Durable Goods Orders- 05.26.2010

Via Bloomberg:

The April durables report lived up to its reputation as a volatile series but this time it was not just in the new numbers but in revisions. Net, durables are still notably healthy. New factory orders for durable goods in April surged 2.9 percent after a revised no change the month before. The headline number topped analysts' projection for a 1.5 percent comeback. The jump in the headline number was led by huge boost in the transportation component.

Excluding the transportation component, new durables orders slipped 1.0 percent after a 4.8 percent spike in March. The swing was largely in civilian aircraft. However, taking into account the March strength in ex-transportation, the relatively small decline in ex-transportation leaves new orders at healthy levels.

Nondefense capital goods orders excluding aircraft fell back 2.4 percent in April after a sharp 6.5 percent boost the month before. Shipments for this category-and source data for equipment investment in GDP-edged up 0.2 percent in April, following a 2.3 percent increase the month before.

Year-on-year, overall new orders for durable goods in April were up a robust 18.9 percent, compared to 17.3 percent in March. Excluding transportation, new durables orders stood at up 18.0 percent, compared to 19.2 percent in March.

The bottom line is that after taking into account monthly volatility, durables orders are still strong at both the headline and core levels. If manufacturing growth is slowing, it is too early to tell from this report.

How much longer until inventory levels will been fully replenished? The Consumer may be alive after all. Though, it is still too early to draw any substantial conclusions from this report. I look to the later summer months to give us a better indicator.


Patrick M Ambrus
Managing Partner
Analyze Capital LLC
ambrus.anlzgroup@gmail.com

Existing Home Sales- 05.24.2010

Via Bloomberg:

April's expiration of second-round stimulus fed a 7.6 percent jump in existing home sales to a 5.77 million annual rate. But, in a big disappointment, supply on the market jumped 11.5 percent to 8.4 months. Heavy supply together with the absence of stimulus point to the risk of price erosion in the months ahead. But at least for April, prices did firm, up 2.1 percent to a median $173,100.

Details show comparable gains for both single-family homes, up 7.4 percent, and condos, up 9.1 percent. The Northeast led the regional breakdown while the West lagged.

Uncertainty over the housing outlook is a key negative for the economy. Should the jobs recovery weaken, foreclosures and distressed sales could make for new trouble in the housing sector. Stocks firmed off session lows following today's report. New home sales for April will be posted on Wednesday.

I am interested to see how the Fed incorporates these statistics into winding down their QE policy. Specifically, I am speaking about the sales of MBS which have helped bloat the U.S. Central Bank's balance sheet. Wednesday brings new home sales.

I was in Boston today taking in State Street. It does not have the outright intensity or ubiquity of Wall Street. However, the feeling of deal making still looms on State Street. This evening I saw an epic Celtics vs. Magic game 4 of the Eastern Conference Finals. The C's lost, but then again I am a Knicks fan...

Patrick M. Ambrus

Managing Partner

Analyze Capital LLC

Twitter: AnalyzeCapital

Empire State Manufacturing Index- 05.17.2010

I need a late pass for this one. This data came out at 08:30. Sorry for the delay. Numbers missed estimates significantly.

Via Bloomberg:

Manufacturing activity remains very strong in the New York region though it did slow from April's exceptionally strong pace. The Empire State index for May came in at 19.11, well above break-even zero to signal significant growth compared to April. The April index was 31.86, to indicate vast acceleration from March.

The key here is that May's numbers may be lower than those in April -- but that doesn't mean May is weak. New orders came in at 14.3 on top of April's 29.49 to extend a long run of monthly gains. Shipments, at 11.29, increased compared to April though the monthly rate of growth slowed. Hiring did not slow with the employment index up more than 2 points to a very strong 22.37. Negatives in the report include continued acceleration in input prices and continued draw down in backlog orders, the latter pointing to still abundant excess capacity.

A slowing in manufacturing activity would be no surprise given the strong rate of acceleration so far this year, a rate that reflects a base effect with the depth of the sector's prior decline. The Philadelphia Fed will issue its manufacturing report on Thursday.

Patrick M. Ambrus

Managing Partner

Analyze Capital LLC
Twitter: AnalyzeCapital

Forecast update: May 17, 2010

From May 3rd I have said: Long the Dollar: Long Airlines: and short Oil:

(Also, not forgetting to mention that I've been expecting the SPX to correct since March, after being wrong for about a month, it feels good to be on the right side - all things considered, starting to be more bullish on the SPX now - need to evaluate for a bottom and look up some calls).


DOLLAR INDEX




AIRLINE INDEX


CRUDE ICE BRENT

Not much to update: I've been right on all my calls so far:

Short Oil
Long Airlines
Long Dollar

However, I will say that dollar is looking super duper over bought. I would expect a pull back bring that bad boy into a new range. The Eur is at 08 crises levels. Considering thats the lowest it pulled to, I won't think it will go below that, UNLESS, people really have no faith left in the EURZONE, which I will say is highly possible so we may see the EUR dip into the high teens if that is the case. For now, ill be expecting a whipsaw where we get temp dollar weakness, however, I need to do deeper analysis to see if everything is still within their trending behaviors.


Here is my old analysis for those who want to double check my performance:

http://analyzecapital.blogspot.com/2010/05/long-term-long-spx-short-crude-long.html


---


Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Driving Habits Over the Years: Via New York Times

For a historical based strategy, this is well worth considering. Lots to be learned in history.



---

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Battles among Internet Browsers

Internet Explorer by Microsoft, Safari by Apple, Chrome by Google, Firefox by Mozilla, and Opera. These five Internet Browsers are actively making changes to either increase their market shares or solely try to keep their current positions in the market. With threat from Google's Chrome, Microsoft's Internet Explorer kept losing it's market share, and reached 59.95% in April 2010, which is what IE4 had eleven years ago.From January 2009, Chrome has kept a double-digit growth rate, and finally beat Safari by the end of last year. Currently, the estimations of each web browsers' market shares are: IE - 51.42%, Firefox - 32.62%, Chrome - 8.82%, Safari - 4.27%, and Opera - 1.99%.

From the beginning of last till now, IE is continuously suffering from market lose, whereas Chrome generally position in a gaining trend. The reason behind this might be pretty obvious. Firstly, plenty of European countries announced policies for Windows that Microsoft cannot make IE as the built-in web browser in system; and instead, during the installation of Windows, users should be allowed to pick their own browser. Another reason could possibly be the boom of netbook market; a lot of manufacturer picked Chrome for their product.

Talking about Opera and Safari, there was a interesting fight on iPhone between the two. It took quite a long time to get Opera approved for iTunes store; and Apple suggests no one who like to install this second browser. However, Opera became the top 1 on iTunes downloading list right after it was on.

Lastly, Firefox. There is data proves that Mozilla owns a group of loyal users who will download every update of Firefox. It is not hard to imagine that people who are use to Firefox would not like to switch to another one, since no other web browsers can have as many addons and functions as Firefox. Moreover, Firefox update much more frequently then others. Although the newest version is 3.6, Firefox 4 Beta is out for download now.

*graphs via ConceivablyTech

--
Clark Chu
Managing Partner
Analyze Capital LLC

Japan's current account surplus widens 65% in March

Check out that HUGE recovery in Q1 exports compared to 2009


Japan's current account surplus widens 65% in March

They may have answered part of the reason why Japan has been seemingly uncorrelated to other major pairs. As I said in the comment of my previous post the technicals show on a year by year time frame the Yen actually is in an uptrend. Aside from 2010, for most of the first quarter which the Yen has pulled back (a re-alignment of the pair with other major pairs), it is still poised to rally.

Part of the reason possibly is that Japan has been able to export away the recession going into 2010, kind of how the US did in 2009 with the weaker dollar. Now that things are turning around (along with other relative economic weakness around the world), the USD is now in full uptrend mode.

The current account surplus of Japan as the article hints (I'd have to double check the gov't stats for accuracy), says that it is mainly due to higher exports.

On the fiscal side, Japan may seem to be in a better position across the developed countries. However, I won't mention the terrible political scene and other economic problems Japan has, but capital certainly has been flowing into the Japanese economy...



Only if work were as exciting as studying for finals, my first two finals tomorrow! 1/2 way done with what is needed for me to leave Uni!


----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

U.S. posts 19th straight monthly budget deficit: May 12, 2010

U.S. posts 19th straight monthly budget deficit

Dollar Weakness??


Its kinda funny how I didn't connect A to B from my last post about taxes: Tax Bills in 2009 Lowest since 1950

Thats the kind of opportunities macro event driven guys should be looking for.




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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Cameron's Takes Over for Brown: UK update: May, 11, 2010

Photography: Toby Melville/Reuters

Cameron's In <--

Pound is gonna rally


----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Tax bills in 2009 at lowest level since 1950

Tax bills in 2009 at lowest level since 1950 <----

This is the kind of justification Obama could use to tackle our public deficit issues. However, probably wouldn't bode well for another term pending other issues (health care, financial reform, oil crisis, world sovereign debt crisis...etc)

What do you think?


----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

BOE Interest Rate Decision-05.10.2010

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

Nothing surprising here. I expect the BOE will behave itself until the Liberal Democrats/Tories can reach a power-sharing coalition. Though, I am surprised to see the committee continue the £200 billion asset purchasing program, considering the FED ended a similar but much larger program at the end of March. I will have to synthesize the minutes before I make a judgement on this data.

However, I maintain bearish sentiment on the U.K. economy. Britain must work out the above stated political uncertainty soon in order to deal with their gluttonous budget deficit which stands at -12.8% of GDP . Additionally, Inflation remains high at 3.4%. Someone will be held accountable for these numbers when the dust from the PM election settles.

Be sure to check out Alex's post on the election results below. Here

Sources:

• estimates taken from the economist and Office for National Statistics
  
• Bank of England Publication
  

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
E-mail: ambrus.anlzgroup@gmail.com

UK General Election Results 2010

Results are out, It looks like the UK ended up in a hung parliment with the Tory party missing over 20 votes for an overall majority. The Greek debt crises still looming, along with the fiscal uncertainty in the UK will not help stabilize the UK/EUR region.

For my perspective, I see a possible new lower dollar trading range vs. these major pairs as it will takes years of recovery from a fundamental perspective. Of course this is not taking into the account of speculation and over exuberance on the sentiment side. All in all though, I still say dollar strength for most of 2010. Will look for a more specific time frame and price range once finals is over.


-----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Market Update: May 06, 2010

WHAT A MIND BLOWING DAY <--- click here

and

Yahoo finance market recap <-- click here

While stocks had looked to be headed for something awful, computer programmed trades quickly clicked to buy and drove the Dow back up several hundred points in a matter of minutes. The Dow closed almost 650 points above its session low, but it still lost nearly 350 points on the session. - via ^above

~~~~

and who said all that computer algorithmic quant trading was so bad...

~~~~

PS: This is the part where I say "I told you so" +%5 correction achieved! hurrah

----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

RBA Interest Rate Decision- 05.04.10

At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.5 per cent, effective 5 May 2010.

Recently, forecasts for world GDP growth have been revised up again, and growth is expected to be at trend pace or a little above in 2010. Conditions in Europe remain quite weak, though recent data suggest growth is becoming more established in North America. In Asia, where financial sectors are not impaired, growth has continued to be strong, contributing to pressure on prices for raw materials. The authorities in several countries outside the major industrial economies have now started to reduce the degree of stimulus to their economies.

Global financial markets are functioning much better than they were a year ago, but sovereign risk concerns have escalated significantly in Europe over recent weeks. This has prompted additional efforts by policymakers to put fiscal policies onto a sounder footing and to provide support for Greece in the near term. To date, there has been very little contagion outside Europe.

Australia’s terms of trade are rising by more than earlier expected, and this year will probably regain the peak seen in 2008. This will add to incomes and foster a build-up in investment in the resources sector. Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing. The process of business sector deleveraging is moderating, with business credit stabilising and indications that lenders are starting to become more willing to lend to some borrowers, though credit conditions for some sectors remain difficult. Credit outstanding for housing has been expanding at a solid pace. New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off. Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.

Recent data on inflation confirm that it has declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. In both underlying and CPI terms, inflation over the most recent 12 months was around 3 per cent. Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year.

With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.

The Board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2–3 per cent over time.

(Comex Aluminum, weekly)

China grew at a pace of 11.9% in the 1st quarter of 2010. It is no coincidence that as China shifts to consumption to bolster growth instead of exports, Australia and other Asia Pacific countries will see benefits. In addition, the run-up in the price of Aluminum has surely bolstered Australian exports. Hence, growth in Australia is alive and well.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
e-mail:ambrus.anlzgroup@gmail.com

Long Term: Long SPX, Short Crude, Long Dollar - May 03, 2010

Long Term = into Q3
Short term = 2 weeks



Here is more confirmation which would be inline with my thesis on the SPX and Crude (currently I would short the SPX within a two week time frame and be long into Q3 and also short crude into Q3). I point out the tight correlation from February to the end of March between ICE BRENT and the SPX. The correlation starts to break down at the end of march. If my thesis is correction one should expect a return to the correlation where the SPX should continue up and oil prices to fall.




As we see above; from the end of January 2010 the dollar continued to strengthen while oil prices diverged drastically. This is counter intuitive if currency markets are a significant factor in determining oil prices (unless supply factors outweighed weaker demand forces - e.g. opec decreased production to keep prices high since a stronger dollar would have curbed demand -> but I don't follow these number so I am not sure).

However this inverse correlation we see in the EUR/USD and ICE Brent can break down are start reverting back to positive correlation as seen back in early January and early December. Though, I can site no evidence to explain such an event, other than technical bearishness for oil (which has yet to happen) AND/OR the resolution to the Greek debt crises and a restoration in the confidence in the Eurozone with clear fiscal matters resolved for the next decade (which I highly doubt as the other PIGS, PIIGS and PIIGGS are still lining up to get lower sovereign debt ratings)

It would seem that the SPX/CB chart is more meaningful as there is greater evidence for a bullish SPX; fundamental and technical evidence (long term trend in tact with strong corporate earings etc...) and possible technical evidence for a bearish oil.



This last chart shows for the end of 09 into 2010 the story has been strong dollar and strong SPX. Currently there is strong fundamental evidence for a continued strong dollar and strong SPX which would confirm short oil as long as this relationship stays in tact.


Currently the big risk I feel is misjudging the timing of all these events to play out.



------

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

ICE BRENT Technical update: May 03, 2010

Short term for ICE brent seems short term bullish (currently against my short oil/long airline industry thesis), at least on the daily chart going into May... too bad I can't get a longer range on this bad boy.

It will probably take the rest of summer for my thesis to play out if I am correct, it is some what arguably topsy if longer term resistance is present.

What this chart needs is confirmation of the supply/demand balance, which my colleague Pat will inform us in detail after finals. If a supply shock occurs (more than expected oil supply due to overestimation) from OPEC due to the US oil spills, this could confirm lower prices as summer demand picks up and the economy shows more robust economic numbers... (look for those econ indicators where oil is inherently important - directly or indirectly)

SPX Technical Update: May 3, 2010

This one goes out to my buddy Sauros who loves reading those candle sticks.

Multiple confirmation on a bearish reversal.

Most significantly an old uptrend broken with long term resistance.

Though typically its not my style...

Two candle stick indicators confirm this bearish reversal: an abandoned baby (I wonder who names these things) along with a dark cloud cover followed by bearish price move confirmation and bearish volume confirmation.


Against my short thesis is the 50 SMA which could pose significant support and currently the 50 RSI support is holding. However, this would all be inline with my exceptions of an overall 5% correction on the SPX.

Lets see if prices continue down!



-----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Market Take: May 3, 2010

To the end of 2nd Quarter into 3rd quarter:

Long:

Dollar
SPX
Airline Industry

Short:
Oil


Ideally, I think the SPX still has room to the upside given a relative stability we are seeing in the US markets with strong earnings (still questionable is the demand side of the story to continue this bottom line growth).

With dollar strength, again relative stability (too much political/fiscal issues vs major pairs EUR/GBP/JPY/ and even AUD).

Oil and Airline industry has seen huge divergence of higher oil and suppressed stocks prices over the past years. With current consolidation (UAL and cont), and summer season, demand will pick up for travel given a somewhat better off consumer. Considering demand won't outstrip higher cost from higher dollar of oil, I would expect oil to fall and the airline industry stock price level to increase. Higher profits from the larger merger and increased travel with cheaper oil.

One could Short oil and long airlines if one were looking for an intra-hedge idea if one was trading either side of the two.