I haven’t updated for a while and to my surprise during that time, my blog was hacked.  So it took me a while to access the database and reconfigure the administration entry.  So I backed everything up and updated the Wordpress configurations.  Thank goodness, I learned how how to code and web development the last year otherwise I would have been really lost.  Anyhow, I am still trading but at a less frequent level as the volatility has gone down.  There will probably won’t be another two years like 2008 and 2009 for a while.  You might as well have gotten a lotto ticket because many people got very wealthy trading during this period.  Unfortunately, I did well but didn’t have enough capital to make it there.  I’ve been working on business projects and finishing up my thesis on external investment influences on mortgage rates.  So I won’t be updating often but I think I’ll update the site every once in a while when there are large turning points.

And I feel that there will be a turning point at this time and it’ll probably push the market back to the downside. I am doing decently this year but mostly playing defense unless I see that the market is oversold.  I just started selling off most of my positions and holding on to a little bit.  Decreasing my exposure to what I feel may be another downside move as geopolitical news takes over when earnings dies down.  The recent rise was supported by rather weak volume so I don’t see any momentum.  It’s a stock pickers market and there are a few good things out there but I feel that there is time for that.

Currently, I’m holding long term calls in Google with some sold calls and holding SRE for a short term conservative play.  I sold out of my Walmart and GNK as I see some consolidation in those names.  I don’t have much exposure at this point but I have some speculative calls on BRCD as they report later this evening.  I think the risk reward in the name is good considering the valuation and the recent drop baked in there.  So we’ll see.

Let’s be clear.  The market will still rise solely based on hope and liquidity.  The world is flush with money and it has to come out from underneath all those mattresses.  However I don’t see a shift away from bonds that signal that everything is in the clear yet.  The economy will not return quickly.  The affects of stimulus and cost cutting are disappearing quickly while revenue and sales stay stagnant.  There is going to be growth but from where?  This basically tells us that this is a stock pickers market from now on and there will no longer be broad based rises in the market.  I feel at this time, certain stocks are at fair value or beyond it.  There are sectors that are trailing and will catch up.  So to bet on the whole mark now is a flawed strategy.  This is where the smart makes money because everyone joe smuck out there was making money this last eight months.

So you’re finally going to get what you’ve been waiting for…my forecast for the next month to end of the year.  I figured there is a few scenarios.  One the market pulls back and we can reload on certain plays that I think look just sheer winners in a year or so.  The market keeps rising and so do valuations.  Three, the market trades sideways for a while.  I pick either side ways or down.  If it goes down, you need to pick strong companies with great earning potential.  So positions that I’m looking or holding include GE, SLW, MON, ALL, CNO, STT, BGC, and a few more.  It’s a stock pickers market.  So decide well.  I’m hedge about 70% long and %70 short.  So I’m trying to protect gains and make some money in case the possibility of a 5-10% pull back occurs.  I think as the market goes into the holiday period, there’s going to be some volatility like usual and could force the market to pull back to the bottom of the consolidation range.  If it breaks that I think it could come close to the 1000 level on the S&P but we’ll see.

I’m seeing something more a smaller retracement led by the leaders of the rally which are techs and commodities.  As the dollar trade pushes back a bit, we’ll probably see commodities pull back a bit.  Perhaps oil to the low $60s and techs just retracing back some gains.  It looks like at this point the pull back for the S&P would be to around 1000 so that’s 6% and I see that for the Nasdaq as well.  So we’ll see.  I think it’ll be a slow and strange six percent.

The key to this historic rally is based on real estate and we’ll see if all that shadow inventory of real estate comes out as a drip or a river.  If it’s a river, we’re dead.  If it drips, we’ll be ok.  But one thing I am going to look out for in the future is probably real estate maybe going up like crazy in certain areas.  Not because of Americans buying real estate but because of foreigners.  When rates start moving up with inflation, US borrowers will face higher rates so they can afford less but those crazy foreigners will pay cash as prices will stay down because rates are so high.  And before you know it, you’ll have a lot more Chinese and Indian neighbors.

It may be safe to a certain portion of this population is perhaps just relaxing on the unemployment benefits until their expire but the job market does not seem to be recovering but very cautious as there is growing preference for temporary and contract workers.  In fact, looking at statistics from outsourcing sites, I’ve seen a rather large growth in outsourcing but not just out of this country but within this country as more and more of the formerly employed are positioning themselves as a freelance or contract employee.  This may be a growing trend as companies will attempt to stay lean in the face of more global competition.

The statistics will put increasing pressure on consumer confidence even if the unemployment benefits are extended as they are widely expected as I expect another stimulus by sometime next year although a smaller one to supplement states.

Here is a summary of the upcoming week.

Monday, August 17:

Lowe’s (LOW), Agilent (A)

Tuesday, August 18:

Cardinal Health (CAH), Home Depot (HD), Target (TGT), TJX Companies (TJX), Hewlett-Packard (HPQ)

*****Housing Starts (July)… PPI (July)

Wednesday, August 19:

BJ’s Wholesale (BJ), Deere (DE), Limited (LTD), Network Appliance (NTAP), PetSmart (PETM)

Thursday, August 20:

Barnes & Noble (BKS), GameStop (GME), H. J. Heinz (HNZ), Hormel Foods (HRL), Ross Stores (ROST), Sears Holdings (SHLD), Gap (GPS)

***Initial Unemployment Claims

Friday, August 21:

Ann Taylor (ANN), J.M. Smucker (SJM)

Options Expiration… Existing Home Sales (July)

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Looking at the week, Tuesday is probably the headliner with earnings from Home Depot, Target, and HP but of course the housing data seems to always makes headlines there days as existing and housing starts will make news.  With options expiration this Friday and housing data, it looks to be a feverish finish to the week.  I’m not quite positioned long but waiting for some positions to come in to my ranges.  I don’t sense that at this point the market will roll over until something  more dramatic occurs in terms of events.  Now that many companies were able to raise money the last six months, it looks like we are buying some time.  But there are many shoes that may fall in the coming months which include a wave of foreclosures and the end of unemployment benefits.

But I heard a good argument about how it would be tough for the US to rebuild the lost consumption from an increase in the savings rate.  I will break it down a bit further into another post about the savings rate but this is a quick and dirty argument.  So let’s start with the 14 trillion dollar GDP which is about 70% driven by consumers so that amount to 9.8 trillion.  So let’s keep the math simple and say 10 trillion.  So the savings rate with peak earnings for 2007 and 2008 was 0.55% and 1.78% by my calculations.  Now let’s compare that to the average that I computed from the savings rate data from the St. Louis Fed was 6.84%.  Comparing just 2008 with the historical average of 6.84% (we just hit 6.9% recently on the last report in May 2009) then that would be about 5% decrease in spending.  Five percent of 10 trillion is 500 billion dollars in lost consumption for this year.  Imagine if savings rates increased more because of reduced credit and employment expectations and don’t forget the reduction in personal wealth.  The government spending is compensating at this point but there has to be another revenue engine for the economy in the future and as far as I can figure out.  Well there is the alternative energy economy that may help but further research in need to figure out what the contribution will be to offset the lose in the decline of the dirty energy economy. But yet the levels of the market at this point aren’t far fetched but in the short term, it just may be.

Well now on to business.  The week ahead we don’t have many major companies reporting but here is a summary is below.  But it seems that Kraft, Proctor & Gamble and Cisco will be the big earnings news to pay attention to as to news on the general economy in general.  I expect Kraft and P&G to be fine while Cisco should be fine as everyone is upgrading their networks 3G networks and working feverousily on their 4G networks.  I don’t expect Kraft or P&G to move the market but Cisco may have an affect on the Nasdaq.  But the biggest news will be initial jobless claims and the jobs report.  That will probably be the biggest mover of the market next week.  I noticed that the last two sessions as opposed to the last couple weeks, the marke thas been selling off so that may be not a good sign but we’ll see.  My portfolio has been suffering on trying to fade the market while my father’s IRA is up almost 30% for this year (his portfolio is holding McDonald’s only by the way).  Chalk another one up for buy and hold.

Monday, August 3:

Humana (HUM), Marathon Oil (MRO), MGM Mirage (MGM), Tyson Foods (TSN), Anadarko Petroleum (APC), Chesapeake Energy (CHK), Principal Financial Group (PFG)

Tuesday, August 4:

Archer Daniels Midland (ADM), CVS Caremark (CVS), Duke Energy (DUK), Emerson Electric (EMR), Entergy (ETR), Tenet Healthcare (THC), Kraft Foods (KFT), Whole Foods Market (WFMI)

*****Personal Income & Spending (June)… Pending Home Sales (June)

Wednesday, August 5:

Baker Hughes (BHI), Dean Foods (DF), Procter & Gamble (PG), Transocean (RIG), Allstate (ALL), Cisco Systems (CSCO), Prudential (PRU), Sunoco (SUN)

***ADP Employment Change (July)… Factory Orders (June)… ISM Services (July)

Thursday, August 6:

Comcast (CMCSA), DirecTV (DTV), Huntsman (HUN),  Thomson Reuters (TRI), CBS Corp (CBS), NVIDIA (NVDA)

***Initial Unemployment Claims (week ended Aug. 1)

Friday, August 7:

Edison International (EIX), Magna International (MGA)

Employment Report (July)… Consumer Credit (June)

I hope to be writing more as my business projects are keeping me busy but in the end, unless you’re a big time trader, you need to make a good living doing something else.

On Wed, Jul 15, 2009 at 4:12 PM, MISTER BULL wrote:

All luck buddy.  But I have gotten really short after today so you might be able to get everything back so no worries but patience is kinda key in everything now.

Here’s a few things that I go by:

1. Always hedge – at least partially because hedging makes you think of the other scenario
2. Always buy or sell in lots because you can always average down or up on a trade – if it moves your way before you get your whole lot, it’s still profit.  Otherwise leg in.
3. Protect your profits.  I have a problem of letting my winners run still but I protect my profits first but if I had another source of income, I would probably let them run more but living on trading profits makes you a bit conservative.

But let’s hope of the reversion to the mean…I mean but my expectations are this: that for GOOG, BAC earnings that the market either doesn’t move or moves down.  Just profit taking especially on options Friday!!!

On Wed, Jul 15, 2009 at 3:16 PM, XXXX > wrote:
Good call man.

On Thu, Jul 9, 2009 at 5:12 PM, MISTER BULL > wrote:
Hhahaaha….not eating is hard but trading is just challenging.

I was a little bit early on my short call on the market but I remain bearish on the market for at least the next few weeks.  Consumers and businesses are still being squeeze by the lack of credit but also by the lack of opportunity.  There are few opportunities for businesses to generate money other than cut costs which many are already doing (with the exception of Goldman Sachs who makes golds out of dog crap – excuse my French).  My forecast, which I am reluctant to do, is that the S&P will find some support around 830-850 so there is about 5-7% downside at this time.  But in the end, we all know that people will have to find a place to put there money eventually.

But this blog will be updated a little more often but less about trading but more about education and analysis.  For those traders, I will still update my trades on twitter but please don’t depend on it for trades because I am not the best at keeping it updated.  However to keep everyone busy until my next post, here is a great article from Michael Lewis about AIG that was published in Vanity Fair.

Michael Lewis AIG