Dumb Money

A lot has happened since I've been gone

2011-11-11T13:29:00.000-08:00

Hey, everyone...if you are still checking my blog, thank you so much. I know I've been slacking and been lazy. I'm going to try and be a better poster from now on even if I don't post everyday, I will try and post at least 3 times a week from now on.

Today was quite a good day in the market's actually the past two days were quite good as we gained back almost everything we lost from Wednesday's huge selloff. I actually thought after Wednesday we would continue downward back into the old trading range because the selloff was so powerful with 99 stocks dropping for every 1 that gained. The bulls still have some fight in them as they wrestled back control of the market the past two days.

As of now, we are still in a trading range market albeit a higher range than we were earlier. On the SNP we got 1220 as the low end of the range and 1290 on the high end.

On the chart you can see our old trading range between 1120 and 1225 and our new one between 1225 and 1280 which we have been in for a couple of weeks now. The bulls are buying in the 1220-1230 area and the bears are selling up around 1270-1290. I don't see any catalyst to push us past 1280 right now although economic data is coming in good. As long as Europe is dysfunctional we will stay in the range.

My only position right now which I told you about last time I posted is in gold via IAU. This trade is working out very well for me as I have a 10% gain so far which puts my trading account in positive territory for the year. Gold has caught a bid on persistent eurozone worries and after it's nice technical bounce off the 150 day moving average which has been long term bull market support.

Gold is in a nice rising channel right now and if you were so inclined you could buy at the bottom of the channel and sell at the top. I'm not that nimble so I'll pass on that trade.

I have not been doing much trading recently as the market has been too headline driven for me to play. I am not nimble enough to trade the 60 point range so I'll just watch from the sidelines with my gold. If you put a gun to my head and said pick a direction for the SNP I'd say we are headed down and now would be a good time to lay out a short position. But with positive seasonality, the bulls are going to be looking to prop this market into year end so it is tough to short now.

I'll be checking all your blogs in the next few days. Sorry for disappearing.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Caterpillar earnings drive markets higher

2011-10-24T13:35:00.000-07:00

Sorry peeps for not posting anything this weekend. My internet has been going up and down and up and down all weekend long. It is really starting to piss me off. Also, I've basically been in a coma the past two days after taking this drug called Seroquel. Man that stuff really puts my lights out. Has any of you taken Seroquel before? Is sleeping for two days in a row normal? I slept till 1 in the afternoon today and I still feel groggy as hell. Anyways, I'll be back up and running today and the rest of the week of course and I'll be checking all your blogs!

Today was a great day in the markets as Caterpillar blew away earnings forecasts, easing fears of a global growth slowdown. Caterpillar builds backhoes, mining equipment basically all the things needed for construction and mining so it is a good proxy for global growth. When CAT is doing well, the global economy can't be that bad.

CAT had record revenues and a 44% rise in quarterly profit easily beating analysts expectations. Caterpillar's stock jumped 5.6% on the news to over 90 dollars a share after being near 70 just 2 weeks ago.

It looks like the breakout from last week is continuing and it is okay to buy stocks here. The DJIA finished 105 points higer and the SNP and NASDAQ rose even more gaining 1.3% and 2.35% respectively. Oil jumped nearly 5% and gold was higher by 1%.

I think this rally is going to continue until 1270 or 1280 on the SNP as we have some serious upside momentum building and this is the seasonal best period to own stocks. Let's see what happens.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

S&P 500 breakout

2011-10-21T13:06:00.000-07:00

Sorry, friends about the late post today. My internet was down this morning so I could not post as per my usual. I am really getting pissed off at my poor internet service. It's has been down at least 6 hours each of the past 4 days. I call tech support and of course they have no idea what's going on. My line is a good distance away from the main office so that is why it's always going up and down. I'm going to call them and ask for a free upgrade and if they don't give it to me, I'm going to get a new ISP. Anyways, on to the markets...

Today was a very good and powerful day for the indexes. I'm calling the breakout on the SNP 500. This should lead to more follow through buying next week.

As you can see on the above chart, SPY finally popped above that little red line which had been like a brick wall for over 2 months now. It is okay to buy stocks here and I will probably do some on Monday.

Strong earnings from MCD propelled it's shares higher by almost 4% today to an all time closing high.

MCD had also been consolidating in a range for awhile and has broken above it. It is okay to buy this breakout on MCD as well.

My gold trade is working out so far as we had a textbook bounce off trendline support and the long term bull market support level of the 150 day moving average yesterday and more follow through buying today.

15.65 is a strong support level and is a good place to buy.

All in all, not a bad day in the markets. It looks like we are shaping up to have a nice end of the year rally. It is time to start buying.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Qaddafi is dead!

2011-10-20T07:44:00.000-07:00

I don't know if you all have heard yet but Moammar Qadaffi has been captured and killed. The Misrata Military Council led an attack on Qadaffi's hometown of Sirte where the ex-dictator was hiding. Not all the details are out yet but it seems Qadaffi was shot in the head and the legs whilst trying to escape rebel fighters in Sirte. More details to come later on.

Libya is the largest oil producing country in Africa and oil prices dropped on this news.

In other news, markets are quiet today trading in a 70 point range in the early going. There has not been much news to catalyze the markets today although new claims for unemployment benefits dropped to 403,000 which was slightly higher than economists had forecast. More importantly the four week moving average of new claims for unemployment benefits dropped to 403,000. This shows that even though the economy seems troubled, employers are not laying off people like crazy.

Market Recap

     Well today was a rollercoaster ride in the markets. The Dow traded in an almost 200 point range but at the end of the day finished 37 points higher. Good economic news was offset by mixed messages from Europe. After being down 100 points earlier in the day, the markets turned around on more news out of Europe. This is such a headline driven market, it is tough to trade.

     I made the mistake of trying play AAPL's earnings and I paid the price for it. I went ahead and bailed out of my AAPL position with a 6% loss. You got to have discipline when you are trading and I don't like to take losses more than 6-7%. Could AAPL go up from here? Sure, it could but it will have to go up without me. I don't want my 6% loss to turn into a 15% loss so I'll bail here.

     I did end up buying some gold today. After setting my limit order yesterday for IAU at 15.80, it triggered early this morning on the open. Gold has not been trading well lately and I believe it is related to US dollar strength. Gold will be under pressure as long as the dollar is strengthening. My buy thesis is that we are at long term bull market trendline support. I believe gold's bullish fundamentals are intact and I am willing to take a shot that gold bounces off support here but I set a 5% stop just in case it doesn't.

I have not been trading well recently, I think I have lost my last 5 trades but hopefully we can turn things around. The good thing is I have kept my losses small and so am only down about 3 pct this year. I really need a winning trade.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Apple misses earnings shares are crushed

2011-10-19T08:06:00.000-07:00

   Wall Street's golden child AAPL missed earnings for the first time in four years yesterday! Profits were 7.05/share which came in below analysts expectations of 7.39/share. The stock is down 4% in early trading after being down as much as 8% in after hours trading yesterday.

     Now AAPL is notorious for low balling guidance so analysts are always trying to figure out how much more they have to up their targets from AAPL's guidance. Last quarter AAPL predicted they would make 6.40/share. Analysts had raised their targets all the way up to 7.39 before earnings.

     AAPL disappointed on iPhone sales selling 17.1 million iPhones while analysts were expecting 18-20 million. Sales were especially disappointing in September as consumers awaited the new iPhone 4S.

     iPad sales were 11.1 million which was disappointing to analysts as well. iTunes had revenue of 1.5 billion in the quarter. The company sold 4.89 million Macs in the quarter. Revenue from the AAPL stores was 3.6 billion. iPhone 4S sales were 4 million in their first three days!

    Wall Street was disappointed in the past quarter but I don't think it's anything to get scared about. After all that was LAST quarter's results...what is more important was their guidance which they raised to 9.30/share for this upcoming quarter. To me, the stock was unfairly beaten up. AAPL is not one of those high flying momo stocks with a 50 PE. AAPL is still growing, raised it's guidance and isn't that expensive to boot. This pullback is a good buying opportunity.

Market Recap
     Well today was shaping up to be a pretty blah day in the markets until the Fed's Beige Book report. The Fed's Beige Book report is a report on the economic conditions across the country according to the Fed's analysis and it can give an insight into the Fed's thinking regarding the economy. Traders sold stocks after the report painted a gloomy picture of our current economic circumstances. We finished lower by 72 points on the DOW after being higher by as much earlier in the day.

     SPY once again fell back from resistance and is having real trouble getting past this resistance area between 1220-1230. My little red line is like a brick wall for stocks...

After disappointing investors yesterday with their meager earnings, AAPL traded down over 5%. Once more, the little red line was like a brick wall.

I believe whatever AAPL's earnings were, it would have sold off. It seems like the stocks that have done well this year like IBM and AAPL have sold off after earnings and the stocks that have gotten really beaten up this year like BAC and MS rallied after earnings. I am holding AAPL now but should probably sell.

One more thing I have my eye on is gold. Gold went into bubble territory in August, then sold off massively in September but was still able to hold it's trendline which I identify as the 150 day moving average. Gold is still in a bullish configuration and I am looking to add to it now that everyone has forgotten about it. The trendline is at 15.62 and I have placed a limit order at 15.80 to purchase some gold. I think gold's bullish fundamentals remain intact(money printing, race to the bottom for currencies, higher than normal inflation around the globe) so gold should be bought on this dip.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Stocks up on Bank of America earnings

2011-10-18T08:04:00.000-07:00

   Bank stocks are up today after Bank of America posted better than expected earnings. Bank of America stock was up almost 7% today in early trading. The big positive surprise was Bank of America's revenue, which was 28.7 billion, increasing even in a tough quarter for most banks.

     Profit per share was .56 which was helped by a 9.8 billion gain for selling it's stake in China Construction bank. Bank of America's core business appears to be shrinking however as it's net interest margin dropped to 2.32%. Net interest margin is the difference between what it pays depositors for use of it's cash versus what it charges for loans. Net interest income which is the bread and butter for banks shrank to 10.7 billion from 12.7 billion a year ago. Bank of America stock has fallen more than 50% this year.

     In other earnings news, IBM's shares were down 4.5% in the early going after posting in line results. Investor expectations were high for IBM after it rallied to a record high close a few days ago.   Analyst's were disappointed with the earnings which showed that IBM may have slower growth in the future. IBM posted revenue of 26.2 billion for the quarter and profits of 3.28 a share. IBM stock has risen more than 20% this year.

   The overall markets are higher today as of 8 AM PST after earlier being down almost 1%. After the bell we get AAPL earnings which I will be watching closely.

Market Recap
     The market looks like it wants to break out but it hasn't yet. The SNP 500 blasted above the 1220 level today on a report in the financial times that the Europeans are going to lever up the EFSF fund from 400 billion to 2 trillion dollars. The market finished right at my little red line which is resistance right now.

Still waiting for AAPL earnings which should be coming soon. I ended up buying some today at around 421 and am looking for great earnings to propel this stock to 450. We are bumping up against resistance right now so these earnings will determine whether they blast past resistance or fall back once again.

OUCH! AAPL just came out with earnings and it was a big disappointment. AAPL reported earnings of 7.05 vs 7.39 expected. The stock dropped 35 dollars immediately after the report almost 10 pct and I am now .5% poorer. :( Check out the 5 minute chart including after hours trading. As you can see we hit 389 dollars in afterhours.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Down and dirty all day long

2011-10-17T01:23:00.000-07:00

We have had one hell of a rally in the US where prices have risen 14.1% on the SNP 500 since bottoming October 4th. We had been rangebound on the SNP 500 for the past two months but it now looks like we are going to break out of the range and head upwards. It has been a truly remarkable rally.

      US stock futures are up and Asian and European market's are as well on a continuation of positive momentum from the past two weeks. US Dow stock futures are up 81 points as of 1:15 AM PST.

     The Hong Kong Hang Seng index has also had quite a rally. It is now 18,800 after rallying nearly 3000 points in the past week and a half. That is a years worth of gains in less than two weeks!

     European bourses are up as well across the board with the FTSE, DAX and CAC all up over 1%. It looks like we will get more rallying tomorrow. I plan on buying some AAPL when I wake up.

Market Recap

Wow, what a turnaround today from last night. My post was very misleading if you woke up this morning and checked the markets. We opened up 100 points down and went down and dirty all day long. It was a pretty bad day in the market's where we fell from strong resistance in the 1220-1230 area on the SNP. My little red line is pretty strong eh?

     The headlines say we were down because German finance minister made some comments that made the market's think that a fix for the Eurozone won't come quick enough. But that is bullshit!! It is the little red line that controls things!! It was a great place to take profits here at this level. But that is okay, I believe the rally is still intact and am a buyer in the 1170-1180 range.

     The other scenario is we head back down the range and retest the lows we made earlier in October. I feel this is unlikely to happen as we are starting the seasonal best period of the year for the stock market. The third year of the presidential cycle is traditionally the best year for the stock market. The 4th quarter of the third year of the presidential cycle is traditionally the best quarter of them all! All this leads me to position for a rally into year end. This pullback will make a nice buying opportunity coming up if you missed the bottom earlier this month.

     After checking the market action this morning, I ended up not buying AAPL today. AAPL acted very strongly today and people seem to be wanting to buy ahead of it's earnings report tomorrow after the bell. I think AAPL will report great earnings tomorrow and should go higher. Maybe I get a better price tomorrow. AAPL is also bumping it's head against resistance.

How about that little red line? After making new all time highs early in the session AAPL sold off with the rest of the market finishing only .5% lower however while the overall market was down 2%. All in all, a pretty strong day for AAPL.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

My favorite songs of all time part 3

2011-10-15T04:29:00.000-07:00

In the past, I always liked listening to different music and was always on the lookout for great new radio stations to listen too. One day whilst spinning the dial I found a station called KCRW. To those that don't know, KCRW is the Santa Monica City College station and they are also affiliated with National Public Radio. During the day they have various NPR shows but at night, KCRW plays some of the best tripped out electronic music that you could never find on any other radio station especially back when I started listening in 1998.

There were a few great shows on there but my favorite was Chocolate City hosted by Garth Trinidad. I listened to it all the time for awhile and really enjoyed the hip hop, soul and world rhythms Trinidad mixed together seamlessly. I think it was on twice a week back then but now it's is on only infrequently. You can still listen to the occasional podcasts of Chocolate City here. This show is where I found out about great bands like Kruder and Dorfmeister and Thievery Corporation, Gotan Project and St. Germain which I feature below.

Kruder and Dorfmeister is an Austrian duo best known for their remixes of popular songs. Here is one of my favorite K&D songs of all time...you know it, you love it...Bug Powder Dust. This song is a remix of a Bomb the Bass track which features Justin Warfield. The very strange title and chorus is from a movie called Naked Lunch which is just a really weird movie.

Everybody loves Thievery Corporation right? These guys were anti-corporation/wall street even before it was cool! One of my favorite albums of all time is The Cosmic Game and on it, is one of my favorite songs of all time, "The Time We Lost Our Way" featuring LouLou with some souful singing...

I don't keep up with music anymore but even I know the Gotan Project is played out. They've been heard on car commercials and Dancing With the Stars but I don't care though, I still love them and am going to put one of their South American flavored songs on here. If the guy dancing had a huge beard and hat, I could almost picture that it's the Hasidic Plumber busting out that Argentine tango.

Last but not least we have St. Germain, the stage name of a French musician named Ludovic Navarre. His beats have been described as a combination of house and nu jazz, but I just call them tight. This song is called La Goutte D'or which translates to "a drop of gold." It is also a neighborhood in Paris known as Little Africa because of all the African and Arab immigrants that live there.

Well, there it is, the downtempo version of my favorite jams of all time. Hope you all enjoyed it as much as I have enjoyed in the past.

Part 1 and Part 2 of my favorite songs of all time.

Google blows away expectations

2011-10-14T07:59:00.000-07:00

   Our favorite benefactor Google, reported monstrous earnings yesterday and the stockholders are reaping the rewards today. Google was up more than 6% today after reporting a 26% gain in profits from a year ago.

   Google makes most of it's money from search ads and it has 76% of the US market and even more of the rest of the world.

   The number of clicks on ads rose 28% from the year ago period and the price they charge per click increased 5%.

   Google +, Google's answer to the Facebook threat increased it's user base to 40,000,000 increasing from 10,000,000 in July.

   Google is also grabbing a larger share of the smartphone marketplace with over 190,000,000 Android phones active worldwide.

   Google's profit for the 3rd quarter was 2.3 billion on sales of 7.51 billion.This equates to profits of about 8.33/share. Google is a cash machine.

     Market's are up on this good news continuing the positive momentum of the past 2 weeks. As of 8:00 AM PST the DOW is up almost 1%. The SNP 500 keeps bumping it's head on the 1220 level.

Market Recap

   Could this be the start of a new bull market in stocks??

The past six months have been pretty brutal in stocks. Since the market topped out on May 1st, 2011 at 137.18, the SNP 500 lost 21.7% of its value bottoming out at 107.43 on October 4th, 2011 indicating we are in a bear market. Since October 4th, the SNP has rallied furiously gaining 14.1%.

     There is a technical indicator called the "Zweig Breadth Thrust"(credit to DeerIslander from Fidelity Family Forum for alerting me to this) that says we are in a new bull market. Basically, a bullish signal is triggered if there is an increase in the indicator from .40 to .615 in 10 days. After this indicator is confirmed, stocks have gained an average of 20% in the next 12 months. Today, the indicator was confirmed. The last Zwieg Breadth Thrust bullish signal was in March of 2009 which foreshadowed a 100% gain of the markets.

     While the macro backdrop looks bleak, that is often the case when bull markets start.

     Today was a very positive day in the markets. We finished right at horizontal resistance on the SPY chart breaking through the magical 1220 level near the close.

This market looks like it wants to go higher and I would not fight it.

AAPL also had a very bullish day rising nearly 3% to close at an all time high. AAPL looks like it wants to go to 450 and I think it gets there. Press your bets on AAPL.

How to Read the Chart
      Some people were asking how to read the chart. Basically, the chart measures the price of a stock over time. Each red or green rectangle is called a candlestick. Each candlestick measures the price movement of that particular day. For example, the red candlestick is a day where the stock price opened at the top of the body of the red candlestick and finished the day at the bottom of the body of the candlestick. Green candlesticks are the opposite. We opened at the bottom of the candlestick and finished at the top.

     If you look at the candlestick for October 4th on the above SPY chart, you can see we opened at 108(the bottom of the body of the green candlestick), then went even lower to reach the low of the day at 107.43 and then zoomed back upward to finish the day at around 112.50 creating a green candlestick.

     Also, the light blue lines represent the 50 day and 200 day moving averages. It would take a longer discussion than I could give here to discuss the significance of these price levels but trust me when I say they are important levels for a stock.

   The light blue bars coming up from the bottom of the chart measures the volume of the stock for that particular day. The higher the bar, the more times the stock was bought or sold that day.

The red line is a line I drew on the chart which is a trendline. Oftentimes, stocks make these types of patterns on the charts and it is useful to note them because if the stock moves up past them or down from them it is significant. As you can see from the AAPL chart above, once we broke above the red downtrend line, we zoomed upwards.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Bank stocks drag averages lower

2011-10-13T10:57:00.000-07:00

   Poor earnings results from JP Morgan are dragging the entire market lower today and especially the financial sector. JP Morgan's net income dropped 4 pct over the July-September period and investment banking revenues declined 31 pct because of increased volatility in the financial markets over the summer. JP Morgan's results do not bode well for the rest of the financial sector.

     JP Morgan stock is down almost 6% as of 10:53 AM PST and down about 25% YTD. Bank of America stock is down almost 5% to 6.23. The broader market's were down as well with the DOW down as much as 150 points early in the session but has recovered somewhat to be down only 50 points at the time of this writing. The SNP 500 was down about .5% but the NASDAQ was green because AAPL was higher by about 1%.

     After the bell we get Google earnings.

Market Recap
     Well, Google posted some nice earnings surprise!! Google's shares are up almost 6% in after hours trading after posting better than expected earnings result. Google earned 2.7 billion dollars from July-September surpassing last year where they made only 2.2 billion dollars. That breaks out to a 8.33/share profit.   Google is taking over the advertising world.

     In other news Fitch downgraded UBS and put Bank of America on watch for a credit ratings downgrade. This has put a damper on the enthusiasm after Google's earnings. After being up earlier, futures have traded down about 30 points.

     Today's action in the market's was quite constructive in my opinion. We should have had a big down day after JP Morgan's poor earnings report but we battled back all day long to finish 100 points higher off the lows of the day. Certain high beta stocks like AAPL also did really well today which makes me enthusiastic about the market right now. Tech stocks were outperformers today with the NASDAQ rising .6% while the SNP and DOW were down.

     I was just about ready to call the end of the rally yesterday, but now I believe we are witnessing the start of the traditional end of year stock rally. It is time to buy stocks right now and I am going to start buying if we get a pullback to the 1170 level. If you are long already, it is time to press your bets. I am looking at AAPL and XLE and ANR for buying opportunity's. I have missed this whole rally but haven't really been kicking myself, there is still time to buy to catch the stock rise.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Stocks and Breaking Bad

2011-10-12T13:28:00.000-07:00

<------mfw I win

     Sorry about the late post friends. I woke up late this morning and had to get out of the house really fast and so did not have time to put up a preliminary post as per my usual.

   Anyways, before I get to stocks, did you see the Breaking Bad finale?? OMFG, I just got around to watching the last two episodes last night and it was EPICCCCCC. This show is the definition of epic! I don't want to spoil it for anyone who hasn't seen it but it was just a sick ass finale. Breaking Bad has to be one of the greatest shows on television right now and Tio has to be one of the greatest characters. I don't know how they are going to top this past season next year. It will be interesting to watch. What did you guys think of it if you saw it?

Market Recap
     Stocks were again higher today as stocks continued their positive momentum from the past week. There was no big news to justify this rally, just a continuation of positive momentum. The Dow rose 100 points and the SNP and NASDAQ were higher by almost 1% as well.

     Oil was down a small amount and gold was up.

     The market's did very well today although a few cracks started to show in the facade. AAPL which had been rallying furiously put up a pretty bearish candlestick today opening on the highs and trading down all day. It is probably time to take profits if you have a position in AAPL.

On the SPY chart, we tagged 122 and immediately fell back from resistance about 13 points. 122 is strong resistance right now, it will take more powerful buying to get above this level. This level is probably a good low risk entry point for a short position.

      Some people were asking how to read the chart. Basically, the chart measures the price of a stock over time. Each red or green rectangle is called a candlestick. Each candlestick measures the price movement of that particular day. For example, the red candlestick is a day where the stock price opened at the top of the body of the red candlestick and finished the day at the bottom of the body of the candlestick. Green candlesticks are the opposite. We opened at the bottom of the candlestick and finished at the top.

     If you look at the candlestick for October 4th on the above SPY chart, you can see we opened at 108(the bottom of the body of the green candlestick), then went even lower to reach the low of the day at 107.43 and then zoomed back upward to finish the day at around 112.50 creating a green candlestick.

     Also, the light blue lines represent the 50 day and 200 day moving averages. It would take a longer discussion than I could give here to discuss the significance of these price levels but trust me when I say they are important levels for a stock.

   The light blue bars coming up from the bottom of the chart measures the volume of the stock for that particular day. The higher the bar, the more times the stock was bought or sold that day.

The red line is a line I drew on the chart which is a trendline. Oftentimes, stocks make these types of patterns on the charts and it is useful to note them because if the stock moves up past them or down from them it is significant. As you can see from the AAPL chart above, once we broke above the red downtrend line, we zoomed upwards.

     You can read more about candlesticks and charts here.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

3rd quarter earnings season kicks off today

2011-10-11T08:09:00.000-07:00

   Earnings season is upon us!! First up on the docket today is Alcoa(AA) after the bell. Alcoa is an aluminum company that is somewhat of a bellweather for the global economy. Alcoa's aluminum goes into the production of cars, trucks and airplanes so it will be intredasting to see what they have to say about these industries and the global economy in general.

     Other earnings this week will be PepsiCo, Mattel and JP Morgan. JP Morgan will be an important one later in the week because we will get to see the state of the financial industry. Expectations have been really lowered for bank profits because of this volatile market environment. JP Morgan's stock has lost almost 30% of its value this year.

     This earnings season will be especially interesting to monitor because they can confirm or deny a global economic slowdown and a US recession. Companies not only report 3rd quarter earnings but also give their outlook for the future which will be much more important with so much uncertainty around. With the market having rallied over 100 SNP points in the past week or so, I believe we will need to see some good earnings from companies to sustain the rally.

Market Recap
     Well, the first earnings of the season was a dud. Alcoa reported disappointing earnings and their stock is down 5% in after hours trading right now. The news was not all bad however as the CEO said economic growth was continuing outside of Europe.

     "With the exception of Europe, we saw growth in our end markets, though at a slower rate than in the first half, as confidence in the global recovery faded," Chairman and CEO Klaus Kleinfeld said.

   Alcoa has been a serial disappointer when it comes to earnings so this shouldn't affect the markets too much tomorrow. US stocks are trading down 75 points after Alcoa's poor result.

     Today was a choppy but quiet day in the markets. With moves of over 100 Dow points being commonplace recently, today's action was almost dull. The Dow finished down 17 points but the SNP and NASDAQ were up as AAPL was sharply higher today.

     Gold traded down 4 dollars and oil was nearly unchanged.

     On a side note, I just picked up a book called the Stock Trader's Almanac. It is a real intredasting book with many good investing nuggets. Here is one of them for example. The best time to buy Gold is in July. Over the past 15 years, if you had bought Gold in July and sold it in December you would have made a 15% average gain. This book has a lot of great seasonal strategies and patterns to follow. I'd recommend it if you have an interest in trading or the market's. You can buy it on Amazon right now for 33% off.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Stocks blast off on European hopes

2011-10-09T22:41:00.000-07:00

   US stock futures are up this evening as German chancellor Angela Merkel and French president Nicolas Sarkozy pledged to have a plan in place by the November 3rd G20 summit to address the slow motion train wreck that is the European debt crisis. There will include a European bank recapitalization and a plan to deal with the Greece mess.

   Stock futures were up over 100 Dow points as of 10:30 PM PST. The euro was also up by more than half a percent.

     French and Belgium officials also pledged to backstop the failing bank Dexia. Merkel and the European leaders pledged to do "everything necessary" to stem contagion from the crisis.

     This week starts off the third quarter earnings season with Alcoa reporting after the bell Teusday. The earnings reports will go a long way to show the sustainability of the recent rally. Pepsico, JP Morgan, Google and Mattel all report earnings next week.

Market Recap
There had been 3 things that were bothering the market recently.

1. The European Debt Crisis- lack of coordination among policymakers has slowed response to the European Debt Crisis and called into question the viability of the euro as a common currency.

2. Recession in the USA- after the stock market volatility in August and September and the budget fiasco killed consumer confidence, everyone wondered whether we were headed back into recession.

3. Hard landing in China- China has been powering worldwide economic growth during this recovery but policymakers there are concerned with inflation and so are tightening monetary policy. Their efforts to throttle down growth has caused concern in the market that they will go too far killing demand for commodities.

     Recently, 2 of these fears have been alleviated somewhat allowing the market to rally. The European policymakers finally seem to take the situation seriously and I believe Merkel and Sarkozy when they say they will do anything to keep the Eurozone together.

     In the United States, economic data has come in better than expected easing fears that we are going into a recession. While the economy is not booming, it is definitely not falling off a cliff.

     In China, economic data has also come in decent but inflation is a little hot. Commodity stocks and currencies have crashed recently because of this fear. It doesn't look like there will be a China hard landing but the jury is still out on this one.

Rudimentary T/A

Wow, what a day in the market's today! The Dow rose 330 pts and the SNP 500 rose even more on a percentage basis. Stocks were led higher by financial and energy and materials shares. A lot of the charts I posted on Friday had nice breakouts today which should lead to more rallying. Here is the SPY chart...

SPY popped up above it's 50 day moving average which is the lower blue line. The 50 day moving average is the average price of SPY for the last 50 days. That should act as support for now.

Now for the AAPL chart...

AAPL popped up nicely above a downwardly sloping trendline(red line) and also popped back above it's 50 day moving average(blue line). This should result in more follow through buying.

It is all systems go for now, next stop 1220 on the SNP.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

#OCCUPYWALLSTREET

2011-10-08T04:33:00.000-07:00

     I don't know if you all have been following the Occupy Wall Street protests recently but the occupation is really gaining momentum. I have been watching it from the beginning when I first heard about it in the middle of August. Here was my first post about it here.

     To be honest, I thought that this occupation promoted by online hactivist collective Anonymous and Adbusters had a real chance to create some havoc and I was worried about the effect on the stock market and my investments. I kept close tabs on the protest on the first day of the occupation on September 17th, watching the livestream all day long. Then the market opened on Monday and there was no media coverage of the event and I thought the occupation would just peter out.

     It seemed that way when the thousands of people who initially occupied the park dwindled to hundreds, but then something crazy happened. After an incident with the police where some protestors got pepper sprayed, the movement finally got some media coverage and the protests really gained some traction.

     Amazingly, this rag tag bunch of misfits, a mix of ex hippies, frustrated youth and new age hacktivists has gained the support of unions and like minded individuals all across the country with occupations springing up in many cities of the United States and the world including my city, Los Angeles.

     The protestors have given voice to the people of America who are angry that the rich are getting richer and the poor are getting poorer. People sense that the American dream, the dream that their children will have a better life than them, is unlikely to occur and they blame globalization and the corporatocracy. The people know that the class war which Republicans have railed against Obama for starting, has already been lost to the oligarchs that run the world through their puppets in governments around the world.

   There is something definitely wrong with a system that socializes losses and privatizes gains. The people are now 15 trillion in debt for problems they did not create. Back in 2008, banks were bailed out to the tune of hundreds of billions of dollars in perhaps the greatest fraud in history. We were told that it would be the end of the world as we knew it if the bankers did not get their money. Well, the banks got their money and all we got was a shitty economy with 9.1% unemployment. To top it all off, Bank of America recently decided to raise fees to 5 dollars a month just for using your ATM card. Talk about a slap in the face. It is no wonder the people are pissed off.

     At the start of this protest, Anonymous put out a video where they said that this Occupy Wallstreet protest could be "the beginning of the global revolution we've all been dreaming about for so long ... wouldn't that be lovely." With protests springing up all over the world and momentum increasing, their dream just might come true.

Watch the global revolution unfold here...

Watch live streaming video from globalrevolution at livestream.com

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

A Nice Jobs Report

2011-10-07T07:50:00.000-07:00

   Markets are up in the early going after a better than expected jobs report eased fears of a recession in the US. The government non farms payroll report showed that 103.000 jobs were created in September, a number greater than economists had forecast. Economists were expecting 60.000 jobs created. The unemployment rate held steady at 9.1% as more people rejoined the workforce.

     In some more good news, payroll data for July and August were revised upward by 99.000. Remember that horrible payroll number from August were we added a big fat 0 jobs? Well, it was wrong. Everybody panicked over that number but it turns out the US economy isn't as bad as the market thinks. The economic data we have been getting recently are consistent with an economy that is slowly growing and not an economy going into a recession.

     Stocks have reacted well to the news with the DJIA up 75 points in the early going as of 7:47 AM PST. The other major averages are mixed. European bourses are all higher by more than 1% and the Asian indexes closed green as well with the Hang Seng up almost 10% in the past two days.

Market Recap
     Stocks ended the day in negative territory today after a choppy session that saw the Dow as high as 100 points up and as low as 70 points down. In the middle of the day Fitch announced that they had downgraded Spanish and Italian debt. This did not move the markets very much as the Dow shot up for awhile then finished down 20 points for the day.

     It seems there was profit taking today after a huge three day runup that saw the SNP 500 gain 100 points. We were bumping up against trendline resistance on a lot of charts so some profit taking was to be expected. I am not quite sure if it is the end of the rally but no one ever went broke taking profits. I would be inclined to hold on to long positions here if you have them and see what next week brings.

Cocktail Napkin Charting
   How about some rudimentary technical analysis? One chart I have been looking at is XLE which is an ETF that represents a broad swath of Energy stocks. XLE fell back from resistance today.

As you can see from the chart, the red line is resistance around 62 dollars. We opened on the highs of the day at 62.18 and pretty much went straight down all day. This is a pretty bearish candlestick and could signal a reversal. The 62-63 level is strong resistance as it is the confluence of two trendline resistance levels. If we can break past this level there should be free reign to rise to 70 bucks. I am not too discouraged by today's action, however. I believe it is just profit taking before another move higher.

The SPY chart looks better as we broke through trendline resistance today creating a higher high for this move which is still bullish for me. We finished right at trendline resistance and within a whisper of the 50 day moving average at 117.99 which is the blue line sloping downward. That should be our next stop.

I don't think this is the end of the rally but we will see next week.

I will do one more chart for DWei who was asking about AAPL. AAPL was down about 2% today and has been underperforming recently. I think this underperformance is related to the JP Morgan analyst report from last week which said they ordered less parts for the iPad so people think they are selling less iPads because of the slowing economy. AAPL lost some of it's mojo at that point. AAPL is stuck between the 50 day and 200 day moving averages which are represented by the blue lines. I believe AAPL is on its way to retesting the 200 day moving average that it bounced off of nicely 3 days ago. AAPL's weakness is concerning to me and I would not be buying it here but I would wait for a retest of the 200 day moving average around 354 and then put a buy order down there if it bounces off the 200 day again. AAPL still has one of the strongest charts around so it is still a buy on weakness.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Quiet and observant day in the markets so far

2011-10-06T07:27:00.000-07:00

     Steve Jobs was a true visionary whose loss will be felt for a long time in the company he cofounded with Steve Wozniak and the products he pioneered. Steve Jobs changed all aspects of our lives. He was a tech geek and his life was computers. He is the type of person that epitomizes the entrepeneurial and innovative spirit of America.    He will be missed.

   After the frenetic activity of the past few months, today has been a quieter day so far. I believe that traders are not making too many big moves in observance. AAPL stock has not sold off like many believed and was actually up a little bit as I type this. I was hoping for a huge selloff by idiots so I could purchase some shares on the cheap but it didn't happen.

   All markets are green so far today.

Economic Data

More people sought unemployment benefits in the past week as new claims for unemployment rose 6,000 to 401.000 after a large fall last week. This is a measure of new people filing for unemployment benefits. We want to get below 400,000 and stay there for there to be signs of job growth.

Market Recap
Today, we got a continuation of the bullish momentum of the past few days which has taken the SNP 500 from 1075 to 1160 in 3 days. We are bumping up against the top of a downward channel we have developed on the SPY chart for the past few weeks.

     If we can get past this channel resistance the next stop is the 50 day moving average at 118.28. This has been a pretty powerful rally on good volume so I suspect we will get past trendline resistance and perhaps poke our head above the 50 day.

   All sectors of the market are participating in the rally with materials and energy being the leaders. This is a good sign for the global economy. Copper has also been rallying. Perhaps it was hedge fund and bank liquidations that drove those stocks and commodities so low. There were many incredible bargains over the past few days.

     Tomorrow, we get the government Non farm payrolls report for September. It is expected that we gained between 50,000 and 60,000 jobs last month. That would be consistent we a weak but steady low growth recovery. If we can get that, we should be able to continue this nice rally we've had for the past few days. Whatever the report says, it will move the markets. Let's see what happens.



Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

RIP Steve Jobs

2011-10-05T17:03:00.000-07:00

You will be missed...

Stocks struggle in the early going

2011-10-05T07:34:00.000-07:00

   Well it turns out that huge spike into the close yesterday where the SNP 500 rose 4.1% in about 45 minutes was caused by a story in the Financial Times that the Europeans finance ministers are finalizing a plan to recapitalize the European banks. It is estimated that European banks will need up to 261 billion dollars to protect themselves from insolvency should Greece or other European nations default. A failure of large banks in Europe could set off a chain reaction which destroys the financial system of the world and sends the world into an epic depression which would last for years. It is amazing to me how close we are to armageddon.

     Meanwhile, the US markets have opened today slightly in the red. We got some good economic data out today and on the whole the data has been better than expected and consistent with an economy which is growing albeit slowly. Markets have not had much reaction to the data however as our fortunes are tied to Europe at this point.   Right now, it is a headline driven market which makes it untradeable for me.

Economic Data
     The ISM Services Index for September came in at 53 this morning which was above economists forecasts of 52.8. Any reading above 50 indicates expansion. This index measures the activity of the services part of our economy like retailing and hotels and restaurants.

     The ADP private payroll survey also came in better than expected with private industry adding 91,000 jobs on expectations of 75,000. On Friday, we get the government non farm payroll number which is expected to show a gain of 60,000 jobs.

Market Recap
     Well today was very constructive in the markets. The DJIA rose another 130 points today building on the 400 point rally from yesterday. Strong momentum is propelling the markets upwards right now. It looked like the market was going to breakdown after Monday and early yesterday but we have reversed and risen back into the trading range from previously.

     The best performing sector today was the energy sector. XLE rose over 3.5% as oil was up over 4 dollars. Technology stocks also performed well as AAPL the biggest component of the technology sector rose almost 2%. AAPL made a picture perfect tag of the 200 day moving average yesterday at 354 and has exploded to the upside rising almost 10 pct from there.

     Gold also rose today as people were bargain hunting after a big drop yesterday. Gold has found support near the 150 day moving average and it would seem like a good place to initiate a position. Gold is one of the strongest markets right now technically.

     European stocks had large gains across the board with the DAX rising almost 5% and most other bourses rising 3-4%. One notable outlier from the bullish action is the continuing decline of the Hang Seng index which dropped another 3.5% last night. That makes an almost 10% drop in only 3 days! I don't think the Asian economies are that bad and so the selloff is way overdone and it is definitely time to buy. I expect the Hong Kong index to bounce back strongly soon and as a matter of fact EWH which is the Hong Kong index ETF was up 3% today.

     I think we have put in the bottom for awhile. Newsflow out of Europe is more positive and it looks like the policymakers there understand the gravity of the situation. US economic data has not fallen off a cliff considering the horrible consumer confidence data. Jobs are still being added and the manufacturing and service sectors are still growing. Despite the best efforts of US policymakers besides Bernanke to wreck the economy, we are still chugging along in a slow growth scenario. All this says to me is moar trading range.

Natural One asked me how much cash it would take to get started making real money in the markets.

I guess that depends on what your definition of "real money." There are some brokerage accounts that require a 500 dollar minimum deposit, but if you are only buying 500 dollar worth of stock you are not going to make much money and transaction costs will eat up your profits. Generally it costs between 5-10 dollars to buy and sell stock in a single transaction. Even if you bought 500 dollars worth of stock and made 20% on your trade, you would only make 90 dollars after buying and selling. This market is tough as well so it would be hard to make 20% unless you are buying a risky stock.

I would say it would take about 5000 dollars to start off with to make a decent amount of money after transaction costs. I don't know your experience level or knowledge of trading but what you can do if you want to learn to trade is to start a play money account. Start off with 10000 dollars of fake money and make some pretend trades and see how you do. That is a good way to start off and learn the ins and outs of trading. This market is very dangerous right now so its definitely best to practice before you get in it. If you do a search on play money trading accounts on google, there are numerous places to get started.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

October is the cruelest month

2011-10-04T07:34:00.000-07:00

For stocks it is. Here are some fun market facts for stocks in October

October 28-29 1929 The stock market crashed 25% in two days heralding the onset of the great depression
October 19,1987 The stock market crashed 20% in one day on what became known as Black Monday
October 6-10, 2008 The stock market dropped 20% in one week as it looked like the entire financial system was going to meltdown.
October has marked the end of the 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998 and 2002 bear markets

     The lesson? While there is lots of panic now, get your buy list ready because there are going to be some bargains out there coming up.

     Markets have opened sharply lower today as the European Union has denied a vital aid payment to Greece. The Greeks keep missing their budgeting targets and the European Union has said that they must cut more. It looks like a Greek default is imminent and that is why market's are crashing. Like I said before, trying to get money out the Greek people is like squeezing blood from a turnip! It's time to let Greece default and let the chips fall where they may. This extend and pretend just isn't working anymore.

Market Recap
     WOW, WHAT A FREAKING DAY FOR THE MARKET!!!!!! Just insane movements today. In the last hour of trading, we moved up over 350 points!! There was some BIG BIG MONEY in the markets today buying in the last hour of trading. Some say it was the PPT or Plunge Protection Team, but whatever it was, big institutions were putting money to work today in the markets.

     The DJIA ended up 153 points today after earlier being down as much as 250 points. The S&P 500 more than 2% and the NASDAQ was up 3%. Oil was down 1% and gold was down 3%! This looks like the bottom for now.

     In the early going stocks spiked up and I thought we might have a huge reversal today so I closed my short positions that I opened yesterday for a tiny loss. Good thing I did because had I kept them I would have been stopped out already!! The Dumb Money indicator works!

     Unfortunately, I did not go long at the end of the day because my brain is fried right now watching this crazy action and I was too frozen to do anything. I would have loved to buy some AAPL today which tagged it's 200 day moving average in a vicious selloff on the release of the iPhone 4GS. Apple dropped from 384 to 354 during the day and then bounced hugely off the 200 day moving average to finish at 372.

     Just an insane day in the markets today. I went ahead and bought some small caps, european large caps and ems today for my long term portfolio. This could be the bottom for awhile. Let's see what happens.



Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Hang Seng getting hanged tonight

2011-10-02T21:46:00.000-07:00

     Any last words for the Hang Seng index? The Hong Kong index is getting creamed tonight on China growth worries. It has completely broken down and is back to May of 2009 levels. Stocks connected to the China growth story are getting hammered the most with Wynn Macau down over 10% and CNOOC or China National Oil Company down over 5%. The Hang Seng index is down 870 points as of 9:47 PM PST. It looks to be another interesting day in the markets tomorrow.

     Dow Futures are down a more modest 80 pts. Gold is up and oil and copper are down. The Euro is down a small amount as well.

Market Recap
The SNP 500 and Russell 2000 small cap indexes have made new lows for the year as the DOW was off 260 points at the close today. The SNP 500 was off 32 points finishing below 1100 for the first time in a year. Gold was up 27 dollars and oil was down 3% to 77.

   European shares also finished lower by 1-2% and the Euro got obliterated today dropping 1% which is a big move in currency markets. The dollar rose against most major currencies as the flight to safety continues. 10 year treasury yields dropped to their lowest level in a few weeks at 1.784.

My Take
Bend over and grab your ankles! That is how the market felt today. We got a complete breakdown of the 1120 level on the SNP that had been providing support for the past 2 months. It looks like we are starting the next leg down in this bear market. I have been busy this morning but got to the computer in time to put on a short position on the Russell 2000 small cap index via RWM and also put on a short of the MSCI All World index via EFZ. I will buy more only if they go higher and I have set a 5% stop on them in case my trade goes against me. I anticipate we will get a quick and sharp drop down to 1040 as we have breached the 1100 level at the close today. I also got stopped out of my XLE position early on in the day for a 3% loss.

October traditionally has been the month with the most stock market crashes by far. I think this October will follow that script as stock traders are a superstitious bunch. The good news is however, that after crashing during October, the market finds it footing and rallies into the end of the year. The last quarter of the year is the best performing quarter of them all with average gains of 4%. That is the script I will follow for the time being unless things change.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Some more of my favorite songs

2011-10-01T04:30:00.000-07:00

In my last post, I put some of my favorite rap songs of all time. I wanted to put many more but I know no one wants to sit here for an hour listening to music so I only put four. As I got older, my taste's started to get more varied. I moved to old school R&B to see where all these rap songs came from. I found that Juicy was just an Mtume sample and a lot of rap was just sampled from old school songs. So I really got into old school R&B for a time.

I tell you, I think the 80's was the best decade for music. Everything seemed so fresh with the first electronic music coming out. One of my favorite's was Kraftwerk who has been sampled numerous times of course especially this song...

I love Kraftwerk so much, I am going to put another Kraftwerk song. This is such a great video. KrazyBen did a sick ass mashup of this song with Timbaland too. It is here if you want to check it out.

I guess those songs aren't really old school R&B so I will put some of my favorites. I've got to put Juicy Fruit by Mtume, one of the best songs ever and one of my personal favorites.

Another one of my favorites was Double Dutch Bus...

Since I did two Kraftwerk songs, I'll go ahead and post one more old school R&B song. Another one of my personal favorites is...I'll be a freak-a-zoid come on and wind me up! I love these old music video's they are a trip to watch nowadays.

Old school R&B is some of the best music ever. There is so many more songs I could've put. Anyways, these are some of the songs I got into besides rap. What are some of your favorite old school songs of all time?

For those of you who wanted to hear some of the songs I made way back when, here is another one. I put one in my music post from last week which is here if you want to check it out.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Markets fall as quarter ends

2011-09-30T07:41:00.000-07:00

     Well, we are getting no window dressing at the end of the quarter unfortunately. In fact it seems people are selling their winners rather than buying them at the end of this quarter! All the stocks that have performed the best in this quarter have been getting whacked. It is the high growth or "beta" names that have performed particularly badly in the past couple of days.

     Green Mountain Coffee Roasters(GMCR) is down about 15% in two days after rising about 20% in the quarter. Apple one of my favorite's of course is down about 5% in a few days after rising more than 20% to a record high of 422 during the quarter. Internet darling Baidu.com(BIDU) is getting taken to the woodshed as well after rising 10% during the quarter. It has gotten smacked down to the tune of 30% in little more than a week. Remember when I mentioned the window dressing trade yesterday? This is like the anti window dressing trade.

     Markets opened lower today as economic gloom pervaded the markets. There was no significant news to cause us to open lower, only perhaps anticipation of bad economic data to come later in the day. We opened lower by over 100 points on the DJIA. We have recovered some of the losses in the first hour of trading as economic data has come in pretty good.

Economic Data

     The University of Michigan Consumer Confidence Survey came in better than economist had expected as consumer's mood perked up due to lower gas prices and a moderation in the stock market's decline. Consumers were still worried about jobs and the economy but they were not as worried as last month.

"The data indicate that consumers have shifted from anticipating deeper declines to the growing belief that the economy will stagnate at its currently depressed level," said survey director Richard Curtin.

   The Chicago PMI or purchasing managers index was out as well which is an important reading on manufacturing activity in the Midwest. This metric came in much better than economist had expected which contributed to a rise in stock prices in the early going. The reading improved to 60.4 in August. Economists had forecasted a drop to 54.5. Any reading above 50 indicates economic expansion.

    This is a very positive number and I'm surprised markets haven't reacted strongly to this news. Sure we've added a few points to indexes but we are still in negative territory. A 60 print for the PMI is very bullish.

Market Recap
     Well, that was an ugly finish to an ugly quarter. The SNP 500 dropped almost 14% for one of the worst quarters since 2008. I was looking at the reasons for today's selloff even in the face of a good PMI number and it turns out that incomes dropped for August. It's been 2 years since incomes fell month over month and this is a horrible sign for the economy. Worker's are getting less share of the pie and that will translate to weaker consumer spending and confidence.

     Stocks across the board were sold today and in the final 15 minutes of trading especially. XLE was down almost 3% putting me down about 2 pct on my trade. I am not optimistic about October as many stock market crashes have happened in the past during this month. September is traditionally a horrible month and October is too and I expect it will be again this time. My thesis is that we will break to new lows in the coming months as it looks like the US economy is sliding into a recession. After making new lows in October, we get a relief rally into the end of the year.



Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Markets rally on German vote

2011-09-29T07:27:00.000-07:00

   Markets were rallying early Thursday morning as the German bundestag approved new powers for the European Financial Stability Fund.

   From Reuters...

"The Bundestag (lower house) overwhelmingly approved new powers for the 440-billion-euro EFSF fund to make precautionary loans, help recapitalize banks and buy distressed countries' bonds in the secondary market."

      The markets welcomed this news as a sign of greater European solidarity as fears of German non participation in the bailout receded. The Frankfurt DAX which had fallen almost 35% from the highs has been rallying strongly recently as German chancellor Angela Merkel has reiterated that the EU would not let Greece default and would keep the EU together.

     Other good news in the markets today was US 2nd quarter GDP was revised upwards to 1.3% from a previous 1% print. This was on the back of better consumer spending and exports than previously thought.

     Initial jobless claims also came in better than expected alleviating fears that the United States was sliding back into a recession. Initial jobless claims came in at a seasonally adjusted 391,000 which was much lower than the 420,000 that economists had forecast. Initial jobless claims measures the amount of new people filing for unemployment benefits in the past week.

     Markets are strong across the board this morning with the Dow up 200 points as of 7:23 AM PST. The SNP 500 and NASDAQ are also solidly in the green up 1.4% and .67% respectively. European stocks are up as well with the German DAX and Paris CAC up over 1%. Across South America, the Brazilian Bovespa was up 1.3% and the Mexican IPC Index was up over 2%.

Market Recap
     Well, today had to be a frustrating day if you are a bull or a bear! Markets opened up strongly and then sold off all day going from 250 pts up to 50 pts down on the DJIA only to rally in the final half hour to end up 143 pts higher.

      The interesting thing about today's market was the complete obliteration of some of the best performing momentum stocks today. AAPL, BIDU, GMCR, AMZN, FOSL, RL all were clobbered today. BIDU was down over 9% today on no news that I can see. AAPL was down 1.6%. All these had done well this year and with end of the quarter window dressing, I would have thought they would be going up on a good day like today. It seems fund managers may be dumping the stocks they have profits in and scooping up perceived bargains like bank stocks. Bank stocks were up across the board today with BAC and C up over 3% today.

     I got stopped out of AAPL today with a 4% loss. It was a poor trade all around and I seem to have lost my mojo with AAPL for now and I will stay away from trading it for awhile. I have almost given up all the gains I had for the year with the last few poor trades. My XLE trade is working well for now (fingers crossed) although it did not look so good earlier in the day. Today's close was quite powerful and I look for a continuation of the strength into tomorrow. We should be able to get some follow through.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Do we get some window dressing?

2011-09-28T06:56:00.000-07:00

   At the end of every quarter on wall street there exists a phenomenon called "window dressing". This is where portfolio managers and traders buy up stocks that have done well in the quarter and sell the ones that have done bad to make their portfolio's look better to their investors. Generally this is a time when stocks rise as money is put to work to make the quarter look better than it really was. If you look at the end of the last quarter in June, you can see a good example of it. Stocks really rose at the end of June.

     We are coming to another end of quarter and after last weeks drubbing, markets are looking for any reason to rally. As such, stocks are once again up today nearly 100 points on the DJIA in the early going and the SNP and NASDAQ are up as well. We gave back 150 pts of gain on the DJIA yesterday and today we may get it all back! The headlines will say we are up on "European hopes" but we know better...it's because of window dressing!

   After flying yesterday, European stocks have settled down a bit mostly in the red by modest amounts. London was down almost 1%, Frankfurt was up with a marginal gain and Paris was down by .4%. Gold remains near yesterday's closing price and seems to be stabilizing and silver is down a small amount. Oil is down almost 1%. The euro is rallying once again up a third of a percent.

     Across South America, the Brazilian Bovespa is up over 1% and the Argentina Merval is not open but was up 2% yesterday. Asian shares were mixed with Tokyo up and Hong Kong down.

Economic Data

     In a bit of good news on the economic front, durable goods orders came in worse than expected but internals were nice. The Commerce Department said durable goods orders dropped .1% in August on slower sales of automobiles. Economists had expected durable goods orders to remain unchanged from July.

     Meanwhile business spending was higher in August easing fears that the economy will fall off a cliff.

     "Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.1 percent last month after a 0.2 percent fall in July," said a Reuters article.

Market Recap
     Well, we didn't get any window dressing today! Early on the markets were up over 100 pts on the DJIA but sold off all day and finished down 180 pts. This action is very bearish. This market is being driven by headlines and any bad news out of Europe causes the market to go down and any good news causes the market to go up. Today, we got bad news in the form of dithering about a Greek bailout payment. Apparently, the Greeks are not meeting their budget cutting targets which is irritating the German's to no end.

From Yahoo Daily Ticker...

     "Ultimately, they're looking to build a 'ring of fire' around Greece," says Axel Merk, president and CIO of Merk Investments and manager of the Merk Funds. "They'll do whatever it takes — they'll give free money at some point -- but it has to be on German terms and they're not coming easily."

   Further, governments and bondholders(european banks) are arguing over who going to take the bigger hit. Right now, the bondholders have agreed to take a 21% hit on their Greek bond holdings but with market prices for Greek bonds implying a much bigger haircut, governments want the banks to renegotiate their terms to reflect the current market values of Greek bonds more accurately.

   Apple is holding above my stop right now and hopefully we get a bounce soon. It is the end of the quarter markup time and with AAPL up 18% this year, portfolio managers want to show AAPL in their portfolios. As such, AAPL was outperforming the market today down only .5% when the NASDAQ was down 2%.

     I went ahead and put on a spec trade with XLE today at the end of the day. I saw XLE drop into the 50's recently and thought the drop was way overdone. It turned out to be true as it bounced back almost 10% over the past two days back to 63. Today, it sold off hard again down below 60 so I decided to put on a quick trade with XLE and set a stop just below the recent lows. Commodities including oil, gold and copper have been hammered recently contributing to the underperformance of energy and materials stocks compared to the overall market. I believe that people are throwing the baby out with the bathwater and these stocks are way undervalued. We'll see what happens...

I picked some up near the lows of the day today at 59.70 and set a stop at 57.80 near the recent low. I will sell on another pop to 63-65.

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Gold bounces back

2011-09-27T07:02:00.000-07:00

   Gold was higher today a huge selloff cause prices to drop 350 dollars from the peak. At one point in overnight Sunday, gold was at 1530 dollars but was near 1650 in recent trading up 4% from yesterday's closing price. Silver also recovered up 9% after an even sharper 30% decline over the past week or so.

   Markets were higher once again this morning on hopes that European policymakers were finally getting a plan in place to fix the European debt crisis.

   "This comes after a European official said that a detailed plan to leverage money in the EFSF was in the works and that the it would use a portion of the money from the fund to shore up European bank capital, while another portion would be used as seed money for a European Investment Bank," said a CNBC article.

     The DJIA opened up 150 points and quickly rose to 250 points higher in early trading. Bank and energy stocks were leading the way with BAC up 3% and XLE up 4%.

   European shares rocketed higher with the FTSE up 3% and the DAX up 4.5%. Asian shares rebounded as well with Hang Seng and Nikkei both registering large gains. Across South America, the Brazilian Bovespa was up 900 pts.

Market Recap
     Wow, that was a pretty bad finish if you are a bull today. We were up as much as 300 points on the DJIA but gave over half of it back in the last hour of trading finishing up about 150. I'm not sure what caused the 200 point selloff at the end of the day but it might be because of fighting between countries about who's going to eat the cost of the bailout. Governments want bondholders to eat a bigger portion of the cost.

     From the Financial Times...

     A split has opened in the eurozone over the terms of Greece’s second €109bn bail-out with as many as seven of the bloc’s 17 members arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, according to senior European officials.

     The divisions have emerged amid mounting concerns that Athens’ funding needs are much bigger than estimated just two months ago. They threaten to unpick a painfully negotiated deal reached with private sector bond holders in July.

      While hardliners in Germany and the Netherlands are leading the calls for more losses to be imposed on the private sector, France and the European Central Bank are fiercely resisting any such move. They fear re-opening the bond deal could spark renewed selling of shares in European banks, which have significant holdings of Greek and other peripheral eurozone debt."

   Needless to say, this is a bad sign for tomorrow. I purchased some AAPL stock amid the euphoria early on and am quickly in the hole 1.5%. AAPL had been outperforming the market recently but has lagged the last 2 days on the news that they are ordering parts for less ipads than expected. This has led people to believe their sales are not as good as forecast which has put pressure on the stock. It looks like this trade is not going to work out for me but I have a stop loss on the stock so it won't hurt me too much unless we get a huge gap down tomorrow which is possible.

     This market is completely news driven right now which makes it hard to trade, for me anyways. If I get stopped out of this AAPL trade, I will probably sit on my hands for awhile until a trend emerges. I will keep adding to core holdings on big dips as well.



   If you are into trading, please check out my friend's blog. It's called the Chartographer's Map Room. This guy really knows his stuff. Thanks.



Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!