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Thursday, June 30, 2011

ag numbers

The head line Ag numbers are bearish. This is allowing POT to decline today. (This is also good for the short-term food inflation, which is good for the economy.)  But the macro-trend for Ag is still very much intact, and the sector will continue to need fertilizers/potash at a demanding pace.

As per the technicals, POT has turned with support near 55, and should continue its test to the negative trend line.


I added with the AM weakness.

Wednesday, June 29, 2011

Market Thought... normalcy

Looks like the 'expectations' post was pretty good. Greece voted in the austerity, and the SP500 closed above the 28/32 SMAs.

IMO, the market is now transitioning to make these the support for a positive trend.  We may see some follow through, but the 62SMA should be resistance.  The market seems a bit spent here, after the last few rallying days, and we may have to wait for earnings to act as the fuel. (Unless the jobless claims tomorrow are kick-ass, or the macro economic data provides the fuel. Reversing the 'top-down' debbie-downers.)

About a month ago I highlighted the major systemic threats that could derail the market in my 'no boom-boom?' post.  For the time being, investors have a sense of normalcy from the various systemic-events that place fear in the market. The only real uncertainty left, at least until Europe festers again, is the US debt ceiling. (Even though Europe is festering, I think very real progress is being made and the structural/productivity improvements, that should have happened years ago, will make Europe a very interesting place for investors and make the Euro a legitimate global currency.)

The action in the 10yr also suggest the biased is now toward the equity markets again.

Obviously it is in a negative trend, but the action is encouraging toward a shift in attitude.

some thoughts

Austerity passed, so I covered my protection and entered ATI in the am.  Currently letting my positions ride. I want to enter POT, but I will wait for the crop report tomorrow. (I am thinking there maybe a 'sell the news' on the report. If there is I will add on the decline. If not, and it rallies to its negative trend line resistance, around 59, I will unload my current position there, then actively trade around that resistance level.)

And just a side note, I normally would have day-traded some AAPL with the AM weakness, but with the lack of real time, and crazy emotions the stock has already given me, I refrained. Apple should base here for the next couple of trading days due to the resistance highlighted in the previous post, but as the quarter's end approaches I am sure a bunch of big-boys do not want to be short this stock.

Tuesday, June 28, 2011

Trade... ATI

If the austerity passes, ATI is setting up for a continued run.  With financial stability in place, aerospace will continue to shine.  The aerospace and defense index is on the verge of a breakout from its current negativity.

The resistance is from the SMAs, and once it breaches, the PPA should rally to 20.50.

In sympathy, ATI has bounced off its daily 200SMA.

Obviously ATI has some resistance of its own between 64-66, but with the continued aerospace boom, ATI should test its upper range by year-end.  With a passing austerity, I will make an initial entry of the Oct 62.5 calls. (I will be actively trading it around its potential resistance.)

hypothetical note on IBM

Currently IBM is at 170. If one was to assume IBM simply mimics the SP500 performance going forward, assuming austerity passes, and the market continues to rally, and reaches 1370 again, IBM should see a market price of 180.

The math:

To get to 1370, year's high, the market needs to move about 5.9% from current level ([1370-1293]/1293). If we apply the same appreciation on to IBM from the current level, we get 180 (1.059*170).

This also jives with forward looking accelerated earnings 2 quarters out, although the above market correlation would suggest IBM sees a higher multiple.  A multiple around high 14s or low 15s, which is very doable.

Just throwing the thought out there. (I will look to actively trade IBM w/my current position between 172-178. In the mean time, I am not touching it until it passes 172.)

Technical note on AAPL

When Apple breaks the 340-345 resistance level, seen within the negative trend line of the daily and SMA points on the weekly charts, it will most likely go to 360 quickly.

Aside from the technicals intimidating who ever is short right now, AAPL is also looking at accelerated EPS growth this quarter and the next. (Meaning, rule-of-thumb valuations are in Apple long's favor as well.)

The only thing the shorts potentially have at this point is a 'no-vote' on austerity or the health of Steve Jobs. The former is looking more promising, especially with the efforts the French, German and Italian banks making an effort to have a soft-restructuring. As for the later, to anyone shorting AAPL for that trade, my thoughts remain the same, Fuck you.

Monday, June 27, 2011

stop-start chatter gets louder

A great info/expectations coming from Johnson Controls on stop-start, which is subsequently really good for AXPW.ob.

Reuters Article highlights:

1. Globally, start-stop will be used in 52 percent to 55 percent of new vehicles built in 2016, up from 8 percent in 2010, Johnson Controls told analysts

2. Shutting down the engine by this method can save 5 percent to 12 percent of fuel and polluting emissions in conventional gasoline-powered vehicles

3. nearly 25 million vehicles will be built with the advanced batteries allowing start-stop in 2016, up from 7 million vehicles in 2011

4. overall start-stop battery sales will be 35 million within five years, including batteries not put into new vehicles

5. advanced batteries will yield three times the margin of more conventional lead-acid batteries [here is where Axion will shine]

6. expansion of start-stop technology is driving demand for newer batteries, called absorbed glass mat (but the BMW presentation showed that AGM w/PbC has far better performance then AGM alone)

7. "In this competition, start-stop has gained share because consumers perceive real value from the application and are moving it forward up the adoption curve," Kim Metcalf-Kupres, vice president of global sales, marketing and strategy

8. Brian Johnson, analyst with Barclays Capital, said the 25 million batteries in new vehicles by 2016 estimate by JCI is up from the company's earlier statements of 17 million.

Years ago I was in Great Adventure. I went to a concession booth to get some food. The two main areas had really long lines, but there was this one guy in the booth near an obscure window on the side of the booth, who appears to just be waiting.  I took the chance to by-pass the long ass lines, and place my order from this obscure window.  Once others started to see the guy actually process my order, the obscure window was no longer vacant. The mob came.  This same feeling just came over me, while reading this article, with respect to AXPW.ob.

Everyday that passes, the increasing chatter makes me more excited about Axion's prospects.

quick thought

The past couple of days there has been increased chatter about the willingness to restructure terms. A scenario that maybe on the table and I think would be an even bigger win for the markets, and possibly an economic win-win, is that Greece passes the austerity (gets the short-term money) and then EU/IMF/banks agree to a bond restructuring (in the very near-term).

(But this would rely on a work around the 'term' default as the rating agencies made their definitions quite clear. I have such disdain for these worthless agencies. They are truly irrelevant in modern real-time data finance.)

I think this scenario could cause the markets to rally to 1400-1450 or so.

Saturday, June 25, 2011

Market Thought... expectations

Over the past few days I have already stated my position with where the market stands.  The closer we get to the default/no-default vote, IMO, the clearer potential actions become.

The SP500 is sitting near its 1250 support, while the shorter trend SMAs are coming down.  Basically, the market is finding a base here.

Market action will be predicated on a vote.  If Greece votes for the austerity, the market will see a sizable move, breaking the negative 28/32SMA. These SMAs will become positive trending supports again.  With a yes vote in hand, I will quickly cover my SPY protection and add to my long positions.  With earnings, the SP500 goes to 1400 by year end.

If Greece rejects the austerity, there is a sizable gap toward the next level of support. The recent chatter has caused me to take on protection.  Re-enforcing the concept of protection was Sheila Bair stating in a speech last night that 'you just need to bite the bullet sometimes' and restructure.  The willingness on her part to accept the restructuring as a course of action I think suggests the contagion fears are overstated. And while Bair and Dimon differ on the concept of capital requirements, it appears they agree on the potential contagion fears of a default on Greece.


So if a rejection takes place, the SP500 probably has about a 5% move lower, where we will see a huge spike in the Vix. The combined set-up, lacking sizable systemic risk and minimal effect on the global economy, will have an awesome buying opportunity.

With the dust settled, I still think we can get a rally to the 1300-1350 level by year end if there is a no-vote on austerity. (Of course this assumes the US debt ceiling is raised.)

If the SP500 approaches the 320SMA, I will look to add a bunch of names, but a few in particular. (ie IBM, ITRI and POT)

IBM - This is my second largest position, AAPL being the largest. Cramer had a good rant on it the other day. (But I would like to point out that I was behind IBM well before Cramer :)



Now is actually a good time to enter IBM, assuming the austerity gets passed.


ITRI -I really like it here due to its prospects over the next few years. Once the Smart-Grid gets standardized, ITRI will see very nice growth. But if the market goes down, an opportunity to get this thing below 40 is really possible. I will be purchasing this name upon a market decline.

POT - The fundamentals in the Ag business is very intact. The weakness due to commodity price weakness is an opportunity. At the 50 level there is strong support. If the market declines it may test its 47.5 level, which is really strong support. (This is the price BHP offered to buy the company.)

Friday, June 24, 2011

protection

As of this morning, the Greeks should have enough votes (3) to get the austerity measures passed. (There have been two potential defections in two days.)

As highlighted in a previous post, I think there is two potential outcomes here:

1. passes, markets rally

2. does not pass, Greece defaults and hopefully the European banks are immediately infused with capital to mitigate the contagion risk. I think this scenario will still cause the SP500 to push toward 1200.

The vote is taking place June 28th or 29th. There is just too much uncertainty to bet one way on this. I took out SPY put protection for the current positions that I have.

Wednesday, June 22, 2011

Market Thought... chillen

Seems like we will see technical movement until austerity passes or doesn't.

The market simply pushed back from the 150SMA.

Plenty of resistance/support over the next couple of days for a drifting market w/out a catalyst.

Some chatter that I found interesting today:  Merkel  gave a warning that a restructuring will have a completely uncontrollable effect on the financial markets, with the subsequent domino effects. Not to encouraging in that I assumed they had a 'plan' in case Greece did not pass the austerity measures in yesterday's Market Thought post.  It would appear they got their thumbs up their asses in Europe not planing for a default or this could be more political rhetoric that has become nauseating. Bernanke put my mind somewhat at ease as he indicated that the Fed had the US banks do a stress test to see the impact of a default, and painted a realistic picture. At least he made it seem like the US was anticipating the default option.

We shall see.

Market Thought... trader's wet-dream?

Papandreou got the confidence vote, now the vote is on to the austerity plan. The EU is allowing Greece to choose its fate.  By July the world will know one of two things. 

1. Greece adopts the new austerity, and gets the bailout funds. 

The removal of a systemic risk allows for a realization that the market is extremely undervalued with the new found sense of (relative) stability.  A sizable rally ensues because the big-boys will model SP500 based on earnings and reasonable PE metrics.  (With an SP500 2011 eps of  $96, and a PE between 14-15 (below average), the SP500 range should be 1344-1440.)

or

2. Greece rejects the austerity

By rejecting the austerity it goes into default causing a banking crisis. The systemic risk becomes real. Everyone and their mother knows it, and has been talking about it for a year. The market has even been anticipating some level of systemic risk.  So the question becomes, why wouldn't the EU know it or anticipate it either? The EU powers-that-be had a year to prepare for it, and has a very sizable monetary facility they can use to infuse the banks with capital to potentially back-stop the contagion. (This is pure assumption, but if a plan was not devised, well then they are morons, and I just don't think they are morons.)

This will lead to a ton of increased uncertainty, and even provides a way for the EU to remove Greece from the Euro. The markets will continue their slide, but depending on the potential back-stop, the actual systemic risk could be mitigated (if planned properly).  If decisive action is taken to mitigate the bank concern, then the SP500 should only test around the 320 SMA.


Despite the if/then scenario that exists over the next two weeks or so, I think there is clarity as to what should happen. And clarity-of-action is the wet-dream of all traders. (Or is it just mine? :)

Tuesday, June 21, 2011

Confidence vote at 5pm

Well, here we go. Will Greece stay or go? A selfish part of me wants them to be politely kicked out of the Euro. (My vacations there will become dirt cheap again, I miss those days :) Another part of me is concerned about the market reaction. (However, this all depends on how the EU handles the banking risk.)

Here is an interesting take on it, although the ECB's position on the matter refutes this:


As highlighted in my market though post 'power-play', I do think the market is pricing in a shock. If Greece is ousted, and the systemic risks to the banks is handled correctly, the market may see minimal damage from it. Maybe test 1200 on the SP500.

I just hope the powers-that-be have a strategy in place to mitigate systemic risks. So much uncertainty.

Monday, June 20, 2011

Market Thought... power play

I am not shy to actively trade when I think there is an opportunity, and I believe conditions have aligned to which I will seek to make a power-play.  I have been keeping cash readily available, and I have been patiently waiting.

Recapping the conditions of the current market:

In the Market Thought post 'no boom-boom?', four potential systemic risks were assessed. IMO, the post is still very valid, but what has engulfed the current mood of the market is Europe's handling of their debt crisis.  This issue was always an over hang, but a crappy Jobs report in early June caused much of the technical breakdowns with the market.  The breakdown was sparked because of the reduced earnings assumption coming from slower economic growth.  This was highlighted in the Market Thought post 'top-down'.

Since May, after earnings season, the market has seen a systematic sell-off causing a huge discount within the market. (An example of this is AAPL literally selling below a 12 PE, backing out cash. Or GOOG selling with 13 PE when backing out cash.) The list of examples can go on-and-on-and-on.

Technically, we are in an interesting position.  In the Market Thought post 'obvious', the obviousness of the big-boys was highlighted. Also, the fact that the NYSE composite index has strong support at its 200SMA.  This was predicated on past performance.

This performance is correlated to the SP500 performance in that, the SP500 major support is the 320 SMA.


But right now we are in a situation where the SP500/NYSE composite supports are not lining up. Either we bounce from here or we test the 320 SMA on the SP500.

Current market players have a situation where earnings of companies are yielding north of 7-9% (1/PE), while short-term rates are very very low.  Global economic growth rates are slowing, but still growing pretty nicely. And, unfortunately, have uncertainty from Europe and the US (on the debt ceiling) that have very real potential systemic threat concerns.

The current discount the market is seeing (market yields of 7-9% vs a 10yr note of 2.9%), is so severe that it looks to be pricing in a 'shock' to the system.

Basically, at current market levels, the market is expecting more than just a 'soft' restructuring from Greece. It is expecting some level 'harsher' debt restructuring. (The market has gotten so many mixed messages from EU leaders that I do not blame the big-boys for systematically selling-off the market. Uncertainty causing a discount in pricing.)

Based on performance of companies, I just do not know how the market declines further with out a systemic threat to the system.  How I will play it:

1. IF, the EU maintains fiscal support while cleaning the structural issues in Greece, weakness toward the 1250 level I will add long positions. (IBM, AAPL, GOOG, POT etc)

2. IF, the EU keeps up with the bullshit confusing media leaks, and the SP500 decides to tests the 1200 level (320 SMA) I will look to enter the markets pretty heavily.

I think Europe provides fiscal support, while fixing the structural issues (that should have been fixed long before allowing countries to enter the unified currency).  The only way I sell my entire position, and go very heavy short the equities markets is if Washington does not raise the debt ceiling. (By not doing so, they will have effectively lost America's economic dominance, and quite literally will put the entire system at risk, again.)

Thursday, June 16, 2011

IBM's 100th



The video was made before Watson won in Jeopardy!, cool video none-the-less.

interesting

The SP500 is off by a bit, compared to yesterday, yet the VIX has skyrocketed some 15%. Basically, the VIX is up about 30% in two days. That's a lot.

Also, I am feeling max pain on my Apple position. And ATI looks really interesting here, especially with Boeing announcing their current market outlook this morning. Normally I would ease into the name now, as it is sitting on its 200SMA support. But the negativity in AAPL and POT is forcing me to be very disciplined and initially adding where my double up position would be, around mid 55.

Market Thought... the clusterfuck

I was originally going to write an angry post about the defeatists in this world. The kind of people who see no positives, but only the negatives.  Who's forecasts give little hope for me and future generations to live in a relatively stable innovative world.  The post was originally going to be riddled with fuck them, fuck this and, of course, fuck that.  But after the past couple of days I have been having, on a personal level, I am just too tired to be angry.

Now, with the clusterfuck that is Greece, the market came in today. With in the 'bounce' post, I highlighted that the current area of the market was going to be tough, but the 'toughness' was exacerbated thanks to Greece.

My market thesis for the summer is predicated on my 'summer of discontent' post. So far, the thesis is holding up.  And true to form, we are near 1250, and I have closed out any protections/shorts and increased long positions.

What is also interesting today, is that the VIX spiked about 16%. The severity of the spike, and the level of SP500 support, suggests a bottom.

Of course this assumes a systemic issue does not take place. (Like a hard restructuring of Greek debt or the US debt ceiling not being raised.)

The schmucks in Washington better get their shit together, and show reasonable progress to increase revenue and cut spending.

As for Greece, you always have a place in my heart, as you are the land that fed my parents. But for fuck sake, you have been living in a corrupt 'fakelo' bullshit society for far too long.  Unfortunately it is only through this crisis will any proper structural changes take place to allow that 3rd world country to reach its true potential.  (Anyone that has led that country, and has not pushed for more efficient structural reforms should be barred from politics. As those leaders allowed their steaming pile of shit to get higher and higher over the last 20 years.)

Tuesday, June 14, 2011

Market Thought... the bounce

We got a nice bounce today thanks to China's soft landing. (But I also think the action after the VF corp/timberland acquisition told the big-boys the market is very undervalued here.)

I think the Market Thought post 'obvious' is in play, but the above information gave a very nice catalyst for the bounce.  Although we had nice action, technically, we are in rough waters.  The SP500 passed the first round of resistance with the 5sma, but it push downward after hitting the 150SMA intra-day.

The action was so nice, we may have follow through, and the 150SMA may only have been intraday resistance. But after that its the 14SMA and the 1305 level. The 1305 level is also indicated by the weekly.

I think earnings will allow the SP500 to breach these resistance levels, but on its own, I am not sure if the 1305 level can be breached just yet. (Unless we rally into earnings, and earnings becomes a 'sell-the-news' event.)

Updated review of Axion Power

In March I  re-assessed my fundamental thesis on Axion Power (AXPW.ob).  Since I could not sleep, and the decline in its stock price, I figure now would be a good time to update the assessment.

The premise of my investment in AXPW.ob is that the company will benefit from two things: 1. stop-start technology and 2. grid storage.

1. Stop-start technology (if anyone does not know what stop-start is, read here):

- The stars started to align for the stop-start implementation when Ford told us, via a Press Release on 12/27/10, that they will implement the stop-start in 2012 on North American cars via the EcoBoost engine.

- A recent study by Pike Research indicates the potential market for Stop-Start vehicles will be some 37million annually by 2020.  (The study also indicates slower penetration in North America, but Ford is paving the way.)

- Johnson Control will invest $420M globally to support the stop-start market.

-Axion presented jointly with BMW (I will say that again, presented with BMW) at the largest Lead-Acid battery convention regarding the PbC technology. (Which showed very impressive performance compared to other batteries.)

The stop-start market looks more and more interesting and exciting as the days go by.

Unfortunately, there is not enough operational-cost information to clearly gauge a proper revenue/expense model via mass production of a PbC battery Axion would produce or as a component supplier of the PbC technology to OEMs. Instead, I look at AXPW.ob from a market capitalization perspective, and ask a simple question: Does a potential market size of 37M by 2020 merit a current market capitalization of $55M?

With the impressive data on how the PbC technology performs, and increasing evidence of its sizable market, I think a $100M market capitalization on AXPW.ob is conservative and a potential minimum.

2. Grid Storage:

There are a ton of estimates circulating about the size of grid storage. In a recent speech by Vinod Khosla, he highlights what energy storage is competing against, and IMO, it suggests why there is such a wide margin with respect to estimates.  But John Petersen had a good write up on the potential market back in March.  Basically he highlighted the potential market to be $50B globally.

This potential $50B is before industrialized countries, heavily dependent on nuclear power, have announced the end of their nuclear ambitions.  (Swiss, Germany and Italy) The energy vacuum will need to be replaced by alternative energies.  Alternative energies (ie Solar and Wind) need to have a storage to even out the load onto the grid. The lack of nuclear energy severely increases the need and potential size of this market globally.

However, the realization of energy storage valuation is a year or two out. Outside of the validation needed for the battery functionality, imo, there needs to be mass market smart grid implementation. But to have mass market smart grid implementation, standards are needed. Industry discussions started in February. (Some progress was made, but there is still work to do.)  This will not stop testing and minimal commercialization, but to realize mass market appeal standards are needed.

With the type of data the PbC technology produced with stop-start, there are real reasons to believe the performance can translate to grid storage performance.  And if the PbC technology can bring the cost of Lead-Acid batteries used within the grid to below $100-250/kh, Axion will have a solid foot hold in this sector. (That, imo, merits a valuation far far higher than $100M.)

Axion is also working with Norfork Southern testing batteries powering locomotives. I do not include this aspect into my valuation assessment, but the studies from the results, imo, continue to suggest the grid storage application will work.

Obviously, this is a speculative name, especially with a ".ob" behind its symbol. This is why I only own 4000 shares. (And yes, I still do a shit load of due diligence even if I own only 4000 shares near current prices :)

Monday, June 13, 2011

MSFT... get it together

I saw an article on Forbes regarding the Skype deal, and I had to opine. For anyone invested in MSFT, it must be frustrating, but this is the simple fact that plagues Microsoft:

They have all the pieces they need to be a Web 2.0 (and even Web 3.0) company but their integration of these parts suck. The lack of integration, causes a very hard user interface and is ultimately rejected.

Google unifies part of its business via the public cloud. ie Google Docs, Gmail and the effortless communication ability. (I love it and use it a lot. Although they definitely need to purchase Talkatone if they want a truly cross platform communication/social tool. Their own Google Voice offering is too harsh on iPhone users, and Talkatone allows for the functionality I was looking for via Google Voice/Chat.)  Google has a bit more to do, but in a far better position then Microsoft.

Apples will be the only company that bring everything together via their private cloud (iCloud). (As I indicated in 2007 the iPhone would have Apple usher in the true mobile experience for the average user, they will make people realize the awesome benefits of the Cloud.)

These other players could have, as they have all the pieces to do so, but failed to do it.

As an investor, will you 'wait' for the competition to do, or go to the company that already does?

Saturday, June 11, 2011

Market Thought... obvious

There has been a lot of chatter that the market will just keep going down. Everyone is expecting it now. The negative side has become the obvious play.  When trades become obvious, I think twice.

A close look at the SP500 suggests it can find support between the 1250-to-1270 levels.

We are at the upper-end of the potential support.  However, it is hard to say with, any conviction, that a weak-upper-ban support will act as a spring board.  There is just way too much negativity inspiring the obvious to be so bold.

Instead, I would rather point out a few interesting observations that may allow for the 1250 area to hold support.

First, the NYSE Composite index is approaching a very strong support. Its 200 SMA has consistently acted as a spring board, and we are very near this levels.

Second, a discussion about oil on The Kudlow Report highlights an interesting supply side argument where the WTIC will be going down due to new pipelines. And these supply side developments are the reason for the WTIC/Brent disconnect, and that the WTIC will keep declining. (Something not mentioned in the discussion should be the psychological effect of this new supply to all the hedgies hoarding crude. They may look to unload their reserves now, or wait another 6-12 months until the demand side elevates the price again. But with the potential unfriendly futures spread to develop, they will most likely want to unload, exaggerating the price decline.)


Third, and most important, earnings season will be upon us in July.  As earnings caused us to rally in April, they will cause us to rally again as premiums have been completely removed from this market. (Remember, the BRICs are slowing, but they still growing at a very healthy clip that will maintain global GDP growth of +4%.)

The equities markets are very very oversold, and individual names are getting really really interesting. For instance, Google. When they took a hit last quarter I indicated I would wait for the stock to get toward the 500 level w/market negativity before playing it again.  Well, here we are. I am looking to play the Dec 2011 500 Calls when GOOG breaches 500.  Around 475-500 is a support area.

Friday, June 10, 2011

Storage Talk by Vinod Khosla

Vinod Khosla recently talked at the Energy Storage Association, and here is a good article about it.

There are a lot of interesting points, but the key take away to the sector was to lower the price. He completely dismissed the current tech in Li-ion batteries for the application. (And blatantly said A123 will not exist in 10yrs. ouch.)  Khosla indicated "the bar for storage as round-trip efficiency better than that of lead-acid batteries with costs below $100 per kilowatt-hour."

Axion's PbC tech lowers lead-acid prices even further by allowing for increased cycles. It is only a matter of time, but Axion needs to do a better job at marketing itself to wall street.

Thursday, June 9, 2011

Market Thought... trigger finger

Due to the 'summer of discontent' post, I am expecting the SP500 to ultimately push to the 1250 level. In the mean time, here is where I think it can go short-term.

Late day weakness settled the closing price on short-term SMA resistance.  The market is still pretty oversold, and with some 'not-so-exciting' data tomorrow, it may see some follow-through on this oversold bounce (maybe to the 1305 level).  If no follow-through is seen, it only re-enforces the thesis that it will test 1250 sooner-rather-than-later. (I took on some protection with today's advance, and if the 1305 level is seen, I will add to the protection.)

Also, some thoughts on copper and BGCP:

1. China's housing market is officially in negative territory. China has a ton of money to absorb this issue, however I do think it only re-enforces the negative thesis toward copper.  With FCX advancing toward its 50SMA resistance, I added to the short.

2. BGCP saw a nice move today, and a lot had to do with one of my favorite CEOs coming out defending the business.  Howard Lutnick is such a shoot-from-the-hip, and honest CEO. (Although I do disagree with the fact that QE3 is needed.)


Wednesday, June 8, 2011

FCX

The aura of macro-economic negativity should not be good for copper.  Copper should decline too. The technical set up is interesting.

It is not as oversold as the rest of the market, and it looks to want to come down.  The copper chart corroborates the technical set up of FCX.

The oscillators suggest FCX has room to go down before getting oversold, and the SMAs are acting as resistance.  There appears to be no support until 47.

If the jobless claims are really good tomorrow (so good that the number is in the 300K range, which I kinda hope we see) the market should rally hard.  If we see a rally (and I am hoping we see one), I will most likely add to this short.

venting...

This summer is shaping up to be a boring one. A slow and steady bleed via the macro-economic conditions highlighted in the previous Market Thought posts. The best strategy will probably be going long equities (as they are very inexpensive), but consistently selling calls against them (as the market will continue to provide a discount until macro data improves). Or selling calls/puts at the right times to capture the sucking of premium from the lack of volatility.

(Unfortunately I am closed off to this, as I would need real-time action to properly time the positions. Sucks ass for me! Instead I am relegated to basically a 'buy on weakness' or 'sell on strength' via a multi-day trend because I do not have real-time tick-by-tick data.)

sucks ass.

trade... ati, FCX

I bought two 57.5 Oct calls on ATI this morning.

update: I also shorted FCX. Plan on covering the short at 47.

Tuesday, June 7, 2011

Market Thought... top-down

There is no secret to this negativity. The market started stalling before earnings season. It did so because economic data was coming in lighter than expected.  But it rallied hard during earnings season because earnings were too strong to ignore.

The 'stalling-market-due-to-weaker-economic-data' is an example of the top-down analysis.  Economic data extrapolated to the equities market assuming a weak macro-economic picture means weak individual earnings.  But when the majority of the SP500 reported earnings, the earnings were simply kick-ass (some 66% beat). (Some beats were so severe the analyst got the estimates wrong by some 15-20%, ie AAPL.)  This is the bottom-up approach. Push comes to shove, equity markets are predicated on profits.

The reason the majority of SP500 companies beat, and are doing better than expected, is because the majority of SP500 companies are global enterprises exposed to the global-GDP, not just America's.  (FYI... Global GDP is projected to be 4.2% in 2011 and 4.6% in 2012 by the OECD.)

Regardless of the above sanity, the technical set ups are now causing the big-boys to act like chickens-without-heads, causing more negativity. (Uncertainty causes discounts, the big-boys are uncertain, so the market is discounted.)  The negativity, and technical supports, were highlighted in the 'summer of discontent' post. (I will refer to this post everyday if I have to :)

Basically, the current psychology of the market is held hostage to marco-economic data.  Because this is causing the top-down assumptions of negativity, I am paying close attention to every economic data point that comes my way.  I will be consistently posting my thoughts on them on tumblr. (link is here, and will always be at the top-right corner under LINKS titled 'shit happens')

Late day action was not encouraging today.  There is a high likely hood that the SP500 tests the 1250 support before August. (Especially when we factor in the uncertainty of the debt ceiling tit-for-tac. As congress and the senate play the game, 'who wants to be the asshole', 1250 seems like a foregone conclusion.)

A good idea maybe to hold SPY or QQQ protection throughout the summer months. (But I still think the declines will provide simply awesome buying opportunities. Especially since I think so many stocks are great opportunities now!)

ATI

Instead of the 62.5 Oct call, I will play the 57.5 Oct call.  I will make my initial entry when the slow stoch (red line) touches/slightly breaches the 20 mark. Then I will double up when/if the red line collapses the 20mark.

It tends to see a bounce when the red line of the slow stoch touches the 20 mark. But I am anticipating more macro weakness than usual, so it may breach. These set ups have usually lead to pops in the stock. I will be playing it for these pops. (I am letting the oscillator guide me on this one.)

some thoughts and venting

Took a half a day at work today (got a Dr appointment at 1140am so I took the morning off). Watching the tick-by-tick on my collection of stocks, and it is so soothing.

1. Apple's action is by far the most frustrating at the moment. (It has a 'money-pit' status on my portfolio again.) Normally I would just sell it, and be done with it, but I know the company too well.  The action does suggest a draw to the 330 level. Basically, everyone knows the upside and downside, and the action is just 'blah'.  Upside will develop when the earnings report gets closer because they will crush estimates, again, and the short know it so they will look to cover before then. Down-side can develop at anytime, especially if we hear something negative about Steve. In the mean time we are in the Summer of Discontent.

2. ATI looks really interesting today. The action does not suggest 62 (or 62.19) will be breached. If I get the opportunity today, I will most likely enter (an initial entry) when ATI is at low 62. I will purchase a few (2-3) 65 Oct  2011 calls.  However, I will be active trading it.

Monday, June 6, 2011

Market Thought... perspective

I knew I would have to keep re-posting the 'summer of discontent' post throughout the summer (and that's the reason I titled it "summer of..." :)

Cramers show-opener rant, imo, epitomizes the big-boy mentality right now. And rightfully so, concerns are legitimate, but the only new economic data point that changes the bullish thesis is last month's job growth.  One month does not make a trend, but there are no bullish catalysts right now.  Earnings season has past, and the psychology is 'blah'. (Although I disagree that estimates have to be cut. I understand the top-down approach would inspire such a thesis, but the bottom-up approach simply does not suggest a earnings reduction. At least not at the companies I follow.)

Instead of bitching about it, I prefer to take advantage.



Since the beginning of May, from the May high (1370) of the current rally, the market is down 5.8%. Since last week's ADP report the market is down 4.1%.  The rate of decline for one week is too fast. I am looking to short the SPY for protection (132 or 133 Aug Puts) when the SP500 approaches 1305. (I would normally be far more active day-trading protection with this market, but I still am lacking real-time tick-by-tick at the office, and that closes me off to intra-day indicators and shift in market psychology. It does suck so very much.)

So impressed

There is just too many things to be impressed about already with the WWDC 2011, and they haven't gotten to the iCloud stuff yet. (With the exception of wireless set up for your OS device.)

link to presentation

Apple just rocks.

update 2:20pm: iOS 5 will supported on 3GS. That means they will keep capturing the lower end market.
update 2:35pm: iCloud is the kicking-while-down for Microsoft. (The PC is even more of a commodity now.)

Sunday, June 5, 2011

Market Thought... summer of discontent

Technically, things are looking pretty crappy. Or at least the set up is making the big-boys think twice.  We have a set up where all the major daily shorter-term SMA support has been breached.


However, the SP500 is oversold on technical support, and now approaching the loner-term 150 SMA support. It is also on the weekly 28SMA support.

IMO, some pretty strong support. However,  looking at these charts, it is obvious that the next leg of support is a ways down.  The daily indicates the near the 200SMA and 1250, which looks to be very strong support. The weekly indicating the low 1200s.  If these supports can not hold, the ultimate support for the current long-term trading dynamic of this rally is at the daily 360SMA.


Superficially, the SP500 seems to be at a precipice.  But we are far from superficial :)

The companies of the SP500 are on track to do some $96 eps in 2011, and Goldman estimates $104 in 2012. (This was corroborated by the recently strong earnings season, and further supported by comments of economic strength in transports, industrials and Jamie Dimon over the last week.)

The type of earnings growth, and beats, we are witnessing should merit higher multiples. At the very least an SP500 that is trading with a PE of 15. The trading dynamic of this rally (starting in march 09) has seen the SP500 trade with a trailing PE of 12-15.  The higher the systemic threat, the lower the multiple. (This was evident last summer as the SP500 tested the 360SMA.)

If we see an eps of $96 by year's end, a trailing PE of 14-15 would lead to an SP500 range of 1344 to 1444. Similarly, if 2012 is to see an eps of $104, a trailing PE of 14-15 would lead to an SP500 price range of 1456 to 1560.

An SP500 that hovers around 1290 for the year is basically projecting flat eps growth. However, we already have confirmation that despite weak economic data, this is not the case. So the market 'should' bounce to reflect price action of normalized multiples.

'Should' represents a sane market psychology, and we know the market is far from sane.  If the market declines to the 1250 level, this would represent a consensus of reduced eps.  We already know that this is not the case, and if the market does approach these levels, it is a very good buying opportunity.

IMO, the only way the SP500 goes below 1250 (and I hesitate to think we even get to 1250 but with a market that allows a company like Apple to trade with an ex-cash multiple of less than 13, I would not be surprised), is if a systemic threat to the system occurs.  However, with proper EU reform taking place, that is one major uncertainty removed as a systemic threat.

Friday, June 3, 2011

Stop-Start developments

Fairly frequently I do a search on 'stop-start technology' to gain more insight into the potential size of the market for my Axion (AXPW.ob) investment. (I say investment because I will not actively trade it until it sees a +$200M market capitalization.)  Today's search produced an article from a Lithium Battery blog (the irony does not escape me), where it states the potential size of the global stop-start market is 35M units by 2015.

That was interesting onto itself, as it gives a basis of the market, especially since the data suggest Axion's PbC tech via lead-acid batteries will be the primary beneficiary. But what really got the small little hairs in the back of my ears/neck perky was the statement that Johnson Controls will invest up to $420M on the stop-start effort globally. (I verified this on Johnson Controls web site.)

I usually do not post this type of info right away, and keep it to build a more macro fundamental assessment, but I felt this info was pretty telling.  Think about it...

The data produced to date on stop-start batteries has the PbC tech as the clear winner, that makes the concept of stop-start viable. The market cap of the company that owes this tech is currently around $60M. Yet Johnson Controls will be investing $420M over the next two to three years on stop-start technology.

There is a huge market disconnect here. Either Axion Power will get bought out (since Johnson will spend $420M, I think we just established a low-end acquisition price) or the market will eventually recognize this disconnect.

employment situation

A review of the non-farm payrolls is interesting. See Link.

The most interesting aspect of it for me is that the temporary services, which is usually a leading indicator to the employment figure, suddenly dropped after March. It was growing, and when from 30 to the negatives very quickly.

This begs the question, what happened in March that caused companies to suddenly stop hiring?

Well, the tsunami and nuclear melt down freezing the third largest economy in the world.  The more I look at the data, the more I realize just how much this disaster has hurt the supply chains and corporate psychology.

One bad month does not make a trend. IMO, the bad data seems to be justified, and I am leaning toward these numbers being an anomaly due to very extraordinary events.

Also, some good data from the report was the Ave Weekly Earnings rose again to $790.51, despite the low 83k private sector job growth.

trades...

I covered my SPY put protection, added IBM and DIS.


I will probably add POT by the end of the day.

Thursday, June 2, 2011

trade targets... IBM, ATI, POT, DIS, SPY

(I'll update this post with charts when I can.)

Looking for target prices on the below names to add, enter or re-enter:


IBM - around 164 due to the weekly SMA support, and the trailing PE going below 14. (The daily indicates some support, that is why I added the other day.)



ATI - 60-62. (The stronger support is around 62, but depending on market weakness, I can see it briefly going around 60. Although it is acting nicely today.)



POT - 50-54. I do not seeing going to 50 with so much SMA support around the 52-53 level, but it all depends on the level of negative sentiment. (Although I did start entering this morning. The overall trend is just too powerful for Ag.) I will expect a pull back near the negative trend line around 59-60.



DIS - 39-40. It looks really interesting right now, but if negative sentiment takes this market, it may get pushed toward the 39 level.  Although, from a multiple perspective, it is very very attractive here. (It usually trades with a trailing PE of 19. But DIS is washing out the recent weak quarter result.)



SPY puts - With the additions to IBM yesterday and POT today, I added a protective short position. I will look to cover near 1290-1300. If the market decides to rally cause of a good employment number tomorrow, I will look to cover the position if the 14 SMA begins to be breached.

Wednesday, June 1, 2011

Market Thought... data

The past few days we saw economic data that was pretty bad. Really no way to sugar-coat it, from housing to the PMIs of the world, the data was not great.  The kicker, and the one that really matters, is the jobs data.  The ADP report was the sucker-punch.

A slowing global manufacturing sector is not a strange phenomena. We knew the effects of the tsunami and supply chain issues were going to be seen around this time of the year. This was factored in already, that is why the market was shrugging off most of the data.

Today should have been a follow-up day to positive market action from yesterday, but the ADP report knocked us. The report really took me by surprise.  I monitor the web consistently, and try to pay attention to any subtlety that would hint to a butterfly-effect of positive/negative outcomes, and nothing hinted to such a poor number. (I am not going to try to speculate as to why it was so poor cause I do not know.  Maybe their survey was corrupted by the supply chain issues, giving a false expectation or causing a temporary hiring slowdown.)

I still think the economy is in good shape. (The data still tells the tale of sustainability, despite the spectacular natural event that proved to slow manufacturing.)  Some recent data that has been getting little attention is that SP500 companies have a combined $960Billion waiting to be used. The payout ratio of companies is at its lowest since 1936! (There is going to be a flood of money coming to equity holders.)

Another very positive, forward looking, development is the action China is taking. (I linked it earlier, but it is a very important fact.) China has signaled to the world that they will not see a hard landing, and use their awesome cash hoard to clean up its fiscal problems.  This will allow their economy to re-accelerate much quicker then anyone is factoring in.

This type of sucker-puck may take time to wash-out. Profits should be strong enough to find support around 1290-1300, but we many need to see a few positive employment reports before the market can kick into gear again.

In the mean time, I am looking to play POT, ATI, IBM, AAPL, GOOG, ITRI, DIS, SU and others when the time is right.

humbling

The market has a nice way of humbling people.  In this case, the 10yr treasury is humbling PIMCO.


Today's ADP jobs report is humbling the view of 'rising 10yr' rates after QE2 ends.

I am not exempt from this either. I saw conditions that made me think the yield had bottomed a few days ago. But I was not expecting such a crappy ADP jobs number. (We should have been in the 100K range.)

Regardless, the lower 10yr is triggering selling in names that are really interesting. I started adding IBM, and will begin to add other names with further weakness. (The markets are already at depressed multiples and reflecting slower growth, despite nice profits within global companies.)

Oh, and if anyone missed it this morning, China's decision to off load some $400Billion in local gov. debt to the central gov, is pretty bullish. And it also displays what kind of action China will do with the +$2 Trillion dollars it has. It will clean up its fiscal house. So if anyone thinks China will have a hard landing in anything, think again.