intra-day side today.

FYI...  I still have the FXE puts (basically a Euro short), as a hedge and will not cover this position until official Greece action is taken. But I did cover light SPY put protection I took on Friday.

Sunday, September 18, 2011


Here is an update on the price targets of the few stocks I am looking to trade on a potential decline:

AAPL - While I will always maintain a position until 420-430 is seen, I will look to enter a trading position on a decline. Since I think the bullish uptrend has already started, any decline should be short lived and shallow.  I am looking for the 390 area, but probably near the 5SMA.

AXP - Hopefully it consolidates near 47ish.

IBM -   Looks to wanna test 175. But if it does not, it may move to 168. If it moves to 175 first, then the support become the 172 level.

BAC - Its hovering on its SMA. Still looking for it to test mid 6, then will enter.

GOOG - With the tech up move, Google should never see 400 again. (It never should have to begin with.) I am looking for the 530 area.

POT - I did not like the relative weakness the past two days. But on Friday, there seemed to be positive info regarding potash (the commodity) pricing. K+S priced the commodity at 375/tonne, and indicating strong demand. I am not as well read on this sector as I am in relation to QCOM, IBM, GOOG or AAPL, and do not know if 375 is below or above industry expectations for current pricing. If I had to make a decision purely based on the technicals, I would wait until the 53 area. (But the expression of strong demand may stem the decline, and allow for the 200SMA to be a spring board.)

QCOM - I am expecting a break out, and have positioned myself for such a move.  Although there was hints of stress on Friday.  If we do not get a break out, QCOM may chill near the 52 area.

SU - I am letting oil (the WTI) tell me when to enter SU. Right now the WTI looks uncertain. It can go to the 92 level or the 82 level. If it sees 82, SU may decline in sympathy, and I will enter Jan options around the price it is trading.

Also, just a note on BGCP and ITRI. I have not sold either of these names, since the market's massive declines. The reasons: BGCP yields almost 11%, so I do not mind waiting. Although it may see resistance near 7.50 area, and may sell the position I added during this market decline. (But will still be in the name.)

As for ITRI, the stock is at center stage to a massive trend a few months away, and trading at the trailing PE of 13.  There is just no way I am selling this stock at such valuations. If I have to wait a year, so be it. Because even if it trades at a trailing PE of 15 in a year, with an EPS of 4.00, ITRI is a $60 stock. (And when the growth becomes evident, the multiple will be higher than 15.)

Friday, September 16, 2011

market indicators

When everyone is expecting a credit freeze, subtle indicators are hard to come by. (The indicators get shot to hell because everyone is front running the worst-case scenario.)  However, I just want to provide a brief summary of what we know going into this weekend.

1. We know there is a ton of behind the scene talks and actions to try to remedy the potential EU credit freeze.

2. We know the EU leadership will not allow a credit freeze to take place. (That is the one unified voice amongst the noise.)

3. We know Europe is still lacking the capability to force bank mergers or provide forced liquidity to the banks. (Still need an amended EFSF.)

4. A meaningful re-structuring of Greek debt can not take place until #3 is taken care of.

An interesting 'tell' today was the hard reversal of the EU banks.  This maybe an indicator that forced mergers are coming, potentially destroying the equity in some of these names.  (I do not care if the equity of these banks get destroyed. All I care about is that a credit freeze is prevented.)

If this is the case, a re-structuring maybe happening sooner-rather-than later.  There was chatter that a 'greek-default' would not happen until October or December, but the truth is it can happen anytime, so long as the capability of #3 is ready.

Based on the SP500 reaction to this sharp bank reversal, it suggests to me the market may see a potential 'shock' after the Greek re-structuring.  But I think that 'shock' will be a capitulation day, and I will be buying a lot. (Target prices may have changed in relation to where the stocks are today.)

I am cash heavy right now, a lot of it due to the above, but also for something I am not too sure I can talk about on the blog anymore. But I am making good progress with it.

Apple rumors... f'm

Every day there seems to be a new iPhone rumor about something. (Heck, I even remember a rumor when the iPad 2 came out that suggested a further delay from the 3-5wk ship time, and the same day Apple's site reduced shipping to 1-3wks.)

The ridiculousness of these rumors are pretty fascinating.

All I know is this, if you look at what Apple will produce this quarter, they will have a trailing PE of 15.5 near a stock price of 430. So if we assume no multiple expansion, Apple is going to the 430 area in a month or two. (My conservative nature is making me look at 420.)  And any decline between now and then, I will be actively trading, along with maintaining a position until 420-430.

Also, as if I even need to be so obvious, I will be using any potential weakness to re-enter QCOM (and actively trade it).

With a break out, QCOM can easily test 56. (But if we remove a conservative nature, the high-end range is 58. And that is far from an un-realistic projection for the stock to meet.)

Thursday, September 15, 2011

IBM patents

Over the past two months Google bought over 2,000 patents from IBM. (I know IBM had a bunch of search patents.)

I also know their patent business is also a +$1B business. I wonder how much Google paid for them? I am expecting a nice one-time benefit from these purchases (on top of IBM's usual good performance) come the end of the quarter.

Depending how valuable these patents were, I am also gonna shy away from playing Google's earnings this quarter because of the potential one-time charge.

I plan on holding my remaining IBM until 175. (I am also actively day trading a few calls.)

Market Thought... euro

The ECB announced a swap deal with a collaborative effort from multiple central banks. The market effect was obviously positive, and caused the Euro to spike.  This is good news as it allows dollar funding, and allows for the Euro to take a needed bounce from its very oversold position.

With the bounce, I repositioned by FXE put protection to the 138 Dec puts. (Despite this move, when Greece restructures, the Euro will get devalued. But what is going on with the Euro is in lock step with the market psychology of removing the discount of a credit freeze.

With the market rise, I sold some IBM, but still maintain a long position.  I see some signs of intra-day stress, but it is far to subtle to make any conclusions right now.  Right now the probability favors we test 1220, or the 320 SMA.

Wednesday, September 14, 2011


We got a leader breaking out...

We got the semis breaking the negativity...

We got positive talk from the industrials yesterday.

If a systemic bank risk is taken off the table, this market is itching to fly.

Hopefully there is consolidation here, then we move up after we get more clarity from EU. But this is how I am playing it:

1. closed out my SPY put protection, and added to the FXE puts
2. eased up on a few QCOM and IBM as I closed out protection, but not what I normally would have. (ie covered 3 QCOM call options, and 1 IBM call. Currently have 7 IBM and 2 QCOM.) 

Normally, I would have been lower on my IBM, but want to be exposed to upside in case a consolidation does not take place. (Will chip away at it near 170.) My trigger finger is itchy, and I will re-enter QCOM on any decline. (If that means intra day, so be it. Unfortunately I was not at my desk this morning, so I could not take advantage.)

Market Thought... EU chatter

There was a ton of EU chatter this morning, and for the most part, was positive. Here is the chatter:

1. Moody's downgrade SocGen. No surprise there. The market was pricing this in the other day.  But a positive effect was the action BNP took.

2. BNP will be unloading about 70b Euro in risky assets. (This is basically a $95B capitalization. The sooner they do it the better, but this is really positive news.)

3. Euro bond proposal by the ECB. This proposal is much sooner then projected by Merkel. This is just a proposal, and there will be a ton of debate around it, but the fact that a proposal is coming so soon is very positive for the credit and equity markets.

4. Ireland and Portugal got far better favorable terms for the bailout funds. Their maturates are extended to 30yrs, and yield brought to zero. This is positive, but to me, more importantly it signals flexibility by the EU. The flexibility should lead to an orderly restructuring of Greece. (With Greece eventually getting an orderly default or re-structuring, I have a feeling Ireland and Portugal will be getting more 'gifts' from the EU.

All this chatter is really good news for markets, especially the capitalization.  Still waiting on the 'Greek default', but looks like the EU is taking the multiple steps needed to get a far better handle of there situation.

(I will add to my Euro short, via the FXE puts, despite any rally, as I believe a declining Euro is a part of the economic equation to fix the EU zone.)

ps... Geithner maybe doing the EU's job saying definitively 'the EU will not let a Lehman like event take place, they will not'. Referencing private meetings between Merkel and Obama. (nice)

Tuesday, September 13, 2011

Market Thought... semis

Last week I highlighted the semis, with respect to market fundies, and we will soon see that get put to the test.

It is pushing against its channel range, but more importantly it will be testing the negative trend via the 50SMA. If the semis start to change their tone, the big-boys will as well.

There is still a shit load of uncertainty regarding Europe, but I think we start seeing my EU anticipated action by early next month.

The market is straddled with resistance areas here, and as we get to 1200 its that much tougher.

But as the SP500 gets closer to 1200, and the bullishness of the SOXX begins to shine, we will have a new low-end to this market. Then, as soon as we get an amended EFSF and bank consolidation (which may go hand-in-hand with a Greek re-structuring), I think we re-gain a bullish trend.

Updated 7:27pm 09/13/2011 - And so it begins. If Cramer is thinking it, so are the big-boys.

Monday, September 12, 2011

Market Thought... endless rumors

What a freaking day.  Sometimes, all you can do is just laugh. We were negative throughout the day. (Although there were hints of bullishness, that I pointed out, but those kind of subtitles have been useless in this tap.)  Then around 2:30pm we got rumors of China helping Italy causing the market to spike, and facilitating a late day rally.

At the moment, there are so many rumors running around, if you don't catch your imagination, it can run wild with speculation.

In the morning we heard from the WSJ that the IMF/EU/ECB will give Greece the Sept bailout funds.  Allowing to a few month to prevent default. (All this despite the electricity union in Greece defying the tax hike.)

Over the weekend we got bank chatter (Germany prepping its banks) and actions (resignation of the German ECB member) that may suggest some sort of action can be coming sooner-rather-than-later.

Greece may get the next round of bailout funds, but the CDS market is still pricing in a default.  And rightfully so, as a part of the bail out funds is to organize 90% of Greek bond holders to restructure the debt. Restructuring is a default.  Everyone, and their mother, is waiting for this to happen, and appropriately, the market has priced it in.

Now, if we combine all this chatter, we have a situation where Greece restructures, banks are gonna be back stopped (to prevent credit freeze) and further sovereign issues my be stemmed by a large buyer with plenty of liquidity (ie China) while the ECB takes care of the periphery (Ireland, Portugal, Spain and Greece).

That is a bull's wet dream.  (Although I bought light protection into the end-of-day-rally, I would love to the above pan out. After all, I am what the data tells me to be, and the data is telling me to be bullish. At least toward the secular growth trends that I follow.)

But now lets be realistic. In order for the above to take place, there needs to be the funds and a plan to back stop any EU bank that would need it.  The funds will be available with the amended EFSF, and there is no mechanism to force mergers within EU banks. (Although the recent Greek bank merger may have acted as a test-run to the forced mergers that will take place.)

How the EU starts implementing their fix will lead to market action.  If things are done in a piece-meal format, the market will start pricing in the activity as steps are taken. However, for maximum effectiveness, they should do this in one shot.  Maybe right after the amended EFSF is voted on and passed, and then announce to the world the above 'wet-dream'.

Regardless of what happens here, I will be actively shorting the FXE (basically short the Euro) via put options with a December expiry. I am doing this for two reasons:

1.  To hedge my long positions.  Right now, the movement within the FXE and SP500 are very much correlated. The closer we get toward the end of September, the amended EFSF will be approved and market correlations will diverge as the market losses the credit freeze discount and fundamentals get priced into individual stocks.  So over the next few weeks, I will close out of my SPY put protection.  But the Euro will still have downward pressure...

2. The Euro will be depreciated within the next 6 months to allow for the EU mess to be fixed.

QCOM ripe, added to IBM

QCOM intra-day is ripe to move higher. Especially after the BRCM CEO interview on CNBC highlighting the shift towards tablets and the new growth trends.

I also added to IBM during the morning weakness.

There are some interesting market set ups here. Economically, I think price action is telling a more bullish story then most would like to acknowledge, but the uncertain threat of Europe leaves equity markets exposed to sudden massive (unhealthy) declines.

I will have a detailed post about this a bit later.

Sunday, September 11, 2011

Market Thought... the paradox

Will a global recession take hold? Has everyone lost their buying power? Is a massive de-leveraging taking place crushing the global economy?

Despite what the talking heads or the ever-constant-negative-folks say, there is price evidence to the contrary. The Baltic Dry Index has been rising since August 15th.

For many months now the index lost its status as an economic barometer because of the massive amounts of ships that came on line, creating a huge glut of shipping capacity, crushing rates. (Hence the flat-lining of the index.)

However, around August 15th, as the equity markets were collapsing, credit markets started pricing in sovereign defaults and EU bank runs started, the BDI started to go higher. Over the weekend I tried to find a reason. The only thing I found was a consultants view that the supply glut will moderate by 2012.

Economically speaking, shipping rates go up when there is more demand in relation to capacity. Rates rose, which means either capacity was taken off line or demand went up.

Another piece of info that I found interesting was Union Pacific's CEO stating that things have slowed, but not at levels suggesting a double dip. More importantly, he stated inventory ratios were extremely low. "The lowest they have ever been".

Basically, if we don't get a credit freeze, and the monetary easing from the emerging markets work, there will be a rush to replenish these inventories. Could the above be a prelude to this? I do not know.

An opinion I do not share, but that I did see floating around:

The rise in the BDI is actually a negative indicator, suggesting a global war. I do not share that opinion. However, in WWII rates did spike after ships were actually destroyed and physically blocking key routes making Aristotle Onassis a very wealthy man. High-tension geopolitical events between Israel and Egypt did take place near mid-August, leading Israel to quickly issue a rare official apology. Needless to say, tensions have not eased. Israel's ambassador left Egypt today. Israel is also facing high tension issues with Turkey as well, which I even blogged about.

Updated 09/12/11: China had a 30% rise in imports for August. Add the 24% rise in exports, evidence suggests actual demand is causing the BDI to rise.

Friday, September 9, 2011

patiently waiting... QCOM, AAPL, POT, IBM, BAC, GOOG, SU, AXP

(I am finally at my computer(s). Personal priorities were longer then anticipated, and surprise family issues, took me from where I was suppose to be today. If anyone from the thing visits here, my apologies. Hell, my personal life was so hectic these past few weeks I completely forgot about a planned Mets game tonight with a bunch of ex co-works. Even though I don't like the Mets, I really wanted to go and have a good time with friends. But there is always a violin playing somewhere...)

Now that we are on the precipice of another end-of-world situation, I am looking for the following.

AAPL - Acting pretty well in the face of this situation. The market is recognizing its balance sheet, product demand and overall strength as a company. It may push 360-365 (if we are lucky), on blind selling.

AXP - The credit card debt biz is strong, and the conversion to cash-to-alternative is a mega trend. AXP has been acting pretty well too, but I am hoping the 45 area is seen.

BAC - With further market weakness, BAC may re-test its recent low. I will add there. (American banks will not suffer the EU tragedy. They are too well positioned.)

GOOG - Waiting for GOOG to go below 500.  The only concern here is that AMZN showed the world how to use Google and basically cut them out of the Android loop. (Although Google will still benefit from mobile surfing.) But below 500 the stock discounts a lot more then just the AMZN threat.

IBM - Anyone reading this blog knows how much I like IBM, and the reasons. They are in all the right places and acting all the right ways. Now is an awesome value, but it may see 158ish.

POT - Ag is a mega-trend. Just look at the farmland prices. With market weakness, POT may see added weakness on Monday's crop report. Everyone knows Ag is a mega trend, so it may take an added it. Looking for the low 50s.

QCOM - Directly positioned to benefit off of the largest cell phone launch in history via the iPhone 5. Now is a great entry for QCOM, but with market negativity, I am looking to add near the mid-high 40s.

SU - A lot is being discounted here already, but as oil moves, so moves SU. Down side here maybe limited, barring an actual credit freeze. Looking for 27ish.

Rumors of Greek default this weekend

Apparently markets have broke with rumors of Greek default this weekend. From my previous Market Thought posts, a default can't happen unless there is a mechanism to back-stop the banks. That is the amended EFSF or after the default the most strained EU banks will be forced to consolidate.

I was expecting the default to take place early next month, not before the EFSF vote.

With out a a facility to prevent a credit freeze markets will collapse. With a facility to protect against a credit freeze markets will rally.

The market could see a shock to the 1160 level, then rally with the right action. Are charts be damned if a credit freeze is allowed.

(I am testing out the new blogger app to write this. Not by a computer. This post was all through the iPhone. So far so good.)