Nightly Recap 3-31-2010
Market Summary:
DOW -50.79 (10,856.63)
S&P -3.84 (1,169.43)
Nasdaq -12.73 (2,397.96)
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Disclaimer:
Open Positions: SRS at 5.97
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Nightly News Links
US Economy:
Ben Bernanke's Mortgage Buying Will Be Missed (Until Round 2 Begins) (Business Insider)
The mortgage backed security (MBS) purchase program began in earnest on March 18, 2009, when Fed Chairman Bernanke announced an expansion of the program to the size limit of $1.25 trillion. The result of that program saw the S&P 500 rise 55.08% between March 18 and today (March 31, 2010), its end. What will the world be like after?
Obama to Open Offshore Areas to Oil Drilling for First Time (NYT)
The proposal — a compromise that will please oil companies and domestic drilling advocates but anger some residents of affected states and many environmental organizations — would end a longstanding moratorium on oil exploration along the East Coast from the northern tip of Delaware to the central coast of Florida, covering 167 million acres of ocean.
Chicago PMI Dissapoints (Econompic)
Investors were also disappointed Wednesday by a survey of Chicago-area purchasing managers that showed U.S. business activity continued to expand in March, but at a slower pace than the previous month. The Institute for Supply Management-Chicago said its business barometer slipped to 58.8 in March, from a nearly five-year high of 62.6 in February. Economists expected a reading of 60.8.
Still, Croft noted that a reading above 50 still reflects expansion. "We think the economy is marching forward here, but not at an extremely fast pace," he said.
ADP Employment... Not Yet "Back in Black" (Econompic)
While many are waiting for Friday’s Payroll figure to tell them the state of the US labor market, I’m going to rely on today’s ADP report as a better gauge. That is because it is private sector based and thus won’t be distorted by the likely 100k+ adds of government census workers and the “methodology used to construct it” takes out most of the impact of the Feb snow storms and March snapback. It turns out that +40,000 was a bit optimistic as ADP showed a contraction of another 23,000 jobs. If these figures are to be believed (we will see "official figures" Friday), then we may have to wait for April for the private sector to stop contracting.
Market Call:Down(Zen Trader)
On a daily time frame I received my sell signal today and picked up DXD & SDS. We’ve been trading in a range with multiple distribution days this past week and it appears we’re in for some more selling. Could I be wrong and we rally? For sure. However, a number of other signals are pointing down.
World Economy:
European Unemployment to 11 1/2 Year High (EconomPic)
Euro zone inflation was much higher than expected in March and the unemployment rate reached 10 percent in February, data showed on Wednesday, highlighting the fragility of economic recovery.
The IMF Warns About German Banks... And That's Bad News For France's Too (Business Insider)
Mike O'Rourke of BTIG spotlights some interesting comments from a recently released IMF report (.pdf) on Germany:
“Simulation exercises suggest that German banks could suffer significant losses from commercial real estate investments in the U.S. and Spain, and more generally from exposures to Southern Europe. The simulations also suggest that a reassessment of risks associated with claims on Southern Europe could have a large impact on capital flows within Europe, as German (and also French) banks would significantly reduce their foreign claims to restore capital ratios.”
Interesting Links:
The Story Of Bottled Water (2010)
The Story of Bottled Water, released on March 22, 2010 (World Water Day) employs the Story of Stuff style to tell the story of manufactured demand—how you get Americans to buy more than half a billion bottles of water every week when it already flows from the tap. Over five minutes, the film explores the bottled water industrys attacks on tap water and its use of seductive, environmental-themed advertising to cover up the mountains of plastic waste it produces.
Have a Good Night
-K
Nightly Recap 3-22-2010
Market Summary:
DOW +43.91 (10,785.89)
S&P +5.91 (1,165.81)
Nasdaq +20.99 (2,395.40)
Nightly News Links
US Economy:
Chicago Fed National Activity Declines in February (Econompic)
The 85 economic indicators that comprise the Chicago Fed's index are drawn from four categories: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. The three month average fell to -0.64 in February from -0.04 in January.
Tomorrow, Tim Geithner Urges End to Fannie and Freddie ‘Ambiguity’ (Bloomberg)
Tim Geithner is set to deliver unwelcome to news to those who play in the public Fannie Mae (FNM) and Freddie Mac (FRE) casino. Private gains can no longer be supported by the umbrella of public protection, capital standards must be higher and excessive risk-taking must be appropriately restrained,” Geithner said in testimony prepared for the House Financial Services Committee that was obtained today by Bloomberg News. The hearing is scheduled for tomorrow at 10 a.m. in Washington.
The Pressure on Malls: More Store Closings (Calculated Risk)
"Our outlook for retail properties as a whole is bleak ... we do not foresee a recovery in the retail sector until late 2012 at the earliest." Over the next three fiscal years, 25 percent of our store leases will reach maturity ... E-commerce is 30 percent of our corporate revenue and it’s very profitable ... even in this environment. The Internet and e-commerce have become the focus on our capital investment."
World Economy:
Global Productivity and Unemployment (Econompic)
Producing more by working less is the key to rising living standards, but in the short term there is a tension between efficiency and jobs. America and Europe have managed this trade-off rather differently. America has gone on a diet: it has squeezed extra output from a smaller workforce and suffered a big rise in unemployment as a consequence. Europe, meanwhile, is hoping to burn off the calories in the future. It has opted to contain job losses at the cost of lower productivity.
The Beginning of the End of the Eurozone As We Know It? (Naked Capitalism)
The widely-extolled idea, that the EU would find a way to muddle through the Greece crisis, looks very much in doubt. The pressure has not simply put the rescue of Greece into disarray, but appears to have led to some positions being taken that, if they hold, look likely to lead to the partial dissolution of the monetary union. This development would have far-reaching ramifications which are far from well understood, to put it mildly.
Interesting Reads:
Dear Evil Speculators (The Reformed Broker)
Dear Evil Speculators,As part of our ongoing program designed to render the US stock market completely dysfunctional, we have added an additional tax to be applied toward your investment income as part of the wildly popular Health Care Bill that we recently finagled through into law: * Individuals earning more than $200,000 a year, or couples earning $250,000 or more, would be hit with a 3.8% surcharge on investment income to help pay for the bill.You see, we are fully aware that in just the past decade, you have been slammed twice - 2000-2002 and 2007-2009 - with two of the most brutal bear markets in history - but we just don't care.
Health Care Expenses vs. Life Expectancy (The Big Picture)
A very insightful chart comparing Countries using Life expectancy and Health care spending.
Hedge Fund Ebullio Capital: Down 86.25% In One Month (Market Folly)
By now, many of you may have already heard the startling tale of Lars Steffensen's hedge fund Ebullio Capital Management. For the month of February 2010, they were down a whopping 86.25%. That brought their year to date total return to -95.83%. Immediately, questions swirl in one's head such as 'How did this happen? What kind of risk management did they have in place? How will they recover?' Remarkably, their investor letter had quite a calm tone to it.
Have a Good Night
-K
Why Not To Use Stop Loss Order
I'm busy investrader trader. I work full time so it is not easy for me to trade throughout the day. Thus, from time to time (read: sporadically), when I'm going to the meeting with an open order, I need to minimize damage to my portfolio in case something was happening to the stock while I was not looking at its chart. During those times I use stop-loss orders. Stop-loss orders are dangerous and I want to share with you something about them.
A stop order (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price, particularly when the order is placed into a fast-moving market, or if there is insufficient liquidity available relative to the size of the order.
I filled an order for 400 PFE at $17.90 (its support). I set a stop-loss at $17.78-- I like to take tiny losses. While away, look what happened:
For a fraction of a second, the price fell to $17.75! Coincidence? This is what happens when others set stop losses and the movement is bearish-- they are being taken out within fraction of a second. More importantly however, stop losses can be seen by market makers and they sure know how to make your life miserable.
Regardless, my stop loss order was not taken out and I'm still in this trade.
Best of all, just see what happened right after:
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
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.
Stock Alerts of the Week April 27 – May 1 2009
As I stated in my latest blog post I wanted to begin giving stock picks based on my trading system.
I have created a page above with all the picks and wouldn't mind people asking for symbols to put on watch list.
I will also try to post a week in review with the signals given out for the week.
Here are the picks for April 27 to May 1st 2009
|
Symbol |
Buy Date |
Buy Price |
Sell Date |
Sell Price |
|
$BKX |
4-27-2009 |
34.54 |
||
|
BAC |
5-1-2009 |
8.84 |
||
|
DRYS |
4-30-2009 |
6.72 |
||
|
ICE |
4-29-2009 |
84.14 |
||
|
ING |
4-29-2009 |
8.34 |
||
|
UNG |
5-1-2009 |
13.72 |
||
|
ICO |
4-29-2009 |
1.90 |
As always these are picks but I am not responsible for any financial losses you make following these picks. I wouldn't mind a share of your gains though.
-K
Stock tips from the Freak strategy
After SKF's latest blunder in which I called the sell-off then couldn't resist the LOW LOW price of $155, I set off to design a strategy that overtime would bring consistent growth. I am using a 4hour interval for the strategy so it really isn't day-trading but also it's not long term investment (like those exist much anymore).
The idea is to give stock tips when the strategy throws me a Buy signal then to call the selling point when the strategy yells SELL.
Now If i use the S&P 500 or the Russel or any other index (all the stocks within it), I will get a lot of buy and sell signals that will drive me crazy.
I'm wondering if any of you have ideas on which stocks to put on watch list. I will also need to create a section on this page to show the buy and sell signals with their dates as well as how much gain/loss occurred.
I think i might be going a bit over my head as many people do this for a fee (Timothy Sykes anyone?) but I will think this through for the next week or two and then decide what to do. Your comments are really needed this time especially for ideas on which stocks to put on the alert list.
Till next Time,
-K (The busy man)
Why stops are important
Recently i began using the stop loss rule because this apple stock i own is driving me insane.
I bought DDM at 61.70 and i figured out it's volatility through Average true Range (ATR) was around $2.40 61.7-2.4= 59.3
I decided to give it a little more space so i set $59.
with 15 shares i held at 61.7 i spent $932.5 ($7 commission included)
i sold with a stop rule in effect at $59 so that is $878 after commission is deducted.
I ended up losing $54.5 or about 5.8%. I'm fine with that as long as it keeps me out of trouble.
Remember!
Disciplined Traders Use Stops and Never go against their own rules.