Are Greek stocks ready for a comeback?
With all the recent bailout talks for Greece it might seem like a good time to short Greek assets right? No!
The risk rewards at this point have been cut in half. I will display a chart below of the Dow Jones Greece Stock Index $GRDOW.
Here is a 3 year chart with no comments. (Click to Enlarge)
Here is the 1.5Year chart showing a different story.
You see... Greece did hit bottom at the same time as the entire market did as well back in March of 2009 BUT Greece topped out in October of 2009 and started its next leg down.
From March-October 2009 the index rose from 124.17 to 267.40!
Thats 143.23 point gain or 115% Gain in 8 months... and here we are complaining that our market has gone up 75% and is overdue for a correction.
Now as we can see from the chart below Greece then took a turn from 267.40 to 150.84 in February of 2010 (and it might be making a lower low coming up if the bailout saga isn't fully discounted yet) the 116.56 point drop from the October 2009 peak to the temporary February 2010 bottom is a 43.5% correction!
Back to my original question... now do you see why I said no to shorting the Greeks? 44% Correction has already occurred and even if there is another 150 points to the downside (another 50% or so) the risk reward is no longer there. I might be looking to buy up some Greek Gyros or Banks soon to play. One such play is National Bank of Greece (NBG)
Here is the chart for NBG to compare to the entire index. Also Notice the Recent Volume (Click to Enlarge)
Thats all for tonight folks. Have a good night and a good trading day tomorrow.
-K
A Special S&P 500 Chart courtesy of Investingfreak
This weekend I will share with you a chart that I view at the end of every week.
When I glanced at it last night i saw that we are right at the bottom of a trending channel.
It will be an interesting week coming up so I decided to finally share it with the rest of the world (including the masterminds at Gold in Sachs)
As always click the above image to enlarge. Since a picture is worth more than a thousand words there is no need for me to comment on it further.
Have a profitable week ahead.
-K
Nightly Recap 3-23-2010
Market Summary:
DOW +102.94 (10,888.83)
S&P +8.36 (1,174.17)
Nasdaq +19.84 (2,415.24)
Nightly News Links
US Economy:
Existing Home Sales fall further in February (The Mess That Greenspan Made)
The National Association of Realtors reported that sales of existing homes fell 0.6 percent in February after a drop of more than 7 percent in January and sales are now at their lowest level in eight months. It's probably best not to make too much of the winter data for existing home sales because it is a very slow time of the year but, the "Months of Supply" metric certainly looks to be going in the wrong direction right now.
What is the Homebuilders Index pricing in? (Investment Postcards)
David Rosenberg, chief economist and strategist of Gluskin Shedff & Associates, states that his regression analyses show the Homebuilders Index to be pricing in the following:
Housing starts: pricing in a level of 800-900k (versus 575k currently)
Existing home sales: pricing in a level of 5,500k (versus 5,050k)
NAHB Housing Market Index: pricing in a level of 35 versus 15 actual.
Is this the most expensive part of the US stock market?
US Debt Update: 6 Months To Revised Debt Ceiling Breach (Zero Hedge)
As a reminder, the debt limit is $14.3 trillion. We are $1.7 trillion away from the limit. At March's run-rate of about $300 billion per month, the debt ceiling will be breached by October 2010. If somehow the government manages to reduce the monthly issuance to "just" $200 billion, we have eight and a half months until breach, or January 2011.
World Economy:
Spain to join Portugal in issuing Dollar-denominated Bond (Zero Hedge)
Yet more countries are anticipating the Fed finally killing the dollar sooner or later, as Spain now joins Portugal in issuing dollar-denominated bonds. If Europe's most insolvent countries are getting on board of the asset side of the Fed's balance sheet, it can only mean one thing: the odds for the winner of the currency race to the bottom are squarely in favor of the US currency. (K remark: I really see this as a contrary indicator being that there is an imbalance in those countries who are betting on a collapse of the dollar.)
Germany Sets tough terms for EU help for Greece (Reuters)
ermany signaled for the first time on Tuesday that it may accept European financial aid for Greece as a last resort, but only if the IMF is involved and euro zone partners accept tougher budget discipline rules. "The condition for action, as a last resort, is that Greece's financing on the capital markets is exhausted," the official said."Furthermore, it would be necessary for the International Monetary Fund to provide a substantial contribution," he said, stressing there will be no decision on actual aid at the summit.
Interesting Reads:
Jim Rogers Starts Some Short Positions (Market Folly)
Potentially the most notable bit of his conversation was when he said, "I had no shorts for about 15 months so I started putting out some shorts recently. But the fact that I've been putting out shorts means the stock market won't pull back." So, it's interesting to see Rogers fight the current trend. In his mind, it's the right play, but he knows he's going to potentially feel some pain first.
Morning Humor- American And Greek Capitalism Explained (Video) (Zero Hedge)
Explaining US economics (with an emphasis on generally accepted criminal accounting practices).
Have a Good Night
-K
The One Day Rally Is Over!
Last night I posted about the S&P possibly having a Kicker Bullish Setup.
Well The S&P Rallied 18.60 points to 1062.98.
The Setup was not executed perfectly (market would have had to gap higher today then go the distance)
All bets are off on an extended rally that needs to go higher than 1080.15 to be worthy of anything.
While the market rallied the S&P only traded at half its normal volume.
Stocks like Citigroup which had traded over a billion shares a day, are lately trading at less than 500 million.
The TED Spread which measures the general risk in the economy has been rising the last couple of weeks. today alone it rose 5.42% which means interbank loans are now riskier. This is still not significant enough and I would like to see another 33% increase in the TED before I really put a lot of my sidelined money on the short side.
We had MBIA (MBI) stock trade up 11.38% today only to be down over 7% in after hours.. why?
Standard & Poor's on Monday cut its ratings on MBIA Inc and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans. ... The outlook for both companies is negative
Well if that wasn't enough the dollar has began to show some strength as well despite the almost 20 point one day rally.
Bottom Line: Be very careful if going long from here on out. The false optimism game has been played for far too long and you might get stuck holding a worthless institutional stock come October. It's also end of month markup so for the next few days prices might be kept afloat by institutions.
Have a good one.
-K
S&P at 1035 by October 1st? I Believe it is doeable.
On September 23rd at 9:24Pm I wrote the following prediction on Twitter.
Prediction Alert: $SPX 1035 By Oct 1st9:24 PM Sep 23rd from web
I made that prediction based on a few trend lines I was watching that had begun to break down. This is from September 16th. it took then 1 full week of the SPX moving along that trendline before finally breaking below. (Click To Enlarge)
The next day my system began throwing out SELL alerts and that confirmed my bearish case. I acted upon a few of the alerts and am happy to say that so far they are green.
Here are the alerts for the Major indices.
In my previous post I was expecting the correction to start 10 days earlier than it actually did and that post now stands at 67% accuracy.
Today S&P Closed at 1044. Will it close at or below 1035 by October 1st? I believe it will, what about you.
Have a good Weekend and check out the rest of the signals by clicking above on the "Current Picks" Tab.
-K
$VION; A perfect trade using the Morning Star Pattern
Today I had a chance to experience those special conditions that cause a day trade to turn into great profits.
The stock chosen was VION. It was down 45% for the day on no news. (It is a Pharmaceutical so I thought some bad drug news came out).
As I watched the price slide down like a waterfall I saw a reversal form. This reversal in candlestick patterns is called the Morning Star.
The patterns is a bottom reversal signal. It is most effective following an obvious downtrend (in this case from 6.50 to 2.20)
According to Candlestick Trading Forum:
The Longer the black candle and the white candle, the more forceful the reversal.
The Pattern psychology for this specific pattern says that when the price goes down fast sellers get panicky. They keep selling off and as they are doing that bulls begin to step in.
Now that I have explained the pattern I used time to explain the entry and exit signals.
Entry 1: 100 shares at 2.90
This was an initial entry to test the playing field.
Entry 2: 100 shares at 3.50
I was looking for price to close above 3.25 for 2 consecutive candles to buy into strength. 3.25 if you can spot it is a resistance from earlier candlesticks.
Exit 1: 100 shares at 4.01
4 is a round number so that makes it psychological for people to dump shares
Exit 2: 100 shares at 4.53
Looking at the far left 4.53 is around where the 2nd large red candle begins. and if you look up further more candles tend to end around 4.75.
Initially I had the limit sell order at 4.74 but I then decided not to push my luck.
Conclusion: After concluding the trade I watched the price go at high as 4.90 then in one big swing it crashed back down to 4.
Overall it was a great risk reward ratio and a well thought out trade. Morning star followed by an initial entry to test strength of the pattern and if it goes your way add another position which will allow you to scale out. Now this did take 2 day trades out so if you have under $25k account you will only have 3 trades in 5 days so it's really not ideal to do every day.
Here is the image to illustrate all the text in this post. (Click to Enlarge)
Hope you enjoyed it and while I do understand this is not a stock pick because it is already gone I hope it serves as a teaching tool to how simple trading can be at times.
-K
Summary of picks from yesterday
Yesterday’s picks turned out to be right on. Although with pathetic moves, AMD gained its way up. It has been trying to break its new resistance at $4.50 majority of the day. Unfortunately, I followed my plan and sold it in the morning to break even (including commission) because I did not have any more patience from watching it a day before. If I would have kept it for the day and trust my own gut, I could have made easy $0.2501 per share (or 6%). I hope some of you had more patience and easily profited on AMD. The lesson to be learned from this is that I’m very impatient trader.
AIB is hanging strong. Even though I intended to keep it for a longer period of time, I sold it with $0.26 per share profit (or 9%) because I needed net liquidity for other trades I did today. With that said, AIB is still a keeper and I will very likely get back into this stock some time this or next week.
| Company | Buy Date | Sell Date | Buy Price | Sell Price | Gain/Loss |
|---|---|---|---|---|---|
| AMD | 5/18/09 | 5/19/09 | $4.1399 | $4.15 | - |
| AIB | 5/18/09 | 5/19/09 | $2.89 | $3.15 | 9% |
Although single digit, 9% profit overnight is always nice.
Let me know what you think about those two picks in the comment box.
SKF down to earth ready to refuel?
On Friday March 6th I made a new blog post calling SKF (UltraShort Financials) Overbought.
Now, 10 days later I want to put my opinion down in writing. SKF went from over $260 to $126 (so far) that is more than 50% off (around $13.40/day for past 10 days).
When I first posted my opinion i was being generous and looking at $182-$186 for the move down to earth.
There was an important fib retracement at $155 and one at $120.
Being a recent fib retracement follower I have a position in the $150-155 range, toady SKF didn't go as low as $120 or i would have doubled down.
If this is the short term bottom for SKF the move up seems to hit $213, I am not good with timing the market with dates so i don't want to give misleading info.
to recap.. SKF trying to refuel? Buy at $155 or $120 with a target at $213
I am including a visual as always (Click to enlarge)
Disclosure: As i stated in my post I have a position at $150's range and was looking to double it at $120.
-K
Is Dow Jones ready to recover?
Almost a Month ago I wrote a post about how the dow had yet to bottom. See: The Dow Jones Industrial Index has not yet bottomed ,at that time the index was at 11,842. A week later I followed up with a prediction that the Dow Jones Industrial would bottom at 10,800 (See:Prediction: Dow Jones Industrial bottoms at 10,800.)
On July 15,2008 the Dow Jones Index fell to 10,827 to make a new 52-week low. That new low came very close to my prediction and soon after it began rebounding. Since the weekend came and I found some time to go and revisit the chart for the dow I now think that the index has bottomed out and should begin to climb.
I believe the market will begin recovering because of a few reasons.
1. 10,800 is a very strong support zone going back to 2006
2. Oil prices have recently fallen from $146 to $128 (maybe that bubble is deflating)
3. The chart shows that the sellers are moving out and more buyers are beginning to take over (green and red lines almost crossing. Green is buyers, red is sellers)
4. At the end of the chart is the amount of money being put in the market. Since mid May it was in a downtrend which meant people were taking money out of the market and now it has broken out of the trend.
As you will see in the chart below however, today's action is within the downturn trend line and it needs to close above 11,500 or we might not have hit recovery period just yet.
Without further adieu i present to you... the Dow Jones Industrial Recovery Chart.
At this point i have invested in stock symbol (DDM) which has the top 30 Dow Jones Companies.
It goes mostly parallel to the Dow Jones Industrial Index. You can check out my current holdings at my Covestor page.
If you have any comments feel free to post them.
Prediction: Dow Jones Industrial bottoms at 10,800
From the way the market has been swinging lately even with any recovery time, the dow jones industrial has yet to bottom a week after i wrote about how it had not bottomed. Over 500 points down later i still think the dow jones industrial has a long ways to go (with some rallies in between obviously). I feel like I am too optimistic by calling a bottom at 10,800 because if President Bush and his best friend Dick Cheney start a war in Iran my bottom call will look stupid.
And here is an updated chart.
