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Outstanding Close to Week

noreply@blogger.com (Avid Trader) — Sat, 15 Oct 2011 18:30:00 +0000

By Harry Boxer, The Technical Trader

The stock market indices closed the week with a bang to the upside, closing at the highs for the day going away as an afternoon rally brought them back to new highs for the session, for the week, and for the last several weeks, in fact.

Net on the day, the Dow was up 166.36 at 11,644.36, the S&P 500 up 20.92 at 1224.58, and the Nasdaq 100 up 45.06 at 2371.94, the high for the day.

Advance-declines were 2530 up and 493 down, or 5 to 1 positive, on the New York Stock Exchange. Nasdaq advance-declines were 3 to 1 positive. Up/down volume was 775,000 up and 100 million down, or 7 1/2 to 1 positive on New York, with total volume of a light 838,000 million shares traded today. Nasdaq traded 1.66 billion shares and had a 3 to 1 positive volume ratio.

TheTechTrader.com board was mostly higher. Leading the way by far was Apple Inc. (AAPL), up 13.57 to 422.00 even, just short of an all-time new high. Amazon.com Inc. (AMZN) gained 10.56 to 246.71, International Business Machines Corp. (IBM) 3.71 to 190.53, which is an all-time new high, and Chipotle Mexican Grill, Inc. (CMG) 3.49 to 320.80.

Universal Display Corp. (PANL) was up 3.19 to 51.36, Molycorp, Inc. (MCP) 1.92 to 39.09, MAKO Surgical Corp. (MAKO) 2.35 to 41.50, Brigham Exploration Co. (BEXP) 1.70 to 30.36 in a strong oil group, and Aruba Networks, Inc. (ARUN) 1.19 to 24.53. .

In addition, Mitek Systems Inc. (MITK) had a big day today, up 87 cents to 11.55, or 8%, on the biggest volume in nearly a month.

Also, low-priced USEC Inc. (USU) was up 71 cents to 2.04, or 53.3%, on 6.77 million shares traded. Oxigene Inc. (OXGN) gained 28 cents to 1.32, or 37%, on over 3 million shares. GTX Inc. (GTXI) jumped 68 cents to 4.02, or 20.36%, on 672,000 shares, while China Shen Zhou Mining & Resources, Inc. (SHZ) rose 34 cents to 1.88, or 22%, on 880,000 shares. ATP Oil & Gas Corp. (ATPG) added 1.48 to 10.65, or 16%, on over 3 million shares, and Flotek Industries Inc. (FTK) 50 cents to 6.14, or 9%, on 1.34 million shares. .

Harman International Industries Inc. (HAR) was up 3.27 to 37.46, or nearly 10%; W&T Offshore Inc. (WTI) 1.54 to 17.77, or 9.5%; and Riverbed Technology, Inc. (RVBD) 1.93 to 23.41, or 9%.

The Direxion Daily Small Cap Bull 3X Shares (TNA) was up 2.44 to 43.23.

The ultra-shorts got hammered today. VelocityShares Daily 2x VIX ST ETN (TVIX) was down 6.38 to 49.89, from 109 two weeks ago. The Direxion Daily Small Cap Bear 3X Shares (TZA) lost 2.32 to 36.48, the iPath S&P 500 VIX Short-Term Futures ETN (VXX) 2.42 to 40.46 and the Direxion Daily Large Cap Bear 3X Shares (BGZ) 1.95 to 35.50.

Stepping back and reviewing the hourly chart patterns, the indices had a huge gap up, pulled back and did about a .38 Fibonacci retracement, held 2345 NDX and 1212 S&P 500. It slowly began to rise, and then accelerated into the close.

That was an excellent way to close the week today.

Good Trading!

Harry

Free 15-Day Trial to Harry Boxer's Real-Time Technical Trading Diary

Evening Market Update

noreply@blogger.com (Avid Trader) — Fri, 14 Oct 2011 23:12:00 +0000

Stocks End the Week on a High Note

Equity markets moved solidly to the upside today, closing out the second-straight week of gains. The advance came despite more negative news stemming from the European debt crisis as Standard & Poor's lowered its rating on the sovereign debt of Spain and Fitch downgraded Swiss banking giant UBS. However, domestic news was more kind to sentiment, highlighted by a strong earnings report from Google and a rise in retail sales. In other equity news, J.B. Hunt Transport Services posted better-than-expected results, while Mattel matched EPS expectations, but with disappointing margins. Treasuries were mixed as an unexpected downturn in consumer sentiment detracted from an otherwise solid day of economic releases.

The Dow Jones Industrial Average gained 166 points (1.4%) to 11,644, the S&P 500 Index picked up 21 points (1.7%) to 1,225, and the Nasdaq Composite added 48 points (1.8%) to 2,668. In light volume, 845 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil picked up $2.96 to $87.19 per barrel, wholesale gasoline added $0.08 to $2.84 per gallon, and the Bloomberg gold spot price increased by $12.60 to $1,680.65 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was down 0.5% to 76.75. For the week, including dividends, the DJIA was up 4.9%, the S&P 500 Index rose 6.0%, and the Nasdaq Composite gained 7.6%.

Google Inc . (GOOG $592) reported 3Q EPS ex-items of $9.72, above the $8.74 consensus estimate of analysts surveyed by Reuters, with revenues increasing 3% year-over-year (y/y) to $7.5 billion, exceeding the $7.2 billion that the Street had forecasted. The world’s largest internet search engine said its Google sites revenues—which account for 69% of the total—rose 39% y/y, while Google network revenues increased 18% y/y. The company’s “paid clicks” increased 28% y/y, while its cost-per-click rose 5% compared to the same period a year ago. Shares finished nicely higher.

Mattel Inc . (MAT $28) posted 3Q earnings of $0.86 per share, inline with the Street’s forecast, while revenues rose 9% y/y to $2.0 billion, also roughly matching analysts’ forecasts. The toy company said it continued to benefit from the strength of its core brands—Barbie, Hot Wheels, Fisher-Price, and American Girl—but this year’s Cars 2 entertainment property also fueled momentum, and domestic gross sales rose 6%, while international sales gained 13%. MAT also announced that it plans to increase its share repurchase program by $500 million. Shares were under pressure as the company’s margins missed analysts’ forecasts, declining 330 basis points (bps), due to the “rapid appreciation of the US dollar in late September,” and higher product costs.

J.B. Hunt Transport Services Inc. (JBHT $42) reported 3Q EPS of $0.57, one penny above the expectations of analysts, while revenue grew 19% y/y to $1.17 billion, which was inline with forecasts. The company’s intermodal division, which involves the movement of freight using multiple modes of transportation, saw a 24% jump in revenue on a 15% increase in volume, and revenue in the dedicated contract services segment grew 16%. Shares traded higher.

Fitch Ratings cut the rating of UBS AG (UBS $12) to A from A+ saying, “Fitch's rating action on UBS reflects Fitch's view that the one-notch uplift for close affiliation with the Swiss state is no longer warranted.” Additionally, the ratings service warned of potential future downgrades of several other global banking giants including, Goldman Sachs (GS $97), Morgan Stanley (MS $15), Barclays PLC (BCS $11), BNP Paribas (BNPQY $22), Credit Suisse Group (CS $28), and Deutsche Bank (DB $38).

Retail sales rise solidly, sentiment falls, while import prices and inventories gain

Advance retail sales for September rose 1.1% month-over-month (m/m), the most since February, compared to the 0.7% growth that was forecasted by economists surveyed by Bloomberg, and August’s flat reading was revised to a gain of 0.3%. September sales ex-autos were higher by 0.6% m/m, above the 0.3% increase that was anticipated, and August’s 0.1% gain was revised to a 0.5% rise. Sales ex-autos and gas increased 0.5% m/m in September, versus the 0.4% growth that was anticipated, and its August figure was revised from a 0.1% increase to a gain of 0.5%. Purchases excluding autos, gasoline and building materials, the figure used to calculate gross domestic product, rose 0.6%, the most since March, after August was revised higher to 0.4%. Ten of the thirteen categories showed increases, led by auto and parts dealers and clothing stores.

Meanwhile, the preliminary University of Michigan’s Consumer Sentiment Index showed consumers’ psyches unexpectedly deteriorated in October, declining from 59.4 in September to 57.5, and compared to the modest increase to 60.2 that economists had projected. The surprising decline in the index came as the economic outlook and the current economic conditions components of the survey both fell. However, on inflation, the 1-year expectation dipped to 3.2% from 3.3%, and the 5-year inflation outlook decreased to 2.7% from 2.9%.

Elsewhere, the Import Price Index unexpectedly rose, increasing 0.3% m/m for September, compared to the expectation of economists, which projected a 0.4% decline for the index. The drop follows a 0.2% decline seen in August, which was revised from a 0.4% decrease. Year-over-year, import prices are higher by 13.4%, versus the 12.4% forecast of economists, and the unrevised 13.0% gain that was posted in August.

Finally, business inventories rose 0.5% m/m in August, compared to the 0.4% gain that was expected, and July’s 0.4% growth was revised to a 0.5% advance. Also, sales rose 0.3% m/m, and the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at 1.28 months.

Treasuries were mixed today, with the yield on the 2-year note 2 bps lower at 0.26%, the yield on the 10-year note gaining 6 bps to 2.24%, and the 30-year bond rate advancing 8 bps to 3.23%.

G-20 debates possible eurozone solutions, while Chinese inflation concerns heat up

The G-20 group of finance ministers and central bank heads of the world’s leading economies met in Paris today, policymakers are reported to have discussed expanding the IMF’s firepower ahead of an EU summit on October 23 The argument for expansion was strengthened today as Spain had its credit rating downgraded by Standard & Poor’s, due to slowing growth and the threat that has emerged for the banking sector and Fitch Ratings downgraded UBS’ (UBS $12) while placing several European and US banks on watch. In other news from across the pond, Italy’s Prime Minister Burlusconi won enough votes in the lower house of parliament, surviving a confidence vote, which lifted Italian stocks.

On the European economic front, eurozone core consumer prices came in slightly hotter than expected for September, while the headline figure matched expectations, and the eurozone’s trade balance swung to a smaller-than-forecasted deficit for August.

China reported that consumer prices decelerated from 6.2% y/y in August to 6.1% in September, as expected, but inflationary pressures remained well above the government’s target of 4%, exacerbating concerns that the government will continue to aggressively fight inflation to the detriment of economic growth. However, China’s producer prices cooled more than anticipated, falling from a 7.3% y/y rate in August to 6.5% for September, versus the 6.9% rate that economists had expected. China’s new yuan loans unexpectedly declined m/m, gaining by 470 billion in September versus 548.5 billion in August, compared to the increase of 550 billion that was projected.

Eurozone optimism and US economic data help rally continue

The upward bias for the US equity markets continued, with the major markets posting steep gains amid growing optimism that a plan to combat the European debt crisis was in the offing, while some US economic data helped soothe concerns about a return to a recession. Germany and France pledged to deliver a plan to contain the eurozone crisis and Slovakia’s parliament became the final member of the coalition to approve the expanded scope of the region’s bailout fund known as the European Financial Stability Facility (EFSF). Meanwhile, weekly initial jobless claims came in below expectations, small business optimism improved modestly, and the Federal Reserve’s minutes from the Central Bank’s September policy meeting, although showing continued disagreement among policymakers, noted real business spending “appeared to expand further,” and that information received during the intermeeting period indicated that economic growth remained slow but did not suggest a contraction in activity. The data complimented Friday’s solid read on retail sales.

However, 3Q earnings season got off to a shaky start, as Google Inc’s positive report was met by disappointing releases from Dow members Alcoa Inc. (AA $10) and JPMorgan Chase & Co. (JPM $32). AA severely missed analysts’ earnings expectations, while JPM’s better-than-forecasted results were offset by the financial firm noting that investment banking revenues were down substantially and it expects mortgage credit losses to remain elevated.

US economic data to heat up

The US economic calendar will be active next week, beginning with Monday’s industrial production report, expected to show growth of 0.2% m/m in September after gaining 0.2% in August, while capacity utilization is forecasted to tick up slightly to 77.5% from 77.4%. Meanwhile, inflation readings will be monitored due to the impact on consumer spending and corporate profits, starting with Tuesday’s Producer Price Index (PPI), expected to show a 0.2% m/m gain in prices at the wholesale level in September, while the core rate, which excludes food and energy, is anticipated to have continued to grow at a 0.1% pace. The release precedes Wednesday’s Consumer Price Index (CPI) report, forecasted to show a 0.3% m/m increase, while ex-food and energy it is expected to remain at a 0.2% rate.

The housing sector will also come under view, starting with homebuilder sentiment in Tuesday’s NAHB Housing Market Index, while Wednesday brings housing starts, expected to advance 4.1% m/m in September to an annual rate of 595,000 units, while building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, are forecasted to decline 2.4% m/m to a rate of 610,000 units. Lastly, Thursday brings existing home sales, forecasted to fall 2.6% m/m to an annual rate of 4.9 million units in September.

Other important US releases will be the first regional readings on manufacturing in October, with the Empire Manufacturing Index and the Philly Fed Manufacturing Index, as well as MBA Mortgage Applications, initial jobless claims, and leading indicators. Other reports in the Americas include Canada’s leading indicators, wholesale sales, and CPI, and Mexico’s retail sales and employment.

Other international releases include euro-zone consumer confidence, German PPI, ZEW Survey of Economic Sentiment Index and Ifo Business Climate Index, UK housing prices, CPI, retail price index and retail sales, Japan’s industrial production, department store sales, machine tool orders and leading index, Australia’s vehicle sales, leading index and import prices, and China will release 3Q GDP, retail sales, industrial production and fixed asset investment, which includes housing and infrastructure spending. The Reserve Bank of Australia and Bank of England release minutes from their last meetings, and Norway’s central bank will meet and is expected to keep rates unchanged.

The Line on Google

noreply@blogger.com (Avid Trader) — Fri, 14 Oct 2011 19:33:00 +0000

By Mike Paulenof

Expecting high-flying Google (GOOG) to make a run at its 2011 resistance line, now at 620-21? Yes, but probably not in a straight line.

My intraday pattern work argues for 608-610, followed by a "pullback" to the 580 area, after which GOOG should resume its climb to test its 10-month resistance line.

Morning Market Update

noreply@blogger.com (Avid Trader) — Fri, 14 Oct 2011 15:15:00 +0000

US Data Helps Get the Bulls Running Again

After a sluggish session yesterday, US stocks are moving higher in early action, aided by a strong earnings report from Google Inc, which was complimented by a better-than-expected read on US retail sales in September. Meanwhile, European equities are gaining ground to help boost sentiment despite a downgrade of Spain by Standard & Poor’s and a ratings cut by Fitch Ratings on UBS, as it also put several US and European banks on watch for a possible downgrade. Treasuries are mostly lower following the data, which also included hotter-than-forecasted import price figures, ahead of reads on consumer sentiment and business inventories. In other equity news, Mattel Inc posted 3Q results that were inline with forecasts, while boosting its share repurchase program. Elsewhere overseas, Asian stocks finished mostly lower on the heels of the aforementioned sluggishness in the US yesterday, and after some inflation data out of China, which remained elevated.

As of 8:48 a.m. ET, the December S&P 500 Index Globex future is 12 points above fair value, the Nasdaq 100 Index is 28 points above fair value, and the DJIA is 99 points above fair value. WTI crude oil is gaining $2.15 to $86.38 per barrel, and the Bloomberg gold spot price is up $11.45 at $1,679.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 76.85.

Google Inc . (GOOG $559) reported 3Q EPS ex-items of $9.72, above the $8.74 consensus estimate of analysts surveyed by Reuters, with revenues increasing 3% year-over-year (y/y) to $7.5 billion, exceeding the $7.2 billion that the Street had forecasted. The world’s largest internet search engine said its Google sites revenues—which account for 69% of the total—rose 39% y/y, while Google network revenues increased 18% y/y. The company’s “paid clicks” increased 28% y/y, while its cost-per-click rose 5% compared to the same period a year ago.

Mattel Inc . (MAT $28) posted 3Q earnings of $0.86 per share, inline with the Street’s forecast, while revenues rose 9% y/y to $2.0 billion, also roughly matching analysts’ forecasts. The toy company said it continued to benefit from the strength of its core brands—Barbie, Hot Wheels, Fisher-Price, and American Girl—but this year’s Cars 2 entertainment property also fueled momentum, and domestic gross sales rose 6%, while international sales gained 13%. MAT also announced that it plans to increase its share repurchase program by $500 million.

Retail sales rise solidly, while import prices gain, more data on tap

Advance retail sales for September rose 1.1% month-over-month (m/m), compared to the 0.7% growth that was forecasted by economists surveyed by Bloomberg, and August’s flat reading was revised to a gain of 0.3%. September sales ex-autos were higher by 0.6% m/m, above the 0.3% increase that was anticipated, and August’s 0.1% gain was revised to a 0.5% rise. Sales ex-autos and gas increased 0.5% m/m in September, versus the 0.4% growth that was anticipated, and its August figure was revised from a 0.1% increase to a gain of 0.5%.

Elsewhere, the Import Price Index unexpectedly rose, increasing 0.3% m/m for September, compared to the expectation of economists, which projected a 0.4% decline for the index. The drop follows a 0.2% decline seen in August, which was revised from a 0.4% decrease. Year-over-year, import prices are higher by 13.4%, versus the 12.4% forecast of economists, and the unrevised 13.0% gain that was posted in August.

Treasuries are mostly lower in morning action following the data, with the yield on the 2-year note flat at 0.28%, while the yield on the 10-year note is gaining 6 bps to 2.24%, and the 30-year bond rate is advancing 8 bps to 3.23%.

Later this morning, the US economic calendar will yield the releases of the preliminary University of Michigan Consumer Sentiment Index, expected to improve modestly from 59.4 in September to 60.2 for October, as well as business inventories, forecasted to increase 0.4% m/m for August.

Europe gaining ground despite bank and Spain downgrade

The equity markets in Europe are moving higher in afternoon action, led by technology issues on the heels of Google Inc’s better-than-forecasted profit report, while growing optimism about the eurozone’s ability to combat the region’s debt crisis continues to support sentiment. As the G-20 group of finance ministers and central bank heads of the world’s leading economies meet in Paris today, Bloomberg is reporting that policymakers have discussed expanding the IMF’s firepower ahead of an EU summit on October 23, which is boosting confidence regarding the containment of the eurozone’s debt crisis. The advance across the pond comes even as Spain had its credit rating downgraded by Standard & Poor’s, due to slowing growth and the threat that has emerged for the banking sector. Also, stocks are showing some resiliency in the face of Fitch Ratings downgrading UBS’ (UBS $12) credit rating, while placing several European and US banks on watch. Moreover, Italy’s Prime Minister Burlusconi is reported to have won enough votes in the first round of balloting to survive a confidence vote in parliament today, per Bloomberg, which is lifting Italian stocks.

On the economic front, eurozone core consumer prices came in slightly hotter than expected for September, while the headline figure matched expectations, and the eurozone’s trade balance swung to a smaller-than-forecasted deficit for August.

The UK FTSE 100 Index, France’s CAC-40 Index, Germany’s DAX Index, and Switzerland’s Swiss Market Index are rising 1.4%, Italy’s FTSE MIB Index is trading 2.4% higher, and Spain’s IBEX 35 Index is up 0.4%.

Asia mostly lower following recent gains and Chinese data

Stocks in Asia finished mostly to the downside in the final trading session of the week following the recent gains seen in the region, as traders digested some inflation data out of China. Also, a credit downgrade of Spain and Europe’s UBS, as well as yesterday’s lackluster earnings report from US Dow member JPMorgan Chase & Co. (JPM $31), dampened sentiment. Chinese stocks found some pressure, with the Hong Kong Hang Seng Index falling 1.4% and the Shanghai Composite Index declining 0.3%. China reported that consumer prices decelerated from 6.2% y/y in August to 6.1% in September, as expected, but inflationary pressures remained well above the government’s target of 4%, per Bloomberg, exacerbating concerns that the government will continue to aggressively fight inflation, while ignoring economic growth implications. However, China’s producer prices cooled more than anticipated, falling from a 7.3% y/y rate in August to 6.5% for September, versus the 6.9% rate that economists had expected. Moreover, China’s new yuan loans unexpectedly declined m/m, gaining by 470 billion in September versus 548.5 billion in August, compared to the increase of 550 billion that was projected.

Elsewhere, Japan’s Nikkei 225 Index declined 0.9% after reaching a one-month high this week, amid the aforementioned data out of China, as well as the US and Europe, while shares of Olympus Corp. (OCPNY $32) fell sharply after the company announced that it ousted its CEO. Meanwhile, Australia’s S&P/ASX 200 Index decreased 0.9% amid some weakness in materials and resource-related stocks, while South Korea’s Kospi Index showed some resiliency, overcoming early weakness to finish 0.7% higher, led by telecommunications issues.

Bank Downgrades

noreply@blogger.com (Avid Trader) — Fri, 14 Oct 2011 15:13:00 +0000

by Larry Levin

A would-be stunner hit the tape today...AFTER THE CLOSE, of course. Fitch released a report saying it put many banks on "watch negative" while others were outright downgraded. The reason for the action: "the ongoing Eurozone crisis continues to feed intense market speculation regarding the potential or bank recapitalization schemes. Therefore for the near term the agency is maintaining a 'single A' range support rating floors for banks in its highest rated Eurozone countries."

LONDON/MILAN, October 13 (Fitch) Fitch Ratings has downgraded UBS AG's (UBS) Long-term Issuer Default Rating (IDR) and revised its Support Rating Floor (SRF) to 'A' from 'A+'. The Outlook on the Long-term IDR is Stable.

At the same time, the agency has downgraded UBS's Short-term IDR to 'F1' from 'F1+' and affirmed UBS's Support Rating at '1'. UBS's Viability Rating (VR) of 'a-' remains on Rating Watch Negative (RWN). This rating action has no impact on the 'AAA' rating of the outstanding covered bonds issued by UBS. A full list of rating actions is at the end of this comment. The rating action on UBS and its subsidiaries is part of Fitch's broader review of changing sovereign support in developed countries announced in separate comments titled 'Rating Banks in a Changing World' and 'Fitch Comments on Support for Euro Banks; Takes Various Support-Driven Rating Actions' both published on 13 October 2011 and available on www.fitchratings.com.

Since the intervention of the Swiss authorities in late 2008, UBS's IDRs have been based on Fitch's view of the availability of sovereign support. As a result, the Long-term IDR has been at the SRF. Reflecting the particularly close ties between UBS and the Swiss government following the transfer of a USD38.7bn portfolio of assets to the Swiss National Bank (SNB) StabFund in late 2008 and early 2009, UBS's SRF has since early 2009 been rated one notch above the SRF for Credit Suisse AG (CS), the other large, systemically important Swiss bank.

Fitch's rating action on UBS's SRF reflects Fitch's view that the one notch uplift for close affiliation with the Swiss state is no longer warranted and the agency has therefore lowered UBS's SRF to 'A' in line with its SRF for CS. Consequently, Fitch has downgraded UBS's Long- and Short-term IDRs to 'A' and 'F1' respectively. UBS's Viability Rating (VR), on Rating Watch Negative (RWN) since 16 September 2011 (see "Fitch Places UBS's Viability Rating on Rating Watch Negative; Affirms IDRs" dated 16 September 2011 at www.fitchratings.com), remains unaffected by today's rating action. UBS's SRF and IDRs continue to be based on Fitch's view that there is an extremely high probability of support for UBS from the Swiss authorities at least until the global financial sector has stabilized and resolution regimes in Switzerland and abroad are in place. In Switzerland, legislation attempting to avoid taxpayers having to bail out one of its systemically important banks again ("too big to fail", TBTF, legislation) is currently being finalized. The legislation centres around strengthening banks' capital positions, imposing more stringent liquidity requirements, improving risk diversification and adjusting banks' organizational set-up to allow for the protection of systemically important utility functions in the event of a bank insolvency or threatened insolvency.

And the market's reaction since this was released? "Survey SAYS?! UP +1.75!" Yes, even bank downgrades are BULLISH. (The full report can be read at www.fitchratings.com)

Trade Date: 10/13/11

E-Mini S&P Trades*

(before fees and commissions):

1. Pivot sell @ 2:09pm at 1202.00 = +.75 & +0.50 (2 lots)

2. Algorithm positions (4)

3. "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...-0.75

Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!

Nasdaq Leads in Mixed Session

noreply@blogger.com (Avid Trader) — Fri, 14 Oct 2011 00:18:00 +0000

By Harry Boxer, The Technical Trader

The stock market indices had a mixed day today with the Nasdaq up and the Dow and S&P 500 down.

Net on the day, the Dow was down 40.72 at 11,478.13, 100 points off its low. The S&P 500 fell 3.59 at 1203.86, 13 points off its low, and the Nasdaq 100 was up 19.70 at 2326.88, 27 points off its low.

Advance-declines were 3 to 2 negative on the New York Stock Exchange, and there were more declines than advances by about 50 issues on Nasdaq. Up/down volume was nearly 2 to 1 negative on New York on total volume of just under 1 billion. Nasdaq traded just 1 3/4 billion shares and had a 2 to 1 positive volume ratio.

TheTechTrader.com board was mixed today. But Nasdaq was strong, led by Apple Inc. (AAPL), up 6.24 to 408.43, and Netflix, Inc. (NFLX), up 3.39 to 117.01.

Other leaders of note on our board today included Coffee Holding Co.Inc. (JVA), which jumped 1.09 to 13.01. TriQuint Semiconductor, Inc. (TQNT) exploded for 1.46 to 7.39, a 25% gain. Mitek Systems Inc. (MITK) jumped another 53 cents to 10.68, Clean Diesel Technologies Inc. (CDTI) was up 27 cents to 3.88, and ZOOM Technologies, Inc. (ZOOM) gained 36 cents to 2.20, or 20%.

In addition, NVIDIA Corporation (NVDA) was up 85 cents to 15.46 in a strong semiconductor group. Royale Energy Inc. (ROYL) was outstanding today, up 1.39 to 3.53, or 65%, on 2.2 million today. Clearwire Corporation (CLWR) was up 35 cents to 1.65, or 27%.

Also, Sina Corp. (SINA) advanced 14.40 to 92.88, or 18%, on 18 million shares traded. Range Resources Corporation (RRC) was up 5.52 to 68.44, or nearly 9%, on 7.2 million, and Akorn, Inc. (AKRX) added 69 cents to 8.88, or 8 1/2%, on 9 million. Mistras Group, Inc. (MG), a member of our Top 25 list, gained 1.62 to 22.10, or 7.9%, and Thor Industries Inc. (THO) was up 2.24 to 36.16, with Williams-Sonoma Inc. (WSM) up 2.16 to 35.66.

Among the ultra-short ETFs, the Direxion Daily Financial Bear 3X Shares (FAZ) was up 2.63 to 53.75, the UltraShort Silver (ZSL) 68 cents to 14.01, the ProShares UltraShort Gold (GLL) 21 cents to 18.11, and the ProShares UltraShort DJ-UBS Crude Oil (SCO) 82 cents to 55.72.

On the downside, Goldman Sachs (GS) was the only point-plus loser on our board today, down 2.96 to 96.15.

Stepping back and reviewing the hourly chart patterns, the indices moved down lower, tested support at 2300 NDX and 1190 S&P 500, and held in the morning. They bounced back in choppy fashion in an up-channel to retest yesterday’s double-top at 2332 late in the session, with the SPX testing 1208 at that point. That was far off from the high for the day at 1218-19. However, they then pulled down sharply, and in the last 15 minutes bounced in what looked like late short covering.

Let’s see how it goes on Friday.

Good Trading!

Harry

Free 15-Day Trial to Harry Boxer's Real-Time Technical Trading Diary

Evening Market Update

noreply@blogger.com (Avid Trader) — Thu, 13 Oct 2011 20:43:00 +0000

Financials Fall While Technology Rises

Equity markets were mixed with a disappointing earnings report from Dow member JP Morgan Chase & Co taking down financials, while technology shares gained on the day ahead of an earnings beat by Google after the close. In international news, China reported weaker-than-expected exports but moved to ease credit for small businesses, while politics heated up in Italy, and the eurozone bailout fund received approval from Slovakia. Jobless claims and the US trade deficit were roughly inline with estimates, while Treasuries rose. In other equity news, Research In Motion apologized for its service outage, Safeway offered cautious commentary on the consumer, while Mead Johnson Nutrition attributed emerging market strength for demand of its products.

The Dow Jones Industrial Average fell 40 points (0.4%) to 11,478 and the S&P 500 Index lost 4 points (0.3%) to 1,204, while the Nasdaq Composite gained 16 points (0.6%) to 2,620. In light volume, 898 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.34 to $84.23 per barrel, wholesale gasoline rose $0.01 to $2.76 per gallon, and the Bloomberg gold spot price lost $8.32 to $1,667.98 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—rose 0.1% at 77.04.

After the close, Google Inc. (GOOG $559) reported 3Q EPS of $9.72 and revenue of $7.52 billion, ahead of the consensus estimate of $8.74 earnings per share and $7.21 billion in sales.

Dow member JPMorgan Chase & Co. (JPM $31) reported 3Q earnings of $1.02 per share, above the $0.91 consensus estimate of analysts surveyed by Reuters, but it was unclear whether analysts had factored in a large gain from a debit valuation adjustment at its investment banking unit. However, although revenues were roughly flat year-over-year (y/y) at $24.4 billion, the figure topped the $23.4 billion that the Street had forecasted. The company said mortgage net charge-offs—the amount of loans that the company does not expect to be repaid—“improved slightly but remained at extremely high levels,” and it expects mortgage credit losses to “remain elevated.” On its credit card portfolio, JPM noted that the net charge-off rate improved and its total credit reserves remained relatively flat quarter-over quarter (q/q).

Also, the company said its investment banking revenues were “down substantially,” excluding the aforementioned favorable valuation adjustment, amid a 31% drop in fees. Additionally, it noted that its retail financial services demonstrated good underlying performance, and its consumer and business banking segments posted solid revenue. Moreover, JPM said its private equity results were negatively affected by market conditions, while its tier 1 common equity ratio was 9.9%, versus 10.1% in 2Q, but above the 9.5% in the same period last year. JPM’s CEO Jamie Dimon added that, “Our shareholders should rest assured that we are being extremely cautious while navigating through this challenging economic environment.” Shares were solidly lower and the report weighed on the financial sector.

Research In Motion Ltd . (RIMM $23) was under pressure as the company apologized for its global service outages for its BlackBerry smartphones this week. RIMM noted that the service problems, which were the company’s largest in history, have been fully restored, though data backlogs may still be occurring causing e-mail delays. The company said the outage was due most likely to hardware issues.

While Safeway Inc’s (SWY $18) 3Q results beat forecasts and guidance was reaffirmed, shares struggled after the company offered a cautious tone and said consumers remain cost-conscious. In contrast, Mead Johnson Nutrition Co. (MJN $74) used its investor day to positively pre-announce 3Q EPS of $0.76-0.78, ahead of the consensus $0.66 and its previous guidance. The company, which makes Enfamil baby formula, said it expects sales for 3Q of $934 million, above the Street estimate of $925 million, saying that despite a 9% constant dollar decline in the North America/Europe segment, strong sales growth in emerging markets, led by China, Hong Kong and Latin America, led to the positive performance. Other factors for the better performance included a favorable tax rate and currency effects, while being “partially offset by higher dairy costs and operating expenses.” Shares of MJN rose.

Jobless claims tick lower, trade deficit roughly inline with forecasts

Weekly initial jobless claims dipped by 1,000 to 404,000 last week, after the previous week’s figure was upwardly revised by 4,000 to 405,000, the level that economists surveyed by Bloomberg had expected. However, the four-week moving average, considered a smoother look at the trend in claims, fell by 7,000 to 408,000, and continuing claims dropped by 55,000 to 3,670,000, below the forecast of economists, which called for a 3,710,000 reading.

Meanwhile, the trade deficit remained at $45.6 billion in August after July’s $44.8 billion was revised higher, versus the estimate of economists, which called for the deficit to come in at $45.8 billion. Exports dipped by 0.1% month-over-month (m/m), due to declines in auto-related and capital goods, while imports were nearly unchanged compared to the previous month, as an increase in auto-related goods was offset by a decline in consumer goods. The price of imported crude oil fell 1.6% m/m to $102.62 per barrel, while the quantity of oil brought in rose 7.6% to 302.5 million barrels. Finally, the US trade deficit with China hit a new record.

Treasuries were higher, with the yield on the 2-year note down 1 bp to 0.28%, the yield on the 10-year note declined 3 bps to 2.18%, and the 30-year bond rate decreased 5 bps to 3.15%.

Weaker Chinese exports and Italian politics offset final vote on eurozone bailout fund

Chinese trade data showed a sharper-than-expected slowdown in exports during the month of September, to a rate of 17.1% y/y from 24.5% in August, while the expectation was for a gain of 20.5%. European and US markets took the data as an excuse to book some gains after a string of positive trading days. However, Chinese shares gained on the day, after the government took steps to ease access to credit for small businesses, where a combination of declining exports and high rates on loans were threatening a liquidity crunch.

Elsewhere in the Asia/Pacific region, Australia’s employment change rose by about twice the amount that was anticipated for September, bringing the unemployment rate down to 5.2% from 5.3%, where it was expected to remain. Finally, South Korea’s central bank left its benchmark interest rate unchanged at 3.25% as expected.

In Europe, the Slovakian Parliament voted in favor of expanding the capabilities of the eurozone bailout fund, known as the European Financial Stability Facility (EFSF), becoming the final member of the coalition to approve the expanded scope of the fund. However, sentiment in Europe was somewhat undermined by the political situation in Italy, where Prime Minister Berlusconi called for a confidence vote to prove he has a majority after losing a routine vote in parliament earlier this week. If Berlusconi loses the vote, he may still be able to stay in power by putting together a new coalition. Meanwhile, an Italian bond auction was met with lower demand.

In European economic news, German consumer prices for September were unrevised as expected from the preliminary report, while the UK trade deficit came in much smaller than economists had forecasted in August after a large favorable revision to the previous month’s figure.

US retail sales and China CPI key reports tomorrow

Economic releases on tomorrow’s US calendar include advance retail sales, forecasted to rise 0.7% month-over-month (m/m) in September, after a flat performance in August, while sales ex-autos and ex-autos and gas are both expected to increase 0.3%. Same-store sales results for September from the nation’s retailers reported this week were generally better than expected, while the retail sales report includes spending at supermarkets and gas stations.

Other US releases tomorrow include import prices, expected to fall 0.4% m/m, the preliminary University of Michigan Consumer Sentiment Index reading for October, forecasted to rise to 60.2 from 59.4, and business inventories, anticipated to increase 0.4% for the second straight month.

Scheduled international economic releases include eurozone CPI, Canadian manufacturing sales, Singapore becomes the first major economy to report 3Q GDP, China reports CPI, PPI, new yuan loans and money supply, and Mexico’s central bank meets and is expected to leave rates unchanged.

SPY Lagging the Q's

noreply@blogger.com (Avid Trader) — Thu, 13 Oct 2011 20:38:00 +0000

By Mike Paulenof

Let's notice the relative weakness of the S&P 500 Depository Receipts (SPY) in relation to the PowerShares QQQ Trust (QQQ), exhibited by the juxtapostions of their trading moving averages.

The QQQ has found support at its fastest, upper-most moving average, while the SPY has violated its most "bullish" moving averages, and has spent the last few hours probing its middle postion moving average. The fact that big technology names such as Apple (AAPL), Amazon (AMZN), Intel (INTC), Cisco (CSCO), NetFlix (NFLX) and others are positive today in contrast to the banks and the industrials, which are heavy, accounts for difference.

That said, which index has the uppper hand? My sense from the chart work on AAPL and AMZN is that they are tired and peaking, which if accurate, means that the QQQ (NDX) will fall into line with the SPY (SPX) in the upcoming hours.

Morning Market Update

noreply@blogger.com (Avid Trader) — Thu, 13 Oct 2011 13:58:00 +0000

Rally Stalls Following Disappointing China Trade Data

Despite a slightly smaller-than-forecasted read on US jobless claims and a roughly inline report on our nation’s trade deficit, stocks are under pressure following the recent rally as of late. The upward momentum has hit a snag on the slowest pace of export growth in China in seven months, fostering concerns about a hard landing for the Chinese economy and dampening the global economic outlook. Treasuries are higher in early action despite the US employment data. Meanwhile, traders are digesting the 3Q earnings report from Dow member JPMorgan Chase & Co, which saw revenues top expectations but its earnings were boosted by a sizeable gain due to a valuation adjustment. Overseas, Europe is under pressure amid the aforementioned China trade data, while Asian stocks managed to gain ground.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 9 points below fair value, the Nasdaq 100 Index is 7 points below fair value, and the DJIA is 62 points below fair value. WTI crude oil is declining $1.09 to $84.48 per barrel, and the Bloomberg gold spot price is down $8.98 at $1,667.32 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% at 77.22.

Dow member JPMorgan Chase & Co. (JPM $33) reported 3Q earnings of $1.02 per share, above the $0.91 consensus estimate of analysts surveyed by Reuters, but it was unclear whether analysts had factored in a large gain from a valuation adjustment. However, although revenues were roughly flat year-over-year (y/y) at $24.4 billion, the figure topped the $23.4 billion that the Street had forecasted. The company said mortgage net charge-offs—the amount of loans that the company does not expect to be repaid—“improved slightly but remained at extremely high levels,” and it expects mortgage credit losses to “remain elevated.” On its credit card portfolio, JPM noted that the net charge-off rate improved and its total credit reserves remained relatively flat quarter-over quarter (q/q).

Elsewhere, the company said its investment banking revenues were “down substantially,” excluding a favorable valuation adjustment, its retail financial services demonstrated good underlying performance, and its consumer and business banking segment posted solid revenue. Also, JPM said its private equity results were negatively affected by market conditions, while its tier 1 common equity ratio was 9.9%, versus 10.1% in 2Q, but above the 9.5% in the same period last year.

Jobless claims tick lower, trade deficit roughly inline with forecasts

Weekly initial jobless claims dipped by 1,000 to 404,000 last week, after the previous week’s figure was upwardly revised by 4,000 to 405,000, and just below the 405,000 level that economists surveyed by Bloomberg had expected. However, the four-week moving average, considered a smoother look at the trend in claims, fell by 7,000 to 408,000, and continuing claims dropped by 55,000 to 3,670,000, below the forecast of economists, which called for a 3,710,000 reading.

Meanwhile, the trade deficit remained at $45.6 billion in August after July’s $44.8 billion was revised higher, versus the estimate of economists, which called for the deficit to come in at $45.8 billion. Exports dipped by 0.1% month-over-month, while imports were nearly unchanged compared to the previous month.

Treasuries remain higher in morning action following the data, with the yield on the 2-year note down 1 bp to 0.28%, the yield on the 10-year note 3 bps lower at 2.18%, and the 30-year bond rate declining 2 bps to 3.17%.

Chinese trade data and retailer report stymieing recent momentum

After posting a string of strong gains on growing optimism about a eurozone plan to fight the festering debt crisis, the equity markets in Europe are under pressure in afternoon action. The pressure on stocks follows a smaller-than-forecasted increase in Chinese exports for September—the slowest pace in seven months—fostering some concern about a hard landing for China’s economy. Also, shares of Carrefour SA (CRERF $24) are solidly lower to weigh on the equity markets after Europe’s largest retailer issued a profit warning due to the slowing growth in the region. However, shares of Alcatel-Lucent (ALU $3) are sharply higher after the Financial Times reported that the telecommunications equipment maker has agreed to sell its corporate call center services business for as much as $1.5 billion, though the company declined to comment on the report.

In economic news, German consumer prices for September were unrevised as expected from the preliminary report, while the UK trade deficit came in much smaller than economists had forecasted in August after a large favorable revision to the previous month’s figure.

The UK FTSE 100 Index is down 1.0%, France’s CAC-40 Index is declining 1.1%, Germany’s DAX Index is falling 1.2%, and Switzerland’s Swiss Market Index is decreasing 0.9%.

Asia higher on European optimism

Stocks in Asia finished to the upside following the gains in Europe and the US yesterday amid some favorable manufacturing data in the eurozone and optimism toward the containment of the European debt crisis. Japan’s Nikkei 225 Index rose 1.0%, aided by some strength in chipmakers following ASML Holding’s (ASML $39) upbeat earnings report yesterday in Europe and export-related issues amid the aforementioned optimism. Meanwhile, Chinese stocks continued to show some strength, with the Shanghai Composite Index gaining 0.8% and the Hong Kong Hang Seng Index rising 2.3%, as property stocks advanced amid upbeat contract sales results out of the sector and continued optimism about recent reports of government support for companies in the region. The gains in China came despite a report showing the country’s trade surplus shrank more than expected in September as exports increased at a smaller rate than economists forecasted.

Elsewhere, Australia’s S&P/ASX 200 Index gained 1.0% following a report that showed the nation’s employment change rose by about twice the amount that was anticipated for September, bringing the unemployment rate down to 5.2% from 5.3%, where it was expected to remain. Finally, South Korea’s Kospi Index advanced 0.8%, led by banks and airlines, while the Bank of Korea left its benchmark interest rate unchanged at 3.25% as expected.

Haircut

noreply@blogger.com (Avid Trader) — Thu, 13 Oct 2011 13:53:00 +0000

by Larry Levin

The Greek mess isn't over. The ESFS mess hasn't been approved yet. European banks need more capital. Sovereign downgrades continue. What else could possibly go wrong? Oh yeah, there's Portugal, and Spain, and Italy, and Ireland. Hmm, we haven't heard much of Ireland lately but John Mauldin has a few good things to say about it.

...And the Irish willingly took on the debt of banks that went bankrupt. If Anglo Irish Bank were a US institution, the equivalent debt would have been about $3.5-4 trillion (depending on the exchange rate). Can you imagine trying to get a bailout for ONE bank for that much? And in Ireland there were three of them (!), though the other two were somewhat smaller. The Irish government guaranteed the bank debt for ECB loans, which money then went to European banks that had loaned the Irish banks the money in the first place.

I have written extensively in the past about how the Irish have figured out they are taking on debt for banks that no government should have touched. It was just too much. It's simple arithmetic: the Irish cannot repay that debt under the current terms (even after the ECB and Europe gave them lower interest rates in July) and ever hope to get out of debt in the next 30 years. They have consigned themselves and their children to decades of toil to pay back English and German and French banks (among others).

And that fact dawned upon them. They voted out the government that allowed the debt to be assumed. It was a clear message, but the government has not yet done anything to rid itself of the debt.

There are those like McWilliams who simply want to repudiate the debt. "It should never have been done, so we will not pay it." He is not alone; that view is becoming increasingly mainstream now.

...We are not Greece, they say; there is a need for "respectability." But when pressed, they would come around to admitting that, "Yes, Ireland will get a haircut." Everyone I met expected it to happen. The difference was the path to the haircut. But while the politics matter, the destination is the same.

Some favor doing it outright. Others truly believe they will be offered a haircut when Greece and Portugal get theirs. They fully expect it. In a meeting with an establishment-insider economist (off the record), who was at the table when the first deal was done, he said there was an implicit understanding with the IMF (and ECB) that whatever was offered to Greece, et al. would be available to Ireland. So Ireland went along with the bailout to keep from imploding the euro and averting a crisis that would have been biblical in proportions. The future of the euro is now not in their hands, because by taking on the debt they did not blow the euro up. Which could have happened, because European politicians were not ready for such a crisis.

So rather than having to kick the door open for a haircut, they expect the door to be opened for them by the IMF and the ECB. A far more respectable path for those who are very pro-Eurozone. But Irish leaders clearly get that voters expect that something will be done...But here is the issue for Europe. The amount of money needed for Ireland is going to be a lot more than they now think, or at least are willing to admit.

When Eurozone politicians worry about "contagion," or one country wanting the debt relief that another country gets, it is a very real worry. And rightfully so, as voters in Portugal or Spain or (gasp) Italy who are burdened by debt that is seemingly intractable will also want relief. It is not just an Irish condition, it is a human trait.

And the money that Europe needs will overwhelm the €440 billion ESFS fund. Stratfor and others think it will take at least €2 trillion. The Boston Consulting Group put out a report that suggest the total number, at the end of the day, will need to be (drum roll, wait for it) over €6 trillion. I don't like their proffered solutions, but their analysis of the debt and the need for relief is sobering.

France is at risk of losing its AAA rating. From my far-removed seat, I think it is almost a certainty they will, as the amount they will have to raise for French banks is enormous. Add another few hundred billion euros for bailout funds for Spain and Italy, and the idea of AAA euro debt goes right out of window. To keep the current AAA, a majority of guarantees needs to be from AAA countries. That is a very touchy issue right now.

But it will all be fine in just a short while say the politicians...as long as the Hopium holds out.

Yes sir, as I said above - the banksters get what the banksters want.

Trade Date: 10/11/11

E-Mini S&P Trades*

(before fees and commissions):

1. Pivot sell @ 9:40am at 1208.75 = +.50 & +0.75 (2 lots)

2. Algorithm positions (6)

3. "Reading the Tape" positions (0) ...combined Secret's, Algo, & "Reading the Tape" total...+7.00

Evening Market Update

noreply@blogger.com (Avid Trader) — Wed, 12 Oct 2011 20:43:00 +0000

Bulls Pick Up Steam on Optimism For Eurozone Bailout Fund

The US equity market rally resumed after a brief pause yesterday, as traders appear convinced that Slovakia will cast the final vote necessary to approve the European bailout fund. Meanwhile, the minutes from the Federal Reserve’s latest monetary policy meeting showed diverging opinions as to what policy tools should be used to boost the stalling US economy. The only other news from the domestic economic front was a rise in mortgage applications, which helped push Treasuries mostly lower. In equity news, Dow member Alcoa unofficially kicked off the 3Q earnings season by reporting lower-than-expected profits after yesterday’s close, while fellow Dow component Chevron said its 3Q earnings should match its 2Q results. Additionally, PepsiCo and Infosys Ltd both beat analysts’ expectations and Dow member Wal-Mart Stores predicted positive same-store sales for the first time in nine quarters. In M&A news, Liz Claiborne announced plans to divest three of its brands for approximately $328 million in cash and Neustar agreed to acquire privately-held Targus Information Corp for $650 million in cash.

The Dow Jones Industrial Average rose 103 points (0.9%) to 11,519, the S&P 500 Index rose 12 points (1.0%) to 1,207, and the Nasdaq Composite gained 22 points (0.8%) to 2,605. In moderate volume, 1.1 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.67 to $85.14 per barrel, wholesale gasoline was flat at $2.74 per gallon, and the Bloomberg gold spot price advanced $14.95 to $1,677.25 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was 0.8% lower at 76.98.

Dow member Alcoa Inc. (AA $10) unofficially kicked off 3Q earnings season late yesterday, posting EPS of $0.15, below the $0.22 consensus estimate of analysts surveyed by Reuters, but revenues grew 21% year-over-year (y/y) to $6.4 billion, compared to the $6.2 billion that the Street had forecasted. The company said aluminum prices fell in 3Q, but with the exception of Europe, it saw growth in its end markets, though at a slower rate than in the first half, as confidence in the global recovery faded. AA added that it continues to forecast a growth rate of 12% for 2011, with a slower pace in the second half and it reaffirmed its long-term forecast for a doubling of aluminum demand by 2020. Shares were lower.

Meanwhile, fellow Dow component Chevron Corp. (CVX $98) reported that 3Q earnings are expected to be comparable with 2Q results, in which it posted profits of $3.85 per share, while analysts projected the company to achieve EPS of $3.41 for 3Q. CVX said lower crude oil prices and “lower liftings” are expected to reduce upstream earnings—exploration and production—while an asset sale gain is expected to boost downstream earnings—refining. However, the company added that both segments are expected to benefit from the strengthening of the US dollar in 3Q. CVX traded modestly higher.

Wal-Mart Stores Inc. (WMT $55) also helped advance the Dow after it said at an analyst meeting that US same-store sales—sales at stores open at least a year—have been positive for the past three months, which would end the company’s streak of nine-straight quarters of declining sales. However, CEO Mike Duke said the company is still seeing a depressed consumer in the U.S., adding “our customers still have concerns about jobs.” Shares moved higher.

PepsiCo Inc . (PEP $63) reported 3Q earnings ex-items of $1.31 per share, one penny above the Street’s forecasts, as revenues rose 13% y/y to $17.6 billion, above the $17.2 billion that analysts had anticipated. The company said worldwide volumes grew, led by emerging markets, and it saw gains across its worldwide snacks and beverage businesses. PEP said it was able to achieve pricing to partially offset commodity cost inflation. PEP reaffirmed its full-year EPS guidance, reflecting uncertainty regarding macroeconomic and consumer trends and the anticipation of high global commodity cost inflation. PEP finished nicely higher.

Infosys Ltd . (INFY $56) traded nicely higher after India’s second-largest software services provider reported a 9.7% y/y rise in fiscal 2Q net profit, to go along with an 17% y/y increase in revenue. The company did cut its revenue forecast for this fiscal year through March 2012, but the forecast still beat the expectations of analysts.

In M&A news, Liz Claiborne Inc. (LIZ $7) agreed to sell its Liz Claiborne, Monet, and Kensie fashion brands for $328 million in cash. The Liz Claiborne and Monet brands are being sold to department store operator J.C. Penny Co. (JCP $30). The company is likely to change its name after the divestiture is complete, as it will focus on its remaining brands including Juicy Couture, kate spade and Lucky Brand. Shares of JCP were higher, while LIZ was up over 30% on the announcement.

Finally, Neustar Inc. (NST $43) agreed to pay $650 million in cash to acquire privately-held Targus Information Corp., a provider of caller identification services. NST, which routes every phone call and text message in North America, said it expects the deal to add at least 20 cents a share to its 2012 earnings, excluding fees and other items. Shares of NST moved higher.

Fed minutes show dissention, mortgage applications rise

The release of the minutes from the August Federal Open Market Committee (FOMC) meeting showed divergence of opinion continues among policymakers. During the meeting, Fed members discussed the range of policy tools at their disposal to try to boost the economy, before deciding on “Operation Twist,” buying longer-term Treasuries while selling shorter-term securities aimed at lowering rates further out on the yield curve to ease financial conditions. Although many participants viewed this as providing additional monetary policy accommodation, some noted that the potential effects on real economic activity would be “limited or only transitory,” amid the current environment.

Also, the idea of launching another round of large-scale asset purchases that would result in expanding the Fed’s balance sheet was discussed, but a number of participants agreed that this option should be retained in the event that further policy action to support a stronger economic recovery was “warranted.” Meanwhile, the idea of lowering bank reserve rates that it pays out was broached, but most agreed that further information on the likely effects was needed. Additionally, most participants favored taking steps to increase further transparency of monetary policy, but agreed that the post-meeting statements were not well suited to communicate fully the Fed’s thinking about its objectives and policy framework. On the economy, although the Fed noted “significant” downside risks to its outlook, it noted that real business spending “appeared to expand further,” and that information received during the intermeeting period indicated that economic growth remained slow but did not suggest a contraction in activity.

The MBA Mortgage Application Index rose 1.3% last week, after the index that can be quite volatile on a week-to-week basis, declined by 4.3% in the previous week. The increase came as a 1.3% gain in the Refinance Index was accompanied by a 1.1% advance in the Purchase Index. Meanwhile, the rise in mortgage activity came despite an increase in the average 30-year mortgage rate by 7 basis points (bps) to 4.25%.

Treasuries were mostly lower amid the strength in equities and after a disappointing auction of $21 billion in 10-year notes. The yield on the 2-year note was 2 bps lower at 0.29%, while the yield on the 10-year note gained 6 bps to 2.21%, and the 30-year bond rate advanced 9 bps to 3.20%.

Slovakia expected to approve rescue fund by Friday

The European markets regained momentum today, despite Slovakia failing to approve the expansion of the eurozone’s bailout mechanism known as the European Financial Stability Facility (EFSF) yesterday. Slovakia, the last member of the eurozone to ratify the expansion of the EFSF, is set to vote again on the issue in the next couple days, with full ratification of the fund expected by the end of the week. Meanwhile, the economic front aided sentiment across the pond, with a report showing eurozone industrial production unexpectedly rose in August, growing 1.2% month-over-month (m/m), compared to the 0.8% decline that economists had expected. In other economic news, UK jobless claims rose by a smaller-than-anticipated amount, French consumer prices unexpectedly declined, and German wholesale prices rose, but decelerated on a y/y basis.

In Asia/Pacific, Australia’s consumer confidence rose and home loans exceeded economists’ forecasts, India’s industrial production rose by a smaller rate than forecasted, and South Korea’s unemployment rate ticked higher to 3.2%, as expected, while remaining near a three-year low, per Bloomberg. Elsewhere, Chinese markets were boosted by continued optimism that China’s sovereign wealth fund is buying shares of the region’s banking stocks and amid reports that the government was lending further support to the nation’s stock markets.

Back in the Americas, Canada reported a 0.1% rise in its New Housing Price Index for August, which follows a similar increase in July.

The US economic calendar will be light again tomorrow, with releases including the trade balance, expected to widen to a deficit of $45.8 billion in August, while weekly initial jobless claims are forecasted to increase to 405,000 from 401,000 last week.

Betting on the Dollar Versus Yen

noreply@blogger.com (Avid Trader) — Wed, 12 Oct 2011 20:12:00 +0000

By Mike Paulenof

Rumors are circulating that in an effort to enable its exporters to compete effectively with China, Japanese authorities are considering some sort of currency "peg," perhaps to a basket of currencies, or vis-a-vis the Yuan, or maybe even in part to gold.

In addition, there are currently heated discussions in Congress about declaring China a "currency manipulator," or otherwise coercing China to allow its Yuan to appreciate faster to enable American business to compete more effectively on a global basis.

Given that, my sense is that there is just too much smoke out there for me not to believe that a major "fire" is about to flash in the foreign exchange markets.

Moreover, it just so happens that my intermediate- and longer-term technical work in USD/Yen is screaming for a powerful upmove in the USD versus a powerful downmove in Yen, which argues strongly that the time has come to add to my long term position in the ProShares UltraShort Yen ETF (YCS).

Morning Market Update

noreply@blogger.com (Avid Trader) — Wed, 12 Oct 2011 13:59:00 +0000

Stocks Find Support as Europe Shrugs Off Slovakian Vote

The US equity markets are higher in early action as European stocks are gaining ground, despite Slovakia’s failure to ratify the eurozone’s bailout facility, aided by an unexpected increase in the region’s industrial production. Meanwhile 3Q earnings season unofficially began late yesterday, with Dow member Alcoa Inc missing the Street’s earnings expectations, while PepsiCo Inc exceeded analysts’ forecasts. Elsewhere, Dow component Chevron Corp announced that 3Q earnings are expected to be comparable to 2Q results. Treasuries are lower amid the early morning advance in the equity markets, following a rise in mortgage applications, and ahead of the release of the minutes from the Federal Reserve’s latest monetary policy meeting. Elsewhere overseas, Asian stocks finished mixed, with China rallying on optimism of government support for stocks, while Japanese equities moved lower amid manufacturing shutdowns due to a flood in Thailand.

As of 8:43 a.m. ET, the December S&P 500 Index Globex future is 8 points above fair value, the Nasdaq 100 Index is 23 points above fair value, and the DJIA is 77 points above fair value. WTI crude oil is advancing $0.43 to $86.24 per barrel, and the Bloomberg gold spot price is up $25.99 at $1,688.29 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.8% at 77.02.

Dow member Alcoa Inc. (AA $10) unofficially kicked off 3Q earnings season, posting EPS of $0.15, below the $0.22 consensus estimate of analysts surveyed by Reuters, but revenues grew 21% year-over-year (y/y) to $6.4 billion, compared to the $6.2 billion that the Street had forecasted. The company said aluminum prices fell in 3Q, but with the exception of Europe, it saw growth in its end markets, though at a slower rate than in the first half, as confidence in the global recovery faded.

Meanwhile, fellow Dow component Chevron Corp. (CVX $98) reported that 3Q earnings are expected to be comparable with 2Q results, in which it posted profits of $3.85 per share, with analysts projecting the company to achieve EPS of $3.41. CVX said lower crude oil prices and “lower liftings” are expected to reduce upstream earnings—exploration and production—while an asset sale gain is expected to boost downstream earnings—refining. However, the company added that both segments are expected to benefit from the strengthening of the US dollar in 3Q.

PepsiCo Inc . (PEP $61) reported 3Q earnings ex-items of $1.31 per share, one penny above the Street’s forecasts, as revenues rose 13% y/y to $17.6 billion, above the $17.2 billion that analysts had anticipated. The company said worldwide volumes grew, along with revenues during the quarter, driven by gains across its worldwide snacks and beverage businesses, and it was able to achieve pricing to partially offset commodity cost inflation. PEP reaffirmed its full-year EPS guidance.

Mortgage applications rise, Fed minutes on tap for the afternoon

The MBA Mortgage Application Index rose 1.3% last week, after the index that can be quite volatile on a week-to-week basis, declined by 4.3% in the previous week. The increase came as a 1.3% gain in the Refinance Index was accompanied by a 1.1% advance in the Purchase Index. Meanwhile, the rise in mortgage activity came despite an increase in the average 30-year mortgage rate by 7 basis points (bps) to 4.25%.

Treasuries are mostly lower in morning trading following the data, with the yield on the 2-year note flat at 0.31%, while the yield on the 10-year note is gaining 7 bps to 2.22%, and the 30-year bond rate is advancing 9 bps to 3.19%.

However, the highlight of the US economic calendar today will likely be the afternoon release of the minutes from the September Federal Open Market Committee (FOMC) meeting. The Fed noted “significant” downside risks to the economy at the last meeting, and began “Operation Twist,” wherein it will reduce its holdings of shorter-term securities and buy longer-term securities aimed at flattening the yield curve and pushing investors and businesses to move out on the risk spectrum. However, the Central Bank said it expects “some pickup” in the pace of recovery over coming quarters but with only a gradual decline in the unemployment rate. Traders will likely pay attention to the degree of disagreement among policymakers—there were three dissenting votes cast at the last meeting—and what, if anything, may be left in the Fed’s toolbox to try to help arrest the discouragingly high unemployment rate.

Data helping boost European stocks despite failed bailout vote by Slovakia

The equity markets in Europe are higher in afternoon action, despite Slovakia failing to approve the expansion of the eurozone’s bailout mechanism known as the European Financial Stability Facility (EFSF) yesterday. However, Slovakia, the last member of the eurozone to ratify the expansion of the EFSF is set to vote again on the issue in the next couple days and the full ratification of the fund by the eurozone is expected. Meanwhile, the economic front is aiding sentiment across the pond, with a report showing eurozone industrial production unexpectedly rose in August, growing 1.2% month-over-month (m/m), compared to the 0.8% decline that economists had expected. The data is helping offset Dow member Alcoa Inc’s disappointing 3Q profit report. Moreover, equity news in Europe is also supporting the advance, as shares of Burberry Group Plc. (BURBY $40) are nicely higher after the UK’s largest luxury retailer, per Bloomberg, posted stronger-than-expected sales. Additionally, ASML Holding (ASML $36) is higher after the chipmaker reported earnings that exceeded expectations.

In other economic news, UK jobless claims rose by a smaller-than-anticipated amount, French consumer prices unexpectedly declined, and German wholesale prices rose, but decelerated on a y/y basis.

The UK FTSE 100 Index is rising 0.4%, France’s CAC-40 Index is gaining 1.4%, Germany’s DAX Index is advancing 1.1%, Switzerland’s Swiss Market Index is increasing 0.3%, and Greece’s Athex Composite Index is trading 4.2% higher.

Asia mixed as China rallies but flooding in Thailand hampered Japan

Stocks in Asia finished mixed with Chinese equity markets rallying on continued optimism that China’s sovereign wealth fund is buying shares of the region’s banking stocks and amid reports that the government was lending further support to the nation’s stock markets. The Shanghai Composite Index gained 3.0%, while the Hong Kong Hang Seng Index rose 1.0%. However, Japan’s Nikkei 225 Index decreased 0.4% amid declines in Japanese manufacturers, particularly in the auto sector, as floods in Thailand caused factory closures. Also, Australia’s S&P/ASX 200 Index fell 0.6%, following a five-session winning streak, amid some weakness in mining issues, despite reports showing the nation’s consumer confidence rose and home loans exceeded economists’ forecasts. Elsewhere, South Korea’s Kospi Index gained 0.8% led by solid advances in the auto sector, supported by optimism regarding a free trade agreement with the US, and despite that country’s unemployment rate ticking higher to 3.2%, as expected, while remaining near a three-year low, per Bloomberg. Finally, the rally in China helped India’s BSE Sensex 30 Index rise 2.6%, even as a report showed Indian industrial production rose by a smaller rate than forecasted.

Slovakia Part II

noreply@blogger.com (Avid Trader) — Wed, 12 Oct 2011 13:52:00 +0000

by Larry Levin

I have a short update today because everything financial comes down to one thing: The banksters get what the banksters want.

As I mentioned in detail yesterday the Slovakian government was against further bailouts of the banking mafia via the EFSF or any other acronym. They are, like the average guy, just sick and tired of it!

So it came down to a vote Tuesday; will the Slovakian government approve the latest bailout or not? The US stock market waited with bated breath as it traded in a very tight range - looking for clues to the outcome of the vote.

Oddly enough (or is the phrase: AS USUAL) the vote results were released just after the close of the US stock market. (Oh sure, it's all a free market - nothing dodgy going on here.) The Slovakian government REJECTED the EFSF slush-fund-for-banker-bonuses plan.

I am writing this as the S&P futures have reopened on Globex. Now let's keep in mind that the S&P has exploded +125.00 points in just 6 trading days on this EFSF Euro-Hopium. It was just rejected. Has the S&P collapsed 50, 60-points? Maybe it is down 20 or 30-points? Of course not, silly; it is down just 2-points...or 8 crummy ticks.

And why is it down an insignificant amount? Because the game is RIGGED folks! The banking mafia made sure that this rejection was tied to a "no confidence" vote of the Slovak government, which means that a new government will be sworn in this week. It also means that the vote will come up again, and the banker's boot-licking stooges that have been hand-picked to come into power know just what to do: pass the slush fund and get on with campaign "donations"...and their new found power.

Yes sir, as I said above - the banksters get what the banksters want.

Trade Date: 10/11/11

E-Mini S&P Trades*

(before fees and commissions):

1. OTF buy @ 10:11am at 1189.75 = +1.00 & -1.25 (2 lots)

2. Algorithm positions (4)

3. "Reading the Tape" positions (4) ...combined Secret's, Algo, & "Reading the Tape" total...+5.50

Evening Market Update

noreply@blogger.com (Avid Trader) — Tue, 11 Oct 2011 20:44:00 +0000

Stocks Calm Before the Earnings Storm

The US equity markets were mixed in a relatively quiet, range-bound session following yesterday’s broad-based rally. Traders were hoping for more positive news out of the eurozone to extend the advance, but the final required vote from Slovakia to approve the region’s bailout fund was delayed. The Street will now turn its attention to the 3Q earnings season, which unofficially kicked off after the close with Dow member Alcoa missing its EPS estimates. Elsewhere on the equity front, 99 Cents Only Stores agreed to be acquired for $1.6 billion, Dollar Thrifty Automotive Group announced that it terminated its takeover solicitation process, and AMR Corp announced a reduction to its 4Q capacity guidance. Treasuries moved lower, as the lone release on the US economic calendar was a modest increase in small business optimism.

The Dow Jones Industrial Average fell 17 points (0.1%) to 11,417, the S&P 500 Index rose 1 point (0.1%) to 1,196, and the Nasdaq Composite gained 17 points (0.7%) to 2,583. In light volume, 841 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.05 to $85.36 per barrel, wholesale gasoline rose $0.05 to $2.74 per gallon, and the Bloomberg gold spot price declined $10.10 to $1,666.55 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was 0.1% lower at 77.51.

After the closing bell, 3Q earnings season unofficially began after Dow member Alcoa Inc. (AA $10) reported 3Q EPS of $0.15, seven cents shy of the consensus estimate of analysts surveyed by Reuters, on revenues of $6.42 billion, which was above the $6.22 billion forecast of analysts.

American Airlines, which is owned by AMR Corp. (AMR $3), announced that it will reduce its 4Q mainline capacity by about 3% year-over-year (y/y), due to the “uncertain economic environment” and ongoing high fuel costs. The airline also announced that it will retire up to 11 Boeing 757 aircraft in 2012 as part of the reductions. AMR traded to the upside.

In M&A news, Dollar Thrifty Automotive Group Inc. (DTG $59) announced that it has not received any proposals for business combinations that eliminated antitrust regulatory risk and it has terminated its solicitation process and will continue to execute its current stand-alone plan. Hertz Global Holdings Inc. (HTZ $10) had submitted a proposal, along with Avis Budget Group Inc. (CAR $11), but recently CAR decided to drop its proposal. DTG moved lower, while HTZ and CAR finished higher.

Moreover, 99 Cents Only Stores (NDN $21) was higher after the discount retailer announced that it has reached an agreement to be acquired by affiliates of Ares Management LLC and Canada Pension Plan Investment Board for $22.00 per share in cash, in a transaction with a total equity value of about $1.6 billion.

Small business optimism improves slightly, while the bond markets return to action

The NFIB Small Business Optimism Index snapped a string of six-straight monthly declines in September, increasing from 88.1 in August to 88.9, and was slightly above the expectation of economists surveyed by Bloomberg, which called for an improvement to 88.8. The increase came as the number of firms reporting expectations of higher selling prices and that the current environment being a good time to expand rose, while businesses were slightly less pessimistic about a better economy, higher sales, and credit conditions. Elsewhere, business plans to increase capital spending ticked lower but remained the index’s biggest positive contributor, and plans to hire moved lower but continued to be in positive territory.

Treasuries were lower, as the yield on the 2-year note rose 2 bps to 0.30%, the yield on the 10-year note was 8 bps higher at 2.16%, and the 30-year bond rate advanced 9 bps to 3.11%.

Slovakian vote on EFSF delayed, Japan reports mixed economic data

The rally in the European markets stalled somewhat today, as the recent increase in optimism that eurozone leaders are hammering out a plan to recapitalize its troubled banking sector to help fight the debt crisis was met with caution. Slovakia was expected to vote today on expanding the capabilities of the region’s bailout fund known as the European Financial Stability Facility (EFSF). However, the approval was delayed after the country’s ruling party said it would abstain from the vote, leaving opposition parties to push the deal through that would make Slovakia the 17th and final country needed to approve the fund. Also, Jean-Claude Trichet, who will end his eight-year term as European Central Bank (ECB) President at the end of this month, offered some cautious commentary. Trichet noted that, “The sovereign stress has moved from smaller economies to some of the larger countries,” adding that the crisis is systemic and must be tackled decisively.” Meanwhile, the Troika, members of the EU, IMF and ECB, noted that Greece is most likely to receive its next installment of bailout aid in early November after the conclusions of the review of the troubled nation’s deficit reduction efforts are approved. But the Troika added that Greece still has to do more on the austerity front. Elsewhere, Italy conducted a debt auction, which drew lower yields and respectable demand.

The UK dominated news on the European economic front, as reports showed the nation’s retail sales in September unexpectedly rose y/y, while the country’s industrial production surprisingly grew month-over-month (m/m) in August. However, UK manufacturing production declined more than expected m/m in August and home prices declined for the month.

In Asia/Pacific economic news, Japanese consumer confidence improved more than expected for September, which offset reports showing the nation’s August trade balance swung to a larger-than-anticipated deficit and a survey on the economic outlook in the country deteriorated for September. Elsewhere, South Korea reported a cooling of the nation’s producer prices for September, while Australia noted a slight improvement in the country’s business confidence in September. Finally, Indonesia’s central bank unexpectedly cut its benchmark interest rate by 25 basis points to 6.50%, with economists expecting the nation to leave its rate unchanged.

Back in the Americas, Brazil reported a 0.4% decline in retail sales for August, a larger decline than economists expected. Meanwhile, Canadian housing starts came in better-than-expected in September, while the August figure was also revised higher.

FOMC minutes on tap for tomorrow

Tomorrow, the US economic calendar will yield the midday release of the minutes from the September Federal Open Market Committee (FOMC) meeting. The Fed noted “significant” downside risks to the economy at the last meeting, and began “Operation Twist,” wherein it will reduce its holdings of shorter-term securities and buy longer-term securities aimed at flattening the yield curve and pushing investors and businesses to move out on the risk spectrum. However, the Central Bank noted that it expects “some pickup” in the pace of recovery over coming quarters but with only a gradual decline in the unemployment rate. Traders will likely pay attention to the degree of disagreement among policymakers—there were three dissenting votes cast at the last meeting—and what, if anything, may be left in the Fed’s toolbox to try to help arrest the discouragingly high unemployment rate.

The only other item on the domestic economic docket will be the MBA Mortgage Application Index, which fell 4.3% last week.

On the international front, reports will include France’s CPI, Germany’s wholesale price index, UK jobless claims, eurozone industrial production, Japan’s machine orders, Australia’s consumer confidence, and Canada’s new housing price index.

Bearish Near-Term Scenario for Oil

noreply@blogger.com (Avid Trader) — Tue, 11 Oct 2011 17:52:00 +0000

By Mike Paulenof

My intraday pattern work in NYMEX crude oil futures has triggered very preliminary signals that the overnight weakness from 86.09 to 83.97 is the start of a larger correction or period of weakness that projects into the 82.00-81.00 area next.

Only a resumption of strength -- in sympathy with continued strength in equities -- that propels nearby crude above 86.09 will invalidate my near-term scenario and argue for a run at testing 88.00 resistance thereafter.

ETFs to watch are the U.S. Oil Fund ETF (USO) and ProShares UltraShort DJ-UBS Crude Oil (SCO).

Morning Market Update

noreply@blogger.com (Avid Trader) — Tue, 11 Oct 2011 14:56:00 +0000

Rally Pauses Ahead of Earnings Season

After yesterday’s sharp gains, US stocks are under some pressure in early action ahead of the unofficial launch of 3Q earnings season with Dow member Alcoa Inc’s report after today’s closing bell. Meanwhile, Treasuries are lower in morning trading after the bond markets were closed during yesterday’s steep gains in the equity markets, and following a modest improvement in small business optimism. In equity news, AMR Corp’s American Airlines reduced its 4Q capacity guidance, while Dollar Thrifty Automotive Group Inc announced that it terminated its takeover solicitation process and will continue as a stand-alone company. Overseas, Asian stocks finished broadly higher amid the increased optimism that eurozone leaders are nearing a plan to combat the debt crisis, while European equities are under some pressure ahead of a vote by Slovakia on the expansion of the region’s bailout fund.

As of 8:45 a.m. ET, the December S&P 500 Index Globex future is 8 points below fair value, the Nasdaq 100 Index is 7 points below fair value, and the DJIA is 57 points below fair value. WTI crude oil is declining $1.16 to $84.25 per barrel, and the Bloomberg gold spot price is down $17.30 at $1,659.35 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.3% at 77.79.

American Airlines, which is owned by AMR Corp. (AMR $3), announced that it will reduce its 4Q mainline capacity by about 3% year-over-year (y/y), due to the “uncertain economic environment” and ongoing high fuel costs. The airline also announced that it will retire up to 11 Boeing 757 aircraft in 2012.

In M&A news, Dollar Thrifty Automotive Group Inc. (DTG $60) announced that it has not received any proposals for business combinations that eliminated antitrust regulatory risk and it has terminated its solicitation process and will continue to execute its current stand-alone plan. Hertz Global Holdings Inc. (HTZ $10) had submitted a proposal, along with Avis Budget Group Inc. (CAR $11), but recently CAR decided to drop its proposal.

Small business optimism improves slightly, while the bond markets return to action

The NFIB Small Business Optimism Index snapped a string of six-straight monthly declines in September, increasing from 88.1 in August to 88.9, and was slightly above the expectation of economists surveyed by Bloomberg, which called for an improvement to 88.8. The increase came as the number of firms reporting expectations of higher selling prices and that the current environment being a good time to expand rose, while businesses were slightly less pessimistic about a better economy, higher sales, and credit conditions. Elsewhere, business plans to increase capital spending ticked lower but remained the index’s biggest positive contributor, and plans to hire moved lower but continued to be in positive territory.

Treasuries are lower in early action following the data and the sharp gains in the equity markets yesterday when the bond markets were closed for Columbus Day. The yield on the 2-year note is up 1 bp to 0.30%, the yield on the 10-year note is 6 bps higher at 2.14%, and the 30-year bond rate is advancing 4 bps to 3.06%.

Europe under pressure following string of gains

The equity markets in Europe are lower in afternoon action following four-straight winning sessions. The recent increase in optimism that eurozone leaders are hammering out a plan to recapitalize its troubled banking sector to help fight the debt crisis is being met cautiousness ahead of a vote by Slovakia, the last eurozone member to vote on expanding the capabilities of the region’s bailout fund known as the European Financial Stability Facility (EFSF). Meanwhile, the Troika, members of the EU, IMF and ECB, noted that Greece is most likely to receive its next installment of bailout aid in early November after the conclusions of the review of the troubled nation’s deficit reduction efforts are approved. But the Troika added that Greece still has to do more on the austerity front.

Elsewhere, the UK is dominating the news on the economic front, as reports showed the nation’s retail sales in September unexpectedly rose y/y, while the country’s industrial production surprisingly grew month-over-month (m/m) in August. However, UK manufacturing production declined more than expected m/m in August and home prices declined for the month.

The UK FTSE 100 Index is down 0.9%, France’s CAC-40 Index is declining 0.8%, Germany’s DAX Index is decreasing 0.7%, Switzerland’s Swiss Market Index is trading 0.3% lower, and Greece’s Athex Composite Index is dropping 2.2%.

Asia moves higher on European optimism

Stocks in Asia finished broadly higher following the solid gains in Europe and the US yesterday amid optimism that eurozone leaders are nearing a coordinated effort to recapitalize the nation’s banks and combat the debt crisis threatening the region. Japan’s Nikkei 225 Index rose 2.0% amid the increased eurozone optimism and following a report that showed consumer confidence improved more than expected for September, which offset reports showing the nation’s August trade balance swung to a larger-than-anticipated deficit and a survey on the economic outlook in the country deteriorated for September. Elsewhere, South Korea’s Kospi Index rose 1.6% as a cooling of the nation’s producer prices for September complimented the aforementioned positive European debt sentiment.

Also, stocks in China moved higher, with the Shanghai Composite Index rising 0.2%, while Hong Kong’s Hang Seng Index advanced 2.4% on strength in banking stocks following the announcement that a state-owned investment firm began buying shares of the nation’s four largest banks. Meanwhile, Australia’s S&P/ASX 200 Index gained 0.6% following a slight improvement in the country’s business confidence in September. Finally, Indonesia’s central bank unexpectedly cut its benchmark interest rate by 25 basis points to 6.50%, with economists expecting the nation to leave its rate unchanged. Indonesia’s Jakarta Composite Index rose 2.3%.

Slovakia

noreply@blogger.com (Avid Trader) — Tue, 11 Oct 2011 14:54:00 +0000

by Larry Levin

The market exploded Monday on the nationalization news of Dexia, no additional sovereign downgrades (but that hasn't mattered recently anyway), and an announcement by Merkel & Sorkozy that they have, in essence, a "plan" to "create a plan" in the near future. When asked about the details, Sarkozy said "It's too early for details..."

And with the absence of anything concrete, but lots of Hopium to go around, the stock indices blasted higher with the Dow closing up over 300 points. To be clear: there is NO PLAN to do anything, but they plan on having a plan "real soon, we promise (this time)." Moreover, there are NO DETAILS OF WHAT THEY WILL EVEN DISCUSS!

Explode indeed; after all, the banking mafia won't have to clean up Dexia or anything touching Dexia as well as Greece, Ireland, Portugal, Spain, and Italy. Oh no! That's for the saps that pay taxes.

So on and on it goes...where it stops nobody knows. But wait a second here; could it actually stop with Slovakia? All of the countries in the Euro need to ratify the "bailout the banking mafia (EFSF) fund" and the only two that haven't ratified it yet are Slovakia and Malta. Who wants to bet, despite it written into the treaties that ALL countries must ratify something this major that "this time" the details of the treaty just won't matter. In the end, can the happiness and bonuses of the banking mafia be held up by Malta and Slovakia? "Meh, just ignore them and the rules" will be uttered by Sarkozy & Merkel.

In der Spiegel we read about the possible cog in the wheel: Slovakia. The full article can be read here:

http://www.spiegel.de/international/europe/0,1518,790577,00.html

Richard Sulik, 43, is an economist specializing in tax policy, the speaker of the Slovak parliament and head of the Freedom and Solidarity (SaS) party, a minor party in the country's four-party coalition government. He lived and studied in Germany for over 10 years before returning to his homeland in 1991.

Sulik has been a vociferous critic of aid packages to Greece and of the expansion of the euro backstop fund, the European Financial Stability Facility (EFSF). As an adviser to the Slovak minister of finance, Sulik played a decisive role in the introduction of a 19 percent "flat tax" on incomes, which led investors to flock to the country.

SPIEGEL ONLINE: Mr. Sulik, do you want to go down in European Union history as the man who destroyed the euro?

Richard Sulik : No. Where did you get that idea?

SPIEGEL ONLINE: Slovakia has yet to approve the expansion of the euro backstop fund, the European Financial Stability Facility (EFSF), because your Freedom and Solidarity (SaS) party is blocking the reform. If a majority of Slovak parliamentarians don't support the EFSF expansion, it could ultimately mean the end of the common currency.

Sulik: The opposite is actually the case. The greatest threat to the euro is the bailout fund itself.

SPIEGEL ONLINE: How so?

Sulik: It's an attempt to use fresh debt to solve the debt crisis. That will never work.

SPIEGEL ONLINE: Slovakia's parliament is scheduled to vote on the bailout fund expansion on Oct. 11. How do you predict the vote will turn out?

Sulik: It's still open. The ruling coalition is composed of four parties. My party will vote "no"; the other three coalition parties intend to say "yes." What the opposition says is decisive.

SPIEGEL ONLINE: What will you do should the EFSF reform pass despite your opposition?

Sulik: For Slovakia, it would be best not to join the bailout fund. Our membership in the euro zone, after all, was not conditional on us becoming members of strange associations like the EFSF, which damage the currency.

SPIEGEL ONLINE: If the euro only causes problems, why doesn't Slovakia's government just pull the country out of the euro zone?

Sulik: I don't see the euro as the problem. It's a good project. Everyone involved can benefit from it -- but only if they stick to the ground rules. And that's exactly what we're demanding.

SPIEGEL ONLINE: Which ground rules should we be following?

Sulik: We have to observe three points: First, we have to strictly adhere to the existing rules, such as not being liable for others' debts, just as it's spelled out in Article 125 of the Lisbon Treaty. Second, we have to let Greece go bankrupt and have the banks involved in the debt-restructuring. The creditors will have to relinquish 50 to perhaps 70 percent of their claims. So far, the agreements on that have been a joke. Third, we have to be adamant about cost-cutting and manage budgets in a responsible way.

SPIEGEL ONLINE: Many experts fear that a conflagration would break out across Europe should Greece go bankrupt and that the crisis will spill over into other countries, including Portugal, Spain and Italy.

Sulik: Politicians can't allow themselves to be pressured by the financial markets. Just because equity prices fall and the euro loses value against the dollar is no reason for giving in to panic.

SPIEGEL ONLINE: But do you really believe that politicians can calm the financial markets by stubbornly sticking to their principles?

Sulik: Let's just ignore the markets. It's ridiculous how politicians orient themselves based on whether stock prices rise or fall a few percentage points.

Excuse me, but is Mr. Sulik suggesting that politicians do what's right and not what's politically expedient? Where the heck is the political equivalent in the USA to this man?

One can dream.

Surely the EFSF will pass. The banking mafia and political class will get its way in the end.

Greek 1-YR bonds now yield 150%!? No problems there - Just move along.

Trade Date: 10/10/11

E-Mini S&P Trades*

(before fees and commissions):

1. No "Secrets' trades filled today.

2. Algorithm positions (0)

3. "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...-1.00

Evening Market Update

noreply@blogger.com (Avid Trader) — Tue, 11 Oct 2011 14:26:00 +0000

Rally Rolls On as Earnings Season Prepares for Kickoff

In In light trading, US stocks posted another solid day in the green, sparked by a weekend pledge from Germany and France to deliver a plan to fight the eurozone debt crisis. The bond markets were closed in observance of the Columbus Day holiday and there were no major releases on the domestic economic front. Meanwhile, gold and crude oil prices moved higher, while the US dollar moved sharply lower. In equity news, Superior Energy Services Inc announced that it has agreed to acquire Complete Production Services Inc for about $2.7 billion, while Netflix Inc announced that it will drop its plan to have its DVD and streaming businesses on separate websites, and Scotts Miracle-Gro Co reduced its full-year earnings outlook. The Street will now turn its attention to the Q3 earnings season, which unofficially kicks off after the close tomorrow.

The Dow Jones Industrial Average jumped 330 points (3.0%) to 11,433, the S&P 500 Index rose 39 points (3.4%) to 1,195, and the Nasdaq Composite gained 87 points (3.5%) to 2,566. In light volume, 846 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil picked up $2.76 to $85.74 per barrel, wholesale gasoline rose $0.06 to $2.71 per gallon, and the Bloomberg gold spot price advanced $38.20 to $1,676.05 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was 1.5% lower at 77.54.

Oilfield services company Superior Energy Services Inc. (SPN $24) announced that it has agreed to acquire Complete Production Services Inc. (CPX $28) for cash and stock, worth about $32.90 per share, or $2.7 billion. Under the terms of the deal, CPX shareholders will receive 0.945 common shares of SPN and cash of $7.00 for each share they own. SPN said the deal will be accretive to its EPS and cash flow in 2012. SPN was down sharply, while CPX traded up over 35%.

Elsewhere, Scotts Miracle-Gro Co. (SMG $45) reduced its full-year earnings guidance as sales at the lawn and garden product maker are expected to decline 2% year-over-year (y/y). SMG said the sales shortfall, which was due to an unexpected y/y decline in consumer purchases in the US during September, coupled with associated gross margin pressure, will likely result in adjusted earnings in a range of $2.70-2.75 per share. Analysts surveyed by Reuters expected the company to post EPS of $2.98. SMG added that while it was counting on another strong fall lawn care season, the weather issues that plagued it throughout fiscal 2011 remained problematic during 4Q. SMG was under pressure.

Meanwhile, Netflix Inc. (NFLX $112) is gaining ground after the company reported that it is dropping its plan to split its movie-streaming and DVD-by-mail businesses into separate websites. NFLX announced in September that its DVD business will operate at Qwikster.com, but now will remain available at netflix.com. The company said, “There is a difference between moving quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case.”

Bond markets and economic docket quiet for Columbus Day holiday

The US bond markets were closed in observance of Columbus Day and Treasuries ended last week with the yield on the 2-year note at 0.29%, the 10-year note at 2.08%, and the 30-year bond at 3.02%.

Also, the US economic calendar will be void of any major releases today and will be less active this week, with Friday’s advance retail sales being one of the key reports due out, forecasted to rise 0.7% month-over-month (m/m) in September, after a flat performance in August, while sales ex-autos and ex-autos and gas are both expected to increase 0.3%. Same-store sales results for September from the nation’s retailers reported last week were generally better than expected, while the retail sales report includes spending at supermarkets and gas stations. The other major US report this week will be Wednesday’s midday release of the minutes from the September Federal Open Market Committee (FOMC) meeting. The Fed noted “significant” downside risks to the economy at the last meeting, and began “Operation Twist,” wherein it will reduce its holdings of shorter-term securities and buy longer-term securities.

There are no major releases on the US economic calendar tomorrow. Other US releases this week include: the NFIB Small Business Optimism Index, MBA mortgage applications, the trade balance, weekly initial jobless claims, import prices, business inventories and the preliminary University of Michigan Consumer Sentiment Index reading for October.

Europe gains ground on French and German pledge, policy concerns emerge in China

Increased optimism in Europe was fostered by the pledge over the weekend from France and Germany to deliver a plan to help recapitalize liquidity-strapped banks, provide a solution for Greece’s debt crisis, and accelerate economic coordination in the eurozone by the G20 summit of world leaders in early November, per Reuters. Meanwhile, sentiment was supported by Franco-Belgian bank Dexia (DXBGY $1) agreeing to a rescue plan approved by the governments of Belgium, France, and Luxembourg.

Elsewhere, there was a plethora of economic data for traders to digest, with German exports rising much more than economists had forecasted in August, resulting in an unexpected increase in the nation’s trade surplus. Also, French industrial production surprisingly increased in August, while Italian industrial production rose sharply for the month, easily exceeding estimates. Finally, a read on UK employment sentiment deteriorated for September, while eurozone investor confidence fell more than forecasted for October.

In Asia/Pacific economic news, concerns about China’s tight monetary policy hamstrung sentiment as an advisor to the nation’s central bank noted that the country should stick to a prudent monetary policy to fight inflationary threats, which will help the small business environment, per Bloomberg. Also, property-related issues came under some pressure after a media report over the weekend suggested China’s home prices will face gradual pressure due to decelerating sales activity and rising inventories. Meanwhile, markets in Japan were closed for a holiday.

International economic reports tomorrow will include Japan’s trade balance and consumer confidence, UK industrial and manufacturing production, Canadian housing starts, and Brazilian retail sales.

No Damage (Yet) to Downtrends in Gold, Oil, Euro/USD

noreply@blogger.com (Avid Trader) — Mon, 10 Oct 2011 20:31:00 +0000

By Mike Paulenof

Apart from Sunday's announcement from leaders Merkel and Sarkozy that both agree that European banks must be recapitalized (the details of which will have to wait until Nov 2), let's notice that today's almost euphoric reaction has propelled the Euro/USD as well as gold and silver only towards a test of their prior recovery highs.

In other words, from a technical perspective, none of the enclosed markets has inflicted damage to their post April-May downtrends, which must emerge at 1.3700 (euro/$), $1.680 (gold) and $33.70 (silver) to get some sustained positive traction.

While such a move could be in progress -- subject to headline risk (positive and negative) -- for the time being the technical set-up remains in the grasp of corrective bearish forces that project new lows in the days/weeks ahead.

ETFs to watch are PowerShares DB US Dollar Index (UUP), SPDR Gold Shares (GLD), and iShares Silver Trust (SLV).

Morning Market Update

noreply@blogger.com (Avid Trader) — Mon, 10 Oct 2011 15:34:00 +0000

Stocks Find Support From European Optimism

The US equity markets are solidly higher in late-morning action with optimism continuing to grow regarding coordinated action by eurozone leaders to fight the festering debt crisis, following a weekend pledge by France and Germany. Meanwhile, the bond markets are closed in observance of the Columbus Day holiday and the US economic calendar is void of any major releases today. Gold and crude oil prices are higher, while the US dollar is under heavy pressure amid a rally in the euro. In equity news, Superior Energy Services Inc announced that it has agreed to acquire Complete Production Services Inc for about $2.7 billion, while Netflix Inc announced that it will drop its plan to have its DVD and streaming businesses on separate websites, and Scotts Miracle-Gro Co reduced its full-year earnings outlook. Overseas, Asian Stocks finished mixed as Japanese markets were closed for a holiday, while European equities are moving mostly to the upside.

At 10:53 a.m. ET, the Dow Jones Industrial Average is up 2.4%, the S&P 500 Index is gaining 2.8%, and the Nasdaq Composite is advancing 3.0%. WTI crude oil is rising $2.76 at $85.74 per barrel, wholesale gasoline is up $0.06 at $2.71 per gallon, and the Bloomberg gold spot price is gaining $27.03 to $1,664.88 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 1.5% at 77.55.

Oilfield services company Superior Energy Services Inc. (SPN $23) announced that it has agreed to acquire Complete Production Services Inc. (CPX $28) for cash and stock, worth about $32.90 per share, or $2.7 billion. Under the terms of the deal, CPX shareholders will receive 0.945 common shares of SPN and cash of $7.00 for each share they own. SPN said the deal will be accretive to its EPS and cash flow in 2012. SPN is down sharply, while CPX is trading up over 35%.

Elsewhere, Scotts Miracle-Gro Co. (SMG $45) reduced its full-year earnings guidance as sales at the lawn and garden product maker are expected to decline 2% year-over-year (y/y). SMG said the sales shortfall, which was due to an unexpected y/y decline in consumer purchases in the US during September, coupled with associated gross margin pressure, will likely result in adjusted earnings in a range of $2.70-2.75 per share. Analysts surveyed by Reuters expected the company to post EPS of $2.98. SMG added that while it was counting on another strong fall lawn care season, the weather issues that plagued it throughout fiscal 2011 remained problematic during 4Q. SMG is under solid pressure.

Meanwhile, Netflix Inc. (NFLX $124) is solidly higher after the company reported that it is dropping its plan to split its movie-streaming and DVD-by-mail businesses into separate websites. NFLX announced in September that its DVD business will operate at Qwikster.com, but now will remain available at netflix.com. The company said, “There is a difference between moving quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case.”

Bond markets and economic docket quiet for Columbus Day holiday

The US bond markets are closed in observance of Columbus Day and Treasuries ended last week with the yield on the 2-year note at 0.29%, the 10-year note at 2.08%, and the 30-year bond at 3.02%.

Also, the US economic calendar will be void of any major releases today and will be less active this week, with Friday’s advance retail sales being one of the key reports due out, forecasted to rise 0.7% month-over-month (m/m) in September, after a flat performance in August, while sales ex-autos and ex-autos and gas are both expected to increase 0.3%. Same-store sales results for September from the nation’s retailers reported last week were generally better than expected, while the retail sales report includes spending at supermarkets and gas stations. The other major US report this week will be Wednesday’s midday release of the minutes from the September Federal Open Market Committee (FOMC) meeting. The Fed noted “significant” downside risks to the economy at the last meeting, and began “Operation Twist,” wherein it will reduce its holdings of shorter-term securities and buy longer-term securities.

Other US releases this week include: the NFIB Small Business Optimism Index, MBA mortgage applications, the trade balance, weekly initial jobless claims, import prices, business inventories and the preliminary University of Michigan Consumer Sentiment Index reading for October.

Europe gaining ground on French and German crisis pledge

The equity markets in Europe are mostly higher in late-day action on improved sentiment regarding a coordinated plan to combat the region’s debt crisis. Optimism is being fostered by the pledge over the weekend from France and Germany to deliver a plan to help recapitalize liquidity-strapped banks, provide a solution for Greece’s debt crisis, and accelerate economic coordination in the eurozone by the G20 summit of world leaders in early November, per Reuters. Meanwhile, sentiment is being supported by Franco-Belgian bank Dexia (DXBGY $1) agreeing to a rescue plan approved by the governments of Belgium, France, and Luxembourg.

Elsewhere, there was a plethora of economic data for traders to digest, with German exports rising much more than economists had forecasted in August, resulting in an unexpected increase in the nation’s trade surplus. Also, French industrial production surprisingly increased in August, while Italian industrial production rose sharply for the month, easily exceeding estimates. Finally, a read on UK employment sentiment deteriorated for September, while eurozone investor confidence fell more than forecasted for October.

The UK FTSE 100 Index is gaining 2.0%, France’s CAC-40 Index is rising 2.1%, Germany’s DAX Index is advancing 3.4%, Italy’s FTSE MIB Index is trading 2.8% higher, and Switzerland’s Swiss Market Index is increasing 1.3%, while Greece’s Athex Composite Index is declining 0.6%.

Asia mixed amid European optimism and China policy concerns

Stocks in Asia finished mixed in light volume, with markets in Japan closed for a holiday, while growing hope that European leaders are nearing a plan to help provide capital support to the region’s banks was met with some uneasiness regarding Chinese monetary policy. South Korea’s Kospi Index rose 0.4% and Australia’s S&P/ASX 200 Index gained 0.9%. However, Chinese stocks lagged behind, with the Hong Kong Hang Seng Index finishing flat and the Shanghai Composite Index returning from a week-long holiday and falling 0.6%. Concerns about China’s tight monetary policy hamstrung sentiment as an advisor to the nation’s central bank noted that the country should stick to a prudent monetary policy to fight inflationary threats, which will help the small business environment, per Bloomberg. Also, property-related issues came under some pressure after a media report over the weekend suggested China’s home prices will face gradual pressure due to decelerating sales activity and rising inventories.

Nationalization

noreply@blogger.com (Avid Trader) — Mon, 10 Oct 2011 15:32:00 +0000

by Larry Levin

Late last week I wrote of Dexia bank: "The bailout rumor that sparked the massive short-covering rally Tuesday is still intact. What's odd, however, is that the rumor has yet to be substantiated. Indeed, it is still a fantasy of the banking mafia to date. Nevertheless, the march higher on putrid volume continues and has nearly reached a staggering 100-point reversal from the low."

The rumor of a private bailout turns out to be false. Dexia is being 100% NATIONALIZED by the countries of Belgium and France.

Reuters reported "The governments of France, Belgium and Luxembourg reached agreement on Sunday on a rescue package for Dexia, which will be put to the stricken Franco-Belgian bank's board later in the day for approval."

So France, Belgium, and Luxembourg will take over the failed bank, which means it not only guarantees the deposits of taxpayers, it also assumes the liabilities of the bank. On Friday these governments were not on the hook to pay off Dexia's liabilities. Come Monday, they are. I can only assume that this will bring more downgrades to the Eurozone - these counties in particular.

Speaking of downgrades, last Friday brought several; Italy was downgraded again, Spain's was downgraded, and Belgium was put under rating review. I can't help but wonder if the ratings agencies knew the nationalization was coming and got in front of it.

The question remains, however: will France be downgraded too?

Trade Date: 10/7/11

E-Mini S&P Trades*

(before fees and commissions):

1. FT sell @ 8:44am at 1160.50 = +2.00 & +2.25 (2 lot)

2. Algorithm positions (12)

3. "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...+10.50

Rally Loses Steam Despite Positive Jobs Data

noreply@blogger.com (Avid Trader) — Sat, 08 Oct 2011 16:21:00 +0000

Equity markets snapped a three-day winning streak as a better-than-expected non-farm payrolls report could not offset more disappointing news out of Europe. Debt crisis fears were exacerbated by Fitch cutting their ratings on Spanish and Italian debt. While in the US, excluding the payroll report, releases from the economic calendar added to the market’s weakness with wholesale inventories failing to meet economists expectations and consumer credit suffering its worst decline in a year. In equity news, Sprint and Clearwire were sharply lower after Sprint announced plans to raise capital and not use Clearwire for its next generation network. Illumnina also sold-off sharply after providing a disappointing estimate for 3Q revenues. Despite the negative news, Treasuries finished lower ahead of a long weekend for the US bond market, which will be closed on Monday in observation of Columbus Day.

The Dow Jones Industrial Average dropped 20 points (0.2%) to 11,103, the S&P 500 Index fell 10 points (0.8%) to 1,155, and the Nasdaq Composite declined 27 points (1.1%) to 2,479. In moderate volume, 1.1 billion shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil picked up $0.25 to $82.84 per barrel, wholesale gasoline fell $0.04 to $2.64 per gallon, and the Bloomberg gold spot price declined $12.91 to $1,638.45 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was nearly unchanged at 78.72. For the week, including dividends, the DJIA was up 1.7%, the S&P 500 Index rose 2.1%, and the Nasdaq Composite gained 2.7%.

Shares of Sprint Nextel Corp. (S $2) gave up early gains and finished solidly lower after the company’s chief financial officer suggested at an investor meeting that it may need to raise capital, as it also announced that it plans to launch its 4G network by midyear 2012. Early gains came from the telecom service provider noting that its users of Apple Inc’s (AAPL $371) iPhone will be among the company’s most profitable. Also, CNBC reported that the company’s CEO Dan Hesse said the device will be “huge” for its cash flow. Sprint will begin selling the iPhone for the first time this month.

In a related story, the stock of Clearwire Corp. (CLWR $1) lost nearly a third of its value after Sprint announced it will not be using networks offered by Clearwire for its 4G endeavor, opting instead to use technology that is becoming the industry standard.

Illumina Inc . (ILMN $27) closed down over 30% after the life science tool maker estimated 3Q revenues of about $235 million, below the $276 million consensus estimate of analysts surveyed by Reuters. The company said its revenues were negatively impacted by an “unprecedented slowdown” in purchasing due to continued uncertainty surrounding the levels of research funding in the US and Europe and overall economic conditions, as well as temporary excess capacity in the market. ILMN also suspended its guidance for the full year.

Nonfarm payrolls top forecasts, but wholesale inventories and consumer credit disappoint

Nonfarm payrolls rose by 103,000 month-over-month (m/m) in September, compared to the consensus estimate of economists surveyed by Bloomberg, which forecasted a 60,000 increase. Prior months were also revised higher, with August’s initial flat reading revised to an increase of 57,000 jobs, and July’s prior 85,000 gain was adjusted to a rise of 127,000. Additionally, excluding government hiring and firing, private sector payrolls increased by 137,000 in September, versus the forecast of a gain of 90,000, after expanding by an upwardly adjusted 42,000—from an initially reported 17,000 gain—in August. The unemployment rate remained at 9.1%, matching expectations. Additionally, average hourly earnings were also inline with forecasts, rising 0.2% m/m but August’s 0.1% decline was revised to a decrease of 0.2%, while average weekly hours unexpectedly rose to 34.3, from 34.2 in the previous month, where economists expected it to remain.

The report was positively impacted by a return of striking Verizon workers, which had lowered payrolls by 45,000 in August. Other job gains came as temporary help increased by 48,000, retail trade added 13,600 jobs, and construction grew by 26,000. Another positive aspect included a gain in worker’s incomes as both hourly earnings and the workweek rose. Lastly, the unemployment rate remained unchanged despite a gain in the labor force. On the negative side of the ledger, jobs in manufacturing fell by 13,000 and government lost 34,000. Additionally, the broader definition of unemployment, which includes people working part-time for economic reasons, rose to 16.5% from 16.2% in August.

Meanwhile, wholesale inventories rose 0.4% month-over-month (m/m) in August, compared to the 0.6% increase that was forecasted by economists, and July’s 0.8% gain was left unrevised. Durable goods inventories rose 1.1% m/m, led by auto-related goods, as well as electrical and electronic stockpiles, while inventories of nondurable goods were down 0.6%, on declining inventories of paper and petroleum. Meanwhile, sales rose 1.0% m/m on a 2.3% increase in durable goods, while nondurable goods declined 0.1%. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at a downwardly revised 1.16 months for August.

After rising by $12.0 billion in July, consumer credit was forecasted to increase by $8.0 billion in August, but unexpectedly fell $9.5 billion. The decrease is the largest drop in consumer credit in over a year and non-revolving credit suffered its most drastic downturn in over three years.

Treasuries finished lower, with the yield on the 2-year note up 2 bp to 0.29%, the yield on the 10-year note 8 bps higher at 2.07%, and the yield on the 30-year bond advancing 6 bps to 3.01%.

Eurozone issues remain the focal point overseas

Uncertainty about a Greek debt default reemerged as France and Germany appear to be at odds regarding the future for the troubled nation ahead of a meeting in two days and a final decision on Greece’s next installment of bailout aid has yet to be determined. Also weighing on sentiment, Fitch cut its ratings on Italy and Spain, due to their high levels of debt as well as their exposure to the eurozone debt crisis. Moody’s Investors Service downgraded 12 U.K. banks, including Royal Bank of Scotland Group Plc. (RBS $7) and Lloyds Banking Group Plc. (LYG $2), due to a lesser probability of government support for the financial institutions. In European economic news, German industrial production fell 1.0% m/m in August, after rising a downwardly revised 3.9% in July, but compared to the 2.0% drop that economists had projected. UK producer prices came in hotter than expected for September and the French trade deficit narrowed more than anticipated in August.

In Asian economic news, the Bank of Japan left its benchmark interest rate unchanged at 0.10%, as expected, and Japan’s Leading Index declined from 104.6 in July to 103.8 for August. A report from Taiwan showed the nation’s trade surplus narrowed more than expected as imports outpaced exports, but both came in stronger than expected for September.

US data and eurozone bank optimism fuel a solid advance

Coming off a dismal 3Q for the equity markets, stocks posted solid gains to kick off 4Q amid some favorable US economic data and some relatively eased concerns about the eurozone debt crisis. Growing fears of a return to a recession for the US economy were curbed somewhat as both the ISM Manufacturing and non-Manufacturing Indices remained in territory depicting expansion—with the former surprisingly accelerating—construction spending rose unexpectedly, jobless claims rose less than forecasted—after complications with seasonal adjustments—and September retail sales mostly bested projections. However, the bulk of the week’s support came from across the pond amid reports that suggested eurozone leaders may be moving closer to some form of a coordinated effort to recapitalize the region’s liquidity-strapped banking sector. The equity front took a back seat to the focus on the macroeconomic picture, but next week, 3Q earnings season will begin, potentially adding another catalyst for the markets. Earnings and guidance will be closely watched as traders try to determine how the recent downshift in the economy will impact valuations going forward.

Focus to shift as earnings season begins

The US economic calendar will be less active next week, with the major releases including of Friday’s advance retail sales, forecasted to rise 0.6% month-over-month (m/m) in September, after a flat performance in August, while sales ex-autos and ex-autos and gas are both expected to increase 0.3%. Same-store sales results for September from the nation’s retailers reported this week were generally better than expected, while the retail sales report includes spending at supermarkets and gas stations. The other major US release next week will be Wednesday’s midday release of the minutes from the September Federal Open Market Committee (FOMC) meeting. The Fed noted “significant” downside risks to the economy at the last meeting, and began “Operation Twist,” wherein it will reduce its holdings of shorter-term securities and buy longer-term securities.

Other US releases next week include MBA mortgage applications, the trade balance, initial jobless claims, import prices, business inventories and the preliminary University of Michigan Consumer Sentiment Index reading for October. The US bond market will be closed on Monday in observance of the Columbus Day holiday. Other reports in the Americas include Canada’s housing starts and prices, as well as manufacturing sales, Brazil’s retail sales, and Mexico’s industrial and vehicle production.

Other international releases include euro-zone industrial production, CPI and trade balance, UK housing prices, industrial and manufacturing production, Japan’s machine orders, Australia’s business and consumer confidence, as well as employment. China will release new yuan loans, money supply, trade data for September, PPI and CPI. The central banks of South Korea and Mexico will meet and the Bank of Japan will release the minutes from its latest meeting.

Indices Close Negative on Late Rollover Reversal

noreply@blogger.com (Avid Trader) — Sat, 08 Oct 2011 16:15:00 +0000

By Harry Boxer, The Technical Trader

The stock market indices rolled over in the last 30 minutes of the session to take the indices from positive to negative to close the week on a down note, but not too far from the weekly highs.

Although the day started out with a move to the upside, the Nasdaq 100 plunged on three different occasions to test support at 2190 and S&P 500 made lower lows and got down to 1150 several times. But the market was not able to break those levels on the NDX and SPX. As a result, the indices had a strong 3-wave move into the last half hour that took them to new highs for the week on the NDX. However, failing to confirm it on the S&P 500 caused a late, sharp rollover in the last half hour that took them into negative territory.

Net on the day, the Dow was down 20.21 at 11,103.12, 129 points off the high. The S&P 500 was down 9.51 at 1155.46, 16 points off the high. The Nasdaq 100 was down 15.23 at 2202.76, 25 points off the high.

That was certainly a late-rollover reversal.

Advance-declines were negative by 3 to 1 on the New York Stock Exchange, and the same on Nasdaq. Up/down volume was more than 4 to1 negative on New York, with total volume of a little less than 1.2 billion shares traded today. Nasdaq traded just over 2 billion shares and had a 3 to1 negative volume ratio.

TheTechTrader.com board, as a result of the late negative sell-off, was mostly lower today. Leading the way on the downside today was First Solar, Inc. (FSLR), down 4.99 to 59.74. Apple Inc. (AAPL) lost 7.57 to 369.80, Goldman Sachs (GS) 5.24 to 92.69, Netflix, Inc. (NFLX) 6.03 to 117.21, Universal Display Corp. (PANL) 2.42 to 44.31, Life Technologies Corporation 2.56 to 36.82, BMC Software Inc. (BMC) 3.86 to 36.98, Youku.com Inc (YOKU) 1.13 to 18.05, and Chipotle Mexican Grill, Inc. (CMG) 4.40 to 294.59.

In addition, SodaStream International Ltd. (SODA) was down 73 cents to 35.05, Clearwire Corporation (CLWR) down 66 cents to 1.39, and Westport Innovations Inc. (WPRT) 57 cents to 27.68.

Ultra-long Direxion Daily Small Cap Bull 3X Shares (TNA) lost 2.71 to 34.03.

On the plus side there were a few gainers of note. ServiceSource International, In (SREV) had a good day after earnings came out, up 1.22 to 14.57, although that traded as high as 15.32 earlier. Silicon Motion Technology Corp. (SIMO) was up 77 cents to 13.26, Coffee Holding Co.Inc. (JVA) 78 cents to 9.04, Liquidity Services, Inc. (LQDT) 73 cents to 31.55, Dollar Tree, Inc. (DLTR) 1.23 to 77.68, Westport Innovations Inc. (WPRT) 57 cents to 27.68, GeoEye, Inc. (GEOY) 2.10 to 31.84, Amazon.com Inc. (AMZN) 3.23 to 224.74, and IPG Photonics Corporation (IPGP) 7.26 to 55.02.

The ultra-shorts had a good session today. VelocityShares Daily 2x VIX ST ETN (TVIX) was up 2.30 to 77.90, Direxion Daily Small Cap Bear 3X Shares (TZA) up 3.42 to 47.67, and Direxion Daily Financial Bear 3X Shares (FAZ) 5.46 to 63.82. The ProShares UltraShort Silver (ZSL) was up 84 cents to 14.83.

Stepping back and reviewing the hourly chart patterns, the indices were up early, had a 3-wave decline, but held support midday on three different occasions, and then rallied in the afternoon. They spiked up in the last half hour, but then rolled over sharply in the last half hour, and plunged to pullback the indices into the negative column.

It was a loss for the session, but it wasn’t too bad considering the gains the indices made this week.

We‘ll see how it goes on Monday.

Good Trading!

Harry

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