Note to self on consumption: 12.10.09

I would like to see the trade data break down. Particularly I am interested in the % of retail that is high end. I would like to match that data to the amount of money spent by foreigners and its relation to some security like high end ETFs. In line I would like to see the same thing for % of certain income level families and there consumption patterns and relating in some way to again a high end ETF of some sorts...

Perhaps there is value to be found in predicting what type of consumption is leading in this environment and if that is enough to lift retail/consumption spending for this holiday season.

Though, there is a wealth of variants of information on this, I haven't had the time to dig through, research and/or analyze the data...

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On a side note, I know I have had a prolonged leave of absences due to admin and school work, but I am working on my next technical spx review which should be up by the end of today.

Alexander Lê
Managing Partner
Analyze Capital LLC
le.alex48@gmail.com

Money Never Sleeps, but People Do - 12.09.09

Via Bloomberg:

Oil whipsawed in reaction to weekly petroleum inventory data. On the negative side for prices are a large 2.5 million barrel build in crude stocks at the WTI delivery point at Cushing, Oklahoma together with a 2.2 million barrel build in total gasoline stocks and a 1.6 million build in distillates. On the plus side is a sizable 3.8 million draw in total crude inventories to 336.1 million barrels. Oil and gasoline imports were down in the week while domestic output of gasoline and distillates were both up. Refineries operated at 81.1 percent of capacity, up from the prior week but still very low. On the demand side, demand for gasoline was steady in the week while demand for distillates dipped. Oil first fell $1 then rebounded $1 to trade at $73 following today's data. Supply in the petroleum market, despite the week's draw in crude, is still very heavy and is a threat to the oil industry should the global economic recovery stall.

If crude continues to stay in a lower range short term ($70-72) I will look to jump in via USO. Tomorrow we will get Natural Gas Inventories at 10:30.

Tommorow's Action:

The U.S. international trade gap in September widened to $36.5 billion from $30.7 billion worth of red ink in August. 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. Looking ahead, the sneak peak indicators are mixed. First, there could be a drop in auto imports from Canada as not as many are needed with cash for clunkers having concluded. But a drop in shipments of nondefense capital goods in October could show up in lower capital goods exports. Also, higher oil prices will cut into any potential improvement in the trade gap.

Consensus is -34.6B. I don't expect this to be much of a market mover unless the gap increases significantly. Data should be flat or slightly improve. If data is week I expect a dollar sell off.

Also,Watch out for initial Jobless claims at 10:30. The combination of initial claims and trade deficit data have potential to move markets in either direction.

It will be interesting to see how dollar strength or weakness influences equity investors for the rest of the trading week.

On Friday we will get a real feel for how well the U.S. consumer is doing with retail sales and consumer sentiment reports.

The ASX 200 and Nikkei 225 are sitting on slight gains to start the trading session in Asia, up .25% and .06% respectively. Futures are negative in the Eurozone and U.S. equity markets are poised to open slightly to the upside.





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

SPX Technical Inter-temporal Update - 12.08.09

**Skip to Summary for quick conclusion:

The Daily Chart (short term thoughts)

Chart 1:



Its been awhile, but I'll try and keep it brief. Some new develops I found interesting enough to write about with what little time I have with finals approaching:

TRADER MIKE <-- click here

Somewhere in one of Trader Mike's blogs he refers and as I paraphrase "to the SPX pulling back in a side ways fashion" ... If you do look at the support and resistance levels I drew out the SPX has been trading in a range. Evidence as a pullback despite static prices lies in falling RSI and downward momentum as seen in the MACD.

RSI:

Interestingly enough the RSI is still holding at 50 support. However, as we see from the beginning of November, the RSI does not manage to reach 70+ and fails around 60+ instead. This could possibly indicating a weakening of trend.
IF 50 RSI breaks to the downside momentum can fall further.

MACD:

A weakening of trend can be confirmed by looking at the MACD's reversion to center-line balance at zero. (seen in Chart 1)

Volume:

Volume's downtrend can be indicative of a weakening trend as well. With the holiday season approaching, volume will be lighter and much uncertainty has yet to be priced in fully about holiday performance (esp. in the consumer sectors of the SPX).

Though interestingly enough we see an abnormal spike around the day of the Employment announcement Dec. 4th. This abnormal spike (above the average volume)could show that that there are many bulls still around defending the 1100 line.

Prices:

All these indicators pointing to downward movements only have resulted in the SPX trading in a range. Bulls and bears are almost evenly matched reflecting the uncertainty in the markets. All this has led to a price squeeze for almost two weeks now, which will result in a big pop. The big question is if it is the upside or to the downside?

To figure this out I look to the long term charts:

Chart 2:



Looking at the SMA evidence as shown above (chart 2). There is significant support for the short term seen in the Daily chart AND the weekly chart. Back in Nov prices flirted with the 50 SMA but have managed to stay above that level for over two weeks. This is reflected in the monthly chart as having Mid term support on the 100 SMA. These two support factors should give enough strength for prices to break through 1100 resistance within 2-4 weeks establishing a new uptrend.

Chart 3:




The chart above (chart 3) shows that, considering price alone, that if resistance is broken at 1100 there is room up to the high 1200's.

Chart 4:



Chart 4 shows that MACD although in the short term has been trending down as seen in Chart 1, the MACD shows a that markets might have possibly stabilized as "current post-recession (2008 issues)" MACD levels are similar to "pre-crises levels (before 2007)." The left side demonstrates that the possibility of a 1100 break in resistance existence with room for upward momentum to 20 (historical highs on MACD - pattern analysis points up). The tightening of the range IMHO is a good sign for bulls. **I stress however that this bullish move is on in a short term time frame of about 1 month+ or so (where prices would be between 1100 and 1300).

I would also site the RSI shown in Chart 3 as having room to 70 "IF" a trend change is not taking place.

HOWEVER

Long term I would have to make a more bearish call which would coincide with strong resistance levels of around high 1200's along with 200SMA price resistance shown in Chart 2. This time frame would put me into mid second quarter or into 3rd quarter 2010.


Summary:

Short Term: 2 weeks - 1 month: I expect a break in 1100 resistance to the upside.
Mid Term: Into First Quarter 2010
Long Term: Bearish into Second/Third Quarter 2010:

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** I would like to note that MACD and RSI in short and long frames do point to room to the upside but are already in high level territory which means greater downside risk. Calling a break in resistance of 1100 is very risky considering the picture seems very toppy at the moment. However, I still stand behind my thesis and assess my performance moving forwards.

**Disclaimer: this only involves look at technicals on the SPX and does not include other market influences such as Currency, Bond, Macro, Commodities, Central Banking Analysis.


Alexander Lê
Analyze Capital
Managing Parnter
Email: le.alex48@gmail.com

Can't Tell Me Nothing- 12/8/09

My intention of this post is not to criticize the system but to rather to question it.

"I had a dream I could buy my way to heaven, when I awoke I spent it on a necklace...I feel the pressure I'm under more scrutiny and what I do, act more stupidly."

--Kanye West, Graduation


Today, Bankers in England must have their bonuses taxed. Bank of Ameria is exiting the TARP program so they can hire a chief executive who will be well paid. Citigroup desperately wants to exit the Tarp but has been denied thus far. Neil Kashkarian takes a new job at PIMCO to build up the Allianz-owned firm's equity business.

These are all headlines from around the today's media. What is abnormal about the above? In short, nothing. Wall Street has not changed since the near financial Armageddon. Why should it? The systems in place were created by the current generation of bankers, traders, analysts, and fund managers. How can the the general public expect change when the current generation live, breath, and sleep meritocracy. The system has been constructed to "reward those who show talent and competence as demonstrated by past actions or by competition." Why is this wrong? Its not.

However, politicians are scrambling to point the finger at firms that bathed in "excessive risk taking/leverage." What good does this do? I will be the first to admit Wall Street has much to be thankful for as we round out the Holiday season. Yet, If there was no Citigroup, AIG, Goldman Sachs, or Bailout inc. bonuses, the same politicians who persistently criticize the system would not be elected/re-elected/appointed.

Washington and Politicians in general need to move away from their "old ways of doing business" if they truly want things to change. I believe in Capitalism. Though, I also believe in checks and balances. Maybe Finane got out of hand for a time, but that still does not justify the finger pointing blame game. The crisis was a perfect storm of poor regulation/risk taking/monetary policy/oversight/ratings/etc... Wall Street will not change unless Washington changes first.


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

Scripting The Future- 12/3/2009

Initial Jobless claims via Bloomberg:

Highlights
Initial jobless claims fell 5,000 in the Nov. 28 week to 457,000, extending a run of impressive improvement that points squarely at improvement for total payrolls (prior week revised 4,000 lower). The four-week week average is lagging despite falling 14,250 in the week to 481,250. Continuing claims for the Nov. 21 week rose slightly to 5.465 million with the insured-workers unemployment rate steady at 4.1 percent, well down from a summer peak of 5.2 percent. The slight gain in continuing claims hardly puts a dent into 10 prior weeks of improvement, improvement reflecting new hiring but also, and likely to a large degree, the expiration of benefits. Those receiving extended benefits rose nearly 60,000 to just under 600,000 in data for the Nov. 14 week. Markets moved higher but only briefly in reaction to the report, one that will firm expectations for solid improvement in tomorrow's November employment report.

Initial claims were 28,000 less then consensus estimates from Bloomberg analysts. Are we finally leveling off? Probably not. However, I do expect to see Initial Jobless claims stay in the 450k-375k range for the remainder of 2009 and well into 2010.

More to come later in the day...

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

The Good, Surprising, and Ugly

The Good:
"Sales of domestic light motor vehicles in October rebounded 17.2 percent to 7.8 million units as sales returned to normal-at least for the current recovery. Combined sales of domestics and imports in rose to a 10.5 million annualized unit rate from 9.2 million in September. Now that the monthly swings from cash-for-clunkers have been wrung out from the data, November will stand out as a possibly true measure of the strength of demand for motor vehicles and of the viability of the consumer sector to a large degree."

Sales for the Thanksgiving Holiday were down about 1% from last year as consumers bargain hunted and held out for heavier discounts. Domestic Motor Vehicle sales for November may give an indication of what consumers are spending on if anything. Economists are predicting a consensus range of 7.5 to 8.0 million units sold. Hopefully, this will mark an upturn in domestic consumption overall.

The Surprising:
"Existing home sales got a giant boost in October from the pending expiration of the first round of buyer credits, a gain that raised questions whether sales rates were pulled forward and would dip in subsequent months. But today's pending home sales report points to continued strength ahead. Pending home sales jumped 3.7 percent in October to 114.1, adding to September's even more impressive 6.0 percent gain. Year-on-year pending home sales are up 31.8 percent. The housing sector appears to be moving off the bottom, underscored by the 4.4 percent rise in private residential construction also reported today at 10:00."

The secondary market is picking up a bit. How much of this can be accredited to the potential tax-credit expiration? Additionally, how many of these homes have maintained timely payment schedules without restructuring or default?

The Ugly
"The construction sector continues to head in divergent directions with housing improving but being offset with declines in nonresidential and public outlays. Overall construction spending was unchanged in October after dropping a revised 1.6 percent in September. The unchanged figure for October came in higher than the consensus forecast for a 0.4 percent decline. Probably the biggest negative in the report is that September was revised down sharply from the initial estimate of a 0.8 percent boost. For the latest month private residential outlays jumped 4.4 percent after a 2.0 percent decline in September. In contrast, private nonresidential fell 2.5 percent in October while public outlays dipped 0.4 percent in the latest month."

This is disappointing news considering the demand for existing homes. One could infer demand for new homes has not picked up due to plentiful layoffs and lack of employment opportunities. It is hard to start a family with no income. Additionally recent college graduates are still struggling to find jobs. I don't expect this number to pick up anytime soon until the demographic of 22-30 years find stable employment.


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

Humpty Dumpty - 24 November 2009

I came across a great piece of technical analysis this morning while reading kevinsmarketblog.blogspot.com:

"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."

Thoughts:

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.