Tuesday, November 24, 2009

Humpty Dumpty - 24 November 2009

I came across a great piece of technical analysis this morning while reading

"An interesting pattern has been developing over the past few months in the stock market which I'd like to share with you. You'll notice in the above chart of the S&P that there has been a tendency for stocks to sell off towards the end of the month and then rally at the beginning of the month.

What I find interesting is that each of the sell offs have been gaining downside momentum. In other words, each down move has been larger than the previous month's down move. Having said that, if the pattern continues to work, stocks could be in for a very negative week as we close out the month. As always, there are no sure things in the market so lets just see what happens.


This morning we will see earnings from Tiffany, revised GDP numbers, FOMC minutes, FDIC earnings, Home Price Index, and consumer confidence. This day could be the straw that breaks the camel's back. I have been waiting for the pullback since the ides of the month. Currently I am short a financial stocks through a prominent long financial ETF.

Be aware of the volume. Herd trading could leave you in or out of the money going into the Holiday break.

Monday, November 23, 2009

Ignorance Is Bliss-11/23/2009

Re-Blog via Bloomberg:

What is the fate of Quantitative Easing? Today Federal Reserve Bank of St. Louis President James Bullard claimed the Fed should expand on QE past March. “Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in,” Bullard said.

Additionally he stated, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing” through additional asset purchases. “If the economy came in stronger than expected and inflation expectations started to ratchet up a little bit we could maybe sell off some of these assets and remove some of the accommodation from our quantitative easing program.”

Bullard also explained, The FOMC is not averse to hiking interest before unemployment cools, “We know the economy changes over time. Everybody’s got very strong opinions and takes the role very seriously. I don’t think anybody would feel bound just because we behaved.”


Naturally, I am not sure what message the Fed is trying to convey to open markets. Every FOMC meeting of recent memory has lacked any type of clarity on interest rate policy. Yet Bernanke, Summers, and Geithner remain to back a strong USD.

On top of all this political banter Ron Paul's bill to regulate the Fed appears to have legs. As I have discussed with my partner Alex, The Fed is split. There is no unification. A disjointed front leads to two things: 1. Power Struggle 2. Defeat.

Wednesday, November 18, 2009

Housing Starts/MBA Applications- 11/18/2009

Housing Starts

Housing starts for the month of October declined 10.6% from September at a seasonally adjusted annual rate of 529,000. Starts are down 30.7% year over year. October was the worst month for housing starts since April.

Many analysts attribute the sudden decline to the delayed extension of the tax break for first time home buyers ($8000).

MBA Applications

In addition, the Mortgage Bankers association announced that applications declined 4.7% for the week ended November 13th.

Poor economic data is ubiquitous at the moment.

Friday, November 13, 2009

Trade Deficit - Affects on Energy and Currencies - 11.13.09

Trade Deficit

The U.S. international trade deficit in September widened significantly on higher oil imports. But the good news is that the freeze up in global trade appears to be thawing as U.S. export rose significantly. The overall U.S. trade deficit widened to $36.5 billion from a revised $30.7 billion worth of red ink in August. The shortfall was worse than the consensus projection for a $32.5 gap. Exports rose 2.9 percent while imports jumped 5.8 percent. The worsening of the trade deficit was led by a wider petroleum shortfall which came in at $20.5 billion compared to $16.6 billion the previous month. The nonpetroleum gap increased to $25.9 billion from $24.3 billion in August.

The widening in the petroleum deficit was due to both more barrels imported and higher prices. Physical barrels imported increased 6.6 percent in September after dropping 9.4 percent the month before. The price of imported oil rose to $68.17 per barrel from $64.75 in August.

Year-on-year, overall exports rose to minus 13.2 percent from minus 20.6 percent in August while imports improved to down 20.6 percent from minus 28.5 percent the previous month.

Overall, the rise in export appears to be more real than the boost in imports. Imports were up on higher oil prices, more barrels of oil, and more automotive imports from Canada. The gain in autos was to replenish auto inventories after cash-for-clunkers. Non-auto imports were up moderately. But manufacturers are benefitting from a lower dollar and healthy gains were seen in capital goods, autos, and consumer goods. While the headline numbers could weigh on the dollar, the details favor it. Equities should like the boost in exports. "

Summary Taken from here (click here)

I got the follow up later: Need more time to digest the data...

In the mean time post questions if you have any.


Thursday, November 12, 2009

SPX Morning Update - 11.12.09

The past two days we have see a double test on the 1100 resistance level.

Is this the fail today? Is this the top? Is this a temp reversal just as we saw back in July? Whats the catalyst for financial Armageddon? Commercial Real Estate (CRE), the financials??

Well, the interesting thing is that fundamentally everything is in place for a continued weak dollar. As long as sentiment (ie: the people still believe in the fed) remains we can see higher equity levels via an artificial weak dollar (Fed Policy). Though it seems that the monkeys on capital hill are trying to take away the Fed's street cred "Dodd's Financial reform" <-- click here

How long before this sentiment will disseminate into the populous? Or will some other big wig on capital hill actually back Bernake?

Lots of upside and downside risks...

So what are my thoughts? I'm going to be conservative and err on the side of caution until better trend formations/indicators form.


Alexander Lê
Analyze Capital LLC

Jack and The Giant Bean Stalk - 11.12.09

This morning ADP Jobless Claims numbers were a bit better then expected. Jobless claims came in at 502,000 down from the revised 514,000 last week. Economists poled by Bloomberg expected 510,000 claims. What does this really tell the market? Nothing. Let's examine this from a corporate/private sector perspective.

We have seen poor corporate earnings through the second and third quarters of 2009. More then 70% of S&P 500 companies beat estimates, but with cost cutting rather then revenue growth. Take Applied Materials as an example. The company announced it will cut another 1500 jobs or 10-12% of its labor force. This equates to $450M savings in the long run. Coupled with 2009 expense axes of $460M Applied Materials can barely turn a profit. Third quarter net income was 10 cents/per share ($137.9M) on $1.53B of revenue. That equates to a meager profit margin of 9.01% compared to 2008 full year Profit margin of 11.8% . My point: there is no revenue growth or job creation. The only growth is coming from accountants sliding decimal places.

Furthermore, recent M&A activity in the tech sector has guaranteed more job cuts as firms look for cost synergies. H-P announced yesterday it will pony up $2.7B to buy 3com, a maker of switching and routing gear. Oracle bought Sun Micro systems. Dell took Perot Systems off the market. Xerox swallowed ACS. Typically in an acquisition the Acquiror ravages the acquiree and keeps only the most profitable/valuable businesses. Hence, most acquisitions lead to layoffs. Not to mention if the acquisitions go bad (3/4 do), more layoffs will follow.

Undoubtedly, the unemployment/Jobless claim numbers may tell Washington and "Policy Makers" what they wants to hear, but the numbers do not indicate long-term economic growth.

Trade with caution...

Patrick M. Ambrus
Analyze Capital LLC

Tuesday, November 10, 2009

SPX Lazy Update: 11.10.09

By now you are probably calling me a LAZY arse. Well truth be told there isn't anything I haven't said before for the SPX on this blog or "TLOT (The Lord of Trading)"<-- Click here

The point is I am going to reblog you to Trader Mike's SPX summary which has said everything I already have been saying or have said.

Trade "Mike's SPX Recap" <-- click here

I will re-mention that a bull picture is still in tact and thus risky to be shorting at resistance. Though weak volume on today's move definitely tells me that resistance is going to be pretty strong (unless we get some fundamental trumpers!)

** Side Note **

Also notice how my typical system points to room to 1100 while mikes system is already calling for strong resistance. I typically use MACD in conjunction with RSI while Mike is using the standard Stochastic indicator. Though, Im not saying one is better than the other, but just for you to be aware of the minor differences that can produce different results


Alexander Lê
Managing Partner
Analyze Capital LLC

Monday, November 9, 2009

Commercial Realestate Looks Promising

Since the ides of March global equity markets have outperformed like never before. Yet consumer credit, small business loans, and interbank lending remain wedged in a tight pair of skinny-jeans . Perhaps this nugget may help decipher the phenomena. You be the judge.

Patrick M. Ambrus
Analyze Capital LLC

You got to diversify your bonds....

Ok I know this is another reblog I got from the Big Picture, but this is something I couldn't pass up... too funny!

"Wu Tang Financial <--- click here for video"

I didn't say it but... Smith Barney are buncha what? enjoy and have a good day!


Sunday, November 8, 2009

Equity Update: 11.08.09

The SGP/MRK conversion went through, I am know an owner of MRK. I'll get some analysis up as soon as I get some down time.

** on a side note there is a high possibility that SPX 1100 will be retested. Which would mean my previous call on SPX topping out before 1100 might not be true.

** Upcoming reports:

  • Atlanta, San Fran, and Chicago Fed Presidents will be speaking.

  • Red Book - consumer confirmation??

  • The gap day from labor day will be interesting to see how this pause will affect markets as the jobless claims come out.

  • fed balance sheet

  • US trade Gap

  • consumer sentiment

It can be a bouncy week sentiment wise. Check your sentiment indicators, good luck to all you risk loving people playing the markets right now.


Econ Update: Current Situation - 11.08.09

Calculated Risk Blog <-- click here

Here is an excellent Reblog on the Health of the Economy.

Any data from the auto industry as we all know is just skewed from cash for clunkers.

That Jobs chart is super interesting. The whole demand side of the economy seems to be missing. The best part is that PPI and CPI numbers the past few months/quarters have been relatively tame. This definitely gives Fed policy leeway for any non-traditional programs needed to keep liquidity in the systems in order to maintain the financial sector on a semi life support (ie mainly quantitative easing), and in order to fix this job's mess.

In addition, looking at the increased bankruptcy in non-US business shows an interesting picture of the weaker end consumers.

The upcoming holiday seasons will for surely be telltale of consumer behavior trends (whether they have changed or not, or if they are on a rebound).

Based off this data, one can make their respective plays for the dollar/equity/commodity markets... but more on that later.

Friday, November 6, 2009

Trader Personality Test

Trading Personality Test <--- Click here

Here is something interesting Pat sent along to me; this will only take 5 mins or so... Try it out! Here are my results:

Thursday, November 5, 2009

SPX Morning Update: 11.05.09

Im not one to beat chests or anything but here were my forecast from last week:

Forecast 11.01.09 <-- click here>


Forecast on 11.02.09 <--- click here>

so the decision?

I took some cash positions already with a 1.6%+ pop to the upside on the SPX this morning.

My C Position was closed out awhile ago in the low 4 range and I will be looking to re-enter for a very short term frame as momentum and support point to the upside I await for more indicator confirmation and will play it conservative as my aggressive and risk management lacking style cost me a relatively small lost (and overall was a good trade turned bad due to a poor disciplined approach). Ill be sure to be aware of my time frame this time and apply the appropriate stop losses and calculate my risk reward ratios.

My SGP died and became MRK ...... but not quite yet totally. Overall my SGP play ended up higher but on the lower side. I should have went out all cash instead of profit taking while prices were in the low 29 range; though I thought the FTC would take much longer to approve the merger. Overall this has been my best equity trade in terms of profit performance over short and long term.

So right now I await my core index holdings to break even or go slightly positive to avoid a tax fiasco so i can make a much more dynamic portfolio.


Monday, November 2, 2009

SPX - Update 11.02.09 - Technical Play

Bears and the Bulls fought hard today with no clear winner. Though the short term bull picture remains some what intact; though mounting bear evidence is making me question the strength. Things are looking very similar to June 09 where prices broke below support before breaking the new resistance of 950 back in the July rally. If price patterns do repeat, we will see a retracement to the upside that will most likely fail to revisit 1100, and fall back down below breaking 1030 support within the next 2 - 3 months (one can calculate percentages from June's moves to estimate price targets).

July 09 Action vs Now:

So is this beginning of the end?:

For those calling the top at 1100, I would not be so rash. Confirmation of a bear trend will have to be seen with a break in 1000 - 1030 resistance along with new 50 RSI resistance and MACD re-visiting former lows seen from the end of 08 and the end of February 09. Though with that in mind, the last 3 pullbacks to the down side seen in Aug and Sept were on a much smaller scale indicating the current 1100 level has much more psychological weight than the previous lighter resistances.

Like I said before, I don't like to call tops when a bull picture is still somewhat intact, but with a long term falling RSI along with a falling MACD with widening channels indicates mounting bear evidence. All these indicators do not show any bullish divergence/convergence.

So what remains of the bulls? Higher highs and higher lows and perfect SMA formation. What is messing up the picture is the price action interacting with the 50 SMA. If this Perfect SMA formation of longer averages under shorter averages (50 vs 100 vs 200) experience cross overs I will be more bearish across shorter time frames.

I will wait for a pullback to the upside and mostly go in cash to play it safe in the short term.


** on a side note: upcoming dollar weakness may confirm the temporary pullback to the upside. Play the lead... Play the lead...

Morning Equity Update - 11.02.09

"Early Morning Short Covering; The close of today will be key; so will the close of this Friday; Watch that 1030 Resistance on the SPX. I expect dollar weakness within the next two weeks after this dollar correction we saw to the upside."

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