I love the Economist because every time I read it I feel more intellectual and intelligent. Excellent piece on the Economist Free Exchange. Those pesky hedge fund margin calls are a factor now. I did not think about that one… Listen guys, this is the playbook, Any bounce I shortable. I referenced the DOW charts of 2008 and after three down days, there was a move to the side and then the operators croaked the market again. Guys, exert caution while shorting stocks as these bounces up can trigger nasty margin calls for the bears. I use puts to hedge my portfolio and avoid these calls. Good luck.

Enjoy!

http://www.economist.com/blogs/freeexchange/2011/08/global-economy

Officially in the bear camp as I hedged all of my portfolios with gold and puts. I am also letting current longs expire as necessary. This one is going to be worse than 2008 as there is selling contagion between nations.

Now, I believe that information was leaked to someone last week of this downgrade and that is the real reason the markets made a u-turn for the worse. Small investors again get decimated as they do not benefit from that type of information. The SEC needs to investigate and make S&P life miserable from now on. Monthly raids are in order…

With the stock market taking technical support levels and the Dow 300 points down it is safe to declare that the market foresees another recession. F_____ng politicians playing games with families. Unemployment is increasing and they play their mindless games with the economy of this country. I have been establishing long positions in Gold and unraveling longs as they get stopped out. I will be initiating short positions using inverse etfs as opportunities arise. Hedge your portfolios using puts if you intent to stay long. Hey Mr. Obama, Senators and Representatives have a nice f____ng vacation while the country gets blown up to smithereens. F____k you all!

Stock Market Black Hole

I read an article in CNN written by economist Steven Kyle. The article is spot-on discussing the chain of events  that could happen if the United States were to default its debt. His solution is quoted below:

“Were I advising a low-income country that had no choice but to listen to my advice, I would have a simple message: “You got in to this mess by passing huge tax cuts over the past 10 years and starting two wars that clearly have gone as far as they are going to go in terms of achieving your goals. So just let those tax cuts expire next year and end the two wars and you will have done more to reassure long-term investors than anything else you could possibly do. That will give you the room you need to make investments to start growing again.”

I agree with eliminating the two wars. I do  not agree with letting the tax cuts  expire as I believe that the government still rakes enough tax income to support most social programs and keep the machinery running. I would eliminate a lot of the pork barrel spending. I would also pass special legislation that would ban representatives and senators from being contacted by think tanks and special interest groups such as lobbyists. I believe that lobbyists are scum of the earth and this government formed “by the people and for the people” has morphed into this bestiality that is controlled by those whom has the most money. Reduce taxes of small business to spur jobs and innovation. Lengthen the school year by one month to prepare our children to compete the BRICS and the N-11 nations. Open the borders to allow the best to immigrate to this nation. After all, this is a nation that was formed by revolutionary events and as such it should continue the revolution in the form of technological innovation and international influence.

Do you want the government to reduce the deficit? Tell your legislators to cut the head of the beast first (aka special interest groups).

Switching gears to the indexes. The SP-500 did a bouncity bounce off the 200-day moving average line. A nice event but not a definite one. The machines know that many traders set stops around those levels so I would not be surprised if there is a broad and quick sell-off to scare the weak hands as the 200-day line is breached. I have been long and taking a beating but so far I have not seen indications of a double dip bear market. However, I have not finished running my scans. My opinion of the market can turn on a dime. Remain Flexible.

SP500 daily 7-29-2011

I can visualize people in CNBC spelling doom and gloom. It is very simple actually, the market is in consolidation waiting for news about the debt ceiling (see charts below). I assume it will be back and forth until August 2 and then we will see. If I were you I would be hedging my portfolios with some puts or vertical put spreads. Directional calendar or butterflys way out of the money and built on the cheap could work too as hedging vehicles. S&P below 1250 spells trouble for the markets as a second massive wave of selling would start (ala October 2008). As a contrarian, panic selling  are my favorite days of buying and accumulating stocks that their long-term fundamentals look good.

How about them GMCR featured yesterday by this humble servant? We take 16 percent in a day as a good return… As always, intelligent comments are most appreciated.

SP500 weekly 7-28-2011

SP500 daily 7-28-2011

I studied some interesting charts that came from the systems I trade. The stock market is undecided and may move sideways until next week when the debt ceiling debacle will be resolved.

SLH: Solera is in a consolidation that is near completion. Triangles can break up or down very violently. Solera Holdings, Inc. is a provider of software and services to the automobile insurance claims processing industry. The Company also provides products and services that complement its insurance claims processing software and services, including used vehicle validation and fraud detection software and services. Its insurance claims processing customers include insurance companies, collision repair facilities, independent assessors and automotive recyclers. The Company’s software and services are organized into five categories: estimating and workflow software; salvage, salvage disposition and recycling software; business intelligence and consulting services, and other. On October 1, 2009, the Company acquired 85% ownership interest in AUTOonline GmbH Informationssyteme. During the fiscal year ended June 30, 2010 (fiscal 2010), the Company also acquired Softwaresysteme GTLDATA GmbH and Market Scan Holding B.V. In June 2011, the Company acquired Explore Information Services, LLC.

SLH Stock Market Chart for 7-26-2011

WTI: W&T Offshore, Inc. (W&T) is an independent oil and natural gas producer engaged in the acquisition, exploitation, exploration and development of oil and natural gas properties in the Gulf of Mexico. The Company has acquired rights to develop and exploit new prospects, and has acquired existing oil and natural gas properties in both the deepwater and the deep shelf, while at the same time continuing its focus on the conventional shelf. As of December 31, 2009, W&T’s proved reserves totaled 371 billions of cubic feet equal (Bcfe). As of December 31, 2009, about 76% of W&T’s reserves were classified as proved developed and 24% were classified as proved undeveloped. Classified by product, 45% of its reserves were natural gas, and 55% were oil and natural gas liquids as of December 31, 2009. During the year ended December 31, 2009, the Company sold one of its fields in Louisiana state waters and 36 non-core oil and natural gas fields in the Gulf of Mexico.

WTI Stock Market Chart for 7-26-2011

GMCR: GMCR is a favorite of mine. I traded it recently for a 30 percent gain using a fixed gain system. An opportunity might present itself to enter it at 91.76. Green Mountain Coffee Roasters, Inc. is engaged in the specialty coffee and coffee maker businesses. The Company operates in two business segments: the Specialty Coffee business unit (SCBU) and the Keurig business unit (Keurig). SCBU sources, produces and sells more than 200 varieties of coffee, cocoa, teas and other beverages in K-Cup portion packs and coffee in more traditional packaging, including whole bean and ground coffee selections in bags and ground coffee in fractional packs, for use both at-home (AH) and away-from-home (AFH). Keurig is a manufacturer of gourmet single-cup brewing systems, targets its premium single-cup brewing systems for use both AH and AFH, mainly in North America. Its primary sales is from its Keurig single-cup brewing system, which includes its Keurig single-cup brewer, K-Cup portion packs used by the system, as well as related accessories. In May 2010, the Company acquired Diedrich Coffee, Inc.

Update 7/28/2011: GMCR gapped massively and closed up near 16  percent. Sometimes I get it right…

GMCR Stock Market Chart for 7-26-2011

TITN: Another triangular consolidation with decreasing volume. Titan Machinery Inc. owns and operates a network of agricultural and construction equipment stores in the United States. The Company is a retail dealer of Case IH Agriculture equipment and a retail dealer of New Holland Agriculture, Case Construction and New Holland Construction equipment in the United States. The Company operates in two segments: Agriculture and Construction. The agricultural equipment, which the Company sells and services includes machinery and attachments for uses ranging from large-scale farming to home and garden use. The construction equipment, which it sells and services includes heavy construction and light industrial machinery for commercial and residential construction, road and highway construction, and mining. It engages in four principal business activities, which includes new and used equipment sales, parts sales, repair and maintenance services, and equipment rental and other activities.

TITN Stock Market Chart for 7-26-2011

ASPS: Altisource Portfolio Solutions S.A. (Altisource) together with its subsidiaries, is a provider of services focused on high value, knowledge-based functions principally related to real estate and mortgage portfolio management, asset recovery and customer relationship management. The Company utilizing integrated technology that includes decision models and behavioral-based scripting engines. The Company has three segments: Mortgage Services consists of mortgage management services that span the mortgage lifecycle; Financial Services principally consists of unsecured asset recovery and customer relationship management, and Technology Services consists of modular, integrated technological solutions for loan servicing, vendor management and invoice presentment and payment, as well as providing infrastructure support. In February 2010, Altisource acquired the interests of The Mortgage Partnership of America, L.L.C. (MPA).

ASPS Stock Market Chart for 7-26-2011

GTLS: Gym, tan and laundry…. Wrong channel. A little extended but can be played for momentum at the bottom of the rising channel. Chart Industries, Inc. (Chart) is an independent global manufacturer of engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. It is a manufacturer of standard and engineered equipment used for low-temperature and cryogenic applications. Its products, including vacuum insulated containment vessels, heat exchangers, cold boxes and other cryogenic components. It operates in three segments: Energy & Chemicals (E&C), Distribution and Storage (D&S) and BioMedical. On April 2, 2010, Chart Japan Co., Ltd. acquired Covidien Japan Inc.’s liquid oxygen therapy business. On August 2, 2010, it acquired Cryotech International, Inc. (Cryotech). On December 28, 2010, Caire Inc. (Caire), a wholly owned subsidiary of the Company, completed the acquisition of SeQual Technologies Inc. (SeQual), which designs, manufactures, and services portable oxygen concentrators, stationary concentrators, and emergency medical products.

GTLS Stock Market Chart for 7-26-2011

You and I are holding most of the debt. I will not go into the details but I will refer you here: http://innovation.cq.com/media/debt_components/. While watching Obama and the Rep. representative hurl accusations at each other like little kids on a playground I cannot helped to think we are kind of doomed. For politicians is all about me me me me wah wah wah. Get the deal done son!

In preparation for the upcoming Apocalypse (aka debt ceiling fight), the stock market hacker rightfully selects the following stocks for your perusal and amusement.

BJRI: Playing the bounce near support (white horizontal line). Risky, but a sniper trade that is not expected for the long-term trader. BJ’s Restaurants, Inc. (BJ’s) owns and operates 103 restaurants located in 13 states (California, Texas, Arizona, Colorado, Oregon, Nevada, Florida, Ohio, Oklahoma, Kentucky, Indiana, Louisiana and Washington) as March 4, 2011. BJ’s restaurants operate either as a BJ’s Restaurant & Brewery, which includes a brewery within the restaurant, a BJ’s Restaurant & Brewhouse, which receives the beer it sells from one of its breweries or an approved contract brewer of its recipe beers (contract brewer), or a BJ’s Pizza & Grill, which is a smaller format, full-service restaurant with a more limited menu than its other restaurants. The Company’s menu features its deep-dish pizza, its own handcrafted beers, as well as a selection of appetizers, entrees, pastas, sandwiches, specialty salads and desserts, including its Pizookie dessert. Its BJ’s Restaurant & Brewery restaurants feature in-house brewing facilities where BJ’s handcrafted beers are produced for some of its restaurants.

BJRI Stock Market Chart for 7-25-2011

APKT: The objective is to capitalize on a change of trend by buying near support (playing the bounce). Acme Packet, Inc., incorporated on August 3, 2000, provides session border controllers (SBCs) that enable service providers, enterprises, government agencies and contact centers to deliver interactive communications, such as voice, video and other real-time multimedia sessions, across Internet protocol (IP) network borders. The Company’s Net-Net product supports a range of communications applications at multiple network border points and also supports service architectures, such as IP Multimedia Subsystem (IMS). The Company’s Net-Net family of products consists of the Net-Net OS software platform, the 2600, 3800, 4250, 4500 and 9200 platforms; 4500 Advanced Telecommunications Computing Architecture blade (ATCA blade); and Element Management System (EMS), Session Analysis System (SAS), and Route Manager Central (RMC), management applications. On April 30, 2009, the Company acquired Covergence Inc.

APKT Stock Market Chart for 7-25-2011

N: NetSuite Inc. provides an on-demand, integrated business management application suite, which provides Accounting/Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Ecommerce functionality to medium-sized businesses and divisions of large companies. It also offer customers support and professional services related to the suite. The Company delivers the suite over the Internet as a subscription using the SaaS model. The Company’s offering NetSuite is designed to provide the business management capabilities for the customers. NetSuite, NetSuite OneWorld and NetSuite CRM+ are designed for use by the types of businesses.

N Stock Market Chart for 7-25-2011

VOCS: This stock could be purchased in an attempt to capitalize on a trend reversal around the 50% Fibonacci retracement point. Vocus, Inc. (Vocus) is a provider of on-demand software for public relations management. The Web-based software suite helps organizations of all sizes to change the way they communicate with both the media and the public, optimizing their public relations and increasing their ability to measure its impact. The on-demand software addresses the functions of public relations (PR), including media relations, news distribution and news monitoring. Vocus provides information database of approximately one million journalists, media outlets, publicity opportunities and other relevant data. The database contains information about the media, including in-depth journalist profiles, contact schedules, podcast interviews, pitching preferences and other relevant information compiled by the media research team. Specific modules include contact management, collateral management, project management, newsrooms, PRWeb online newswire, email campaigns, analytics and measurement, and news on-demand.

VOCS Stock Market Chart for 7-25-2011

MKSI: MKS Instruments, Inc. (MKS) is a provider of instruments, subsystems and process control solutions, which measures, controls, powers, monitors and analyzes parameters of manufacturing processes. The Company also provides services relating to the maintenance and repair of its products, software maintenance, installation services and training. The Company’s products are used in diverse markets, applications and processes. The markets it serves are manufacturers of capital equipment for semiconductor devices and for other thin film applications including flat panel displays, light emitting diodes (LEDs), solar cells, data storage media and other advanced coatings. The Company operates in one segment. It groups its products into three product groups: Instruments and Control Systems, Power and Reactive Gas Products, and Vacuum Products.

MKSI Stock Market Chart for 7-25-2011

WRC: The Warnaco Group, Inc. (Warnaco Group) designs, sources, markets, licenses and distributes a line of intimate apparel, sportswear and swimwear worldwide. The Company’s products are sold under several brand names, including, but not limited to, Calvin Klein, Speedo, Chaps, Warner’s and Olga. The Company operates in three business groups (segments): Sportswear Group, Intimate Apparel Group, and Swimwear Group. The Company’s products are distributed domestically and internationally, primarily to wholesale customers through various distribution channels, including major department stores, independent retailers, chain stores, membership clubs, specialty and other stores, mass merchandisers and the Internet. In addition, the Company distributes its Calvin Klein branded products through Calvin Klein retail stores, and as of January 2, 2010, the Company operated 1,097 Calvin Klein retail stores worldwide.

WRC Stock Market Chart for 7-25-2011

KNDI: This selection is for the speculative long-term trader. Kandi Technologies, Corp. (Kandi) is engaged in the design, development, manufacturing, and commercializing of electrical vehicle, all-terrain vehicles, go-karts, and specialized automobile related products for the People’s Republic of China (PRC) and global export markets. Sales are made to dealers in Asia, North America, Europe and Australia. Kandi’s products include off-road vehicles (which include all-terrain vehicles (ATVs), utility terrain vehicle (UTVs), and go-karts), motorcycles and mini-cars. Its subsidiaries include Continental Development Ltd., Zhejiang Kandi Vehicles Co. Ltd. and Kandi Special Vehicles Co., Ltd. The Company is a manufacturer of go-karts in the People’s Republic of China. Kandi produces a range of go-karts, from the 90cc class to the 1,000cc class in cylinder displacement. During the year ended December 31, 2009, the Company launched the battery powered all-electric CoCo.

KNDI Stock Market Chart for 7-25-2011

In times of uncertainty the yellow metal rules supreme. However, investors are also purchasing other defensive securities such as the Swiss Franc (not a security). Why? Well, Switzerland has 28 percent debt vs its GDP and relatively low unemployment. How can you get exposure to this currency? Simple, just purchase the iShares MSCI Switzerland Index Fund (EWL). There is also an ETF option for investors looking to get exposed to the Swiss currency; the Rydex Swiss Franc Trust (FXF) is designed to track the price of the Swiss Franc relative to the U.S. dollar. I am looking very aggressively to buy securities with an international bias as growth will come from outside the US.

FXF Swiss Franc Daily 7-20-2011

I have been reading about international debt and the PIIGS (Portugal, Ireland, Italy, Greece and Spain) ever since I took a derivatives seminar. However, the United States is very close to the precipice because of their excessive borrowing and the increase in the nation’s debt.

See, there is a fight in Congress about whether the debt ceiling should be raised again. It now stands at 14.294 trillion dollars. So far, the Us has borrowed 14.293975 trillion dollars and the ceiling is 25 million dollars away (literally pennies away). Should you be worried? You betcha! I will simplify as much as I can so bear with me.

Role of the Treasury: Collect taxes and issue debt in the form of T-Bills, treasury bonds and others. The Treasury is a government agency.

Role of the Fed: Control the flow of money, inflation and other stuff by using adjustments to the interest rates. The Fed is not a government agency. It is a not-profit corporation allowed by the government to operate (a true monopoly). I recommend that you read “The Creature of Jekyll Island”.

So guys what happens in brief:

The Treasury issues bonds to fund the activities of the government (healthcare, food, etc.). China, individual investors, funds, and others buy these bonds and give money to the Treasury in exchange for the future obligation (bond par value and interest payments). The US uses this borrowed money and tax collected to fund their social programs, pay employees, build roads and pay for fancy White House galas. However, Congress has a limit of borrowing of 14.294 trillion dollars. If this limit is not increased what happens?

- Federal employees will have to be laid off.

- Social programs are reduced or cut.

- Social Security payments are reduced or stay the same.

- Voters are pissed off.

- Absent borrowing, US can start defaulting on its debt payments. The credit of the US is downgraded. This is bad because suddenly the interest payments for future bond issues are increased as investors will require better rates of return for risk exposure.

- The Capital Asset Allocation model (CAPM) model no longer holds. US T-bills are used in the model as a risk free return. What corporations will use as their risk free rate?

I bet that the borrowing limit will be increased. Why? Because the Fed can turn the printing presses and pay the debt interests. Another option is to  raise taxes substantially. Eventually, the devaluation of the dollar is going to be massive. Right now we are borrowing above 90 percent of Gross Domestic Product (GDP) and increasing.

US Debt 2011 via the Economist