Trading Goddess

Very Bullish Dollar Weighted Put/Call Ratios

2009-07-15T10:43:00.002-04:00

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Daily Support, Pivot & Resistance Levels

2009-07-15T09:33:00.002-04:00

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TNA TZA Update

2009-07-14T20:32:00.001-04:00

MUHHHHHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!!!

Up 7.3% and 4.4% on TNA and TZA respectively.

Short both.

It's not evil inside... it's pure gold.

AVNR - bounces on support / rebota en soporte

2009-07-14T12:09:00.000-04:00

English-
AVNR - The stock has made its way back to the last breakout level and bounces. The stock has now broken its recent downtrend and a move higher has started. Look for this stock to test ist recent highs of 2.60 in the short term where a breakout higher is expected. Price target is 4.00.

Español-
AVNR - La accion ha llegado de nuevo a la zona de la ultima ruptura alcista y hace rebote. La accion ahora hace ruptura del movimiento bajista y empieza una movida alcista. Se espera que la accion haga prueba del nivel de los 2.60 a corto plazo y se espera una ruptura de ese nivel. Objetivo es de 4.00.

CY - Uptrend intact, watch for breakout / Tendencia alcista intacta, se espera ruptura

2009-07-14T11:20:00.000-04:00

English-
CY- Stock is testing the resistance level. The uptrend is intact and a breakout higher is expected. Look for a break above the 9.40 level to enter longs. Price target is 11.00.

Español-
CY - La accion esta en prueba de resistencia. La tendencia alcista sigue intacta y se espera rutura alcista. Se busca la ruptura de los 9.40 para entrar en largos. Objetivo es de 11.00.

Turning Up Tuesday - Can We Hold It?

2009-07-14T09:36:00.000-04:00

I WAS really excited about yesterday's rally.

Meredith Whitney gave us the catalyst for the bear squeeze we expected But THEN I saw Cramer last night. Nothing scares me more than watching Cramer's bandwagon do a 180 degree turn and head my way as he's been wrong and wrong and wrong and then wrong for months now. Still, I'm going to try to ignore that noise and keep a level head, dealing with facts rather than fads to figure out which way thing will be going. We were happily buying last week while Cramer was herding his sheeple out of the market and we'll be enjoying the free ride as he stampedes the masses back in, especially during expiration week but we'd rather see some honest, uptrending consolidation based on earnings than going back to early May's roller coaster model that hurt so many investors on both sides.

We are, of course, thrilled with the move so far, as you can see from the new buy list that I put up over the weekend. We cashed in our FXPs right at the top and went long on the DIA $83 calls at .40 as our 2nd trade of the day (the first was a long on GOOG into earnings). Those calls finished at $1 (up 150% and we are done, of course) and we also went long on GLD while it was still low in our 10:31 Alert and I put up a hedged play on TNK but that was it. We did all our buying last week, when things were cheap and we just spent the rest of the day waiting to see if we would make our target levels.

As I said in yesterday's morning post, we were looking for 1,750 to hold on the Nasdaq as our primary indicator that we were going to hold our 33% pullback levels on the broader index so it's not really rocket science to see where that DIA trade came from as we timed it for right when the Nasdaq crossed back over the line after the morning dip. Having a trading premise is always helpful and, in the 9:32 level watch to Members I had said: "Without $60 oil the best we can really hope for today is to claw back to our middle set of figures. Earnings can take us up over the higher numbers as the market rotates out of commodities (if they see that other stocks look "safe"). So that’s the outlook for the week (so far)."

The levels we were looking to hold and break over were:

Dow 8,100, 8,300, 8,500 to break H&S pattern

S&P 870, 900 and 930 to break pattern.

Nas 1,750, 1,775 and 1,825

NYSE 5,600, 5,800 and 6,000

Russell 475, 490 and 510

As it turned out, the Dow finished right at 8,331, S&P 901, Nasdaq 1,793, NYSE 5,761 and Russell 493 so just the NYSE holding us back at the moment but the Dow was over by about what the NYSE missed so we can call it a wash for now. I did amend my Dow target at 3:01, saying to members: "Speaking of volume, 142M just coming into 3pm, very stickable and we’re going to need it to prevent a sell-off here. Another 100 points would be very nice though but I’m thinking we run into trouble at last Monday’s high of 8,325." That prediction worked out just fine into the close and at 3:58 we decided we could expect a follow-through move of up to 1.25% today so a test of 8,400 will be today's hopeful target for the Dow.

As we expected, Asia gave us a good pop this morning with the Hang Seng up 3.66% (we expected 4% so a bit of a miss actually), quickly erasing last week's losses. The Shanghai was up 2% but was never really down and the Nikkei was stopped dead by the 2.5% rule, also not an encouraging sign after comming off such an awful week. India popped 3.75%, Australia gained 3.23% but the Baltic Dry Index flatlined at 2,975 and that's not a very good indicator that the rally is real. Auto makers were higher in Tokyo after the Nikkei reported they were stepping up production capacity in China amid brisk local demand, with Nissan Motor surging 7.3% and Honda Motor up 2.7%, while Toyota Motor rose 3.6%. Brokerage stocks also jumped in the broad market rebound, with Nomura Holdings soaring 6.9%. "I think it is quite clear the worst is over, but the recovery will be tenuous," said Selena Ling of OCBC.

Europe is up about a point and they outperformed us yesterday and were boosted by gains in the financial sector but Germany's ZEW Business Sentiment Index fell to 39.5 in June from 44.8 vs. 47.4 expected. Industrial Production in the Euro-Zone was also weak in June, up 0.5% vs 1.4% expected there. Barry Knapp of BCS raised his S&P forecast significantly and outlook for earnings season has been raised in the EU but until the EU indexes get past the 5% rule and hold it, this is just a technical bounce off the 33% retrace that we expected. “The key point is that the capital markets have normalized,” Knapp wrote in a note. “The broad improvement in capital markets implies that the recovery is very much alive.”

8:30 Update: Our June PPI report came in much hotter than "experts" had anticipated. This time they were off by 100% as prices jumped 1.8% in June vs. 0.9% expected by people who obviously don't have cars. Crude goods led the advance, of course, rising 4.6% and energy costs overall were up 6.6% for the month after climbing 2.9% in May. Even the core PPI was up 0.5%, that's a 6% annual inflation rate so you'd better be doing better than that with your "cash" or you are falling behind my friend! This is why we got back into gold yesterday as $910 did seem cheap ahead of PPI and tomorrow's CPI. Overall, this is nothing to panic over as long as the commodity bubble continues to abate, halfway through July, that's looking good but don't count GS out just yet - they can still force their $85 oil target if they want to.

We also got Retail Sales this morning and those were up a better than expected 0.6% but, again, gas sales skew the numbers and without that increase, retail sales rose just 0.3%. In fact, retail sales excluding autos and gas fell 0.2% in June! Adding insult to injury, Chain Store Sales for the first week of July fell 1.7% from last month and 5.7% from the first week of July last year. As I mentioned with last week's retail numbers, we are comping to numbers when everyone had stimulus checks so it's not a fair comparison but the weak holiday weekend numbers indicate people are not heading back to the malls just yet and that's a big worry with only 150 shopping days until Christmas.

Goldman Sachs did not disappoint with $3.44Bn in profits, which was really amazing as they paid out $6.66Bn (I'm not kidding, that's the number!) in compensation. Still despite paying out 1/2 of net revenue in salary and bonuses, investors love the $5 per share net earnings but maybe not enough to break $150 as much of this is baked in. We sold July puts, which will be wiped out, against August puts, which may come back if they can't break out here so it will be fun to watch.

JNJ also had good earnings, off just 5% from last year's stimulated totals at $1.15 per share vs. $1.11 per share expected. The company reaffirmed the full-year forecast and consumer sales were strong so that's a good thing. DELL warned on Q2 earnings last night so GS was wrong with that upgrade and we were wrong to play them in the $5KP and should be happy to salvage a dime on the $13 calls, we'll follow up on that later. Also in our $5KP, we need to watch SGR closely, who came back nicely yesterday but didn't hit our $2.50 target yet on the $22.50 calls but I have hopes for this morning.

So we need to see a 1.25% move in our indexes hold for the day or we may be back to making bearish bets. We'll be watching the 5% lines in Europe as early indicators but, as I said to members yesterday - I'm very glad we picked up a lot of stocks last week but I am also very glad they are well-hedged entries as we should be happy to make small gains that keep us ahead of inflation. It's still going to be a bumpy ride out there and we are still not committing too much until we see more data.

Daily Support, Pivot & Resistance Levels

2009-07-14T09:25:00.007-04:00

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Does Momentum Work?

2009-07-13T12:29:00.001-04:00

At the beginning of the year I posted the 10 best performing stocks for 2008. The list included the following stocks:

Best performing stocks in 2008

EBS +413% / Biotechnology
STSI +345%/ Cigarettes
CRD – B +258% / Business services
GAI +245% / Appliances
AIPC +224% / Processed and Packaged goods
MXC +210% / Independent Oil and Gas
DARA +194$ / Biotechnology
KIRK +173% / Home Furnishing Store
FINL +151% / Apparel Stores
GBR +147% / Oil & Gas exploration

Let see what happened 7 and half months later:
EBS = -50%
STSI =-73%
CRD-B =-69%
GAI = -17%
AIPC = +30%
MXC = -17%
DARA = -22%
KIRK = +308%
FINL = +32%
GBR = +40%

An equal weighted percentage portfolio of all the 10 members and without using any stops would deliver 16.2% YTD. Another example of the real investing world, which confirms that 10% of our trades usually account for 80-90% of all the profits.

Huge moves, but no real edge in either direction. You might try to create a portfolio with the top 10 best performing stocks of the last year and put a stop just below the last higher low on the weekly chart. Such an approach will guarantee you that you will ride the move as long as it continues and you will jump when there is a clear sign that the major trend is in trouble.

Biotech stocks proved again that they are rarely suitable for an investment. They are trades. Many double, tripple and quadruple and then go back to where they started. Using stop losses with them doesn’t really work, since in the majority of the cases they just gap down. One way to hedge your biotech bets is to costantly protect them by 90-day OTM puts. This will protect you from disasters on the downside and give you plenty of room to ride the upside. Another possibility is to sell every month OTM calls, that are about 15-20% away from the current price. Such an approach will allow you to gradually decrease your cost basis. It will limit your upside potential and it won’t provide too big of a cushion on the downside, but it is still better than not having an exit plan. If you get exercised, your profit will be more than 20% for the month. If trend is still looking healthy, you can always jump right back in. Keep in mind that many of those stocks don’t climb gradually. The bulk of their move is often congested within a week or a month.

Catching a trend and riding it is what all investors should aim at. The ones that make money consistently know that no trend last forever and they always have an exit plan.

SLM - Looking for rebound / Esperando rebote

2009-07-13T10:24:00.000-04:00

English-
SLM - Stock is in a support level. Look for a bounce off these levels entering longs above the 9.35 level. Price target on bounce is back to 10.50.

Español-
SLM - La accion se encuentra en zona de soporte. Se busca rebote de estos niveles. Entrar en largos por encima de los 9.35. Objetivo es de 10.50 de nuevo.

Daily Support, Pivot & Resistance Levels

2009-07-13T09:55:00.002-04:00

Fari Hamzei

Hamzei Analytics, LLC

http://www.Twitter.com/HamzeiAnalytics

Weekly Support, Pivot & Resistance Levels

2009-07-13T09:54:00.004-04:00

Fari Hamzei

Hamzei Analytics, LLC

http://www.Twitter.com/HamzeiAnalytics

Digging in the Mud for Green Shoots - How Did We Get Back Here?

2009-07-12T10:26:00.003-04:00

I'm digging for green shoots but you have to sift through a lot of manure to find them this week!

A few weeks ago I complained that the MSM was irrationally exuberant and I couldn't find any negative articles (outside of PSW, of course, where people thought we were too negative calling for a correction) and now, less than a month later, you can hardly find anyone who doesn't think we're going back to the March lows. I stand by my statement to Members in yesterday morning's Alert where I said: "It’s ridiculous for the Dow to go back to 7,500 and ridiculous for the S&P to go back to 800. While it’s easy to make squiggly lines on a chart show 10% drops ahead (which seems like a normal 50% retrace of the gains overall) I just think it’s dead wrong from a valuation perspective so I’m not inclined to play it, especially when those valuations are about to slap you in the face over the next few weeks. Maybe I’m wrong and maybe earnings will suck and Q2 will be a miss and guidance will be lower but right now I say - Show me the misses."

So I said Cramer was an idiot to be herding his sheeple into stocks when the Dow was at 9,000 and now I am saying Cramer is an idiot for stampeding the herd out of stocks at 8,000? Am I that fickle? Not really, I just believe we are in a fairly tight trading range. On June 17th I warned on June 24th, as the market "rallied" back to 8,500 I warned we were simply in the midst of a "dead cat bounce" - using the following, very descriptive graphic:

We played oil to top out at $70 for a whole month before it finally fell and I had warned people to stay out of the USO oil fund on June 6th (20% higher than here), but perhaps the last straw was when I pointed out that China was buying oil in bulk for $16 a barrel and even that was a ridiculously expensive price that more sensible buyers would not pay. Not long after that, Iraq had trouble with their own oil auction, again, no one in the industry had any real faith that $70 would hold and now, not even $60 is holding. They talk a very good game but don't put their money where their mouths are! On Wednesday, June 17th, with oil already back to $70 from $73, I said in that morning post: "We’re looking for proper capitulation in the energy markets and follow-through from our indices to the 5% rule at least (we are hoping for 8% total pullback on this leg)." That leg bottomed out at $67 the next week, down 8.2% from $73 before doing it's own dead cat bounce back to $72.50, where we shorted it again!

Keep in mind that our chief fundamental indicator, that allowed me to hit the June 15th market collapse right on the head, was copper prices falling back - an event I compared to George Foreman knocking out Joe Frazier in 1973. In that morning's post (Dow 8,800) I said: "This morning copper has been knocked down and is leading commodities lower after coming off an earlier knockdown at $200 and another at $150 - having started its run way down at $125 back in December. Of course, after a 100% run to almost $250 we can certainly forgive them a 20% pullback to $225 per our 5% rule and we’re not going to call the fight just yet but Oil is also pulling back off a 100% run while gold has only moved 17.5% over the same time period, already double-topping at $1,007 and $989 in February and May respectively."

Copper is HOLDING that $225 line, finishing Friday at $221.15 despite a dollar that is holding up well (about the same as June 15th at the moment) so we are still not ready to call this fight as either copper or the dollar may come off the canvas and put in a couple of good rounds in July. Just a few days before our market view proved to be right on the money, I had to ask myself in the weekend wrap-up "Is Cramer Still Wrong?" as the relentless last-minute market saves were giving us all headaches as we sat on our bearish DIA and USO short positions and mainly sat out the June rally as it all seemed like one giant pump job to me. It turned out that, yes, Cramer was still a buffoon and I was only one day early with my top call of June 12th, which I termed: "Fall Down Friday."

So here we are, back at the bottom of the trading range I predicted back in March and even as far back as November, when I said that, based on the fundamentals the crash should settle out at Dow 8,650. 5% above 8,650 is 9,100 and 5% below 8,650 is 8,200 and that's all within the bounds of what I see as the "right" level for the markets to consolidate. Can we still go 10% up or down from there? Of course we can - the question is where is the market going to get pulled back to. Other mid-points are S&P 900 (855-945), Nasdaq 1,750 (1,650 -1,850), NYSE 6,000 (5,700-6,300) and Russell 515 (490-540). We certainly obeyed the top of our range recently and now we'll simply see if we can hold the bottom through earnings. At the moment, this "horrific" sell-off is nothing more than a long-expected trip back to the lower end of our range.

Is the current panic justified? What's really changed in the last 30 days? Obviously, there were great attempts being made to push us up and over the top during the early part of June - the media pandering, the constant "stick saves," Cramer's idiocy, Goldman Sach's $85 oil call - all attempts to pull investor dollars off the sidelines and break out of our range. Failure to do so seems to have led to a sell-off, perhaps funds are giving up on the year or perhaps the sheeple who were herded in at the top have no appetite for a market that doesn't go up and up and up.

We've been testing the lower end of our range, mostly doing buy/write plays that give us 15% discounts off the current entry price. Hopefully that's enough cushion to ride out a panic dip but we are also scaling in with plenty of cash on the side, as we're happy to buy more if the market does drop 20%, all the way back to 700 on the S&P, where we would happily load up the truck. Meanwhile, we're picking up good stocks at what we HOPE are cheap prices, given the current market conditions. While we are not yet in what I like to call "monkey with a dart-board" territory, where almost any stock is a bargain, we certainly have some clearly good deals out there already.

Earnings will tell the tale in the upcoming weeks. Don't forget we don't buy stocks to bet on the economy, we buy stocks to bet on companies - some will do well and some will do poorly but the fundamental question is: will they provide a good return on your investment? After hanging onto our cash for more than a month, since Wednesday, as stocks started falling back near the bottom end of our range, we finally took the opportunity to give ourselves an additional discount, selling puts and calls (and sometimes just naked put selling) against entry positions on stocks that are already trading near their March lows. Our hedged entries provided us with the following net pricing:

CAL at $7.36/8.18 (price if called away/price if put to us) - now $10, March (all non-spike) low $8

CBS at $4.31/4.65 - now $5.97, March low $4

COST at $43.35 - now $44.97, March low $40

CVX at $58.20 - now $61.40, March low $58

DIS at $20/20.50 - now $22.41, March low $16

EXM at $4.02/4.51 - now $6.05, March low $4

RT at $6.50 - now $7.12, March low $1

SNDK at $11.54/12.77 - now $14.47, March low $9

SPY at $85.95 - now $87.96, March low $70

SPWRA at $19.90 - now $22.35, March low $22

SUN at $19.06/19.53 - now $22.09, March low $27

V at $55.30 - now $59.86, March low $50

VLO at $13.49/14.24 and again at $13.30/14.15 - now $15.57, March low $16

WFR at $12.83/13.91 - now $16.61, March low $13

X at $25.30/$26.65 - now $30.77, March low $20

XLF at $8.98/9.99 - now $11.10, March low $7

XOM at $58.98 - now $65.12, March low $64

ZION at $9.07/9.54 - now $11, March low $8

As you can see, most of our buy/write selections were for targets very near the March lows. If you wanted to smack yourself for not being brave enough to buy stocks when they crashed in March - what is your excuse now for not taking a hedged entry that effectively gives you the same price now? Of course, hedging our entries somewhat limits our upside, but that limit is 10-20% PER MONTH, not exactly a deal-breaker in the average portfolio. Combine this hedged entry strategy with portfolio management techniques (see Strategy section on "Scaling Into Positions," something I expanded on in this weekend's Member comments) and you can get very comfortable with your bottom fishing.

We also do not make these selections in a 100% bullish portfolio. We have our long DIA covers, following our "Mattress Play" strategy and on Friday morning I also discussed setting up some long disaster hedges using the FXP on the assumption that, if our markets are going to fall back to the March lows, then China has a LOT of catching up to do and we can likely do better betting against the Shanghai composite, which is up over 100% since November, than we can betting the Dow or S&P down, which are up "just" 20% since November and 35% over the March lows.

We'll see how earnings come out over the next few weeks. All the "green shoots" talk in May and June had the effect of raising expectations for Q2 and we are not going to get the easy victory we were handed in April as Q1s earnings were and upside surprise over something I had complained was a very low bar at the time. Now I think expectations are fair and I think we are also being given fair entries on certain stocks as investors engage in a little pre-earnings panic. Keep in mind this is round one of our scaling back into stocks, the same cycle we started during the March crash before we cashed out into the end of May, waiting for EXACTLY this to happen!

Hopefully all goes according to plan and we don't head too much lower, the green shoots may have died on the vine in the summer sun but that doesn't mean we'll never have another good season. It comes down to the question - where are you going to put your money? Commodites have lost their luster and the emerging markets are looking iffy. Treasuries are still paying near all-time lows, TIPS don't really keep you up with inflation and Europe and Japan are certainly not in better shape than we are and I don't think we're going to be racing back into housing anytime soon. Money has to go somewhere and there is less money now in US equities (especailly non-commodity equities) than there has been in the last decade - the situation is ripe for a rally, we just need a catalyst to move things forward and hopefully earnings will provide it.

If not, we'll step back and reassess. We are not guaranteeing this is a bottom but we are willing to establish some well-hedged positions here, rather than miss a very good opportunity to make some new entries.

Secrets of the Temple

2009-07-11T09:17:00.002-04:00

Secrets of the Temple, soon to be out in Public ???

http://therealnews.com/t/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=3994&updaterx=2009-07-10+12%3A27%3A24

Fari Hamzei
Hamzei Analytics, LLC
http://www.Twitter.com/HamzeiAnalytics

Stocks Going Ex Dividend during the Last Half of July

2009-07-11T00:56:00.000-04:00

If you want to try the stock trading technique called 'Buying Dividends,' which is the process of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend, there are many stocks to choose from. This technique generally works only in bull markets.

When you buy dividends, there are many stocks in many different sectors to choose from. In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks. WallStreetNewsNetwork has compiled a free downloadable and sortable Excel list of the stocks going ex dividend during the last half of July. They came up with many companies all with market caps over $500 million. Here are a couple examples showing the stock symbol, the ex-dividend date and the yield:

Foot Locker, Inc. (FL) ex div date: 7/15/09 market cap: $1.5B yield: 6.2%

RPM International Inc. (RPM) ex div date: 7/15/09 market cap: $1.7B yield: 5.9%

Caterpillar Inc. (CAT) ex div date: 7/16/09 market cap: $18.4B yield: 5.5%

The rest of the ex-dividend stocks can be found at wsnn.com. If you like dividend stocks, you should check out the high yield utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com or WSNN.com. For more details on dividend definitions, check out definitions of dividend dates. Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Author doesn't own any of the above.

By Stockerblog.com

UNG - Starting Small

2009-07-10T18:15:00.001-04:00

Picking up a little UNG here around 12.30 - I'm willing to build this position over a longer period of time as long as UNG tracking doesn't break down.

I wish I would have seen a little more of a breakdown but I'll buy slowly and patiently.

As I see it, it would be harder for the sentiment to get much more negative surrounding nat. gas barring a huge natural gas explosions that kills several endangered species of puppies and kittens.

I still have a couple of Oct 15 calls

Also Breaking News:

According to Bloomberg today the El Nino effect developing is probably going to make this hurricane season lighter then normal.

Then the article goes on to say it could also make it worse then normal.

So there you have it, prepare for season that is going to be:

1. Lighter then normal

or

2. Heavier then normal

What would we do without this insight?

Article: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFU7peSD1U2o

Carl Swenlin on SPX & Gold

2009-07-10T18:02:00.004-04:00

Carl Swenlin, founder of DecisionPoint just posted an excellent article on SPX & Gold:

http://decisionpoint.com/ChartSpotliteFiles/090710_hs.html

Fari Hamzei
Hamzei Analytics, LLC
http://www.Twitter.com/HamzeiAnalytics

Surfing the Neck Line

2009-07-10T11:59:00.006-04:00

So California’s IOUs are going to be traded? Seriously?

So does that mean that CA now kind of has its own currency? Seriously? I don’t live there, but can someone tell me if you can now buy milk with an IOU?

IOUs pay 3.75%? If they move the decimal one place to the right I might get seriously interested in buying some!

While everyone and their neighbor’s squirrel is watching the neck line in the S&P500 at around the 880 level (which has been violated at least inter-day) I thought I would pass on some humble thoughts on some of the stuff I have been watching.

1) The oil bull seems to have already laid down his sword and is now having a schizophrenic argument with himself as to whether he is the new world reserve currency or a commodity that no one wants. Seems he is in the depressive part of his manic depressive cycle. Likewise the bulls in the whole commodity/materials complex seem to have taken very heavy fire from the bears and are in broad based retreat.

2) The oil bull was guarding the left flank of the great golden bull and basically opened the door for the enemy and put him on the defensive for now. I may have to update my wave count soon :(.

3) I trade the Canadian financials more than the ones in the US, and many were actually flirting with the bottom of their trading ranges BEFORE this whole mess started up till a few days ago. So if you have been on a mountain top in Tibet for the last year and you own the Royal Bank and you just got back, your account is probably flat and you are wondering what all the commotion is about. To quote TG WHAAAAAA!!!!! Uber overbought or just plain solid????

4) So is it the financials that are holding the market up? Seriously?

5) I noticed that the bears brought up some artillery and started shelling the financial complex Wed. It looked like we were about the take out a trend line before the bulls called in air support at that end of the day.

6) Anyway I am watching KBE closely, because if the bears can carpet bomb this sector and it lets go to the downside maybe we will see some fireworks!

Happy trading all and have a fabulous weekend!

Stop the Week, We Want to Get Off!

2009-07-10T09:24:00.000-04:00

TGIF for sure, it seems like ending the week is the only way to stop the markets from dropping!

We failed to take back our weak bounce levels I laid out in yesterday's morning post as the Dow failed to hold 8,250 on a very brief spike past it, the S&P failed right at 888 in the morning and again in the afternoon (where we were able to use it as a "go short" indicator), the Nasdaq flirted with 1,750 all day and barely held it, the NYSE also failed 5,700 in the afternoon and gave us a good, bearish indicator while the Russell never came close to 488 and failed our critical 480 mark at the close. As I've been saying all week, we really don't have to watch anything but the NYSE, which will test the critical 5,600 mark this morning and failing that level would be, in technical terms: BAD!

Oil ($62) and gold ($920) also failed our levels so there was nothing to be bullish about in yesterday's action. We were in and out of DIA puts and calls, using S&P 880 as our inflection point and we took the money and ran on our AA calls (up $330, 78%) and DIA calls (up $45, 20%) as our first two completed plays in our $5,000 Portfolio, which will now be tracked under Seeking Alpha's "Stock Talk" feature as an experiment for non-members. We did a day-trade as well in the $5KP on MCD, picking up the $55 calls at $1.65 for a quick ride to $2, adding another $175 (21%) to the kitty for the week. Our only open trade in this hit and run portfolio is SGR, where we are in the $22.50 calls for $3.30, selling the $25 calls for $1.45 for a net $1.85 entry on this bullish $2.50 vertical spread (4 contracts). Earnings were a slight miss but we're not worried as the order backlog is fantastic and we'll be buying more if the after-hours sell-off holds into the morning. If this play comes through for us we'll be up about $800 in our first week and well on-track of our goal to double up over earnings season.

It will be a shame to have to play the dark side but we're back to neutral now after covering our bullish plays with DIA puts as the upside just seemed way too risky heading into the weekend. It looks like the puts will be doing well this morning as the futures look dreadful (7am), pushed down by a 2% move up in the dollar that has oil back below $60 and gold under $910. CVX gave disappointing guidance last night and if XOM follows them down 2%, just those two will cost the Dow 25 points. We have trade data at 8:30 but I don't see that as a rally point and at 9:55 we get to see how confident (or not) our consumers are.

As you can see from David Fry's SPY charts, we have now clearly formed the dreaded "head and shoulders" pattern and only a very rapidly declining 200 dma stands between us and technical Hell. We are going to test that line today (87.69 on SPY) and possibly run into the 89 dma at 86.48, which is almost exactly a 10% drop off the June 11th top of $96.11 so we are loving that spot for a 20% (of the drop) bounce back to 88.40 so that will be our significant upside line today. Sadly, that is just 2 S&P points over yesterday's close and 888 resistance is above that so the chance of slogging through that mass of resistance to have a good day is not very high this morning.

Only the low volume caveat is giving us hope as perhaps Mr. Stick is saving up his firepower for a big finish on Friday. It will indeed take a Deus Ex Machina to save the markets this week as we're not expecting any data or announcements to move the markets this morning. Next week is a data fiesta with PPI, Retail Sales, CPI, Industrial Production, Fed Minutes, Housing Starts and the NY and Philly Fed Reports plus tons of earnings so it's good to be in cash or neutral into the weekend as we'll have plenty of fun things to play off next week, especially with options expiration day looming on Friday!

Asia closed out their week fairly flat and back around the May averages. The Nikkei finished at 9,287, 500 points off Friday's open and the Hang Seng gave up early gains to finish down 82 at 17,708, also down about 500 points for the week. Japanese shipping stocks fell after a report in the Nikkei that rates on container ships from Asia to North America had been dropped for the first time in three years, reaching six-year lows. The paper said in just-ended negotiations with businesses, shippers had agreed to reduce rates by 20% to 40% for the fiscal year ending May 2010. The dollar was propped up to 93 Yen in overnight trading but wasn't fooling anyone and is back to 92 Yen ahead of the US open yet the dollar remains strong against the Euro ($1.39) and Pound ($1.62), which means those currencies are exceptionally weak against the Yen which is, as we've been saying, TERRIBLE for Asian exporters.

Chinese exports did, in fact, fall 21.4% in June but that was a little better than May's 26.4% decline. Imports were down 13.2% in June, despite China's massive commodity stockpiling during that month and it was, of course, much better than May's 25.2% decline. You can see on the chart of the Baltic Dry Index how China's commodity binge pretty much commandeered the fleet for June, pumping up rates and then dropping them as the program wound down. That being the case, it's no surprise that the BDI chart looks very similar to the oil chart or the CRB chart for that matter. China's stimulus program is having some effect as June property prices rose 0.2%, the first increase in six months, fueled by low interest rates and government measures to support the sector including tax breaks on transactions and lower downpayment requirements - things our government needs to do if they want to get serious about building a recovery.

Europe is down about half a point (8 am) ahead of the US open with the FTSE testing the 4,100 line, the DAX bumping along 4,580 and the CAC barely holding 3,140, all right about the 10% lines off the June highs. Overall, the global markets have gone from being down about 20% for the year in March back to up about 5% at the end of May and are now (other than the Hang Seng, which is outperforming) down about 5% for 2009. Of course our starting point for the year already sucked and we're all (other than the mighty Hang Seng) still down around 40% off our highs. The question that will be answered next week is: "Do earnings justify that 40% drop in valuation?" Perhaps they do but I don't think they justify a 50% drop in valuation and the Nikkei is already there so we'll see if they can hold the 9,800 line.

If not, it's the Hang Seng that has the farthest to fall and FXP (ultra-short China) is a good way to cover the potential drop. July $12 calls are $1.07 while the July $13 calls are .57 with FXP at $12.83. Taking this $1 vertical spread for net .50 gives you a break-even at $12.50 and makes excellent weekend disaster protection as it won't take much of a dip in China to double you up by taking the FXP over $13. On a longer-term basis, the Jan $15 calls at $2.62 make excellent downside protection as naked longs (FXP was over $100 last Fall) or you can sell the Jan $20s for $1.62 against them and put yourself in a $5 spread for $1 net. These are nice protective plays as you can take $5,000 out of a $100,000 portflio and have $20,000 worth of downside protection against a collapse in Asia. 5% of your portfolio giving you a 20% hedge is a good risk/reward strategy.

Another fun way to play FXP is a FREE play you can create by buying the ETF at $12.83, selling the 2011 $40 calls for $1.75 and buying the Jan $20 puts for $8.80. This puts you in for net $19.88 and you have the right to sell your stock for $20 through January 15th (by exercising your put) so you have no downside. Should the FXP fly up, you will, of course make all of the upside gains and you will be capped out at $40 by the calls you sold. Should FXP head down and force your exercise, the 2011 caller will retain some value and that would be your loss (risk) against the potential $20 upside. Those are a few of the creative ways you can hedge against disaster as the Hang Seng is outperforming other global indexes by 20% or more and if we go down, you can be pretty sure they will go down too!

We don't want to hedge the US markets lower, we think they are low enough and hopefully today we'll get the bottoming action this market needs to break higher but Mr. Stick has his work cut out for him this afternoon as we need a move up over 8,300 to avoid printing a very ugly weekly chart. As I said to members yesterday into the close:

I just don’t get this half-assed defense of MINIMAL support levels. Right at 480 on RUT and 880 on S&P and 1,750 on Nas. Arguable the Dow and NYSE have made progress but if this is all they can do then this is very scary. Maybe they are saving up for a ridiculous rally tomorrow or maybe they simply can’t do it, even on this pathetic low volume and that means we are one snippet of bad news away from a black Friday-type event.

My logic is that clearly the markets are being supported but then I have to say, to what end? Why support them at all if you can’t close the deal? I expect better out of my evil market manipulators, that’s all….

So it's all up to Mr. Stick to save the markets today but in cash we trust is our motto as we don't like to place our faith in the invisible man pulling the strings (but we sure have learned not to bet against him!). Our trade deficit numbers were actually great, the lowest number since 1999 in May, despite a 20% rise in oil prices that month. Import PRICES, on the other hand, were up 3.2%, the biggest monthly increase in 20 years thanks to Goldman's commodity manipulation (oops, allegedly!). Excluding petroleum, import prices were up just 0.2%.

Lines we don't want to fail today are: Dow 8,100, S&P 880, Nasdaq 1,750, NYSE 5,600, Russell 470. Most likely, we will open below all of those lines so the trick will be taking them back but even that is just going to be pathetic and will give us a bad pattern into the weekend. The only thing that is going to turn us bullish is a return to Wednesday's opens and that would be Dow 8,300, S&P 895, Nasdaq 1,775, NYSE 5,750 and Russell 495. Our shining ray of hope is the SOX, which close to recovering at 262 so we'll be watching them very closely but these are the slimmest of hopes and the dark side is still the quick and easy path for most of our trading.

On the whole, we should be thrilled though. We finally got the down week we expected (and held out for) all last month but, as the old saying goes: Be careful what you wish for because you might actually get it!

Have a good weekend,

- Phil

Daily Support, Pivot & Resistance Levels

2009-07-10T09:03:00.001-04:00

Thursday Closing Put/Call Ratios

2009-07-10T09:02:00.001-04:00

Today we passed the 3,000 Followers mark on Twitter

2009-07-09T22:27:00.001-04:00

As promised back in May, to commemorate this milestone, we are offering 3 of our most popular packages -- at 33% off of our regular prices -- Proprietary Indicators, Phoenix Options Newsletter and Index Futures Chatroom and Streamer, as our Summer Specials.

Sign-up links are posted on Twitter. Just go to http://twitter.com/HamzeiAnalytics to take advantage of this offer (which expires on end of business Friday, July 10th).

Other People's Money

2009-07-09T21:08:00.000-04:00

I judge for the current market sentiment by the way investors react to companies’ earnings’ reports. When risk-aversion is the popular theme of the day, speculators subconsciously look for a reason to sell. The slightest weakness in an earnings’ call will be exaggerated and extrapolated and the stock will be sold. It doesn’t matter if a company beats the analysts’ estimates or if it guides higher for next quarter. It matters how market participants react to the news. When “good” earnings reports are getting sold, market is in defensive mood and you should act accordingly.

The story is different when investors are confident about their own and the economy’ future. During such times, people are looking for a reason to buy. They tend to ignore any weakness and a single ray of hope in an earnings’ report is enough to get them excited and start buying like crazy. You know the spirit of Wall Street is high, when slightly lesser than expected losses are generously rewarded by double digit one day gains.

Earnings’ season is here and it will provide hundreds of good trading opportunities. I will illustrate a variation of what I am looking for through one of the good trades I had lately in American Greetings (AM).

1) Reaction to news is more important than news itself. I am looking for 10%+ gains on at least 5 times the average daily trade volume.

2) Stock beats beats estimates by wide margin and guides higher for next year.

3) The breakout is from relatively tight (preferably flat) range – the longer, the better. It is a sign of a neglected stock. Stocks that run up in front of earnings’ reports, tend to be sold on the news.

4) The stock finishes the day in the upper 1/4 of its daily range. With other words, it forms a nice, long, green candle without too long shades.

5) The low of the first 30 min candle might be used as an initial spot to place your stop. The real winners rarely revisit that point. The best trades are profitable from the moment you enter. Along its way up, the stock will form several bullish flags and wedges and offer opportunities to raise your stops or enter if you missed the initial move.

American Greetings reported a profit after 2 consecutive quarters of losses. The reason behind the sudden green bottom line wasn’t higher sales or margins (typically what I am looking for), but lower expenses. The important part was the market reaction. AM went up 41% on the day it reported it EPS number.

On a side note, the company was paying 48 cents dividend, which before the earnings’ jump accounted for more than 7% annual yield. Dividend is usually the last thing I care about, but in this case it was notably good.

AM earned 25 cents per share compared to a profit of 27 cents for the same quarter, last year. Normally I look for triple digit Q/Q growth, higher margin and at least double digit sales growth, but in this case we had a discontinuation of a losing streak and a promise of higher margins in the future. To be honest, you don’t even have to put so much effort analyzing those details. The important thing was that investors were buying AM’s shares like they’ll run out of fashion.

There was only one analyst, following the company and he expected revenue of 20 cents per share. Is it possible that a tiny 25% earnings’ surprise (25c vs view of 20c) can cause an almost 1005move in a matter of a week? In general, anything is possible, but this was only one side of the story. AM has relatively small float – 36.7 mill. I prefer stocks with float below 25 mill or even below 10 mill shares as they tend to move faster. The evening before AM’s report was announced, it had over 20% of its float sold short and a short interest ratio of over 15. The last figure played an essential role in the AM’s gigantic move.

Market Commentary as of Wednesday, July 8, 2009

2009-07-08T21:56:00.002-04:00

We still stand by our May 22nd intermediate bias change, to the short side, which was again re-iterated on our June 12th blogpost here.

What is clear now is the very short-term over-sold condition we are in. The chance of short-term rebound (a dead cat bounce) has increased as we enter the Q2 Earnings Season.

This is evidenced by our MoMo reading (first chart) of below -30 as denoted by the green horizontal line and VXO trading near +3 sigma today (second chart).

Daily Support, Pivot & Resistance for Select Futures, Indices & ETFs

2009-07-08T21:03:00.002-04:00

Dollar Weighted Put/Call Ratios

2009-07-08T20:52:00.001-04:00