Cara's Commentary & Community Chat, Monday, Jul. 13, 2009

Good morning.

Upgrades:

BBY - to Outperform @ Oppenheimer. PT Raised from $40 to $42
SNDK - to Overweight @ Thomas Weisel

PT Raised:

GOOG - from $442 to $465 @ Jefferies & Co. Buy
INFY - from $35 to $40 @ Jefferies & Co. Buy

http://www.nymex.com/ng_fut_cso.aspx

Bill, perhaps while in Havana someone will mention the concept of term limits. In the USA, term limits haven't slowed the good-ol-boy's club for at least 8 generations:

"Obama and Cheney, Making Connections

Wednesday, October 17, 2007

Vice President Cheney is related to Sen. Barack Obama.

At least that was the stunning announcement made yesterday by Lynne Cheney, who said that the very white vice president from Wyoming is in fact the eighth cousin of Obama, the Senate's only African American member. She said she discovered the link, traced back to a Huguenot who figured prominently in Maryland history, while researching her latest book."

Is the rumor Fidel has re-settled in Miami after retirement really true?

POT - PT Lowered from $120 to $100 @ RBC. Outperform

nat gas is getting schelacked.UNG under 11.00?

"July’s options expirations week (expirations take place on Friday). Options expirations weeks are usually positive, especially when the week before follows its usual pattern of being negative, which this week did.

But while expirations weeks tend to be positive through the year, the July expirations week tends to be negative, down 6 of the last 9 years. (In 2002, the last year of the 2000-2002 bear market, the Dow lost a big 4.4% on the July options expirations day alone). So we shall see.

And the week after options expirations weeks tends to be negative anyway, and that is so also of the week after July expirations, which have been down 7 of the last 11 years."

[Sly Harding]
~~~~~~~~~
See attached chart...

"Adding a bit more fuel to my argument is that we now finished a fourth week to the downside on the Dow and that is the maximum since the start of Primary wave c. So, chances are we are going to finish higher next week."

[molecool]
~~~~~~~

"We saw a small change in the McClellan Oscillator Friday, suggested a large price move is likely early next week"
[McHugh]

[Bev: This small move in the McClellan always seems to result in a big move.]
~~~~~~~~

Bev- I think Les mentioned max pain for the SPYders is 90. Is that a concern?

no buyers in sight at lower and lower levels.

No positions right now.

oh no gold is going down!!

but i thought china was buying gold!!
and everyone is getting out of the US dollar.

if the US dollar can hold up this well in the face of all these alleged people
getting out of the dollar, just imagine how well it will do when the media finally wakes up to the reality that the other G20 nations are printing money, funding stimulus plans and facing corruption and decay just like america!!!!

wake up gang.

gold will eventually go up, but not because just the US dollar goes down, and not becuase the world is sick of dollars. these are propaganda statments released by governments to appease the voting public into thinking the problems affecting america arent their fault and wont come home to roost in their country... corruption and mis-management are human traits, so if the US overspent and is about to amp the printing press, odds are other states are doing the same to keep pace.

for me the cue will be if and when gold starts moving up in virtually all major currencies, regardless of what oil is doing, if we start to see gold advance in the face of all other factors it will be the sign that the competitive devaluation happening in ALL currencies is starting to show signs of cracking. how much government debt can other central banks buy from eachother until it gets called what it really is: fiscal cannibalism. people looking to bond sales data are getting skewed info, so long as other states keep going to eachothers parties and buying the debt, they will hold down the fort.

gold is still the canary in the coal mine, but canaries are fragile and can get stepped on by miners easily. only when they realize the air might be running out will they rush for the elevator....

right now, the canary is getting stepped on.

Alright, I'm out for now. Sold SKF permkt (GS got my attention), held QID as it didn't react very negatively and I was still up. All gone for now.
Stopped out of kryptonite (UNG)premkt. Cost me a commission.

This should give you the all clear to go long....

I'm going to go do something that makes me more $, my x-ray vision isn't working that good today.

I moved my long term trading account into the 100% long position at the end of last week. I got the 10% correction I was expecting and am no longer as fearful of a significant downdraft in the markets...

Flew a Yak 40 from Moscow to Donyetsk a few years ago. You carried on your own luggage and boarded on a ramp in the rear. The seats were wicker. You could sip your own carry on cognac and buy a fried chicken basket for 2 bucks. Contrast that with my AA flight from Aspen to DFW yesterday (miserable cattle car MD 80) and the Yak sorok was like a little bit of heaven. Il 62 is a good plane when the motors work...udacha!

tof- Man, that's ultimate counter-trend wrestling. I would have had a hard time sleeping last night.

HA! I'll still go short if we get to 930 or so.
The charts are still rolling over.

I hate earnings week...too iffy.

The Put trade looks really crowded, careful out there.
Bill, enjoy your well deserved time off and remember, plenty of SPF 50!

Craig - Today's price action strengthens my belief that we should be in this market on the long side. Going into last night the overseas markets rolled over and our futures were down nicely. The market is up big right now. I think people are still too negative/hesitant about this market.

SPX 26 week EMA is flat which is better than downtrending. The SPY triple RSI screen is 26,46, and 39.

Except for some capitulation plays, I can't get excited about going long or short.

BND is giving a Triple RSI sell alert.

Rather than waste our time trying to trade these markets, why aren't we all just shorting both FAS and FAZ? The erosion factor is incredible and pretty much guarantees big returns...or so it seems.

SRS: http://tinyurl.com/ndld92

IYR: http://tinyurl.com/ndxt88

Not going to try fighting this.

2nd - I really think we should be shorting both FAZ and FAS. It seems like it will continue to work.

Ameritrade has both available to short...

I see a bearish wedge on the S&P 500 forming. Looks like we might be dropping some soon.

Looks like it is testing the long term uptrend line.

http://stockcharts.com/h-sc/ui?s=$NATGAS&p=M&yr=16&mn=0&dy=0&id=p02874610140&a=158183243

On the daily charts, I see gold & miners as well as oil & energy stocks really oversold right now. Bullish RSI divergences are all over the place. I also see the canadian dollar bottoming out, and the yen looking overbought. It just seems to me we should be set up for a PM & energy rebound right now.

Re Bradley: I agree it can hurt you as much as it can help. The chart you show by Manfred is free. He has one for subscribers that he tweaks.

Just curious, thanks. IMO, better following price and being aware of the above.

Telestar3d

Agree!

http://www.incrediblecharts.com/tradingdiary/tradi...

It's been so long since gold went up, I've forgotten what it feels like. :)

Re: "I really think we should be shorting both FAZ and FAS. It seems like it will continue to work. Ameritrade has both available to short..."

I did this last week through Interactive Brokers a day or two after the reverse split. Shorted equal dollar amounts of each. As of a few minutes ago, the trade looks like this:

Unrealized profit(loss)
FAS (560.30)
FAZ 599.50

As David commented main risk is that e.g. FAZ takes off, the rest of your issues decline, FAS doesn't keep up and you get a margin call...

Looks like we are getting our big move from the small change in
Friday's McClellan Oscillator.

I'm guessing that last spike in gold was a large number of shorts getting stopped out at around 920.

You know, I don't think Gann would be fazed by this market. But using what (little) I know of Gann, I can't get my head around the price action. Day trading seems to be the only thing working right now.

2nd-
You seem a bit obsessed with this new trend trading thought of yours. Stick with what works for you. I'd say that is day trading. Cant argue with an 87% return.

Looking at the bottom from late 2002 to early 2003: End of the bear had a head and shoulders also. After the head and shoulders broke, H&S measurement dictated target as opposed to fibonacci or gann. Interestingly the numbers are almost exactly the same. We may get to see, in real time, if history repeats.

Pz- You have a point. I'm going to drive the Camry over to Gann's Body Shop and pick up the dented Lexus. Probably won't take it for a spin until tomorrow, though.

http://tinyurl.com/nk3bny

2nd - "I'm going to drive the Camry over to Gann's Body Shop and pick up the dented Lexus."

Nice move, this way you won't have to worry about that double chin above the neckline.

Looks like Asia's loss is our gain...

CP- That's the problem with you engineers, man- everything refers back to chart formations. I still have some high-grade Euro-rolled on the table, if you want to think outside the chart ;)

Never seems to be a problem to borrow the financials. That should tell you it is not as good a short as the commodity juiced ones with the contango. I think it is safe to surmise that HB&B are shorting the good ones.

Sounds like you're in denial.

We all see what we want to see ;)

Tell ya what I see is a double chin drooping over Uncle Sam's neckline there. It just ain't a pretty picture no matter how ya look at it... ;))

Chickenpookie
Look at positive, GS goose it earning by stealing from tax payer. And market went up. They (GS) did pay back big time to tax payer. Everyone’s 401k balance went up big today?

But I'll stick with the Camry for now. Minor gain on a 7-minute trade in ERX, minor losses on 7-minute trades in FAZ/QID. That was it for today.

Funny how unprecedented demand does not equal an unprecedented gold price rise...

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

http://tinyurl.com/ncj9b7

The coin blanks must be coming from "deep" storage. It takes time to mine the stuff.

SKF has been slowly moving up over the past 2 weeks. If today was a medium-term trend change for the financials (meaning if they are destined to move higher for a few weeks), then how will SKF most likely look tomorrow? I would say tomorrow should look very similar to today under these assumptions. That is, SKF will most likely gap down (since those who were late to the party today will try to buy at the open) and then keep falling throughout the day. SKF rising above $44 is unlikely under this scenario. Therefore, I have just placed a buy stop limit order on SKF with stop at $44 and limit at $44.10. If SKF rises above $44 tomorrow, then not everything is so rosy with the financials and the medium-term trend down has not changed.

So I noticed a distinct difference in how these two closed. GS apparently had some pretty serious distribution going into the close at about 149.50. The volume rose like in the rest of the financials, but it alone did not have any price movement upwards.

JPM on the other hand, spiked up hard on high volume into the close.

Does that tell us something about GS earnings tomorrow? Does it say anything about how the financials overall will do tomorrow? I am not sure, but its an interesting divergence.

ALOHA !!

It is important to keep in perspective what the gurus of the markets were saying prior to the collapse. Either they out and out lied to help out the GS short position or they're completely inept ... Not much in between on this issue!

This is what Hank Paulson Said about the global economy in 2007 ...

"This is far and away the strongest global economy I've seen in my business lifetime."

-Hank Paulson, July 12, 2007

I think he called the TOP that day!

Hank should do a duet with Jim Cramer on Bear Stearns!

This is a link to that article. Take a look at some of the stats on the sidebar from those days!

LINK: http://tinyurl.com/3445km

(Link from the Cunning Realist, 07/13/2009)

Okay ... Mahalo!

kaimu
Actually we’ve wasted our military in such a fashion in Afghanistan and Iraq, fighting against an anonymous enemy of millions of faces, not one of them in an identifying uniform, while we are oh so identifiable...It is not good to Bringing them back to America that doesn't resemble anything like the country they left, is a recipe for disaster. If I was the elite I'd keep them far away from home, if things go south over it won't be pleasant for the elite at all.

FDR sent MacArthur to deal with the WWI bonus marchers. If these guys ever march on Washington they will not be put down by a few National Guard troops and who could blame them?

ALOHA !!

Very funny 2nd ... I especially like the Bear Stearns logo in lights! So Ben plays guitar and sings also? Hummmm ... there's HOPE for him after all!

I am always amazed at how these "venerable" institutions crashed and burned so fast once they were "allowed" to fail! Both Bear Stearns founded in 1923 and Lehman was founded in 1850 ... All combined a total of 245 years in business and how long did it take them to fall once the derivatives got hold of them? Why is they're Board and management aren't in criminal court? They're probably all out at the Hamptons with Michael Milken and the gang! Then where is that dried old plumhead the AIG genius GREENBERG? Come to think of it where is that "has-been" George Bush puttin' his spurs these days? Imagine all the BILLIONS his loyal owners will plow into his Presidential Library???? Hank alone ought to come up with the funds!

I am constantly amazed at how far complete failures rise in America! Heck, some of them even make it to President!

10-4 ...

ALOHA !!

No, I think that was a CITI internal office memo, that somehow made it onto the WSJ and the NYSE! Who would have thought a "memo" had so much power!

2nd
No one mention that Meredith Whitney was going to be on CNBC and it may be a market moving event. She was there just before important earning from GS

http://tiny.cc/c0tax

2nd ... You are a musical genius. I can tell without even hearing a note.

Kaimu ...You are a fountain of information, not to mention the inspiration for 2nd's future You Tube video, as above.

ALOHA !!

Here is a trivia question for you 2nd ...

Who did Jimi Hendrix open for on their 1967 North American Tour(tour dates 7/8 to 7/16/67)?

ALOHA !!

Paying house payments for the unemployed? Man, the US TAXPAYERS have some gigantic, broad shoulders!

These guys have totally uprooted anything remotely resembling "contract law"! They have shredded the US Constitution for their own enjoyment and they are on a fast track to shred the markets.

As I have said in the past I believe the AMERICAN DREAM was nothing more than a con job to get votes! Over the many decades every administration "promises" more and more so that they can get more votes. This AMNESTY that is in the works is yet another example of "buying votes". These guys in the two-party aristocracy will pimp their Mothers if it would get them a vote! Where's leadership with any integrity?

I guess that is what I'd call the ultimate "generational trade" when the monetary system collapses.

IT IS WHAT IT IS ...

hey mark,

keep the faith.

vb

Probably the Monkees, if I remember correctly.

vanillabean - Don't worry, this time next year the economy will be rocking!!! Well, it'll be better anyway... These guys have been on the money with their forecasts:

http://uclaforecast.com/contents/archive/2009/medi...

BTW, yesterday one of my female ducks hatched out some baby ducklings and today a few more. Actually, there are two female ducks on this nest. Ha!!!

ALOHA !!

Let me get the gist here ... Because today the US TREASURY almost another 41BIL USD was paid out in TARP funds and last week another $22BIL USD was paid out to US Banks and companies. So last month we got a rally in the financials where ten banks claim they never needed TARP and were forced to take the funds. So how is it they are able to repay the TARP? They jump start the rally by the CITI memo and the FASB accounting changes so that they are now profitable so once their share price gets high enough then they dilute the hell out of their companies and sell shares so they can pay off their TARP liabilities in order to get back to the all important "bonuses"! Can't they make money the old fashioned way ... earning it? They have to shuffles millions of their own shares to, as far as I can see, brain-dead investo-trons who have convinced the "herd" that the pain is over!

Then Meredith comes on and talks about GS ... In the same breath she says unemployment will be 13%(if you double it that's the real number). By the way, Meredith, the formula we used to use to measure unemployment back in 1994 already calculates out to 21% unemployment, so whats your point? If unemployment keeps rising and I HAVE THE FACTS on the US TAX REVENUES and they are off a cliff grim, then when will all these US Banks ever get out from under their BAD DEBT loads? None of what she says adds up! Like I said back when the FASB rules were changed ... Obama is essentially announcing that, "ALL THE RED CARDS ARE NOW WILD"!

The commercial real estate is in the tank, so with unemployment rising who will be paying mortgage payments? Is this why the US government now wants to pay mortgage payments for the unemployed, just so they can keep their BANK OWNERS alive and well while the rest of us go down the toilet? Hey if Obama paid my mortgage I'd vote for him also! Problem is I am TOO RESPONSIBLE and I do not have a mortgage ... Essentially the responsible people in this World are forced to take care of the irresponsible ones. That only goes so far mates ... until we start running out of "responsible" and "solvent" people! THEN WHAT?

Look Obama, just get a sudden streak of honesty, and send us all a check for $50,000USD and be done with it! YEAH ... I'll pay the tax on it!

GOVERNMENT IS ESSENTIALLY THE NEGATION OF LIBERTY"- Ludwig Von Mises

For traders out there, I would add the word "financial" between "of" and "Liberty" ...

ALOHA !!

Come on CP ... you can't remember back that far ... You Googled it didn't you?

Man, I think I'd have to be on drugs to open for the Monkees! Maybe Davey sang a duet with Jimi on Purple Haze ... HA!! I guess Hendrix needed some cash ... What must the "bubble gummers" thought when Hendrix started up? HA!! Mommy-y-y-y ... I want my Mommy-y-y-y ...

Is there a You Tube clip on that?

ALOHA !!

Les posted - "The most extensive research on tax multipliers is found in a paper written at the University of California Berkeley entitled The Macroeconomic Effects of Tax Changes: Estimates Based on a new Measure of Fiscal Shocks, by Christina D. and David H. Romer (March 2007). (Christina Romer now chairs the president's Council of Economic Advisors). This study found that the tax multiplier is 3, meaning that each dollar rise in taxes will reduce private spending by $3."

What a load of crap!!! Haven't I shown that for each US tax dollar the government receives they spend $5? So, $5 - $3 = $2 increase in spending! The US government more than offsets what its citizens don't want to spend! Don't take my word for it, go look it up at the US TREASURY DAILY STATEMENT ... So the ROMERS make no allowance for government spending ... Hummmmm???

This woman and her husband need more medication ... they are still conscious!

kaimu - What do you think will happen when all those US dollars the Chinese have been hording make it back to the US???? Oh wait, I guess maybe they're already here in the form of government debt which cannot be covered due to diminishing IRS receipts! Maybe China doesn't have any extra dollars to lend to the beggars unless they print Yuan to buy them with. Wouldn't that tend to devalue the yuan further, leaving more downside for the $USD?

This entire process sounds inflationary to me, meanwhile the supply side is shutting down, which can also be considered inflationary.

Placing a small buy limit order on SRS at $19.50 and another one at $20. I think the market might have a hump shape tomorrow and I want to try to catch that hump to in case it happens while I am sleeping. :) Also, changing my buy stop limit order from SKF to SRS, with stop at $22 and limit at $22.1. I have enough of SKF in my portfolio already and now I want to get some SRS.

http://tinyurl.com/mal9bo

An amendment based on Congressman Ron Paul’s House bill to audit the Federal Reserves was blocked by the Senate this week on procedural grounds.

Speaking on the Senate floor, Republican Senator Jim DeMint and supporter of an audit said, "allowing the Fed to operate our nation's monetary system in almost complete secrecy leads to abuse, inflation and a lower quality of life."

Good interview, not good news.

Charles Ortel, managing director with Newport Value Partners, an independent research firm, agrees. "Transparency is the key to any market," he says, noting the Fed doesn't mark-to-market its assets, much of it now consisting of the worst toxic debt Wall Street had to offer.

In truth, the Fed doesn't work in complete secrecy - they do release a weekly update which details the size and type of assets on its balance sheet. According to the latest report, the Fed’s balance sheet shrunk to $1.989 trillion, falling below $2 trillion for the first time since March.

And Bernanke backers are inclined to say, give the Fed a break. Those supporters including, Warren Buffett, claim the Fed’s action saved the U.S. from an even greater economic catastrophe.

But Ortel isn’t buying it: "We are well into a major crisis of confidence... those with major league exposure to the dollar and U.S. companies are quietly reducing that exposure," he claims.

If one looks at recent U.S. Treasury auctions, appetite for U.S. debt remains relatively strong. But Ortel says the smart money has little confidence in the future of the U.S. and is instead buying gold and other hard assets.

Les,

Van Hoisington's fund (WHOSX) has been my major source of gains since last Oct. I don't recall exactly how I stumbled onto his quarterly comments, but I have found him very convincing along with A. Gary Shilling re deflation.

At one point I was 40% into his fund and have been adding or subtracting throughout the year as the 10-yr floats between 3 and 4%. I've begun an adding-only mode within the past month.

ALOHA !!

Cheery? I'm always cheery mate!

Look, countenance has nothing to do with it. If I read something based on half logic I will call it like I see it!

This crisis is based in money not the economy ... the economy is a symptom!

One of the issues is that eventually it does not matter how much DEBT the government throws onto the fire there will be zero or negative growth, but that is just the first Chapter as these guys never go past INFLATION VS DEFLATION debates. Then they never define what sort of DEFLATION we are in. I guarantee you the rising cost of living I am now experiencing is NOT deflation! I really wish we had the REAL DEAL ... the kind of DEFLATION that sank everything in FDR times, because I'm tired of seeing all my bills keep going up!

Here is what is happening on an economic level in these two simple charts based on US FED data.

This chart clearly shows what government is attempting to do, which is to pick up the consumer/biz slack on spending. If you have a consumer driven economy like we do then someone has to "spend" to keep it going. The US government sees themselves as the appointed spenders. You'll notice that the "rate" has been steady since 2002 up until 2008. Then look at the radical shift in the "rate" of government debt growth in the past year or so up over 20%.

LINK: http://www.nowandfutures.com/images/debt_federal_s...

Then look at this chart and see how consumer and business credit has stalled and look at the growth rate of credit plunge from around 10% to 12% annual to zero.

LINK: http://www.nowandfutures.com/images/credit_all.png

Those who control this monetary game we are in will not let their powers slip away voluntarily without a fight. Do not underestimate the US government and the US FED abilities to create money and spend and devalue. This country and their powers were built on INFLATION not DEFLATION.

You cannot have true "deflation" while all prices for food, gas, electricity, healthcare are rising(consumer staples). I am not convinced the couple knows what they speak of simply because they analyze one side of a multiplier based on consumer debt growth equations. That is really what this economy is based on is DEBT. That is so because our money is based on DEBT.

There is a very easy way out of deflation, the kind that FDR faced. The RESET BUTTON ... FDR was able to inflate his way out within a two year period. Ben Bernanke knows how, he has made numerous speeches about it prior to his new role at the US FED. It has nothing to do with "multipliers" ... since this is a monetary crisis it will be a monetary solution that will resolve this failed economy.

It will end when the C WORD is in full force, then the US Dollar will be devalued severely.

Isn't it a given that rampant accumulation of DEBT cannot go on forever? I always thought it was and I didn't go to Harvard to figure that out ...

So what is the end game according to Mauldin once the "multipliers" have run their course and DEBT does not equal growth and the debate is over? What next? Is it buy more GS? Or bank holidays? I don't know what does he say? I have never read his stuff ...

Its a MONETARY CRISIS ...

Mahalo !!