May 21, 2013 4:00pm ET:
Well, the major averages managed to hang in there to makr this the nineteenth successive Tuesday where they are closed in the green. However, the market leading Transport Index (DTX) was the noticeable laggard and the fact that the Trin and the VIX are both rising could spell timeout for the market in the near-term. Tomorrow, the ears of everyone on Wall Street will be pinned to Bernanke's testimony before Congress listening for any shred of a change in monetary policy. Market tone will be guided by the testimony and could either be very quiet or very volatile, depending on what's being said. Could be a profitable day for the day traders or a good one to sleep in. In remembrance of testimonies past, I might just do the latter. Today's Market Highlights: Marine shippers on the move
The Guggenheim Shipping etf (SEA, $18)
gapped out of a five month trading range yesterday on over four times normal volume. Not only did it handily break near-term resistance at $17.50, it also took out long-term resistance at $18. This etf is used as a proxy for the famed Baltic Dry Index which is viewed by economists as a leading indicator of future production and economic growth. The SEA has lagged the overall transportation index (the IYT is an etf proxy for this index) but it appears as if it's now trying to play catch-up. The shippers in particular have suffered much more than their land-based peers and investors are trying to rectify this situation.
Today's biggest movers were Genco Shipping (GNK, $2.10)
and Frontline (FRO, $2.46)
. Both of these gained 17% and 12% respectively as investors piled in. Perhaps not so coincidentally, these two names are also the ones that saw the biggest drops in share value since their 2010 highs, down over 90% from their peak values. Although they're showing signs of life, they do face some near-term resistance--for Genco that's at $2.50 and for Frontline it's in the $2.75 to $3.00 range. A break above those levels could mean clear sailing for a while.
While Genco and Frontline appear poised for growth, they are not major holdings of the SEA. The fund's biggest holdings are foreign-based companies such as Maersk (16%) and several others which only trade on foreign exchanges. US exchange traded members include Navios Maritime and Teekay Tankers, both of which have more than one trading entity. For example, Teekay is listed under Teekay Corp (TK), Teekay Offshore (TOO), Teekay Tanker (TNK), and Teekay LNG (TGP). These are different businesses under the same corporate umbrella and detailing their differences is the subject of another article. My point today is just to alert you to the potential growth opportunity in this unloved industry group. Subscriber Notes:
There are no new entries. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.05 (neutral)
Average VWAPs: +73/-36 (bullish) May 20, 2013 4:00pm ET:
The market melt-up appears to have hit a cool spot as selling pressure heats up. At the close, the VWAPs (a measure of institutional buying and selling) on both the positive and negative sides were exactly equal and at elevated levels indicating that the bulls and the bears are duking it out. A pop in the VIX reflects the rising bearish sentiment. Two events this week could push this evenly-weighted bull/bear seesaw to favor one side.
The first is Fed chairman Ben Bernanke's testimony to Congress on Wednesday. This will be important in setting the tone for the markets (particularly the dollar, equities and US treasuries), as traders hunt for clues on when the Fed is likely to ease its rate of asset purchases. The second is the Durable Goods Orders coming out on Friday. Orders are considered a leading indicator of manufacturing activity and we'll need to see some good numbers as the recent Empire State manufacturing numbers and the Philly Fed numbers were disappointing. Today's Highlights: Solar stocks continue to burn
On Friday we noted the breakout in the Guggenheim Solar etf (TAN, $25)
. Today, the Market Vectors Solar etf (KWT, $50)
followed in its footsteps. The entire space popped on JA Solar's (JASO, $9.5)
record earnings announcement showing huge demand for its solar cells in Japan. The news surprised everyone and boosted share price by a whopping 70% on nearly 29 times normal volume! As a rising tide lifts all boats, nearly every stock in the space experienced a surge in both price and volume. Other big winners include Canadian Solar (DSIQ, $9, +17%), LDK Solar (LDK, $1.8, +20%), Hanwa Solar (HSOL, $1.6, +31%), Trina Solar (TSL, $6.8, +20%), Renesola (SOL, $2.5, +18%)
, and Yingli Green Energy (YGE, $3.1, +13%)
. Volume on all of these issues has been expanding--a sign that investors and institutions are taking notice. Technically, the charts of YGE, TSL, LDK, and CSIQ are the most compelling, but as always, do your own research first. Adding one or two of these stocks (or one of the etfs) could provide that ray of sunshine that perks up your portfolio. Subscriber Notes:
There is one new Stock Darling. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.9 (neutral)
Average VWAPs: +51/-77 (bull/bear battle) May 17, 2013 4:00pm ET:
The market continues to melt up and it appears as if there's more room to run as the VIX continues to fall and the Transports (DTX) continue to lead. Most of the sectors continue to hit new highs with the notable exception of pharma and healthcare which are taking a much needed break. Today's Highlights:
Metals continue to slide with some hitting new yearly lows. Silver (SLV)
and the Gold Miners (GDX, GDXJ)
were among today's biggest losers in this space while Gold (GLD, IAU)
is testing major support at the $1300/ounce level ($130 on the GLD and $13 on the IAU). Commodity based currencies Aussie $ (FXA)
and the Canadian $ (FXC)
ranked among the biggest currency losers as a result.
Surprisingly, oil and clean energy
are hanging in there. Today, the Oil & Gas Explorer etf (IEO)
decisively broke through major resistance at $75. Its next test could come at the $80 minor resistance level and should it pass that, a move to the $87-$90 level would be next. Closely following in its footsteps are the Oil & Gas Services funds (OIH, XES)
which could break out as soon as tomorrow. The oil and gas commodities themselves aren't looking so bullish but that situation may change soon, especially with the summer driving season looming upon us. The clean/alternative energy space is definitely on the move
. We previously noted the rise of badly beaten down solar stocks and today they again led the alt-energy pack. The Gugghenheim Solar etf (TAN)
recently broke out of a year long base. The fund gained another 5.25% today. Stocks poised for further upside
From time to time I post stocks that are rallying on increasing volume. What this means is that institutions are starting to take notice and a further rise in the stock (barring any downturn in the market) is typically the norm. Today I'll be mentioning two such stocks.
The first is Rite Aid (RAD, $2.8)
. The company jumped on better than expected earnings on 4/11 and volume since then has been increasing. The stock has been consolidating for the past few weeks but that all changed today when it jumped over 7% on twice normal volume. Those in the know are saying that this company's metrics are improving and that it is currently undervalued compared with its peers. It looks like Wall Street agrees.
The second is Tearlab (TEAR, $10.16)
. The company enables eye doctors to test tears for a range of biomarkers. The stock has been rising for more than a year and a half as volume slowly increased. However, the volume has been stepped up substantially in recent months. The company recently beat earnings estimates on expanding margins causing not only a jump in share price but a jump in volume.
The two above-mentioned stocks are worth your consideration and as always do your own research before investing. Enjoy this lovely spring weekend! Subscriber Notes:
There is one new Stock Darling. 1:40 pm ET: Intraday support/resistance:
Trin range: 0.7 - 0.95 (rising Trin is bearish)
Average VWAPs: +63/-40 (bulls in control but bears are grumbling) May 16, 2013 4:00pm ET:
It looks as if yesterday's internals didn't lie because we got our expected pullback today. The question is whether or not today's drop is a one day event or if we're in for more downside. Judging from today's leadership to the downside by the Transports (DTX), tomorrow could start off on the wrong footing but we may not stay in negative territory for long. The volatility index (VIX) should have made a bigger move up today considering the negativity didn't react much indicating that the bulls are still in control. Also, the sharp reversal to the upside going into the close indicates short-covering. This shows us the bears are afraid to hold short positions for any length of time.
So is there an upper limit to this market? Some stock pundits like Peter Lynch believe in the Rule of 20 which states that a market equilibrium P/E ratio should equal 20 minus the inflation rate (given by the CPI). Using the latest inflation figure of 1.1 would imply an equilibrium P/E ratio of approximately 18.9 times earnings. Calculating the upper bound of the market depends on which earnings multiple you use: the trailing 12 month, the 12 month forward estimate, or some sort of average value. Using $86 as the trailing earnings level on the S&P (from Standard & Poors) and $114.5 as the forward estimate (from Factset Research) gives us a range in the SPX from a low of 1625 to a high of 2165. I'm not an expert on this topic but if we're to assume the trailing earnings number, then the market is already overextended. On the other hand, if we're to assume the forward earnings figure, then the market has a long way to go before it corrects. A lot of this will depend on when the Fed decides to start raising interest rates which many feel could be by the end of this year.
The moral of the story? Be vigilant and don't become too complacent. There's still half of the month left for the Sell in May scenario to unfold. Beware of the Bear! Subscriber Notes:
There is one new Stock of the Day. 1:50 pm ET: Intraday support/resistance:
Trin range: 0.65 - 1.05 (rising Trin is bearish)
Average VWAPs: +46/-57 (bull/bear battle) May 15, 2013 4:00pm ET:
The market continues to melt up but internals are beginning to show some tiny signs of fatigue. Although I definitely wouldn't bet against the market, I wouldn't be surprised if it took a step back in the next day or so. Today's notable market action: Toot, toot, hey, beep, beep!
Commodities continue to slump as gold and silver miners continue to sell off, some to their lowest levels not seen in years. As an example of just how far they've fallen, consider gold miner Allied Nevada (ANV, $8)
which has lost more than 80% of its value since mid-October. The Gold Miner etf (GDX, $27)
and the Junior Gold Miner etf (GDXJ, $11)
have lost 55% and 40% respectively over the same time period. Just because these issues are well off their highs doesn't mean now is the time to step in and buy--far from it. Their charts show no signs of basing and I'd wait until they break out to the upside before initiating a long position. Remember, never try to catch a falling knife!
On the flip side, automakers were among today's winners as the following issues motored to new highs on heavier than normal volume: Fiat (FIATY, $7), General Motors (GM, $32), Ford (F, $15), Isuzu (ISUZY, $86), Nissan (NSANY, $23), Honda (HMC, $41)
, and Toyota (TM, $127)
. Most of these tacked on 2-3% to yesterday's share prices except for Isuzu which jumped 14% on three times normal volume. Most of these companies are still undervalued with P/E's hovering around 10 except for Honda and Toyota with P/E's of 19. (Fiat has the lowest P/E value of 6.) Aside from Fiat and GM, all of the above pay a dividend (most around 2%). Adding some wheel makers to your portfolio could definitely give it some traction, and that's something to toot about!
[Note: For a little topic apropos background music, check out this
classic music video.]
Enough auto metaphors. That's it for today. Subscriber Notes:
There is one new Stock Darling. 12:50 pm ET: Intraday support/resistance:
Trin range: 0.55 - 0.75 (bullish getting into contrarian territory)
Average VWAPs: +83/-26 (bullish) May 14, 2013 4:00pm ET:
CNBC dubbed Tuesday as Rally Tuesday noting that the equity market has rallied for all eighteen of the past Tuesdays. Not only was today no exception, but it was lead by the Transports ($DTX) indicating that another leg up is in the cards. There's nothing in the market that is hinting the bears are even close to crashing the bulls' party. Market internals are no where near contrarian levels and nearly all of the major sectors are at new highs. Heck, even the dollar is doing well!
So, where should prudent investors park their money? Well, throw a dart at a sector board and start there. All joking aside, the place to be is in equities and the two countries to be invested in are the U.S. and Japan. China's day in the sun is over--at least for now--and emerging markets could lose out if the dollar keeps rising. If you're looking for a diversified international portfolio of equities, do choose your spots carefully. Options players may wish to continue playing tracking stocks to the long side and use cash-secured puts as stock entry mechanisms.
Not much more to say today other than to paraphrase Horace Greeley: Go long, young man, go long! Subscriber Notes:
There is one new Stock of the Day. 2:15 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.85 (bullish)
Average VWAPs: +80/-36 (bullish) May 13, 2013 4:00pm ET:
The sun continues to shine both on both the US and Japanese markets as both countries' powerful central banks are committed maintaining a low interest rate environment as a mechanism for spurring economic growth. These actions are luring investors away from low-yielding bonds into equities which is what has been fueling this rally. Ever since Japan's Prime Minister Abe's promise to stimulate his country's moribund economy, we've been highlighting Japanese companies that trade here on US exchanges. (Scroll down to find more.) Today, we're adding other issues to that group as well as reiterating previous mentions.
In the area of financial services, both Daiwa Securities (OTCF: DSEEY, $10)
and Nomura Holdings (NYSE: NMR, $9.3)
jumped by 7% and 9% respectively to hit new highs. Technically, both of their charts are bullish but that of Daiwa's is more orderly. Both companies are experiencing rapid growth and if the Bank of Japan honors its commitment to continue its easy monetary policies, then there's no reason to think that the growth in well-managed securities companies won't continue to expand. If you're looking to construct your own basket of Japanese stocks, I'd definitely take a look at these two, especially Daiwa. (Trade Note: Daiwa and a few others mentioned below have fairly low trading volumes so please use limit orders when placing a trade.)
Three other companies in the Financial sector with compelling charts are MS & AD Insurance (OTCF: MSADY, $14.25)
and commercial banks Mitsubishi Financial (NYSE: MTU, $7.2)
and Sumitomo (NYSE: SMFG, $10)
. All three issues just broke out of multi-year bases and look poised to travel higher. In the Consumer Discretionary sector, auto maker Toyota (NYSE: TM, $125)
continues to gain traction while badly beaten down electronics makers Sharp (OTCF: SHCAY, $5)
and Sony (NYSE: SNE, $19)
hurdle out of oversold bases on heavy volume. And no wonder! Despite the recent strong moves in both of these issues, their P/E's are still negative--a situation that will likely be changing and soon.
Note that all of the above mentioned companies do pay a dividend, albeit small ones (but a lot better than CD rates!). As always, please do your own due diligence before acting on any investment advice, including mine.
Sayonara until tomorrow. Subscriber Notes:
Am working on some Stock of the Day candidates. 2:10 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.8 (bullish)
Average VWAPs: +43/-51 (bull/bear battle) May 10, 2013 4:00pm ET:
It appears as if the market's two day break is over as all of the major averages closed the day in the green. Internals are signaling that the bulls are back in control. Despite a fall in volatility, the VIX (volatility index) is on the positive of side of 12 giving this rally more room to run. I still think we'll see the SPX test the 1650-1670 projected resistance (the exact number is determined by the current P/E estimate). As this will be a major point of resistance, the SPX could make several runs at it before breaking through. Today's Notable Market Action: Is solar a good bet?
Big action was seen today in many issues but most notably in the makers of solar panels. The Guggenheim Solar etf (TAN, $21.55)
rose over 6% to break out of a one year base. Contributing to today's move were major constituents First Solar (FSLR, $49)
and Sunpower (SPWR, $18)
which comprise 19% and 5% of the funds equity holdings. Both of these stocks rose to new yearly highs on expanding volume, moving 10% and 5% respectively.
But are these companies worth a buy? One author at the Motley Fool thinks that while top-line revenues are increasing, margins are shrinking due to stiff competition and falling chip prices. If you're thinking of adding some sunshine to your portfolio, you should definitely read this
article before making a decision.
Since this space is fairly crowded, some consolidation is probably in order such as what recently happened with Power One (PWER)
. Personally, I'd rather take advantage of falling margins and stiff competition by investing in Elon Musk's Solarcity (SCTY, $29)
which essentially makes its money by selling power generated by solar panels (provided free to homeowners) back to the power grid. As long as electric companies are forced to buy home-generated power, the Solarcity model should remain viable.
That's it for now. May your weekend be full of sunshine and good weather! Subscriber Notes:
There is one new Stock Darling. 2:30 pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.1 (neutral to bullish)
Average VWAPs: +85/-36 (bullish) May 9, 2013 4:00pm ET:
As predicted the Dow Transport Index followed through on yesterday's sell-off and lead the rest of the pack on the way down. Internals are growing increasingly bearish as evidenced by a rising VIX and Trin. In addition, many individual issues that have enjoyed big gains during the spring rally showed signs of weakness as buying pressure virtually dried up (re: topping tails for you technicians). For the bulls to stay in power, though, a little respite is required, so don't you bears start nipping from the honey pot just yet! Today's Trade Highlights: A Yen for Japanese Stocks
Today's biggest news occurred in the currency markets which saw some big ups as well as big downs. On the upside, the greenback (UUP)
jumped by 1%. I know that doesn't sound like much but in the currency realm, that's a huge move. Correspondingly, international bond funds WIP, BWX, IGOV, and BWZ
all shed 1% of their values. Continued upside in the US dollar was forecast by Keith McCullough of Hedgeye and reported here on 4/29 (scroll down to view).
On the flip side, the Japanese Yen (FXY)
broke recent support at $98.50. Judging by the triple topping tail (see above weekly chart of the FXY), further downside is in the cards. The exchange traded issue has support at the $5 levels making $95 it's next test. Considering Japanese Prime Minister Abe's vow to weaken the currency, I think it's entirely possible we'll see a retest of the 2008 low at $90.
Although this is bad for folks long the currency, it's good (in general) for most Japanese companies. We mentioned taking long positions in Japanese stocks in the March 11th and April 11th blog posts. Today we're adding two more stocks to the list: Fuji Heavy Industries (FUJHY)
and Softbank (SFTBY)
. The former company is involved in the automotive, aerospace, and industrial machinery industries while the latter is a telecom and internet service and equipment provider. Fuji's stock chart has been a rising juggernaut and continues to hit new highs; Softbank's rise hasn't been so smooth but it leapt to a new high today gaining nearly 6%. As always, please do your own research before investing in any stock.
For those of you who would prefer a basket of stocks, consider the Japan country fund (EWJ, $11.76)
or better yet the Wisdomtree Japan Hedged Fund (DXJ, $49.20)
which has the advantage of being able to hedge against Yen/Dollar fluctuations. Comparing the two, the EWJ has gained nearly 40% (which ain't too shabby!) since the November low while the DXJ rose almost 60%. Both vehicles currently yield over 1% and both offer options.
That's it for now. Sayonara until tomorrow. Subscriber Notes:
There are no new entries. 1:40 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.85 (neutral to bullish)
Average VWAPs: +76/-36 (moderately bullish) May 8, 2013 4:00pm ET:
My internet connection issues are finally resolved. Too late, though, for today's Intraday Support/Resistance numbers to be published, alas, but the good news is that I can still publish today's blog albeit a tad behind schedule.
The really good news is that the bulls continue to rock, although they may be taking a much-needed break soon. How do I know this? The market-leading Dow Transport Index (DTX) is showing signs of slowing down. Today marked the first day the DTX was unable to best the other major indices. Negative VWAPs (a measure of institutional selling) are rising indicating that the bears are beginning to get restless. We may see a few more up days but my suspicion is that the market isn't going to wait that long to consolidate. Today's Market Highlights: Biotechs biting the dust
Biotechs have been on a tear for years. Just since last November, the biotech tracking funds (BBH, FBH, IBB)
have all gained close to 40%--it's no wonder that they're finally taking a rest. Notable breakdowns in individual issues were seen today in the stock charts of Coronado Bioscience (CNDO, $9.5), Isis Pharmaceuticals (ISIS, $16.6)
, and Infinity Pharmaceuticals (INFI, $32.4)
. In Infinity's case, the stock has broken several levels of support and further price erosion looks probable as selling pressure is on the rise. If you're long any of these issues, you may want to revisit the reason you bought the stock in the first place. It could be that too much expectation arising from the promise of new treatments was built into the share price and investors are now beginning to come to terms with reality. Just a thought... May 7, 2013 3:00pm ET:
Yesterday's breakout in most of major averages was carried through to today giving the bulls yet another leg to stand on. This rally is being led by the Transports (DTX) which is what we need to keep it going. Today's rise in the VIX and the Trin only give the bulls more room to run. If you're a bear, you might care to consider going into hibernation because it sure appears that the Sell in May paradigm isn't going to be kicking in as yet.
I'm having internet connection problems and am awaiting the cable guy (please let it not be Jim Carrey!). The connection is slower than molasses and I'm giving up for the time being. Hope to have things back to normal tomorrow. At least I'll get to eat an early lunch... Subscriber Notes:
There is one new Stock of the Day. 2:30 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.1 (neutral)
Average VWAPs: +74/-38 (moderately bullish) May 6, 2013 4:00pm ET
Another banner day for the bulls as the S&P 500 (SPX), the Nasdaq, and, most importantly, the market-leading Dow Transport Index (DTX) reached all-time highs. Both the small-cap Russell 2000 (RUT) and the Dow Industrials (DJIA) are having problems breaking through near-term resistance. For the Russell that level is at 960 and for the Dow it's 15000. Leadership from the transports is indicating that these resistance levels may be toppled as early as tomorrow. Both the VIX (volatility index) and the Arms Index (Trin) indicate that this market still has room to run in the short-term. Today's Notable Market Action: Airlines continue to soar
Domestic airlines continue to fly higher and technically show no sign of leveling off. It seems as if there's an etf for virtually everything and one would think there would be one for the airlines. Well, Guggenheim did have one (ticker symbol FAA) but they closed it a couple of months ago. So, the only way to get in on the action is to buy the individual names.
Most of the airline issues are now trading at P/E's on par with the S&P 500's P/E (15-17 range). Southwest Airlines (LUV)
P/E is 28, quite a bit higher than the rest of the field. I'm not sure why this is so; they may be better at hedging their fuel costs and expanding margins but this is just a guess. Although LUV's chart is still very bullish, I'd rather pack my money into Alaska Air (ALK)
. The company sports one of the lowest P/E's (15) in the industry and technically it has a great looking chart. Today, the stock broke out to a new all-time high on twice normal volume. As always, please do your own due diligence and know your risk tolerance before investing. Subscriber Notes:
There are two new Stock Darlings. 12:40 pm ET: Intraday support/resistance:
DTX 622/633 (@ new high is extremely bullish)
Trin range: 0.65 - 0.85 (falling Trin is bullish)
Average VWAPs: +48/-35 May 3, 2013 4:00pm ET
Better than expected employment data was all that was needed for the S&P to break through the 1600 which has been a source of recent resistance. In so doing, it made a new all-time high as did the Dow Industrials (DJIA) and the small-cap Russell 2000 (RUT). The fact that the Dow Transports (DTX) lead the way is great news for the bulls because we need this index to lead the charge onward and upward. Despite today's 5% drop in the volatility index (VIX), it still has further room to fall giving the rally more room to grow.
Since we're now in uncharted territory, where is the next point of resistance? Well, 2014 earnings on the S&P are projected to be $110. Using the historical P/E ratio of 15 gives a price target of $1650, roughly 2.2% above today's close ($1614). Using a high-end P/E of 17 gives a target price of $1870, or 16% above the current level. We could make it there eventually but I do think the market is overdue for a pull-back. We'll probably get one when it reaches the $1650 level--or when the $VIX drops below 12, whichever comes first.
That's it for today. Off to a meeting. Enjoy the weekend! The Derby Trade: Don't buy the horse, buy the racetrack!
The Kentucky Derby is tomorrow and if you're itching to play the ponies, why make a risky bet when there's a much safer one? Everyone knows that Churchill Downs (CHDN, $80)
hosts the venerable race but few know that it is a publicly traded company. Its stock performance has been stellar: Since 2009 shares have risen 167%! Although the company missed recent quarterly estimates, the stock was able to brush off the bad news by hitting a new high today. Management has ambitious expansion plans--a racetrack/casino complex near Cincinnati and a casino acquisition in Maine. The company pays a 1% dividend and there are options. Mint juleps are extra. Subscriber Notes:
There is one new Stock of the Day. 1:50 pm ET: Intraday support/resistance:
h RUT 947/961
Trin range: 0.8 - 0.9 (neutral)
Average VWAPs: +58/-59 (bull/bear battle) May 2, 2013 4:00pm ET
Back from the NAAIM (National Association of Active Investment Managers) conference in Denver and have much to do so I'll keep it short today. Well...it appears as if yesterday's threat of a Sell in May scenario is being put on hold as some of the major averages were able to not only erase yesterday's damage but add to it. Mr. Nazzie razzle-dazzled by adding to its previous high (the highest since 2000) mainly due to action in internet and semiconductor stocks.
Regarding internet issues, both LinkedIn (LNKD)
and Yelp (YELP)
moved to new highs. Yelp leaped previous resistance, adding more than 27% to yesterday's close on ten times normal volume. Reporting today, the company beat revenue projections which prompted an upgrade.
In semiconductors, solar stocks were among the more active issues. Surfing through the industry group, I found the chart of Semiconductor Manufacturing (SMI, $3.91)
to be especially compelling. The stock has been rising steadily after breaking out of a two month consolidation pattern last summer and today it broke $3.60 resistance, gaining over 10% on slightly heavier than normal volume. It appears that momentum is on its side and technically it gets a green light. Fundamentally, though, there's not enough information on it (without going into the SEC filings) to tell what's going on as it is a Chinese company trading here as an ADR (American Depository Receipt). From what little info I could find, it appears as if the company has been having cash flow problems but hey, the stock wouldn't be rising if investors weren't finding something to like! Trade Note:
The unemployment report is due out before tomorrow's opening bell. This event has the potential to add a lot of volatility to tomorrow's trading action. If the number is bad, that means the Fed will continue its QE policies which is good for the market. However, a bad number lends credence to the manufacturing numbers which are showing contraction. This could make investors nervous about the possibility of another recession which might lead to a sell-off. Perhaps the best outcome would be to maintain the status quo. We'll see.
[Photo: Dr. Kris at her Portfolio Preserver booth at the 2013 NAAIM conference in Denver.] 1:55 pm ET: Intraday support/resistance:
h RUT 928/946
Trin range: 0.95 - 1.45 (falling Trin is bullish)
Average VWAPs: +84/-34 (bullish) May 1, 2013 1:00pm ET
There will be no blog today as I am traveling back from the NAAIM conference in Denver where it's snowing--no dancing around the Maypole here! Our regularly scheduled programming will return tomorrow, provided my flight isn't cancelled. 1:10 pm ET: Intraday support/resistance:
h RUT 931/947
Trin range: 1.0 - 1.15 (neutral to mildly bearish)
Average VWAPs: +34/-84 (bearish) April 30, 2013 Dateline: Denver, 6:15pm ET
At my booth today at the annual NAAIM Conference so didn't get to hear any of the speakers, alas. But had a chance to peruse the market and although the major averages gained ground, the S&P (SPX) was unable to even touch the 1600 level, a point of resistance. The good news is the market-leading Dow Transports were able to break through its downward trending channel meaning that the Sell in May scenario may be delayed or not occur at all this year. A rising Trin--typically viewed as a bearish sign--could just be giving the market some breathing room to move higher. The Fed's interest rate decision is coming out tomorrow and markets are typically quiet before it. However, if there's even a soupcon of the Fed signaling an end to QE (quantitative easing), then we could see a sharp sell-off ushering in the Sell in May playbill. Today's conundrum: Are commodities poised to rebound?
Commodity-tied countries Canada and Australia are showing real strength. Today, the loonie (FXC)
and the Canadian country etf (EWC)
both broke out while the Australia country fund (EWA)
chalked up another new high. If the crash in commodities can't keep these countries down, does this mean that they're on the cusp of rebounding? And, was the sell-off in gold overdone? I don't have the answers--just asking the questions. 12:50 pm ET: Intraday support/resistance:
h RUT 939.25/946.25
Trin range: 0.95 - 1.3 (neutral to mildly bearish)
Average VWAPs: +85/-35 (bullish) April 29, 2013 Dateline: Denver, 10pm MT
I'm at the annual NAAIM conference in Denver and am very tired but wanted to post a quick blog on a very interesting talk that I attended to today by Keith McCullough of Hedgeye Risk Management. The title of the talk was Macro Matters & Wall Street 2.0 which really doesn't tell you much of anything. The thesis of the talk was essentially this: Predict the direction of the dollar correctly and you can predict what the rest of the market is going to do.
McCullough gave strong evidence quoting both geo-economic and geo-political reasons why the dollar is going to appreciate, and strongly, too. If his assumption is correct, this has considerable ramifications for stocks, bonds, and commodities. And the picture is rosy indeed but there is one big caveat: The jobless claims rate must continue to fall. I don't have time to delve more deeply into McCullough's argument so I'll just give you the bottom line: A rising dollar will be good for stocks and bonds and bad for commodities and emerging markets
. He believes gold has only begun its move lower and could reach $850 per ounce. His current ETF picks right now include the following two lists. On the Long Side
: Bull Dollar (UUP), Healthcare (XLV), Consumer Discretionary (XLY), Home Construction (ITB), Singapore (EWS), and the Phillipines (EPHE). On the short side
: Gold (GLD), Emerging Markets (EEM), Yen (FXY), Freeport-McMoran (FCX), Materials (XLB), and Italy (EWI).
For further information, you can access McCullough on Twitter (@KeithMcCullough) and on his website Hedgeye.com.
Now to bed! 12:30 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.9 (falling Trin is bullish)
Average VWAPs: +65/-35 (moderately bullish) April 27, 2013 Special Weekend Edition: I'm in Barron's!
I'm very honored to be featured in the Electronic Investor section in this week's Barron's Magazine
, in both the print and online editions. Check it out here
. FYI, the cookies (which I baked) in the photo spell out I (heart) NYSE. Bon appetit! April 26, 2013 4:00 pm ET:
Wash, rinse, repeat. That's been the tone of the market for the past few trading days. I don't have much to add to what's already been said, except that I am a bit surprised that the market held up considering the worse than expected GDP number that was released earlier. (It came in at 2.5% instead of 3%.) Apparently, money printing trumps fundamentals but there will come a time (maybe soon) when investors feel the market is overbought. Right now there's no way to tell. Market internals show the bulls and bears duking it out and it's not clear who has the upper hand. Perhaps the fact that the bears are have made it past round three is an indication that they might deliver the one-two punch to end the bulls' run.
In other news, solar stocks continue to advance and homebuilders are bucking up after a brief slump. Precious metals took a breather after this week's rebound off of oversold levels. Oh, I forgot to mention that the pound sterling etn (FXB)
broke $152 resistance yesterday. Upward momentum seems to be on its side and a move to the $161 level could well be in the cards.
That's it for now. Next week there probably won't be a blog until Thursday as I will be attending the NAAIM conference in Denver. Weekend reading suggestion:
It is rumored that there will be an article on me in tomorrow's weekly edition of Barron's, both online and in print. Here's a link to their website: http://online.barrons.com/this_week Subscriber Notes:
There are no new entries. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.05 (neutral)
Average VWAPs: +46/-50 (bull/bear battle) April 25, 2013 4:00 pm ET:
Today the market marched in like a lion and limped out like a lamb. The mid-day turnaround looked to be the bulls passing the baton to the bears. For the past few days we've been noting that the VWAP's (a measure of Smart Money activity) on both the buy and sell sides have been elevated indicating a possible changing of the guard. Note that there are only three more trading days left before the Sell in May phenomenon kicks in. Of course there are no absolutes in the market and, yes, this year could indeed be different--but I don't think so. I gave four reasons to support my thesis yesterday. Here's another one to add to the pile.
Yesterday, CNBC ran not one but two separate segments showcasing bigwigs at Goldman Sachs, both of whom are bullish on the market. The reason they gave was the same: Their in-house economists think the world is in a state of economic expansion which will continue to fuel not only our stock market but markets abroad as well. I don't know what numbers they've been looking at but I'm sure not seeing much that cheers me. Recovery in the Eurozone is tenuous at best and who knows what China's growth stats really are?
In this country, not everything is as rosy as it's being painted. Sure, the financial media has been touting that 70% of all companies that have reported so far have beaten earnings estimates but what they've been omitting is that overall revenues are falling. This fact indicates economic contraction, at least it does to me. But not being an economist, I certainly could be wrong.
Putting this all aside, the fact that two
spokes-folks came out publicly spinning the same yarn has me thinking that Goldman must be building up a huge short position in the equity markets. Yes, this is the cynical point of view but if past Goldman dog-and-pony shows are any indication, I'm sticking with it. (I've always been suspicious that something's afoot whenever Goldman trots out Abby Joseph Cohen.) With that said, I'm mounting my soapbox and recommending that people prepare to batten down the hatches as May could get very ugly. Subscriber Notes:
There is one new Stock Darling. 1:50 pm ET: Intraday support/resistance:
VIX 13/13.7 (bullish/bullish complacency)
Trin range: 0.65 - 0.9 (bullish)
Average VWAPs: +84/-48 (moderately bullish but bears still tapping their feet) April 24, 2013 4:00 pm ET: Today's Highlights
The major averages continued their rally despite some negative economic figures. This market seems to be advancing on fumes and some storm clouds are forming on the horizon. To wit: 1. Despite today's advance, the Dow Transport Index (DTX) still hasn't been able to break out of its downward trending channel; 2. The low VIX is indicating growing investor complacency; 3. Negative VWAPS, a measure of institutional selling, are on the rise even on bullish days like today; and 4. Consumer staple stocks are selling off which could be an early indication that conservative investors are moving into the safety of cash. (Also, this sector could just be taking a much needed break.) No need to run for cover yet but you should be readying your game plan if and when the market turns around because it could happen soon and very quickly. Aerospace and defense stocks
saw lift-off today as industry giant Boeing (BA, $91)
reported better than expected earnings with an improved outlook for delivery of their problem-plagued Dreamliner. The news not only sent shares of the company to new yearly highs but also those of Northrop-Grumman (NOC, $74)
and Orbital Science (ORB, $18)
. All of these issues gained 3% on heavier than normal volume. On a technical note, I think they're all solid buys at these levels and I particularly like the strength in Northrop-Grumman's chart, having recently rallied through $70 which has proven to be a multi-year resistance level. As an added bonus, all of these stocks pay a 1% dividend.
Upward momentum is increasing in solar stocks
which numbered among today's biggest winners. Shares of First Solar (FSLR, $12)
jumped 12% on twice normal volume to hit a new yearly high. Outpacing this move was that of JinkoSolar (JKS, $6.54)
which gained a whopping 15%, also on heavy volume. The stock broke through $6.50 resistance and if it can keep up this pace, it'll be testing $10 major resistance in no time. The gain in solar issues helped boost a couple of Clean & Alternative Energy etfs (GEX, QCLN)
to new highs.
That's it for now. Getting ready for next week's NAAIM conference in Denver so I must scoot. Subscriber Notes:
There is one new Channeling Stock. Regarding yesterday's Stock of the Day candidate (which was up another 5% today), I sold some May 22.5 cash-secured puts for $1.30 as a buying mechanism. The put options are not heavily traded so if you want to follow suit, please use limit orders (day orders only!) and stand your ground. My trade languished for hours until the market maker relented just after the closing bell. (Options can trade for up to a half hour after the bell, FYI.) 2:45 pm ET: Intraday support/resistance:
VIX 13.25/13.75 (bullish/bullish complacency)
Trin range: 0.65 - 0.9 (falling Trin is bearish)
Average VWAPs: +77/-44 (moderately bullish but bears waiting in the wings) April 23, 2013 4:00 pm ET:
It's after hours and Apple stock (AAPL)
has been halted pending their earnings release. As mentioned yesterday, this report could make or break the stock, at least in the short term. After hours trading is typically non-eventful but today's earnings release could easily cause some fireworks.
...Okay, Apple shares just re-opened, trading up $20 on news that the numbers weren't as bad as expected--whew! This move will likely cause the tech-related tracking stocks--the SPY and the QQQ's--to jump on tomorrow's open. Today's less-than-bad news should boost the spirits of Apple-heads everywhere, at least until the next earnings release. Keep your fingers crossed that Tim Cook can pull a rabbit (via a new product besides the iPhone5) out of his hat by then...or even darker clouds could gather over the next earnings announcement. Commenting on today's report, a Jeffries analyst on CNBC predicts that the upcoming release of the Samsung Galaxy S4 phone will take significant market share away from the iPhone. Apple had better not rest on its laurels!
In overall market action, the major averages extended their recent move back up. The jump today in both the Nasdaq and the small-cap Russell 2000 (RUT) was impressive but the fact that the market-leading Dow Transports (DTX) turned around was a bit of a downer. It hasn't been able to break through its downward trending channel and until it does, I won't be taking on any new positions (except for today's Stock of the Day). Also, the VIX is now trading back under 14 which is getting close to being in contrarian territory (typically under 13). The next few days should tell us if the Sell in May scenario will come into play this year--right on cue! Trade Note: Beware of Jumpin' Jack Flash Crash!
Today's flash-crash arose because of an erroneous tweet that was hacked onto the Associated Press' Twitter stream. This one tweet caused an instant destabilization in both the equity and currency markets, amplifying just how fragile this market really is. The crash lasted only a few minutes but that was long enough to take out a lot of stop-losses resulting in undeserved investment losses. This event is an unfortunate and (I hope!) unintended result of computerized trading, but it is now part of the new normal of the trading environment. This should be a cautionary tale to those of you who have hard stop-losses (i.e., good-until-cancelled sell orders) on your stocks. I understand that many people simply do not have the time to constantly monitor their positions but this is one good reason to set mental rather than physical stops. A better approach might be to set up email alerts with your broker to notify you when your stop-loss level is reached. This way you'll still have the peace of mind knowing that you have some protection while also being in the position of deciding whether or not existing circumstances merit taking action.
On the other side of the coin, if you have a short position, a good-until-cancelled buy order set at a low price could work in your favor during a flash crash, provided there's time for it to get executed. Some things to consider... Subscriber Notes:
There is one new Stock of the Day that I strongly urge you to take a hard look at. This company is forging partnerships left and right and is poised for explosive growth. 2:10 pm ET: Intraday support/resistance:
VIX 13.3/13.8 (VIX getting into contrarian territory)
Trin range: 0.85 - 1.5 (neutral to bearish)
Average VWAPs: 48/-46 (bulls & bears duking it out) April 22, 2013 4:00 pm ET:
Today's market action was essentially a continuation of Friday's flight to safety in equities. Steady-eddy dividend payers such as consumer staples and utilities continue to shine as reflected by the new highs made in both the Consumer Staples etf (XLP)
and the Utilities etf (XLU)
. Pharma and biotech stocks are also leading the march to new highs. All of these sectors have made significant gains since December and although none are looking particularly toppy chart-wise, that doesn't mean that they'll go up forever. Any shakeup in the market and these could likely be the first sectors to plunge, so please be careful if you're considering initiating any new long positions. Remember, the higher they go, the farther they have to fall. The precious metals market got a respite
after their recent sell-off with gold miners in particular enjoying a nice rebound. Many today jumped 5% to 7%. The question is whether today's action is the beginning of a recovery or just a pause of consolidation before continuing down further. Conservative investors may wish for confirmation in either direction before initiating any positions. For example, on the largest physically held SPDR Gold etf (GLD, $138)
I would wait for it to break $140 resistance before building a long position. Similarly, on the other actively traded gold etf, the iShares Gold fund (IAU, $13.85)
(which trades at one-tenth the price of the GLD), I would wait for it to clear the $14 level. There are options on both of these exchange traded funds but the options field on the GLD is much, much more liquid than IAU's--just an FYI. Trade Alert! Tomorrow's Apple's earnings release could trigger strong after-hours action
The big news this week is coming tomorrow when Apple Computer (AAPL)
releases its latest quarterly earnings report after the bell. Sure, their revenue numbers and sales stats will be closely watched but even more important is what they will say concerning future guidance. Lower than anticipated numbers will definitely leave a bad taste in the mouths of investors. Combine this with increasing doubt (even on the part of many analysts and die-hard Apple-heads) that the company's products are beginning to lose their luster and you have a perfect recipe for a nasty after hours sell-off. One thing is for sure, though, this earnings report is sure to be a real nail-biter! If you're long a lot of Apple stock, taking out some put insurance either on the stock itself or on the QQQ's (where AAPL makes up 13% by weight) might be a wise idea. (Note that options on the Q's are much cheaper than on Apple.) Subscriber Notes:
There are no new entries. 1:55 pm ET: Intraday support/resistance:
VIX 14.4/16 (falling VIX is bullish)
Trin range: 0.45 - 0.95 (falling Trin is bullish)
Average VWAPs: +78/-30 (moderately bullish) April 19, 2013 4:00 pm ET:
Children of the '70s will remember the Moody Blues' classic song Ride my seesaw . That tune pretty much sums up recent market action: one day up, the next day down. Daytraders have been very happy riding this seesaw, especially the volatility exchange-traded vehicles (XIV, UVXY, etc.). High VWAPs (a measure of institutional trading) on both the positive and negative sides indicate a power struggle between the bulls and the bears. My crystal ball isn't telling me which side is going to win but typically increasing volatility in the volatility index (VIX) denotes a changing of the guard. I think the Sell in May phenomenon is still on track.
Another reason to think the bears will step into the drivers' seat is the continuing advance in defensive stocks. Today, new highs were made in Consumer Staples (XLP)
and Utilities (XLU)
. Real estate investment trusts (REITs) also topped the leaderboard. Note that all of these vehicles pay dividends and tend to be less volatile than other equity sectors.
That's it for now. Have a nice weekend! Subscriber Notes:
There are three new Stock Darlings (all dividend payers) and one new Channeling Stock. 1:10 pm ET: Intraday support/resistance:
VIX 14.8/17 (falling VIX is bullish)
Trin range: 0.95 - 1.45
Average VWAPs: +63/-57 (bull/bear battle) April 18, 2013 4:00 pm ET:
The market continued yesterday's decline yet somehow the S&P, the Russell 2000, and the Dow Industrials managed to hold key levels--barely. The rise in volatility, though, suggests that these levels won't hold for long. Many sectors are testing support levels and the bad news today was that the Information Technology etf (VGT)
broke a key support level at $70. [The next support level is at $65, FYI.] The breakdown in this fund reflects the continuing decline in Apple (AAPL) which comprises over 17% of the fund's holdings. Other heavyweights include IBM (7%), Microsoft (7%), Google (6%), and Oracle (5%). All of these issues traded in the red today which only compounded the VGT's malaise. The IT space has been the recent darling of the market and it's due for a breather. If you're long this etf, I'd suggest taking profits or protecting your position as Apple appears to be heading towards its next support level at $350. Bearish Trade Ideas: Closing the Gap
One chart pattern of great interest to technicians are price gaps. They occur when a stock opens either over the previous day's high or under the previous day's low. The gap suggests further movement in the opening direction and there are times when the stock reverses back to the previous gap point. If a break through the gap occurs, the technical convention is for the stock to continue to fill the gap. When it does so after rally, the move is viewed as bearish.
Today, Synchronoss Technologies (SNCR, $26)
entered a large gap created on February 11th. The gap area is from $24.75 to $27. With the share price currently around $26, there's still about a buck and a quarter's worth of expected downside. There's another smaller gap just above $22 and we could see it close that gap, too. Bears may wish to jump on this one but please do your due diligence first! 1:50 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.5
Average VWAPs: +47/-68 (bull/bear changing of the guard) April 17, 2013 4:00 pm ET:
The market took another dive today on heavy volume. Monday's down day was also marked by heavy trading whereas in the past several months, sell-offs were light. What this means is that the bears are trying to cut into the bulls' dance card, and if the downward trend in the market leading Dow Transport Index (DTX) is any indication, they may succeed. However, they're not cutting in without a fight. Today, the bulls were able to stop the decline just in time for all of the major averages (excepting the DTX) to close above recent support levels. However, they may not be able to prop up the party too much longer and a break in current levels would mean that the bears are taking over. Specifically, these support levels are the following: S&P 500 (SPX) 1500, Dow Industrials (DJIA) 14500, Nasdaq 3200, and Russell 2000 (RUT) 900. Moreover, mounting volatility is a sign that the sentiment is shifting, so be careful out there! Today's Bearish Action: Steel on the slag heap
Virtually all commodities have been hemorrhaging but none more so lately than the metals and miners. Adding to the ongoing slide in gold and silver, the steel etf (SLX)
finally joined the club by breaking major support at $40. If you have a long position in this instrument, it would behoove you to monitor it closely. A further decline in price and I would recommend exiting the position entirely or at least buying protective puts (but please note that the SLX's option field is not very robust).
That's it for now. 1:10 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.65
Average VWAPs: +32/-72 (moderately bearish) April 16, 2013 4:00 pm ET:
What the market taketh away, the market giveth back--at least in part. That sound you heard at the opening bell was the bulls breathing a collective sigh of relief that yesterday's carnage wasn't repeated. All of the major averages moved up sharply on the open and finished the day regaining a sizable chunk of what was lost yesterday. But this doesn't mean that this rally has found new legs--not just yet, anyway. While being today's biggest percentage gainer among the major averages, the market leading Dow Transport Index (DTX) is still moving within a downward trending channel (see chart above). For this rally to continue, the DTX will have to make an upside channel breakout. Today's highlight: Cocoa looking sweet
Today, all sectors were back in the green, but the real sweet spot (pardon the pun) was in the Cocoa etn (NIB, $31)
. The stock has been basing for over a month and today it broke resistance on more than four times normal volume. Clearly, someone is bullish on it! If you're looking to add some commodity exposure to your portfolio and want to stay away from precious metals and oil (and please do!), definitely take a closer look at NIB. Mind you this is not going to be a big mover, but on the other hand it's less risky than many other commodities. Chartwise, I see upside movement to at least the $34.50 level (+11% from here). Should it clear this level, then a move to its previous high at $37 is entirely reasonable (a gain of nearly 20%). There is no dividend but there are options, though they are rather thinly traded. Seasoned options traders may wish to sell the August 30th cash-secured put as an entry mechanism. Subscriber Notes:
There is one new Stock of the Day. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.55 - 1.0
Average VWAPs: +91/-31 (bullish) April 15, 2013 4:00 pm ET:
There's little to be cheery about on today's quintuple whammy* of gloom and doom. The market started the day on a sour note with gold, silver, and basically all other commodities gapping down on the open. Last Friday, gold broke $1500 major support ($150 on the gold etf (GLD)), blew right through minor support at $1400 and is currently testing $1300, another minor support level. Silver fared even worse. Today, the silver etf (SLV) broke major support at $25 and is heading straight for its next support level around $17.50. However, this is a minor level and I would not at all be surprised if it blows right through that, too. Judging from the overall momentum of the moves and today's extreme rise in volatility (which we'll get to next), I'd say it gets there sooner rather than later.
Speaking of market volatility, the VIX gained a whopping 43% over yesterday's close. That's the biggest one day gain since February 25th. The index blew through the bull mark of 15 and is now solidly into the bull/bear demilitarized zone at 17. A rise above 20 would signal a hand-off in control from the bulls to the bears. Yes, Virginia, today could be the start of the Sell in May and go away scenario, especially given that today's tragic headline news regarding the bombing at the Boston marathon can only add to investor uncertainty and increased volatility.
Although volatility and gold garnered most of the attention from the financial media, the really big news went unreported. The Dow Transports (DTX), widely considered a leading indicator in market direction, broke a major support level at 600. It appears to be making a series of lower highs and lower lows which is a bearish chart pattern. This doesn't mean that tomorrow will be another stinker but rather that the overall trend is moving in a downward direction. The index is only ten points away from testing minor support at 580 and should it breech that, then a slide down to last autumn's 480-520 area of consolidation is not an unreasonable expectation.
I hope today's market action was a wake-up call to all of you perma-bulls. Sure, this could be just a minor shake-out but the augurs are indicating otherwise. If you haven't taken measures to protect your long positions, now is the time to do so. Book some profits and buy some puts--Dr. Kris is wagging her finger at you!
*Quintuple whammy: 1. Dow Transports break major support; 2. Big rise in the VIX; 3. Continued break-down in precious metals and other commodities; 4. Tragedy at the Boston marathon, and last but certainly not least; 5. Tax day! 1:55 pm ET: Intraday support/resistance:
Trin range: 0.5 - 0.85
Average VWAPs: +33/-139 (very bearish) April 12, 2013 4:00 pm ET:
The market took that catnap I mentioned yesterday and it turned out to be just that. About an hour and a half following the opening bell, the major averages woke up and began advancing. Maybe if the closing bell was delayed for another half hour they would have made it into the green (the Dow almost got there), but alas that is for another day. Judging from the internals, that day could be Monday. This morning's slump didn't much affect the VIX which managed to close at its lowest level in nearly a month. Take that all you bears! Today's Trading Highlights: Precious metals continue to tarnish
The big news today was gold breaking its $1500 major support level (the $150 level on the gold etf (GLD). Following right in its footsteps were platinum (PTM, PGM, PPLT), palladium (PALL), and silver (SLV)--the latter which hit a new two year low. The break in these support levels suggests further downside which is rather interesting considering the sabre-rattling from North Korea who wants to see Tokyo toast on its breakfast menu. I'm not sure if this continued slide in commodities means that everyone thinks that North Korea's threats are empty or if everyone is just hoping it will go away. Should North Korea actually act on its threats, the continuing fallout in commodities could change in a heartbeat and for that reason alone, I'd be very wary of being in any type of leveraged inverse precious metal tracking fund such as the Gold Miners 3x Bear etf (DUST)
, the 3x Inverse Gold etf (DGLD)
, or the 3x Inverse Silver etf (DSLV)
. Today, all of these funds gained a whopping 15-18% and could gain much more but remember should precious metals rebound on headline news, these fast gains could easily turn into even faster losses. If you're holding physical gold and want to keep it, there's still time to buy protection but I'd recommend buying puts (on the GLD) since your risk of loss is limited to the amount of your initial investment. Just a word to the wise.
Have a good weekend! Subscriber Notes:
One new Stock of the Day will be posted later today. 1:40 pm ET: Intraday support/resistance:
Trin range: 1.1 - 1.8 (rising Trin is bearish)
Average VWAPs: +50/-50 (bull/bear fight) April 11, 2013 4:00 pm ET:
All cylinders are firing in this rally as many sectors continue to steamroll to new highs. Today's biggest winners were specialty retail (XRT), biotech (IBB, BBH, FBT), healthcare (IXJ, IHI), consumer discretionary (XLY) & staples (XLP), telecom (VOX), gaming (BJK), insurance (KIE), aero & defense (PPA), utilities (XLU), financials (XLF), and media--whew! Aside from nearly every US sector, the biggest winners came from overseas, most notably Greece (GREK +4.9%) and Japan (EWJ, +1.2%)
I've been harping on moving into Japanese stocks since March 11. If you had picked up some of the issues mentioned on that date, you'd be doing quite well especially Mitsubishi Financial (MTU)
and Sumitomo Mitsui Financial (SMFG)
. Since that time, these issues have gained 15% and 10% respectively. Mizuho Financial (MFG)
has been the only one that hasn't done much of anything (down 2%). If you're thinking of jumping into Land of the Rising Sun stocks, I want to warn you that a topping tail formed on the Japanese etf (EWJ) today which is a bearish candlestick pattern. Unless you have a fundamentally compelling reason for getting into a specific issue, I'd recommended waiting until the EWJ begins moving back up again.
On a broader market note, the Dow Transport Index (DTX) is starting to lose steam indicating that the market may be ready to take a catnap. It's long overdue! Subscriber Notes:
There are no new entries. 1:30 pm ET: Intraday support/resistance:
VIX 12.1/12.6 (bullish)
Trin range: 0.85 - 1.2
Average VWAPs: +66/-37 (moderately bullish) April 10, 2013
****Please note that there will be no blog today. We will return to our regularly scheduled programming tomorrow.**** April 9, 2013 4:00 pm ET:
It just doesn't get a whole lot more bullish than today's action--which is precisely why I'm starting to get worried that this rally might be running out of steam. The late day sell-off in the major averages sent most of them down enough to close in the red, but the selling pressure that was especially evident in the small-cap weighted Russell 2000 (RUT) and the Dow Transports (DTX) didn't apply to the Dow Industrials which managed to squeak to a new all-time. Today's drop in the VIX (volatility index) is putting it into contrarian territory and though the VIX has been known to stay at these low levels (below 13) it hasn't been hanging out there for very long. The Trin (Arm's Index) is also getting into contrarian land. The market may rally for a moment on the tomorrow's open but the internals suggest that a follow-through rally is unlikely. This, folks, could be the beginning of the end of our spring rally, so please start thinking of ways to position your portfolio defensively. Today's trading highlights: Solar is flaring/Gold miners are glittering
Solar stocks began heating up yesterday but today's blow-out earnings from First Solar (FSLR, $39)
boosted the stock over 50% at one point. The company also announced a new acquisition whose advanced solar technology will help boost the bottom line, according to company management. This double whammy of good news along with massive short-covering was responsible for today's price and volume pops. Despite the big move, First Solar is well off its all-time high of $317. If you've been itching to get back into this arena, I'd wait for the dust to settle before taking a position on this puppy. Today's good news lifted the entire industry group with the solar etfs KWT & TAN
gaining 13% and 15% respectively.
The sun was also shining on mining stocks
which have been getting drubbed by the falling price of gold and other metals. Allied Nevada (ANV)
was one of the group's biggest gainers. There was no news to account for today's 30% jump other than the possibility of major players covering their short positions.
On a technical note, one thing to be aware of is the fact that the gold etf (GLD)
is testing its $150 major support level for the third time in the past couple of years. This is going to be a critical test for everything touched by the Midas metal. A break below this level would likely spell further downside for the miners and could put some of them out of business should it fall too far. The one key factor to keep in mind when evaluating mining companies is how much it costs them to extract the ore. Obviously, falling gold prices will put a crimp in everyone's style but those miners with high production costs will feel the pain the most. Subscriber Notes:
There is one new Stock Darling. 1:45 pm ET: Intraday support/resistance:
VIX 12.7/13.7 (falling VIX is bullish)
Trin range: 0.6 - 1.0
Average VWAPs: +80/-25 (bullish) April 8, 2013 4:00 pm ET:
The major averages continued to defy gravity in spite of last Friday's dismal jobs figures. Market internals are all flashing green, though not yet at bullish extremes. There's still more play in the VIX as well as the Trin, and positive VWAPs aren't close to hitting an extreme--all of these are signs of a rally continuation.
The question now is: How high can the market rise? The S&P Policy Committee is calling for 1670 by year-end and they tend to be conservative -- and right. This year's average EPS (earnings per share) is expected to go to $111.13 up from $103.47. That's bottom up. S&P says the technicals also support 1670 after a bounce off 1520-1530.
Despite the rosy outlook, there are sure to be bumps along the way. Alcoa (AA) is kicking off this quarter's earnings season today with some of the major banks reporting later in the week. Weaker than expected numbers especially out of the banks could put a serious crimp in the bulls' swagger. We'll just have to wait and see. Trade Idea: Is wearable computing coming of age?
What with the hoopla surrounding Google glass and the mystery surrounding Apple iWatch, institutions are taking a hard look at the wearable computing space. Making major headway in this area is Himax Technologies (HIMX, $5.81)
. The market for wearable computing devices is predicted to reach 70 million users by 2017 and with this explosion in demand, it may be difficult for a fledgling company to increase production fast enough. In a recent presentation at the Technology & Beyond Conference, Himax indicated that it is already supporting a rate of production that will be able to meet expected demand.
Share price has been rising steadily from its $1.50 low last August (an increase of nearly 290%!). Trading volume was several hundred thousand shares per day but exploded when the stock broke out on March 5th with over 18 million shares changing hands. Since then, volume has been markedly heavier (over 3.4 million shares on average) showing that institutions are starting to get involved. According to a must-read article
posted today on SeekingAlpha.com, the author makes the following conclusion regarding Himax's prospects: HIMX is a $914 million company that has more than just one or two things going for them. The company's extensive production record, its nearly 2000 patents and the partnerships with several multi-billion dollar companies allows HIMX to be a reliable option for larger companies looking to develop wearable computing devices. With the broader technology market moving in the direction of these smaller devices, HIMX seems to be perfectly positioned for a growth in mobile computing whether by smartphone or wearable computing - or both.
With customers in Taiwan, China, Japan, Korea, Europe and the US, HIMX has consistently demonstrated that they are not a single contract company with all of its business in one place. The corporation is a diverse technology company experiencing consistent growth. HIMX is a stock to watch throughout 2013 in my opinion and is poised to breakout to even greater levels pending future partnerships with major companies. It is not hard to see HIMX as a future multi-billion dollar company as Asian mobile computing markets emerge and the wearable computing market becomes a reality. Subscriber Notes:
There is one new Stock of the Day. 1:45 pm ET: Intraday support/resistance:
VIX 13.6/14.5 (falling VIX is bullish)
Trin range: 0.7 - 1.25
Average VWAPs: +64/-33 (moderately bullish) April 5, 2013 After 4:00 pm ET:
Today's much worse than expected new jobs number tanked the market on the open but that couldn't keep a good index down. The Dow Transport Index (DTX), a leader in market direction, promptly washed that news out right of its hair and marched back to end the day in the green, the only major index to do so. The other piece of good news is that while the VIX began the day at a new monthly high in the bull/bear transition zone, it finished markedly lower indicating that whatever was bothering investors didn't last long. The only spoil sport among the major averages was the tech-heavy Nasdaq which wasn't able to hold its current (and fairly major) support level at 3200. The fact that Google (GOOG) and Apple (AAPL) were off 12% and 5% respectively didn't help the Nasdaq's cause at all. (Note that Google broke $790 major support and Apple is testing $420.) A breakdown in tech just might be the early warning sign that the market is due for a pull-back. Today's Market Highlights:
Today's flight to safety was evidenced by the big jump in treasury and bond funds along with the overwhelming flow of funds into dividend-paying vehicles. Of the 82 issues on today's New High list, 66 of them (80%) pay a dividend. A disproportionate number were utilities and REITs (real estate investment trusts)--the safer industry groups. The surge in these issues was reflected by the rise in the REIT spyder (RWR)
and the Utilities etf (XLU)
, both of which pay a dividend (2.8% & 3.7% respectively). Despite the recent rise in these issues, the XLU is still 11% off its pre-crash high while the RWR is 20% beneath its high.
Have a good weekend--hope your taxes are done! Subscriber Notes:
There are no new entries. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.25
Average VWAPs: +82/-33 (bullish) April 4, 2013 4:00 pm ET:
The major averages stopped their slide ending the day above recent support levels. Though this sounds like good news, we have yet to face tomorrow's jobs numbers which could easily pull the plug on any attempt at a rally. Although there are some positive economic signs, there are an equal number of negative ones and right now the teeter-totter is equally balanced. Our economic recovery is fragile and continuing problems in the Eurozone could have enough economic impact to derail it. Multi-nationals especially would bear the brunt of the pain. Ford (F) and General Motors (GMC) both cited dismal European sales figures in their last earnings reports.
Just as the Fed's quantitative easing policies have been bolstering the US stock market, so has Japan's stock market been similarly supported by those of the Bank of Japan's. Yesterday we noted that Japanese beverage maker Kirin (KNBWY)
was on a roll and today it shot up another 5% (note that it is richly valued). Following in its footsteps were two Japanese banks Mitsubishi Financial (MTU, $6.27)
and Sumitomo Mitsui (SUTNY, $4.89)
along with the Japan Smaller Capitalization (JOF, $8.68)
closed end fund which all broke out to new highs. Japan's central bank is determined to keep the sun rising for a while and a move into some Japanese issues still makes good financial sense. Trade Note: Has Best Buy found a turn-around formula?
Today, big box retailer Best Buy (BBY, $25.13)
announced that it plans to roll out in-store kiosks devoted to Samsung products, notably notepads and smart phones (both high-margin items). Right now Samsung doesn't have any company owned stores in the US unlike Apple, Sony, or Microsoft and this joint venture with Best Buy could be a growth catalyst for both companies. One reason Apple (AAPL) has been so successful is because of its Apple stores. These customer-friendly environments are sleek and sophisticated and offer a hands-on product experience. Perhaps the biggest selling point is their friendly and knowledgeable staff who are always willing to help their customers get the most out of their Apple devices. All of this adds up to a devoted consumer base who seem more than willing to pay up for these perks.
I think it can't hurt Best Buy to take a lesson from Apple's marketing manual and apply it to Samsung whose innovative products have been generating more buzz than Apple's have lately. (Witness the Galaxy Note 2 and the Galaxy S4.) In fact, I'd like to see the entire Best Buy store redesigned as a collection of eye-catching boutiques staffed with people who know their product lines inside and out and are devoted to helping customers learn how to use them. Think a mini Geek Squad per kiosk, but wearing designer spectacles. Sure, there will always be those who will want to pay lower prices online, but as Apple has shown, people are definitely willing to pay up for a stimulating product environment and excellent customer service.
Apparently, many investors are excited with the Samsung/Best Buy pairing as shares of the latter surged 16% on the news. Because of today's big jump, though, I wouldn't rush right in and buy it here. Rather, I'd wait until the dust settles and we know more about Best Buy's marketing intentions. Subscriber Notes:
There is one new Stock Darling and one new Stock of the Day. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.6 - 1.1 (falling Trin is bullish)
Average VWAPs: +56/-44 (bull/bear struggle) April 3, 2013 4:00 pm ET:
Yesterday we noted that bulls may be retreating as the bears advance and today the bears not only advanced, but nearly massacred the bulls. The high negative value seen in today's VWAPs indicates that institutions are beginning to lighten up their holdings. If they're starting to run for cover, so should you. Sure, we could get another rally before summer but it seems as if we're stuck with downward momentum for now. Right now the major averages are sitting on support; a break below these levels will likely send them down to their next support levels which are the following:
S&P 500 (SPX): 1540
Dow Transports (DTX): 580
Dow Industrials (DJIA): 14400
Russell 2000 (RUT): 895
Bulls should seriously think about booking profits and hedging long positions. Remember that put options on index tracking stocks offer a fairly inexpensive form of insurance. For example, for portfolios heavily weighted in large cap stocks, use options on the SPY
; to hedge a portfolio of small-cap stocks, use the IWM
; and for a tech-heavy portfolio, use the QQQ
. If your portfolio is composed of a mixture of stocks, use a mixture of the above vehicles in the same weighting as your portfolio. If your portfolio only contains a few names, you can also choose to buy puts on each one provided it has options and they are liquid. If you don't know how to use options, you could take a position in exchange-traded funds that are the inverse of the ones that comprise your portfolio. Please note, though, that you'll be paying more for this type of insurance and as with any futures-based product (which these are), there is a significant risk that the fund will not perform according to the inverse of the long index. There are many articles written on this subject so please do your homework first before adopting this (or any) approach. Hot & Not
Bullish action was tepid to say the least today, but there was one bright area--foreign stocks. The ones lighting up the New Yearly Highs list were mostly found in the consumer staples sector: Netherlands based grocery retailer Koninkluke Ahold N V (AHONY, $15.80)
, Japanese beer and beverage maker Kirin (KNBWY, $16.23)
, French cosmetic maker L'Oreal (LRLCY, $32.69)
, and Swiss-based food and beverage maker Nestle (NSRGY, $73.64)
. The other name is Swiss-based drug maker Roche (RHHBY, $59.51)
. All of these issues have been in major rally mode for over the past six months and while momentum is still on their side, Kirin and Roche are looking toppy. Also, Kirin's P/E is a whopping 180 and unless there's some compelling reason for this high valuation, I'd recommend staying away from it. (There's been a lot of consolidation in the beverage business and Kirin's high valuation could be due to speculation of a take-over but I don't have any evidence pointing to this.) In short, what the market is telling us is that investors are beginning to look outside the US for growth. [Trade note: These issues trade here as American Depository Receipts (ADRs) which usually have lower trading volumes so please use limit orders when buying or selling although Nestle and Roche sport decent volumes (500k+).]
The bears continue to pummel commodities, especially metals and mining stocks. Today's New Yearly Lows list was populated with no less than 30 miners, most of them in gold. This industry group continues to bite the dust and I would stay well away from taking any long positions until it consolidates and begins moving back up again. You can do serious damage to your portfolio by trying to catch a falling knife! Subscriber Notes:
There are no new entries. Please note that I do not give exit recommendations on the Stock Darlings or Stock of the Day picks, so please review your positions and formulate your own exit plan. 2:25 pm ET: Intraday support/resistance:
Trin range: 1.1 - 1.6 (rising Trin is bearish)
Average VWAPs: +27/-113 (very bearish) April 2, 2013 4:00 pm ET:
The bears are starting to get restless but the bulls won't be going down without a fight. Yesterday's sell-off in the transport index (DTX) and the small-cap based Russell 2000 (RUT) could be the early warning signs that the bulls are running out of steam. On the flip side, the fact the neither the VIX nor the Trin moved significantly to the upside could just mean that today's sell-off is an isolated event. What makes me think that it could be a lot more than a one day event is the fact that both of the above indexes have broken near-term support. To repeat yesterday's caveat, negative news out of Friday's jobs report could be the torpedo needed to send this rally into an early Sell in May swoon, especially on the heels of today's manufacturing figures showing continued contraction in the Eurozone. What's hot & what's not
Gold mining stocks continue to strike out while health care gets a boost from a raise in Medicare prescription drug rates. Leading the pack to multi-year lows in the gold mining group were Barrick Gold (ABX, -2.5%), Allied Nevada (ANV, -11.3%), Anglogold (AU, -3.4%), Eldorado Gold (EGO, -9.4%)
. The gold mining etfs (GDX, GDXJ)
both shed over 4% while the 3x Gold Mining Bull etf (NUGT)
lost 12%--ouch! Technically, these charts have not put in a bottom and although I've been reading that a few popular financial pundits are now bullish on the miners, I would not advise building a position in them until their charts show signs of stabilizing. Right now, the bears are still in firm control.
While the gold miners continue to slump, healthcare stocks--healthcare providers, biotech, and big pharma--continue to rise. Many of them broke out to new highs on the Medicare news which could fuel these issues higher. However, the topping tails seen in many of today's break-outs are saying that there doesn't seem to be much buying pressure left to propel these issues higher--at least for now. In this regard, I'd probably hold off before taking a position in any of these just to see if the momentum holds. Tesla Update
In yesterday's write-up on electric car maker Tesla (TSLA), I said that the company was scheduled to make a major announcement on Thursday (tomorrow). Either the company moved up the date to today or the source I read that quoted that time was in error. In any case, the company just came out with its announcement saying that it is offering a revolutionary new financing product to help buyers get into a Tesla. In essence, it would work as a kind of hybrid between leasing and owning. The result for the consumer is a net monthly payment of around $500. For further details, please read the press release
Following the news, after hours trading in Tesla is mixed. It will be interesting to see where it opens tomorrow. Subscriber Notes:
There are no new updates. 2:25 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.2
Average VWAPs: +48/-60 (bull/bear changing of the guard?) April 1, 2013 4:00 pm ET:
The major averages took some time off today following the Easter holiday. Some mixed economic news probably didn't help the cause as manufacturing numbers came in worse than expected while construction figures were better than expected. More sabre rattling out of North Korea probably had little to no impact on the market as one would expect gold and other precious metals to shoot up if anyone was taking their threats seriously. Market internals are still in the bulls' camp although today's rise in the Trin (Arms Index) could signal further downside on the open tomorrow. Apart from global headline risk, the only thing with market-moving potential this week is Friday's employment report. A slide in that number could be bad news for the market. Stock of the Day: Tesla Motors on the move
Electric car maker Tesla Motors (TSLA)
zoomed out of the starting gate this morning after reporting its first quarterly profit ever. The stock popped nearly 12% on the open, easily hurtling the $40 level which was an area of major resistance. The stock finished the day up nearly 16% on ten times normal volume. Option trading was also heavy especially on the call side and it's no wonder as short interest represents 65% of the float. (Buying calls is a way to hedge a short position.) This move in the stock represents a new high and if the company's sales projections are met, then the stock will certainly go higher.
With improving distances between charges and the roll-out of new charging stations, the company's sales projections may even be conservative. It recently was awarded Motor Trend's Car of the Year as well as being named the World Green Car of the Year. The company is only starting to expand globally and once consumers are educated on the car, demand could easily increase. Tesla management is taking the initiative to increase public awareness. Here in Santa Monica, the company opened a store on tourist-laden 3rd Street Promenade to showcase its new Model S sedan and talk to customers one-on-one. Every time I pass by there are always a lot of people inside. I think this hands-on approach is a wise investment in resources as it brings the product out of the realm of the esoteric into the realm of reality.
This Thursday the company will be making a major announcement. which is generating a lot of speculation. Rumors on the speculation menu run the gamut from announcing a strategic partnership, a breakthrough new technology (mostly regarding the distance between charges), and a concrete plan to roll out new charging stations. Whatever it is, billionaire founder Elon Musk promises that it will be exciting and of that I do not doubt. For more information on Tesla, please read today's article
in SeekingAlpha.com. Subscriber Notes:
There is one new Stock of the Day. 1:30 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.3
Average VWAPs: +38/-61 (bearish but bulls are fighting back) March 28, 2013 4:00 pm ET:
The S&P (SPX) closed above its all-time high set back in 2007. The Dow Transports (DTX) are moving up and the volatility index (VIX) is moving down--more good news. The VIX is low, but not too low; the DTX is moving up, but still hasn't pierced its recent top. The rest of the major indices are also moving up. Trading volume has been steady which is really good since the market is not over-spent meaning that there are more dollars available to send the market higher. Historical price-to-earnings (P/E) estimates value the S&P at around 1670, a level we may see soon.
Economic fundamentals and world events seem to be the only dark clouds over the bulls camp. On the former front, slightly worse than expected jobless claims came in today as did the Chicago PMI, though still on the expansion side. Most monthly numbers in and of themselves aren't worth a hill of beans; the overall trend is what's important. For right now, I wouldn't read much into them. Regarding the latter, Eurozone debt problems are a source of continuing ennui and the escalating situation in North Korea could turn into a major problem for all markets, especially if major aggressive tactics are implied. Risk-off on Risk-on
This market has been a juggernaut since last November. It's interesting that in previous market run-ups the big winners have been the sexier sectors full of volatility such as tech. Not this time. On a roll are defensive names such as big pharma (PJP), Healthcare (IXJ, XLV), Utilities (XLU), and Consumer Staples (XLP). All of these exchange-traded funds not only hit new highs today but many of them jumped in the process. Joining the group were Biotech funds which also hit new highs (BBH, IBB, FBT). Note:
Because of Good Friday, tomorrow's market is closed. I reported earlier that it was open for a shortened day but I was in error. Subscriber Notes:
There are two new Stock Darlings. 12:25 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.3 (rising Trin is bearish)
Average VWAPs: +40/-41 (bull/bear struggle) March 27, 2013 4:00 pm ET:
The S&P 500 (SPX) just cannot seem to close above the 1564 level. For the last two days, it's made a charge towards it going into the close but the level has proved to be insurmountable--at least for now. A close above this would likely signal another leg up in the rally, perhaps the last one before Sell in May fever sets in.
I do believe that the SPX will hurdle this level for two reasons. Number one is that the Dow Transport Index (DTX) is leading the charge, as it should. Last week's sell-off gave it the space it needs to launch a new rally, and it's doing just that. Reason number two is that the volatility index (VIX)--while back to a level of complacency (under 15) following the Cyprus snafu--is still high enough to allow for further index expansion. The market may seem overbought but if you look at the bigger picture, many stocks are still undervalued (meaning that P/E's are lower than their historical norms). While buying isn't frenzied, the pressure is steady--a good thing. This reflects a commitment by institutions (aka the smart money ) to accumulate positions. And if they're doing it, you should be, too. But don't dawdle as the bargains won't last forever. Today's Highlights: Sucking & Soaring
Sector rotation continues as stocks in the consumer staples (household products), consumer discretionary (gaming, hotels, restaurants), healthcare (pharma, biotech, healthcare services and providers), regional banks, and utilities (especially electric utes) all continue to advance. Today's spotlight in the consumer discretionary sector was on the mattress makers
, especially Tempurpedic (TPX, $50, +7%), Select Comfort (SCSS, $20,+7%),
and Mattress Firm (MFRM, $35, +12%)
. The latter reported rising revenues prompting an upgrade and an increased price target of $37. The news sparked the gains in the other two pushing all three of them above resistance levels. Technically, all of these charts appear to be on bullish paths. Investors may wish to get in bed with one of these, and this is one time where I mean that both literally and figuratively!
So much for the sunny side of the bed. On the gloomy side, shares of European telecoms continue to slide
. Telecom Italia (TI, $7)
sunk to a new all-time low while its northern amici France Telecom (FTE, $10)
slid to a new ten year low. Today's 3% haircut in both of these issues was nothing compared to the 10% shearing in the Greek compadre Hellenic Telecom (HLTOY, $2.8)
. The downward momentum appears to be unstoppable and bears may want to take a gander at these names. Bulls may wish to put them on a watch list if and when they start to turn around. Remember, the further something falls, the more room it has to rise. Subscriber Notes: There are two new Stock Darlings. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.05
Average VWAPs: +70/-27 (bullish) March 26, 2013 4:00 pm ET:
After the minor derailment over the Cyprus snafu, the major averages are back on the rally track. Today's precipitous drop in the VIX is telling us that the foreign fears have been allayed for the moment. However, the breakdown seen in the charts of the Spain (EWF), Italy (EWI),
and Greek (GREK)
funds are telling us that investors are fearing further instability in the Eurozone's more fragile economies. If the risky banks in Cyprus are allowed (or rather, forced) to tax deposit accounts over $100,000 (to the tune of 40%!) to satisfy bailout demands, then what's to stop a similar taxation of deposits in the riskier banks in France, Spain, Italy, and Greece?
As the Euro picture darkens, so the US picture brightens. Today's durable goods and housing numbers lend credence to a strengthening economy. Riding this wave of optimism is the Gaming etf (BJK)
which broke out of a two month base to a new multi-year high. As long as consumers have (or think they will have) more money to spend, this completely discretionary group should continue to hit the jackpot. Quick Trade of the Day: Mazor Surgical Robotics catching the eye of Wall Street
Via its Renaissance technology, Mazor Surgical Robotics (OCTF:MZRTF, $3.67)
is an Israeli based biotech company that, according to its website : is transforming spine surgery from freehand operations to highly-accurate, state-of-the-art procedures, with less radiation--even for minimally invasive surgery. Based on surgeons' experience with SpineAssist and thousands of procedures worldwide (over 15,000 implants), the new Renaissance Guidance System is powered by Mazor Robotics' clinically validated technology.
On February 4th, the stock broke out and volume has been very heavy since then. Clearly, the stock caught the eye of at least one big player and is under accumulation. At this point, the buying pressure doesn't appear to be easing. Note that the stock has gained over a buck since its breakout (+64%) so it could be subject to some consolidation soon. Despite a marked increase in volume, the average daily tally is still only 36k so please use limit orders Note that this is a fairly speculative trade so please play accordingly (i.e., with discretionary funds). Subscriber Notes: There is one new Stock Darling and one new Stock of the Day. 1:00 pm ET: Intraday support/resistance:
VIX 12.4/13.6 (falling VIX is bullish)
Trin range: 0.85 - 1.1 (falling Trin is bullish)
Average VWAPs: +51/-31 (neutral to bullish) March 25, 2013 4:00 pm ET:
Oh dear, it appears as if the Sell in May scenario may play out sooner than expected. While the market is still with the bulls, the internals are showing that the bears are growing increasingly restless. Today's rise in the VIX (volatility) is being supported by the Trin, and the VWAPS (a measure of institutional trading) is showing a marked increase in selling pressure. The big tech names--Priceline (PCLN), Google (GOOG), and Apple (AAPL)--were the day's biggest losers
as the Technology etf (XLK)
closed in on $30 support. A break below that could spell the beginning of the end of this rally. Today's trading highlights & lowlights The sun may be setting on solar
as two Solar etfs (KWT & TAN)
both pierced resistance levels. This energy group (sometimes classified as a subset of the semiconductor space) has been fizzling out for a while and today's action only served to increase downward momentum.
The good news is that gains were seen in a few industry groups.
The first is in the consumer staples sector where food manufacturers (which is really what most of them are, sadly) and retailers worked to extend recent rallies. Some issues are getting long in the tooth but shares of Post (POST, $43)
and Ingredion (INGR, $71)
continue to press higher.
Real-estate also continues to attract investor attention. Many of the names in this group are structured as REITs (real-estate investment trusts) and as such they pay dividends. My favorite three names making the new highs list based on chart technicals are Franklin Street Properties (FSP, $15), Medical Properties (MPW, $16)
, and Ramco-Gershenson Properties (RPT, $17)
. They all have dividends yielding in the 4-5% range.
The last group getting bid up are small media names. Scripps (SSP, $12), LiveNation (LYV, $12), Nexstar (NXST, $18), Sinclair Broadcasting (SBGI, $19),
and Navarre (NAVR, $2)
all broke recent resistance to hit new yearly highs. Two of today's biggest gainers were Navarre and Entravision both of which rallied nearly 9%. Entravision (EVC, $3)
, a Spanish radio and TV broadcaster, has been soaring since its recent earnings announcement. It trounced analysts' estimates by solidly beating on both the top and bottom lines. Since then, volume has been exploding as Wall Street takes notice. However, I'm not sure how much longer this momentum can be sustained and I'm thinking that part of its rally could be fueled by take-over expectations. If you do wish to take a long position (after doing your due diligence), I'd start small and build from there--just in case. Subscriber Notes:
There is one new Stock Darling. 1:10 pm ET: Intraday support/resistance:
VIX 12.4/14.6 (rising VIX is bearish)
Trin range: 1.1 - 1.7 (rising Trin is bearish)
Average VWAPs: +21/-120 (bearish) March 22, 2013 4:00 pm ET:
Although the major averages are ending the week on a positive note, they're still down overall from last week. The good news is that the Transports (DTX) are on the rise clearing the way for the next leg up in the rally. The VIX is still in the bullish zone albeit elevated from its previous low. This is actually good news because it gives the upcoming rally room to run--sort of like letting out a notch in a belt to make room for that Thanksgiving turkey dinner. Of course, all bets are off should we receive more negative surprises from the Eurozone (or elsewhere) over the weekend. Follow up to yesterday's trade: Shippers continue their ascent
It sure looks as if the oil tankers and marine dry shippers are heck-bent on rallying after yesterday's positive forecast coming from the shippers themselves at yesterday's analyst conference. The Shipping etf (SEA, $17.70)
rallied enough today to break out of a two month base. Note that the stock faces major resistance at $18; a move above that would be very bullish. Trade Talk: A small stock under heavy accumulation
A rising cumulative increase in daily stock volume means that the company has piqued the attention of major institutions signaling continued money flow into the issue. One stock that has been gaining traction on a heavy increase in volume is PGT Inc (PGTI, $8.10).
This company makes residential impact-resistant windows and doors. On February 21st, the company reported better than expected revenues and earnings. The above chart shows that it was just this news that aroused institutional interest. Since then, the stock has gone on to gain 62%. Volume still appears to be strong and with expected growth in the housing industry, we could see more upside. However, the stock is trading at a fairly rich P/E but if earnings continue to grow, that shouldn't be a deal-breaker. The bigger problem is that the stock has risen so far so fast and a period of much-needed consolidation could well be in the cards. No matter, investors may wish to keep an eye on this issue and perhaps begin building a position.
Next week we'll look at another new issue under heavy accumulation. Subscriber Notes:
There are no new entries. 1:25 pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.0
Average VWAPs: +56/-34 March 21, 2013 4:00 pm ET:
Yesterday, we noted that the negative divergence between the Dow Transports (DTX) and the other major averages signaled the probability of further decline and the augur didn't let us down. Today's slump is actually good for the market. The internals are mildly bearish and we could see more downside tomorrow. It's very possible that the DTX could retrace to the 598 support level before turning around. We'll know soon enough! Today's Trade: Shippers on the move
One of today's market movers was the shipping industry. Big gains were seen pretty much across the board with the following names breaking out to new highs: Diana Shipping (DSX, $9.60), Global Ship Leasing (GSL, $4.20),
and Navios Maritime (NM, $4.50)
. All of these issues rallied 4%-5% on twice normal volume, but that was nothing compared to Overseas Shipping (OSGIQ, $3.30)
which jumped over 50% on ten times normal volume to fill the gap created last October.
The reason for today's mega-move was the direct result of a shipping conference being held in New York. From Thompson-Reuters:
Analysts attending the Capital Link shipping conference in New York said there was a very positive talk on product tankers. Demand for these ships, which transport oil from refineries to consuming markets, is expected to rise, an analyst said. This is lifting the shares of crude oil and dry bulk transporters, he said. Moreover, investors at the conference think rates might be near the bottom as fleet growth slows, another analyst said.
These are certainly positive comments and it's no wonder that investors were piling into the stocks today. This is one transport group that is not even close to being over-extended and I think adding one or two of these issues to a portfolio would be a prudent move. For those of you who prefer investing in a basket of stocks, check out the Shipping etf (SEA, $17.56)
. One nice feature of this fund is that it pays a dividend which is currently yielding 3%. Subscriber Notes:
There is one new Stock Darling. 2:10 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.3
Average VWAPs: +28/-97 (bearish) March 20, 2013 4:00 pm ET:
It appears as if the Street was expecting a bit of bearish bias in today's Fed commentary but the fact that it didn't get it sent the major averages mildly higher. All of the major indices with the exception of the market-leading Dow Transport Index (DTX) appear to be on track to close in the green. That sounds good but the fact that the DTX isn't following suit could mean that more consolidation is in order. The precipitous drop in the VIX (volatility index) is saying that investors are figuring that the Cyprus headache is under control, at least for the time being. With many sectors still gaining traction, it appears as if the bulls are preparing for another rally starting very soon. I do think that if the market turns lower tomorrow, this could be one of the last buy the dip opportunities for a while. Trade Notes: Build your portfolio with housing stocks
It's just insane how bullish anything related to housing is right now--home builders, home building suppliers, home furnishings, lumber, and even the transports to haul all of this stuff. Seriously folks, you need to put some home-related issues into your portfolio right now especially considering that housing is starting to heat up. I can't tell you which ones to buy but here's a sampling of stocks breaking out to new highs today (and all of these are definitely worth closer scrutiny): Homebuilders:
Standard Pacific (SPF, $9), D R Horton (DHI, $25), KB Home (KBH, $22), Lennar (LEN, $43) Building Products:
AAON (AAON, $27), Fortune Brands (FBHS, $38), Lennox Int'l (LII, $65), Masco (MAS, $21), PGT Inc (PGTI, $8) Home Furnishings:
Ethan Allen (ETH, $32), Leggett & Platt (LEG, $33), Williams-Sonoma (WSM, $50)
Earlier, Williams-Sonoma (WSM) reported better than expected Q4 earnings and raised its dividend, causing its stock to break out of a seven month trading range. It shot up 10% on seven times normal volume. This appears to be the beginning of another leg up in its rally but you may want to wait a couple of days for today's gains to consolidate before entering into a position. If you don't have the time nor the energy to select individual issues, you may wish to consider buying the homebuilder etf (XHB, $31)
which also broke out to a new high today. Many of the above issues pay a dividend, albeit small ones. (The largest is Legget & Platt with a yield of 3.5%.) Subscriber Notes:
There is one new Stock of the Day. 2:10 pm ET: Intraday support/resistance:
VIX 12.2/13.2 (falling VIX is bullish)
Trin range: 0.65 - 1.0 (rising Trin is bullish)
Average VWAPs: +59/-30 (mildly bullish) March 19, 2013 4:00 pm ET:
Well, it certainly appears that the market is indeed consolidating and judging from the rise in the VIX along with a relatively low Trin, we're likely to be in for more downside. But it's not time for the bears to start partying as internals are still bullishly biased. There are plenty of stocks that are advancing as both bond and sector rotation continue. You frisky bears can feel free to take a few small short positions but you'd better watch them like a hawk and be prepared to exit on a moment's notice. I still think the S & P 500 (SPX) will make another run towards its all-time high of 1576 before the sell in May and go away mentality kicks in. Trade Note: Sweet talkin'
Shares of Tootsie Roll (TR), Hershey's (HSY)
, and J&J Snack Foods (JJSF)
got a sugar rush today as investors bid them up to new yearly highs (all-time highs for Hershey's and J&J Snacks). It's interesting to note that while many Americans are trying to slim down, the stock of snack food makers are rallying. I'm not quite sure what this means but the charts on all of these are bullish. The only major technical hurdle appears in the chart of Tootsie Roll. It's closing in on $30 which is an area of major resistance. However, should it manage to hurdle that (and I think it will), I'd expect it to continue rising to $40 at least. Both HSY and JJSF pay dividends yielding around 1%; the yield on HSY is close to 2% and it's the only one of the bunch that has options. The near-the-money strikes are quite liquid making it a good candidate for a covered call strategy. Subscriber Notes:
There is one new Stock Darling. 1:50 pm ET: Intraday support/resistance:
VIX 12.9/15.5 (rising VIX is bearish)
Trin range: 1.0 - 1.5
Average VWAPs: +20/-123 (very bearish) March 18, 2013 4:00 pm ET:
The market took a dive this morning apparently on the news that Cyprus may seize deposit funds held in its banks to help finance a bailout. Apparently the folks who thought up this plan didn't think that it could shake up investors across the globe who fear that if it happens in Cyprus, it could happen anywhere. Should it prove to be the case, then the only safe place for cash is indeed in the mattress. But should one take today's announcement from a tiny island seriously or should it be lumped into the Mouse That Roared category?
Well, if anyone is to have any faith whatsoever in a country's banking system, this proposed solution can't even be entertained. Perhaps that's what more rational heads were thinking as the major averages began retracing their opening losses. The advancement lasted until the credit markets closed after which another sell-off occurred. I do think, though, that mixed in with today's headline news is the beginning of a much-needed consolidation which we noted here on Friday. Today's pop in the VIX (volatility index) underlined the headline risk jitters but at 13 and change, it's still well in the bullish zone, so don't fret just yet! Trade Notes: Coffee & CowsToday's trading theme was risk-off
meaning that bonds and the greenback did well at the expense of pretty much everything else. Getting a really big boost today were muni bonds. They've been unloved as of late and perhaps today's 1% to 3% rally is a sign of an impending comeback.
Commodities for the most part did not fare well at all. Industrial metals were among the worst performers
: Base Metals fund (DBB, -2%), Industrial Metals fund (JJM, -2.3%), Nickel (JJN, -2.9%), Copper (JJC, -3%), Aluminum (-3%),
and Tin (JJT, -4.5%)
. In agricultural commodities
, both the Livestock etf (COW)
and the Coffee etf (JO)
slid to new all-time lows (since 2008 inception). If you're too chicken to short either of these latter two, stick them on a watchlist in the event of a turnaround. Subscriber Notes:
There's one new Stock Darling 1:30 pm ET: Intraday support/resistance:
Trin range: 1.0 - 1.4
Average VWAPs: +55/-47 (bull/bear struggle) March 15, 2013 4:00 pm ET:
The major averages have finally decided to take a step back to digest some of their recent gains. The bears are starting to make their presence known but I don't think they'll be stepping into the drivers seat soon. Why? Well, the VIX is still siding with the bulls and the Dow Transport Index (DTX) remains resilient under pressure. The SPX is closing in on its all-time high of 1576 and a break above that would signal another leg up in the rally. However, a rejection of this level could spell a minor correction. Judging from the previous two consolidation phases in mid-December and mid-February, we could see a 3% cut in the S&P bringing it back to the 1525 level. For this rally to continue, though, we will need to see some consolidation and today's swoon could be the start of it.
On a side note, a guest on CNBC earlier said that he's projecting 2013 earnings on the S&P to be around $113. Using a conservative P/E ratio of 15 for the index gives a target price of 1695 which is more than 8% above today's level. Using a less conservative but still realistic value of 16 gives a target price of 1800, representing an upside of 15%--yowie! Just some numbers to keep in mind should the S&P break above this critical mark. Trading Notes: Aero & defense stocks attaining lift-off
It appears as if investors believe that sequestration is no big deal, at least when it comes to aerospace and defense contractors. The Powershares Aero & Defense etf (PPA)
has been in a steady melt-up since last June, gaining over 25% in value. Individual names are also springing to life. Breaking out to new highs today are the following: L-3 Communications (LLL, $81), Orbital Science (ORB, $16), Keyw Holdings (KEYW, $15), Precision Castparts (PCP, $194)
, and Hexcel (HXL, $30)
. All of these companies are involved in different areas and I can't really recommend one over the other. Technically, their charts are all very bullish. The best chart from a historical perspective belongs to PCP. Since its low of $6 in 2000, the stock has gained an astounding 3100%! Now it may not continue to appreciate at this rate but analysts still really like it giving it a mean recommendation of 1.8 (on a scale of 1.0 being a strong buy and 5.0 being a strong sell). A UBS analyst recently upgraded the stock and the mean analyst price target is $219, about 13% above current levels. Whichever company/companies you choose to invest in, adding one or two of these names would be a great addition to any portfolio, even one that is semi-conservative. Of the above mentioned issues, only L-3 pays a meaningful dividend (2.7%).
Enjoy your weekend and have a great St. Paddy's Day, begosh & begorrah! Subscriber Notes:
There are two new Stock Darlings. 1:30 pm ET: Intraday support/resistance:
Trin range: 1.0 - 1.4
Average VWAPs: +55/-47 (bull/bear struggle) March 13, 2013 4:00 pm ET:
Much better than expected retail figures gave a boost to the market, as if it needed it. While the Dow Industrials (DJIA), the S&P 500 (SPX), and the tech-heavy Nasdaq continue to consolidate, the market leading Dow Transport Index (DTX) took off again, ending the day up over 1.6%. Volatility settled back under the ultra-complacent low level of 12 putting our previous prognostication of a retest of the 10 level back on track. Honestly, this market is so bullish it's starting to scare me! Bull Market Trading Tip: Buy stocks with cash-secured puts
I've been looking for some interesting long stock recommendations to pass on to my readers but there are so many good picks out there (especially in foreign companies) that I'm having a tough time selecting just one or two. Rather than making a specific recommendation, I'd like to remind those of you familiar with options trading that you can sell cash-secured puts as a way to lower your cost of entry while also generating cash into your account
To those of you unfamiliar with this method of buying stock, what it amounts to is selling a put option (usually the front-month put) at a strike price where you would be happy to own the stock. Let's use Microsoft (MSFT, $27.92) as an example. Say you'd like to purchase 100 shares of the stock. Instead of shelling out $2792 for the stock, you sell one April 27 put for $0.25. Since one options contract represents 100 shares of stock, you're immediately bringing in $25 ($0.25 x 100) into your account (less commission costs). There are two catches to this strategy: 1. Should the share price fall below $27, you have the obligation (not the right) to buy the 100 shares of stock at $27, and; 2. You need to have $2700 of cash available in your account in the event that the stock is put to you. In any case, your cost basis is lowered from $2792 to $2675 ($2700 for the stock put to you less the $25 you took in from the sale of the put) resulting in a savings of $117 (again, not including commissions). Should the option expire out of the money (meaning the strike price is lower than the stock price on the expiration date), you get to keep the $25 that you took in from the sale of the put. Sounds great but remember that you also risk losing out on any price appreciation in the stock during the time you hold the put. Options trading is a two-edged sword!
If you're interested in this method of buying stocks, you'll need to familiarize yourself with options trading and tell your broker that's what you intend to do. As always, paper trade any new strategy before taking a position (and start small, please). 1:50 pm ET: Intraday support/resistance:
Trin range: 1.0 - 1.4
Average VWAPs: +65/-27 (bullish) March 12, 2013 3:45 pm ET:
The major averages decided to take a little break today and all I have to say is that it's about time. It's been nearly two weeks since the S&P 500 (SPX) has had a down day. The legs of this rally are getting long while the distance between the SPX is widening, two signs that market could be ready to consolidate. Today's tell came from the sharp rise in the VIX (+8%). This could be just the pop that refreshes or it could signal that a reversal is imminent. The only thing keeping me optimistic in the short term is that Dow Transport Index (DTX) is bucking today's down-trend. We could see it move right back up tomorrow to possibly retest its all-time high near 620. For right now, the place to be is still on the long side. Trade Update: M&A Arbitrage:
On December 27th, we noted a juicy M&A play involving an $8 per share all cash bid for BCD Semiconductor (BCDS). At the time, BCDS was trading for around $7.35 which is the price I paid for it. The acquisition was completed last week (March 5) and $8 per share was deposited in my brokerage account for a realized return of 8.8%. These M&A arbitrage deals are typically very low risk and as such they usually don't come with such a high return, but sometimes one gets lucky. I'll let you know if I stumble across any more. Subscriber Notes:
There's one new Channeling Stock. 12:55 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.15 (neutral)
Average VWAPs: +32/-43 (neutral) March 11, 2013 4:00 pm ET:
Just when you think the market internals can't get any more bullish, the volatility index (VIX) dives to its lowest level in six years. This is good news for the bulls, at least for the near-term. Despite the fact the VIX is now under 12, it still has a ways to go to test its all-time low at 10. I do believe it could easily reach this level if and when the S&P 500 (SPX) tests its all-time high at 1576. Right now the SPX is only 22 points away from doing just that. Judging from the average velocity of this rally (2.6 pts/day since the Nov. 16th low of 1360) we could see the SPX reach this level in 8 - 10 trading days. Till then at least, the bulls can keep their party hats on. Trading Note: Bank stocks on the move in the land of the Rising Sun
Japan's recently elected Prime Minister Abe is vowing to keep his promise of stimulating his country's moribund economy via mechanisms such as expanding the money supply and putting downward pressure on the yen. The move appears to be working as Japanese stocks are heating up. Today, Japanese bank stocks were lighting up the leader board
: Mitsubishi (MTU, $5.97, +5.7%)
and Sumitomo (SMFG, $8.68, +5.6%)
lead the way as they broke out to new yearly highs. The other major player in this group (that trades as an ADR here in the US) is Mizuho (MFG, $4.55, +4.8%)
which is close to testing its recent high. All of these stocks are 60-70% below their 2006 peaks so they've got lots of room to run. As long as the government sticks to its current expansionary policies, banking coffers via increased deposits and loan activity should continue to swell. All of these stocks sport low P/E's (MTU +12, SMFG +8, MFG +8) and all pay dividends in the 2-3% range. They all offer options but they are thinly traded. Hey, with the current share price so low, why even bother? Subscriber Notes:
There's one new Stock Darling. 1:30 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.8 (bullish)
Average VWAPs: +59/-26 (mildly bullish) March 8, 2013 3:15 pm ET:
Today's unemployment figures were much better than expected but this good news was tempered by a downgrade in Italian debt. While economic figures here point to growth, it doesn't appear to be the case in Europe which is still trying to recover from its own financial crises.
Many financial pundits are now predicting an explosive bull market but there's one big technical hurdle that needs to be cleared first. You can see from the quarterly chart of the S&P 500 (SPX) above that we're on the verge of testing a double top. This chart pattern is viewed by technicians as a major event. If the stock is able to break above the previous two highs, this will open the gate for a bullish stampede. However, should the opposite happen, we could very well see a decline back to the 800 level, opening up the gate for a bearish stampede. We should know one way or another soon, possibly even within a week. You can't say that we're not living in exciting times!
That's it for now. Must dash to a meeting. Have a good weekend and don't forget to turn your clocks forward this Saturday night! Subscriber Notes:
There's one new Stock of the Day. 1:30 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.2 (neutral)
Average VWAPs: +49/-29 (mildly bullish to neutral) March 7, 2013 3:45 pm ET:
Well, yesterday's prediction turned out to be half right and half wrong. The market did rally on the open yet it was only the Dow Transport Index (DTX) that was unable to keep the ball rolling...but it appears as if it, too, is beginning to pick up some steam going into the close. Volatility continues to fall and the Trin has moved out of contrarian territory meaning that further upside is in the cards--providing the unemployment rate doesn't come in and stink up the joint tomorrow morning. Trade of the Day: Banking on Banks
With the Fed's printing presses still operating in overdrive, much of this money is going directly to banks which is fattening up their coffers. The financials as a whole have under-performed the rest of the market but that situation has been changing as investors look for value. The banks as a group sport a collective P/E of 12--that's 25% below the historical P/E of the S&P 500. All of this free cash means that banks will be looking to do something with it. Sure, making loans is one way to distribute it, but they may also use a portion to add share value via such mechanisms as stock buy-backs and dividend increases.
You can play the expected rise in share price by literally throwing a dart at a board of bank names or you can buy a basket of them via bank etfs. Two regional bank etfs (IAT, $26) & (KRE, $31)
broke out to new multi-year highs today on heavier than normal volume as did the bank etf (KBE, $27)
. All three of these pay a dividend just under 2% and all are optionable. A covered call strategy on any of these etfs could be a nice way to profit from the expected price appreciation in this group
. Subscriber Notes:
There's one new Stock Darling. 1:30 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.9 (bullish to neutral)
Average VWAPs: +45/-51 (bull/bear struggle) March 6, 2013 3:50 pm ET:
This is one of those days where there's not a lot to say that hasn't been said before. There is one thing, though, that is worthy of note: the topping tail on the Dow Transport Index (DTX). Regular readers of this column know that the DTX is considered a leader in market direction and also know that a topping tail indicates that buying pressure is drying up. What this means is that the market appears ready to take a breather. Supporting this notion is the rise in the volatility index (VIX) and the fall in the Trin (Arms Index) to contrarian levels. Sure, the market may rally on the open tomorrow but I do not think such a rally can be supported. Now would be a good time to book some profits especially in issues that have enjoyed a nice run-up.
Remember that the unemployment claims number will be released tomorrow and the unemployment rate on Friday (both before the bell). Wall Street will be watching both of them closely. An unexpected rise or fall especially in the unemployment rate could be a significant market mover. Just so you know.
That's about it for now. Subscriber Notes:
There's one new Channeling Stock. Please note that in the next few days i'll be weeding out plays from the Stock Darling and Channeling Stock databases. 1:15 pm ET: Intraday support/resistance:
Trin range: 0.55 - 0.7 (bullish to contrarian)
Average VWAPs: +38/-55 (mildly bearish) March 5, 2013 4:00 pm ET:
In case you didn't tune into any media source today, you may not know that the Dow Industrials (DJIA) set a new all-time high. The really bullish news, though, was the fact that the Dow Transport Index (DTX) lead the pack with a gain of nearly 1.5%. The fact that the DTX is still leading augers further upside movement. Adding more fuel to this rally is the Trin (Arms Index). It's been moving in a bullish range (under 1) and has yet to move to down to a contrarian level (around 0.5 and below). And if that isn't enough to douse the last smoky wisp of the bears' campfire, today's rally was fully supported by the financials, consumer discretionary, and tech. This rally is so bullish it's beginning to make me just a little nervous! Market Leaders & Laggards:
Pretty much everything today was coming up green--it appears as if spring has indeed sprung, at least on Wall Street. Benefiting from the rotation out of low-yielding bonds have been the equity-based dividend exchange traded funds
in particular. They've been on a roll for some time but today many of these issues gapped the barrier of recent resistance to hit new highs: VIG ($65, 2.2%), SDY ($64, 3%), VYM ($54, 3%), DON ($63, 3.3%), DVY ($62, 3.4%), PEY ($10, 4%), DTN ($60, 5.4%), DTD ($58, 5.6%).
(The first number is the share price and the second is the dividend yield.) These funds certainly look tempting but just remember that if the market trips and tumbles, so will these.
Apart from the continuing slide in gold and silver mining stocks, the rest of the market did quite well. However, bearish topping tails
were spotted in Timber (CUT), Biotech (FBT, BBH, IBB),
and Pharma (PJP).
All of these exchange-traded funds have had long runs and these topping tails are indications of weakening buying pressure. If you have a long position in any of the aforementioned, now is the time to either shore up your position, set a trailing stop/loss, and/or buy put protection. One of the biggest caveats in trading is to never let a winning position turn into a losing one. That is the definition of heartbreak. Subscriber Notes:
There's one new Stock Darling and one new Stock of the Day (a short write-up will follow). Please note that in the next few days i'll be weeding out plays from the Stock Darling and Channeling Stock databases. 1:35 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.8 (bullish)
Average VWAPs: +74/-33 (bullish but bears are still hanging around) March 4, 2013 4:00 pm ET:
It's nice to come back from vacation to a bullish market! It appears as if we're on track for all-time closing highs in both the Dow Transports (DTX) and the Dow Industrials (DJIA). The internals reflect today's bullish mood with the volatility index (VIX) shedding nearly 7%, moving back under the line of complacency at 15. Because the DTX is considered a leader in market direction, I'm expecting the party to continue through tomorrow at least. The Trin is still relatively high seconding the notion that today's rally has legs.
Moving the market is the ongoing sector rotation out of bonds and commodities (especially energy and metals) and into utilities, consumer staples, consumer discretionary, and the greenback. In fact, both the consumer staples etf (XLP)
and the consumer discretionary etf (XLY)
appear to be closing at their all-time highs, too. Noteworthy highs & lows:
were among today's biggest gainers with the following stocks breaking out to new highs: Republic (RJET), United/Continental (UAL), Delta (DAL), Alaska (ALK),
and Skywest (SKYW)
. All of these issues were up 4-5% which are big gains in this industry group. The airline etf (FAA)
also broke out to a new high, rising 3% on the day on quadruple normal volume. This industry group should continue to do well especially if energy prices continue to fall.
Moving to the dark side, gold and silver miners
continue their slide with many putting in new yearly lows. The gold miner etf (GDX)
and the junior gold miner etf (GDXJ)
continue to dig deeper into the hole. Both shed over 3% today as their downward momentum appears to be accelerating. As my regular readers may recall, on January 24th I recommended a pairs trade: going long the transports (IYT) and shorting either the GDX or the GDXJ. Had you done that at the day's closing prices, you'd be up 3.5% on the long (IYT) side and up a whopping 17% on the GDX short and 22% on the GDXJ short. True, the gain on the long side isn't much to brag about but the gain on the short side sure is. If you're still holding on to these, do start setting trailing stops to protect profits. Subscriber Notes:
There's one new Stock Darling. Please note that in the next few days i'll be weeding out plays from the Stock Darling and Channeling Stock databases. 1:25pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.0 (neutral)
Average VWAPs: +61/-46 (bull/bear battle) February 25, 2013
The Stock Market Cook Book is on vacation until March 5th when the blog and Subscriber Services will resume. See y'all next week!
February 22, 2013
4:00 pm ET: Apparently, two days was all the respite the bulls needed before charging right back. The VIX fell back down to its previous level signifying investor complacency. From the looks of it, there are no sequestration fears here. Well, not yet anyway. I've spent the entire morning rooting around trying to find something interesting to write about. Other than the fact that high-end handbag and accessories maker Coach (COH) made the Yearly Low list on no news, there's not much else to report. Have a good weekend!
Note: There will be no blog next week as I will be on vacation. 1:30pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.25 (neutral)
Average VWAPs: +57/-34 (mildly bullish) February 21, 2013
4:00 pm ET: Yesterday's market sell-off was extended today but buyers eventually stepped in pushing the major averages back up. Although it's unlikely any of them will close in the green, the Dow Transport Index (DTX) is leading the charge. That's the good news. On the downside, the volatility index (VIX) hurdled past the 15 mark--the first time since the beginning of this year. On the one hand, there's the good news and on the other, there's the bad news. Is there anything we can infer from this? Well, obviously we can infer that there's a struggle between bulls and bears. Bears can cite the upcoming sequestration as a reason for a continuation to the downside while bulls can cite the fact that many Congressmen and political pundits are saying the fear of sequestration is over-blown. It seems like it comes down to whom you believe. Recent economic numbers, too, have been contradictory--is the economy on the verge of further expansion or is contraction setting in? Also weighing in on the minds of investors is the possibility of an increasingly hawkish stance by the Fed despite the fact that Bernanke & Co. said that they would keep rates low at least until unemployment falls below 6.9%. Historically, the Fed hasn't always kept its word and people know this A possible change in stance regarding further quantitative easing has many worried that this could trigger hyper-inflation. Not being an economist, I can't say that I side with them but if this scenario does pan out, the stock market ain't the place to be, and that is one thing I do know. Although the threat of hyper-inflation may be real, the likelihood of it actually occurring is not set in stone. However, it's something that will be lurking in the back of the minds of investors which could easily add to market anxiety, the result being an increase in volatility. The take-away here is to note these possibilities so that you can prepare for them. As my mother always said, fore-warned is fore-armed. Subscriber Notes: There is one new Stock Darling--a great long-term hold that pays a dividend and is one of those steady-eddy stocks that can be used as a source of steady income by writing covered calls. 1:25pm ET: Intraday support/resistance:
Trin range: 1.3 - 1.75 (bearish)
Average VWAPs: +38/-79 (moderately bearish) February 20, 2013
4:00 pm ET: The major averages finally took a much needed coffee break. Following a slide after the open, buyers stepped in reversing the downward movement. But the rally was cut short when the minutes of the previous Fed meeting were released at 2pm ET. Judging by the precipitous drop, one would think the Fed was thinking of raising interest rates but in actuality, the Fed merely hinted that some members may be thinking of changing their stance regarding current quantitative easing policies. Just the whiff that money printing may come to an end sometime in our lifetime was enough to spark a broad-based sell-off. Not only did the major averages manage to erase recent gains, but the VIX shot up reflecting increasing apprehension on the part of investors. Lately, what's been good for stocks and commodities has been bad for the dollar and treasuries, and vice-versa. So it's not surprising to see the dollar and treasuries strengthening as stocks and commodities sold off. Does this mean there's more downside for the market? If the Dow Transport index (DTX)--a leader in market direction--breaks current support at 590, then I'm afraid we could see a further decline. Right now, the VIX is still below 15 which is still bullish but another move like today's will move the mood-meter towards the neutral zone. Trade of the Day: Silver wary
Stocks may find a bottom in the near-term but I'm afraid that holders of precious metals will experience more pain. The financial media made a big deal out of today's death cross in gold (see below), but technically silver was the biggest loser as its exchange-traded funds all broke support/resistance levels. If you want to take a speculative position on the further decline in silver, I'd recommend taking a short position in a silver etf such as the SLV or a long position in the levered bear etfs such as ZSL or DSLV. Please note the perils of levered etfs and trade accordingly. (SeekingAlpha.com has some excellent articles on this subject.) Currently, the SLV is trading at $27.6. It's next support level is at $26. The options field for the SLV is very liquid so options traders may wish to consider a put position. (Note: A death cross is when the 50 day moving average crosses below the 200 day moving average; a golden cross is just the opposite.) Subscriber Notes: There are no new entries. 1:25pm ET: Intraday support/resistance:
Trin range: 1.0 - 1.95 (rising Trin is bearish but it's getting into contrarian territory)
Average VWAPs: +32/-67 (moderately bearish) February 19, 2013
4:00 pm ET: The market is firing on all cylinders and the bulls are firmly in the drivers seat. The Dow Transports continue to lead the market and as long as the VIX stays low, it's clear sailing for a while. Enjoy this good market weather while it lasts! Trade of the Day: Is Groupon the Deal of the Day?
As my subscribers know, we've been bearish on online discount retailer Groupon (GRPN) since it was recommended as a short on April 12, 2012. At the time, the stock was $15.28. It proceeded to sink until it hit bottom on November 13th at a price of $2.63—a drop of 87%! Since then, the stock has been clawing its way back to just under $6 and if it can manage to close over that level, further upside is likely. Why am I switching my stance? For two reasons, but first a little background. The stock was recommended as a short because of the high expectations in the minds of investors and, more importantly, the business model's low barrier to entry. While other web entities such as Living Social and Amazon's Daily Deals have been going head-to-head with Groupon, the fact that Groupon has been able to not only hang in there but attract new users (including yours truly) is worth noting. An increasingly loyal user base is being reflected in the company's firming fundamentals: EPS and sales are both rising and the company expects earnings to rise by 41% next year before leveling off. Apparently, an analyst at Stern Agee agrees with management's rosy prognostications and upgraded it to a Buy with a $9 per share price target. The technicals are also very compelling. Take a look at the above chart and if you're a chartist, you'll notice the completed inverse head-and-shoulders pattern along with a nearly completed island reversal. For the reversal to be complete, the stock price not only needs to jump over the $6 mark but close over it, too. If that happens, then we'd have two powerfully bullish technical indicators bolstering the long side. Analysis of the head-and-shoulders pattern gives an expected minimum price target of $8.40. If it bests that, look for resistance at the $9 and especially the $10 levels. There are a couple of caveats to this trade. The first is that I wouldn't even think about taking a long position until the stock closes above $6 as mentioned above. The second is that the company reports earnings next week on February 27th after the bell. Disappointing numbers could tank the stock and conservative investors may wish to wait until after that date before taking a position. However, I'm thinking that the company may well beat the numbers in which case the stock could jump. If you're a gambler and are familiar with options, taking a small long position (such as a call spread) could be a profitable play with limited downside. Also, folks wishing to buy the stock at a discount could sell cash-secured puts. (The March 5.5 put is going for 37 cents.) The good thing about Groupon options is that they are fairly liquid. Subscriber Notes: There are no new entries. 1:15pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.05 (falling Trin is bullish)
Average VWAPs: +57/-46 (bulls & bears both on the prowl) February 15, 2013
4:00 pm ET: The Dow Transport Index (DTX) is finally looking a little tired, if the extended topping tail on its candlestick chart is any indication (and it is). The market has been in consolidation mode for the past week and it's now looking as if it's finally ready to take that break we've been talking about. The VIX (volatility index) today tested its multi-year low put in last month and I suspect we could see a mild rebound off this level as the major averages take their break. But is this extremely low VIX telling us that we've reached *the* market high? I don't think so. Look at the quarterly chart of the VIX above and you'll see that there's still some downside room left. My apologies if I'm starting to sound like a broken record, but I still believe we'll see an S&P (SPX) retest of the 1550-1575 level before any major market correction, and this chart of the VIX is another indication that this scenario can very well happen. It just needs to it before the reality of sequestration sets in on March 1st. Trade of the Day Update: Long Transports/Short Gold miners pairs trade On January 24th I recommended a pairs trade to take advantage of the rotation out of gold and into stocks. Since the Transports have been leading the market, I suggested taking a long position in the transport etf, IYT, either by buying the stock itself or call options, and initiating a short position in the gold miners, the laggards of the gold group. Since then, both sides have paid off. The IYT had the misfortune of taking a breather just after the recommendation, but since then it has come back to post a 1.6% gain. On the other hand, the gold miners have been trending down steadily. The gold miner etf (GDX) is off 7.7%. The junior gold miner etf (GDXJ) sank even more, shedding nearly 11% of its value. As mentioned above, the transports are looking rather toppy and I'd recommend taking your chips off the table and closing out this side of the trade. However, the gold miners still are digging deeper so I'd keep this side open at least until we see something to indicate a reversal in price. That's it for now. Tax season is rapidly approaching--have you organized your tax info and made your tax appointment yet? If not, the upcoming three day weekend is a good time to start. Have fun--I know I will (ugh!). 1:20pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.9 (bearish)
Average VWAPs: +49/-49 (bulls & bears duking it out) February 14, 2013
3:00 pm ET: The market is still managing to melt up, little by little, despite previous attempts at rolling over. The Dow Transport Index (DTX) still won't take a break and we'll likely not see a pull-back until it does. Market internals are all bullish in spite of negative news from the Eurozone indicating systemic contraction. Many market pundits believe the Euro malaise will spread to our shores and it's only a matter of minutes before we begin to feel their pain. Actually, the time frame is more like a couple of weeks when sequestration begins. I believe that time frame is entirely plausible given that it could take that long for the S&P 500 (SPX) to retest its previous two highs in the 1550 - 1575 range. Once it does that, then all bets are off as to which direction it will proceed. The view right now is that down will be the more likely direction. Notable market action: Drilling for profit in oil services stocks
Oil service and equipment stocks (think drillers) have been on a roll. Today, four oil services and equipment etfs hit new highs: SPDR S&P Oil & Gas Equipment & Services (XES), Market Vectors Oil Services (OIH), IShares Dow Jones US Oil Equipment (IEZ), and Powershares Dynamic Oil & Gas Services (PXJ). All jumped by 3%--a gigantic move for these issues. The moves reflect the rallies in their constituent components, most notably Schlumberger (SLB, +4%) and Halliburton (HAL, +7%). The charts of all of these issues suggest there's a lot more upside in the offing and if the opinions of energy experts are to be taken at face value, we can expect the price of oil to continue to rise into summer. We've noted that the market may be due for a correction but that shouldn't hurt energy as its price is independent of the stock market. (For one thing oil prices can't be manipulated by the Fed). Now is the time to move into this group and I'd recommend doing your due diligence before deciding on which stocks or etfs to purchase. Each one of the above mentioned funds are based on different underlying indexes, so be careful! For example, the XES invests in a broadly diversified basket of stocks where no individual component comprises more than 3% of the fund. On the other hand, the OIH and the IEZ are both heavily weighted in Schlumberger (SLB) and Halliburton (HAL). For the OIH, these two stocks comprise a whopping 30% of the fund's holdings and in the case of the IEZ, they make up 25%. All of these etfs pay a dividend, albeit a small one. (The OIH has the highest yield of 0.9%.) The OIH is by far the most heavily traded at over 4M shares per day. It also has a very liquid options field making it a good candidate for a cash-secured put entry and a follow-on covered call strategy. Have a happy Valentine's Day--no calorie counting! 12:35pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.1
Average VWAPs: +71/-45 (bulls in charge but bears are waiting in the wings) February 13, 2013
1:25 pm ET: There's really not much to say about this market other than to repeat what I wrote yesterday: The major averages are looking tired and today are showing signs of cracking. The market leading Dow Transport Index (DTX) has been falling from its early morning high and a close in the red would be a strong sign that the market is ready to take a small correction. As one CNBC Fast Money trader said earlier, if you're sitting on obscene profits (his words), now would be a good time to book them. In spite of his interesting choice of words, I couldn't agree more with his sentiment. Moreover, I do think this impending correction will be a minor one and as such it is NOT the time for bears to initiate any long-term short positions. Right now, parking cash on the sidelines is the most prudent play. That's it for now. Note to Subscribers: There are no new entries but a new Stock of the Day was added a couple of days ago, in case you haven't checked it out. 12:50pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.35
Average VWAPs: +41/-41 (neutral) February 12, 2013
3:25 pm ET: While the S&P 500 (SPX) continues to melt up, the Dow Transport Index (DTX) is stalling. Since the DTX is a leading indicator of market direction, what this stall is suggesting is an end to the current leg in the rally. Don't worry! This doesn't mean that the rally is over; rather that the market is going to take a step back while it digests current gains. Technically, we're probably looking at a retest of the 1495-1500 level on the SPX. This sounds bearish on the surface but it's not--just standard operating procedure. Right now everything is coming up roses for the bulls as strength is seen across all sectors including tech (XLK) and financials (XLF, KBE), both bellwethers of market strength. In fact, this market is so strong that last night's news of North Korea's nuclear test wasn't enough to disrupt today's advance. We'll see if tonight's State of the Union address will have any influence. A short blog today. Got to dash to a meeting... 1:10pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.0 (bullish to neutral)
Average VWAPs: +50/-35 (mildly bullish to neutral) February 11, 2013
4:00 pm ET: The major averages are in stall mode as Wall Street gears up for tomorrow's State of the Union address. President Obama is expected to highlight spending projects to put people back to work which will likely be vehemently and vociferously opposed by the Republicans. Many fear sequestration (the government withholding funds and slashing the budgets of non-exempt programs) but I don't really think this will happen, if history is any indication. When so threatened in the past, Congress has simply increased its budget cap thus solving the problem. (In the sake of brevity I'm simplifying the scenario.) Anyway, many feel that the prospect of sequestration could lead to a market sell-off. Since politics is not my bailiwick, I can't offer my own view. However, it's something for traders to keep in mind. Today's notable market action: Solar stocks shining
Shares of solar chip makers heated up today on the heels of an article appearing in Bloomberg saying that investment in residential solar systems is estimated to balloon from $1.2B last year to $5.7B this year--that's a whopping 375% increase, folks! The news caused shares of Sunpower (SPWR) to not only recover from its post-earnings swoon last Friday (despite the fact the numbers beat estimates yet again) but to set a new yearly high. Shares gained 19% on three times normal volume. Riding the wave were two Chinese solar chip makers Jinkosolar (JKS, +8%) and Renesola (SOL, +7%). Now, the US has a trade tariff against Chinese imports of solar panels but this could be a moot point as the solar panel cost per kilowatt hour output keeps falling. In 2009, the average cost was $1.29; in 2015, the cost is estimated to be only $0.42--that's a two-thirds cut. Further, with the coming explosion in domestic solar energy, US manufacturers may not be able to meet quotas thus paving the way for foreign competition. (Note: I have not researched the expected production figures so I can't state this for a fact.) I do think, though, that solar has a bright future and a careful selection of one or two individual names would make an excellent addition to an investment portfolio with a longer-term horizon (several years at least). The caveat to all those interested in this space is to let the above-mentioned companies be your springboard for further research. There are many players in this field some of whom will probably not be around for the long term. The weaker players will be nudged out and the stronger players will likely be swallowed up by the bigger fish. To be sure, solar energy is an exciting field, but one that is not without industry-specific risk. 1:05pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.9 (bullish)
Average VWAPs: +37/-35 (bull/bear neutrality)
February 8, 2013
4:00 pm ET: The bulls are firmly back in the drivers seat and it's going to take a pretty big crowbar to pry them loose. Both the small-cap Russell 2000 (RUT) and the Dow Transports (DTX) continue to plow into new high territory. I still believe that the S&P 500 (SPX) will test its previous two highs (2000 & 2007) and there's no technical reason to suggest otherwise. Of course, geopolitical events could upset the apple cart and so as always it's prudent to have an exit strategy in place. Today's Market Focus: Is it time to buy insurance?
It's been no secret here that insurance companies have been staging a comeback ever since their near demise during the global financial crisis in 2007. Although they've regained quite a bit of their pre-crisis values, they still have a ways to go. Currently, the P/E (price to earnings ratio) of the insurance industry group stands at 11.7 (according to Yahoo! finance). The Insurance Spider (KIE) is an exchange-traded fund representing a basket of insurance companies. Shown in the monthly chart above, you can see the stock recently broke through $47.50 resistance and is moving on to likely test its $62 high. The stock pays a dividend currently yielding 1.8% and sports a modest P/E of 10, a value slightly under the industry average of 11.7. Obviously, individual insurance names are also doing well. Those with P/E's lower than the industry average may offer extra value to the investor. With that consideration in mind, the names that are breaking into new high territory today are the following: Arch Capital (ACGL, $49): P/E = 9.5 Dividend Yield = 0
Aspen Insurance (AHL, $35): P/E = 9.6, Dividend Yield = 1.9%
Alleghany (Y, $376): P/E = 6.5, Dividend Yield = 0
Primerica (PRI, $34): P/E = 12.6, Dividend Yield = 1.1% Okay, so Primerica's P/E is slightly over the industry average but the stock jumped today on account of a surge in sales as well as being added to the S&P 500. Also, take into account that the insurance industry's P/E of 11.7 is still well-below that of 17.3 on the S&P 500. If you're interested in adding some insurance stocks to your portfolio, I would consider looking at each of these in the order listed. Yes, my assessment is based purely on technicals and in my opinion the chart of Arch Capital is the clear winner. In fact, it's been such a juggernaut that it's been on our Stock Darlings list since last October 1st. (For more info, please checkout our Subscriber Services.) Since then, the share price has appreciated by over 15%! Arch just announced that it is expanding its business by moving into the mortgage guaranty space where it feels it can profit from the rebound in the housing market. To me, this is Icing on the cake. Best wishes go out to you of all on the East Coast. Hope you've hunkered down and can take some time to enjoy the winter wonderland! Don't forget to toss out some left-overs to our feathered and furry friends who may suffer a temporary disruption in their food sources. 1:30pm ET: Intraday support/resistance:
VIX 12.7/13.2 (falling VIX is bullish)
Trin range: 0.85 - 1.2 (neutral)
Average VWAPs: +51/-36 (neutral with bullish bias)
February 7, 2013
4:00 pm ET: The bears tried to move in this morning but the bulls charged right back. Today's session just ended with the major averages still in the red except for the Dow Transports (DTX). The fact this was able to hang in there along with the VIX retreating back under 13 was a coup for the bulls who live to rule at least for another day. Tomorrow morning's jobs report could either fuel the bulls or feed the bears, and whichever way the jobs report goes, so goes the market, I do believe. Today's Most Notable Market Action: Apple (AAPL) shares shot up as company management says it's considering hedge fund manager and major Apple shareholder David Einhorn's request that the company return some of its diamond-as-big-as-the-Ritz cash pile to shareholders. This is certainly a question that many have been asking especially as Apple management has said in the past that they have no definitive plans to use it. Anyway, the news, coming about a half an hour before the closing bell, lit a fire under the stock. This late-day movement accounted for pretty much all of its 3% gain, enough to propel it out of its recent trading range. Looking at its chart, there's a gap it needs to fill between $465 and $485, and if investor enthusiasm continues, it could easily accomplish that. Twenty points sounds like a lot of ground to cover but when a stock is trading at $468 (today's closing price), that's less than a 4% move--easy, peasy. Fun Factoids about Apple
1. Apple generates about $1 million PER HOUR on iTunes sales. (BTW, haven't people heard of Pandora (P), Songza, and Jango? These are all free music services.)
2. Apple is sitting on $137 BILLION in cash. With roughly 939 million outstanding shares, this means that each share has a cash component of $145. So, if you need to know where the floor is on the stock, this is it. Note to Subscribers: There is one new Channeling Stock and one new Stock Darling. 1:30pm ET: Intraday support/resistance:
Trin range: 1.1 - 1.5 (rising Trin is bearish)
Average VWAPs: +54/-48 (bull/bear struggle)
February 6, 2013
4:00 pm ET: It seems as if the bears spent the entire month of January in hibernation, but as soon as February hit, they woke up along with Punxatawny Phil. They've shaken off the snow and are venturing out in search of some market weakness on which to nibble. They're hungry and they're on the move--the bulls had better watch out! How can we tell the bears are back? On the macro level, the daily of chart of the major averages tell some of the story. They've been trading sideways since the beginning of the month and the fact that the daily trading range is so wide tells me that the bears are starting to make their presence known. We also have the fact that the VIX is starting to move out of its range of complacency (above 14). A close above that level for two consecutive days would be further indication that the bulls' strength is weakening. Even so, it's not time yet for them to worry. I do think the market will go higher with an SPX retest of its previous two all-time highs in the 1550-1575 range. If it doesn't manage to best it, that's when the bulls should definitely make their move to the sidelines. Trade of the Day: Countering granite with quartz?
Caesarstone Sdot-yam (CSTE) is an Israeli maker of quartz countertops used in both residential and commercial construction as well as in home-remodeling. Earlier today in its earnings announcement, the company reported a 45% increase in 2012 sales just in the U.S. alone. The good news propelled the stock up 9%. Subscribers to my stock service are already familiar with this company as it was chosen as a Stock of the Day pick several weeks ago on January 18th. Since then, share price has risen 15%. I do think there's a lot more upside as the company continues to grow both domestically and globally. It's expanding production by 15% in its current facilities and is scheduled to open a new production unit in the US by the end of next year. Considering the domestic and global boom in construction and home remodeling and the fact that, well, a lot of people are looking for something more versatile (the color can be customized) and more modern looking than granite, I believe that Caesarstone is poised for growth in the next couple of years. 1:30pm ET: Intraday support/resistance:
Trin range: 0.6 - 1.1 (neutral)
Average VWAPs: +36/-58 (bears starting to get an edge)
February 5, 2013
3:45 pm ET: Following yesterday's sell-off arising from renewed Eurozone concerns, the major averages picked themselves up and marched right back up. Not only did they manage to erase most of yesterday's losses, but the Dow Transport Index (DTX) was able to hit a new all-time high. The DTX is considered by most to be a leader in market direction, so this is very good news for the bulls. The volatility index (VIX) dutifully slid back into its complacency zone under 14 thus keeping the bears in check. Right now, this rally is firing on all cylinders--hope you're along for the ride! Market Highlights: The Thailand fund (TTF) has been on a tear since 2009, gaining a whopping 350% in the interim. However, its rally is looking long in the teeth and may be nearing the end as buying exhaustion appears to be setting in. The recent topping tails appearing in its candlestick chart pattern are evidence of this. Holders of this fund may wish to start booking profits and/or protecting their position. Financials have been making a strong comeback especially JP Morgan/Chase (JPM). Today the stock broke to a new multi-year high ($48) and is close to testing resistance at $50. A break through that could propel it to its next challenge at the $65 level. Conservative investors may wish to consider adding this stock to the financial component of their portfolio (after doing proper due diligence, of course). I was going to insert my Trade of the Day write-up here but because of the number of charts, it'll be appearing in the articles section below. Note to Subscribers: There are no new entries but I'm looking at some Stock of the Day candidates. 1:05 pm ET: Intraday support/resistance:
VIX 13.4/14.2 (falling VIX is bullish)
Trin range: 0.9 - 1.2 (neutral)
Average VWAPs: +52/-35 (mildly bullish but bears are sniffing around)
February 4, 2013
4:00 pm ET: Negative political developments in Europe over the weekend pushed the major averages off a cliff on the open. They managed to find their footing around midday but their slow upward trek was halted as sellers stepped in near the close. Although the market is down, trading volume was light indicating that the bears aren't ready yet to take control. Today's dip could be nice buying opportunity for the bulls but a rising VIX is cautioning me to wait until the market begins to turn up before adding to existing positions or initiating new ones. Market Highlights: The flight to safety trade was in play today with the dollar strengthening against foreign currencies. Many country etfs experienced sell-offs especially the Italy fund (EWI) and the Spain fund (EWP), the two countries that generated this weekend's bad news. Shares of these two issues shed over 5% with both gapping through recent support levels. On the flip side, Japanese stocks got a lift from the depressed yen (caused by forced devaluation by the Bank of Japan), especially Panasonic (PC). Earlier, the company surprised Wall Street by turning a profit mostly due to cost-cutting measures. The good news gave the stock a 12% boost. Competitor Sony (SNE) rode the wave with its shares rising over 2%. Both of these stocks have been on the comeback trail for several months and today's lift only served to reinforce a continuation in upward momentum. However, both do face significant product issues and it's unclear to me how far they'll be able to cruise on yen devaluation alone. If you're looking to get into either of these issues, please do your due diligence and scale into your positions. Note to Subscribers: There are no new entries but I'm looking at some Stock of the Day candidates. 1:30 pm ET: Intraday support/resistance:
VIX 13.8/14.6 (rising VIX is bearish)
Trin range: 0.9 - 1.35 (rising Trin is bearish)
Average VWAPs: +29/-67 (moderately bearish)
February 1, 2013
3:15 pm ET: Dr. Kris is under the weather today so there will be no blog. Hopefully, she'll be back on Monday, bright-eyed and bushy tailed. Have a fun and safe Super Bowl weekend!
January 31, 2013
4:45 pm ET: As predicted, the market took a much needed breather, but considering January's historical gains it's no wonder the major averages are feeling a bit tired. For the record, the advances were impressive: the tech-heavy Nasdaq +2%, the large-cap S&P 500 5%, the blue-chip Dow Jones Industrial average +6%, and the small-cap Russell 2000 +6%. But you know what? These numbers can't hold a candle to the gain in the Dow Transports which saw a whopping 9% return. Can you see why the Transports are considered a leader in market direction? There's a saying on Wall Street: So goes January, so goes the rest of the year. Well, if this January is any indication, the market is poised to rally further. As I mentioned previously, I'm expecting the S&P to test the 1550-1575 level which represents a 3-5% advance above its current level. Scaling into long index positions on market dips would be a prudent investing strategy until the market shows us that it's run out of rocket fuel. Trade of the Day: Investors betting on Macau
Las Vegas Sands (LVS) reported earnings last night and although it missed its earnings estimate, it handily beat on every other number sending its share price up 7% today. Revenues from Macau gaming tables accounted for the vast majority of revenues and 2013 revenues are expected to increase due to the addition of 200 new gaming tables. The company also announced a 40% increase in its quarterly dividend from 25 cents to 35 cents giving a 2.5% yield at current levels. Wynn Resorts (WYNN) just reported earnings. Fourth quarter evenues came in nearly 10% lower than last year's mostly due to a drop in its VIP traffic. For Wynn, this is significant as the $28 billion it earns from its VIP segment dwarfs the $700 million from its mass market segment. Wynn also upped its quarterly dividend, doubling it to $1 per share (3.2% yield). Like LVS, Wynn shares broke out to a new high today, gaining 4%, but because of its rather downbeat earnings report, the stock is trading slightly off its closing price in the after hours session. Today's action in these two stocks was reflected in the Gaming etf (BJK) which broke to a new high. Both Wynn and Las Vegas Sands are major components of this fund which is heavily weighted in companies doing business in Macau--a good thing, at least for now. The fund yields a respectable 3.6% which is sure to rise once the increase in WYNN's and LVS's dividends are included. The trading volume on this fund is low (45k average daily volume), so please use limit orders when trading to take the bite out of a potentially large bid/ask spread. As long as the Chinese keep bellying up to the gaming tables, Macau casinos should continue to beat the house. Note to Subscribers: There is one new Channeling Stock. 1:10 pm ET: Intraday support/resistance:
Trin range: 1.1 - 1.7 (bearish)
Average VWAPs: +65/-38 (mildly bullish)
Note: Today I will be dropping intraday coverage of the OEX (S&P 100) and initiating coverage of the small-cap Russell 2000 (RUT). January 30, 2013
3:50 pm ET: For the past several days, we've been noting the cracks in the bulls' house citing a rising VIX and a toppy DTX. It appears that the bears were able to gain a toe-hold and force an opening judging from the roll-over in the Dow Transport Index (DTX). The VIX also began the day over the 14 mark and a close above it would be another sign that the bulls are having trouble holding on. This morning's news that the Fed will be keeping up the status quo (meaning continuation of its current quantitative easing policies) for as long as unemployment remains high didn't do much to shake up the market. However, I do believe that the market will be taking a well-needed breather for the next few days because of the divergence between the VIX and the Trin. To explain, the Trin gapped down to very bullish levels on today's open while the VIX gapped up. Now, the Trin has no where to go except up in the bearish direction meaning that today appears to be the beginning of a move down. You bulls shouldn't get too worried, though, as no market moves up in a straight line (unless it's being manipulated). Trade of the Day: The Euro is bucking up!
You heard it here, folks, go long the euro! If you don't know anything about trading the currency market, don't worry. You can buy the Euro exchange-traded note, the FXE, as a proxy. Fundamentally, there really is no way to ascribe an intrinsic value to one currency as they are all valued relative to each other, and the currency ETNs are no exceptions. The one difference between them and Forex currency pairs (e.g., dollar/yen, etc.) is that they are valued against a basket of currencies instead of just one. In this way, then, the ETNs (Exchange Traded Notes) can be compared with one another, say the FXE with the UUP (the long dollar fund). Okay, enough instruction. If you're a technician, you can see by the above chart that the FXE has broken out of an inverse head and shoulders pattern and is moving up. Using $132.50 as the shoulder line with $120 as the bottom of the head, we have $142.50 as an approximate target. [The target price is the difference in value between the top of the head (or in this case, the bottom of the head) and the shoulder line added onto the shoulder value: ($142.50 - $120) + $142.50.] The option field on the FXE is reasonablly liquid for near-the-money strikes so a long-term bull strategy could be a viable return/risk investment alternative for you seasoned options traders. Note to Subscribers: There are no new entries. 1:05 pm ET: Intraday support/resistance:
Trin range: 0.55 - 0.9 (falling Trin is bullish)
Average VWAPs: +45/-42 (neutral but both sides are vying for dominance) January 29, 2013
4:00 pm ET: The market melt-up continues as the mighty Dow Jones Industrial Average (DJIA) moves within a New York minute of its all-time high near 14200. The S&P 500 (SPX) is also looking as if it, too, wants to test its previous double top in the 1550-1575 range, but the road it must travel is a bit longer than the Dow's along with a few stumbling blocks along the way not only for it but for all of the major averages. The first potential rut in the road is a rising VIX. We noted that it breached 14 yesterday but today it backed off and is now bouncing within its 12-13 zone of complacency. That's the good news. The bad news is that the Trin is beginning to inch up indicating increasing bearish sentiment. Plus, the Dow Transport Index (DTX), generally considered a leader in market direction, is beginning to lose steam. It appears as if the market is currently operating on fumes and it would only take a small amount of negative news to put the kibosh on this rally--at least for the moment. Wednesday's FOMC rate decision and accompanying statement could be just the catalyst to push the market in either direction. We'll know tomorrow when they make their 2:15pm ET announcement. Play of the Day: Oil producers & refiners
Many sectors have been making new highs for a while and a market drop could have a negative effect on issues that are becoming over-extended. Not in that category are oil and oil stocks. This commodity has been recovering from a slump in prices with many analysts predicting that prices will continue to climb, citing a strong recovery in China coupled with uncertainty in the global oil supply especially in the Middle East regions of political tension. Today, two crude oil funds--OIL & USO broke out of recent bases. These funds still have a ways to go before they test previous highs so this should be a good area of investment for the mid-term. Accompanying the move was the break-out in the IShares Oil & Gas Exploration & Production Index Fund (IEO). This exchange-traded fund gained over 2% helped in part by some of its larger constituent holdings Phillips 66 (PSX), Marathon Pete (MPC), and Valero Energy (VLO). Valero was up a whopping 12% after it reported a 20-fold increase in Q4 profit while the other two did a good job of tacking on 5% in a sympathy move. Other industry group standouts are Sunoco (SXL) and refiners Tesoro (TSO) and Western Refining (WNR). All of the above mentioned issues are hitting new highs and all pay a dividend. Unless more oil is released from reserves, China's economy stalls, or Middle East tensions dissipate, a bullish stance on oil seems like a safe place to park some cash for the time being. Note to Subscribers: There is one new Stock Darlings and two new Channeling Stocks. 1:00 pm ET: Intraday support/resistance:
VIX 12.7/13.9 (VIX back down in 12-13 range)
Trin range: 0.9 - 1.35 (rising Trin is bearish)
Average VWAPs: +67/-32 (moderately bullish) January 28, 2013
4:00 pm ET: The bulls are in full-on party mode but they'd better not let down their guard too much because it appears the bears are starting to wake up from their long winter's nap. How do we know this? Several things are giving them away. First and foremost is the VIX--the volatility index--which has been settling into a groove located between 12 and 13. Today, however, it leaped over that 13 fence and spent the day grazing in a higher pasture. Sure, the 13 level is still well on the bulls' side of the ranch, but the fact that it made such a pronounced jump is a sign that all may not be right at the OK corral. Another tell is the rising Trin (Arms Index). This is not nearly as bearish as a rising VIX, but it does lend credence to the bears' case. Also, many individual equity issues are showing signs of decreased buying pressure. This situation is exemplified by many stocks showing what is known in candlestick charting parlance as a topping tail . Now before you make a mad dash for the exit, please note that these signs could just be indications of impending consolidation and not the beginning of a correction. Considering the tremendous gain made since the beginning of the year, it makes sense for the market to want to take a breather. Today's notable market action: Despite very little noteworthy sector action, commodities saw some nice moves, both to the upside as well as to the downside. On the plus side, an Oil & gas services (e.g., drillers, etc.) fund, PXJ, put in a new high as did the Swedish Krona (FXS). On the minus side, gold miners Harmony gold (HMY), Comp. de Minas Buenaventura (BVN), and Newmont Mining (NEM) slipped to new lows. Following in their footsteps were the industrial metals miners Century Aluminum (CENX), Noranda Aluminum (NOR), and Southern Copper (SCCO), all of which slid by 4%. The reason for the slide is unclear--perhaps a move in sympathy with Caterpillar's (CAT) earnings report that said future guidance couldn't be accurately gauged because of the uncertainty in the global economy. Could it be that current global growth prognostications are too optimistic? Note to Subscribers: There are two new Stock Darlings and two new Channeling Stocks. 1:10 pm ET: Intraday support/resistance:
VIX 13.1/13.9 (rising day-over-day VIX is bearish)
Trin range: 0.85 - 1.15 (rising Trin is bearish)
Average VWAPs: +38/-52 (mildly bearish) January 25, 2013
3:20 pm ET: The market continues to defy gravity with pretty much everything--with the exception of precious metals--continuing to move up. Earlier, the Transports (DTX) showed some signs of weakness but the swoon didn't last long as the bulls rushed in and quickly administered CPR. The market has made some incredible gains and I would not be at all shocked if traders booked some profits before the weekend. Hot Today: Foreign etfs continue to rally with the following funds hitting new highs: Germany (EWG), France (EWQ), Belgium (EWK), Italy (EWI), UK (EWU), Eastern Europe & Russia (RNE, CKE), Europe (VGK), EAFE (EFA), Thailand (TTF). If you thought Europe was dead, think again. The funds listed above speak for themselves. On the home-front, machinery stocks got a big boost as Oshkosh (OSK, +18%) blew out estimates and gave full-year guidance that was much higher than previously estimated. Breaking out to new highs on this great news are the following: Terex (TEX, +12%), Manitowoc (MTW, +4%), Mueller (MLI, +4%), Colfax (CFX, +3%), RBC Bearings (ROLL, 1%). Internet stock giants also jumped. Shares of Expedia (EXPE, +5%), Amazon (AMZN, +3%), Ebay (EBAY, +2%) all hit new highs while Priceline (PCLN) gained 5% to best $690 resistance. The charts of all of these are showing that they're itching to run a lot more. Trade Follow-up: If you had followed yesterday's long transports (IYT)/short gold-miners (GDX or GDXJ) pair trade using closing prices, you'd be up close to 3% today (mostly due to the fall in the gold miners). Now, there's still time to take advantage of this trade but don't wait too long! Have a good weekend! Note to Subscribers: There are two new Stock Darlings. 1:15 pm ET: Intraday support/resistance:
VIX 12.5/13.15 (falling VIX is bullish)
Trin range: 0.6 - 0.8 (falling Trin is bullish)
Average VWAPs: +68/-31 (bullish) January 24, 2013
4:00 pm ET: Apple's rotten earnings release yesterday caused a major sell-off in the stock (-12%) putting the kibosh on the Nasdaq. While Apple (AAPL) was the major party pooper, it was aided and abetted by its parts suppliers. But none of this stopped the mighty transport index (DTX) from advancing and while there's no sign of it letting up, the other averages are showing signs of fatigue. Add to this the fact that the Volatility Index (VIX) saw the upside of 13 for the first time in four days and some profit-taking could be in the cards very soon. Hey, the S&P has advanced nearly 100 points (+7%) in three weeks--that's an annualized return of 120% (not that's not even including dividends)! Compare it with its historical return (including dividends) of 14%. Of course, we probably won't see this return this year but the number does help put the magnitude of its recent gain into perspective. There is still a lot to love about this market. Most sectors are moving up with the exception of precious metals and their miners, especially the gold miners. The entire group has been in a slump since September when it began to fall several weeks before gold itself. On the flip side, the transport have been steadily chugging higher and today they experienced their best gain in weeks helped in no small part to Swift Transportation (SWFT) which blew past its earnings and revenue estimates. The news attracted many new shareholders as the stock gapped up a whopping 28% on 13 times normal volume causing it to easily bust through $12 resistance. This action was echoed by others in the industry: J B Hunt (JBHT, +6%), SAIA (SAIA, +4%), Old Dominion Freight (ODFL, +3%), Canadian Pacific Rail (CP, +2%). These, too, shot up into blue sky territory. Pairs Trade Idea: This bullish action in individual transport issues was reflected in the Transport etf (IYT) which gained 2% on the day. For those of you who enjoy pairs trading, buying the IYT and shorting one of the gold mining etfs (GDX or GDXJ) could be an attractive bet. If you don't like shorting stock you can play the short side with puts, providing you've had options trading experience. (Go to the CBOE website for information on options trading.) Both the GDX and GDXJ have fairly liquid options with the GDX's being the most liquid. You could also play the long side with call options on the IYT, but note that its option field isn't nearly as robust. The good thing about using options to put on this trade is that it lowers your cost basis; the bad news is that all options have a built in time limit so please buy the longest dated option you can afford. Just in case. Note to Subscribers: There is one new Stock Darling. 1:00 pm ET: Intraday support/resistance:
VIX 12.4/13.1 (rising VIX is bearish)
Trin range: 0.85 - 1.25 (falling Trin is bullish)
Average VWAPs: +37/-65 (moderately bearish) January 23, 2013
4:00 pm ET: The market melt-up continues albeit at a slightly slower pace than in recent days as traders and investors await Apple's earnings after the bell. Analysts agree that the sales figures for the iPhone 5 will be stellar but that's not what everyone is waiting for. No, revenues are already a done deal. What is piquing everyone's interest is how Apple will guide earnings and revenues for future quarters. Apple (AAPL) is already feeling the heat from Samsung's suite of mobile and tablet products, and Nokia's (NOK) new Lumia phone is attracting rave reviews from consumers and analysts alike. Many also feel that Research in Motion (RIMM) will hit a home run with its eagerly anticipated new Blackberry 10 which I'm sure comes as sweet news to loyal Blackberry addicts--I mean--users. It's also true that mobile carriers are using the increasing sales in iPhone competitors to pressure Apple into lowering its margins (the amount it charges carriers per phone). These are the numbers that will be listened for and scrutinized in today's earnings report and conference call. If anything, it should prove to be very interesting, and you can be sure that Jim Cramer lead off his Mad Money show with an Apple earnings debriefing. Notable Market Action: The Greek country etf (GREK) is testing its all-time high of $19.93. The stock has more than doubled from its low put in last June. Riding its coattails is Hellenic Telecom (HLTOY), a stock that we noted here last week (scroll down for more info). Since writing about it last week, the stock has advanced more than 11%. Last week Deutsche Bank (DB) upgraded Hellenic Telecom from Hold to Buy. Note that Deutsche Telecom (DTEGY) holds a 40% stake in the company. Trading just under $5, the stock needs to quadruple to approach its all-time high near $20, so I'd say it has room to run! [Disclosure: I am personally long this stock.] 1:15 pm ET: Intraday support/resistance:
VIX 12.5/13.15 (falling VIX is bullish)
Trin range: 0.6 - 0.8 (falling Trin is bullish)
Average VWAPs: +68/-31 (bullish) January 22, 2013
4:00 pm ET: There's only one way to describe this market--awesome...like totally, dude! It's the most bullish I've seen since the dot-com bubble. Everything is coming up roses and there's nary a sector, currency, or commodity that's bucking the uptrend. We've got the small to mid-cap index, the Russell 2000 (RUT), hitting a new all-time high. The Dow Transport Index (DTX), a leader in market direction, continues to put in new all-time highs, too. There's really nothing I can see technically to stop this bull run. Some of you maybe thinking that the VIX is too low to stay at this level, but if you think that the VIX can't go any lower, think again. In the two years preceding the 2007-2008 mortgage meltdown, the VIX was able to stay in the 10 to 13 range (with the occasional dalliance above 15) before moving above the dreaded 20 level, the bull/bear dividing line. The move above that in early 2007 was a tell that the market was poised to fall. Anyway, we're no where near that situation right now, a belief that is supported by some on Wall Street. In a tweet put out today by Merrill-Lynch to their clients (as well as to the entire Twitterverse), they said that their panel of experts expects a huge breakout in equities as the retail investor moves from low-paying long-term bonds to the dividends and capital appreciation of stocks. So at least for now, the stock market is definitely where it's at, dude. Party on, bulls!! Today's sizzle: The hottest areas in the market today were the following: Insurance (KIE), Transports (IYT), Materials (XLB), Healthcare (XLV). All of these exchange-traded funds along with many of their constituent components continued to rally to new highs. Although not at new highs, solar stocks felt the heat with many stocks making big gains: Jinko Solar (JKS, +12%), JA Solar (JASO, +11%), Yingli Green (YGE, +10%), LDK Solar (8%). Speculative Movers: You big-risk takers may wish to look at the junior 3-D printers which have been zooming on very heavy volume over the past several trading sessions: Organovo (ONVO, +26%--yes, this is today's gain!), Cimitron (CIMT, +17%), Perception (PRCP, +7%). Remember, though, that what goes up, eventually must come down, so please limit your investment to money you can afford to lose. Note to Subscribers: There are two new Stock Darlings and one new Channeling Stock. 12:45 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.2 (falling Trin is bullish)
Average VWAPs: +55/-33 January 18, 2013
3:50 pm ET: Today's early morning swoon was halted by the news that Congress has decided to kick the debt ceiling can down the road for a few more months. Investors hailed the news as manna from heaven and the collective sigh of relief was reflected in the collapse of the VIX to pre-crash levels. The only thing now that could possibly rain on the bulls' parade would be when the market runs out of buyers. I'm not expecting this to happen soon because of decreasing market valuation due to the increase in earnings (as are being reported). What this means is that the market has more room to run to return to historical norms, i.e. a P/E on the SPX of around 15. I honestly believe that we will be testing the previous high of 1575--and soon! Today's most notable industry gainer is the investment banks & brokerages. Morgan Stanley (MS) trounced revenue estimates in its pre-opening earnings report. The news bolstered the entire group with many making new highs. Today's biggest gainers breaking to fresh highs are the following: Morgan Stanley (MS, +8%), State Street (STT, +6%), Apollo Global Mgmt (APO, +5%), Blackstone Group (BX, +3%). Most of these still sport relatively low P/E's (except for BX) and all pay dividends--STT 's dividends yield a juicy 7.6%! Have to dash--that's it for now. Have a good weekend! Note to Subscribers: There is one new Stock Darling and several new Stocks of the Day (to follow shortly). 12:55 pm ET: Intraday support/resistance:
Trin range: 1.0 - 1.4
Average VWAPs: +39/-39 (bull/bear wrestling match) January 17, 2013
4:00 pm ET: Following several days of digesting gains, the major averages took off again. This market is so bullish it's almost dizzying. The media is saying that Main Street (aka the retail investor) is rotating out of low-yielding bonds and into stocks, searching not only for dividends but price appreciation as well. This is a bit worrisome on two levels: 1. When Main Street piles in is when Wall Street (aka the smart money ) runs for the exits; 2. The buying spree will have to end at some point--but will it be sooner or later? To answer this question, I honestly cannot say. The internals, alas, aren't telling us anything. The VIX has chosen to take up residence in the basement apartment and the etfs based on VIX futures aren't hinting at a rebound anytime soon. So, on the surface it looks as if the bulls have permission to party like its 1999 and we could easily see the S&P (SPX) retest its all-time high of 1550. The Dow Transport Index (DTX) has already broken to a new all-time high so there are no identifiable headwinds to impede upward momentum. But this doesn't mean that stuff can't happen! Since volatility is so low (meaning that options are cheap), it would be prudent for long-term investors to protect their portfolios with LEAP puts. (If you don't know what you're doing in this regard have your broker or investment adviser help you with it.) There's so much action in today's market that in the interest of time and space, I'll just summarize it. Commodity funds at new highs: Water (PHO, FIW, PIO), Agribiz (MOO), Palladium (PALL). Sector funds at new highs: Medical devices (IHI), Consumer discretionary (XLY), Healthcare (IXJ, XLV), Insurance (KIE), Banks (KBE), Homebuilders (XHB), Transports (IYT) Country funds at new highs: Turkey (TKF--we noted two compelling Turkey stocks yesterday), Belgium (EWK), France (EWQ), Eastern Europe (RNE), Thailand (TKF--this fund just won't quit!) Notable break-outs: Oil (OIL, DBO, USO), Semiconductors (SOXX, SMH) Note to Subscribers: There will be at least one new Stock of the Day. 12:35 pm ET: Intraday support/resistance:
Trin range: 1.15 - 1.5 (rising Trin is bearish)
Average VWAPs: +60/-26 (bullish) January 16, 2013
4:00 pm ET: The market spent the day consolidating, although decent gains were made in many individual issues. Shares of Apple (AAPL), one of yesterday's losers, rallied 4% to push the price back over the $500 mark. This action is likely due to investor hopium that occurs every quarter just before its earnings announcement (1/23 after the bell). (Options players should note the increase in implied volatility in Apple options, especially those on the buy-side.) On the other hand, Facebook (FB) shares did a face plant, losing about 1% on the day. It appears as if investors and analysts are confused as to how the company's new graphic search engine (announced yesterday amid much fanfare) will add to revenues. I think there needs to be more clarity on this issue before the stock can make a meaningful advance. Today's market hot spots
International stocks: It's still Thanksgiving for investors in Turkey. Two US-traded Turkish stocks on the move are Turkish bank Turkiye Garanti (TKGBY) and mobile operator Turkcell Iletisim (TKC). Both stocks have been rallying since last June and moved up another 2% today. Don't worry about them being overextended as they are both are a ways away from their historical highs. It's tough to go wrong with foreign mobile carriers, and Greek wireless telecom provider Hellenic Telecom (HLTOY) is no exception. This stock has also been a fantastic performer gaining over 3% today. The stock got crushed during the credit crisis, dropping more than 95% from its 2007 high of $19.46. At under $4/share, it still looks like a bargain. Stocks in recovery: Shares of gun makers Sturm-Ruger (RGR) and Smith & Wesson (SWHC) felt the brunt of negative sentiment following the Newtown tragedy. Both issues have been recovering from their recent lows with today marking an influx of buyers. The buying pressure sent both stocks up 5%. Of the two, Sturm-Ruger boosts a better chart as well as a 3% dividend. On an economic note, if the charts of office supply chains are any indication of business expansion, then things are looking pretty good. Shares of OfficeMax (OMX) and Office Depot (ODP) both hit new highs today on twice normal volume while shares of Staples managed to move through resistance. Of the three, Staple's chart is the least compelling right now as it has some significant resistance to clear before I'd be a buyer. The other two sport much better charts and OMX pays a 0.75% dividend to boot. That's it for today! Note to Subscribers: There are two new Stock Darlings and one new Channeling Stock. 1:25 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.0 (neutral/bullish)
Average VWAPs: +45/-34 (neutral) January 15, 2013
4:00 pm ET: Whew, what a day in the market! It almost had a circus-like feel what with Facebook's (FB) media event and Apple's (AAPL) big decline both vying for the center ring. Facebook's announcement that it is incorporating a graphic search engine into its mobile application apparently wasn't what investors were hoping to hear as they sent the shares spiraling down more than 2.7%. But that wasn't close to Apple's loss of 3.2% which came on no news at all. Yesterday, I opined that I believed Apple could hold the $500 level, at least until it reports earnings next week. The stock typically enjoys a pre-earnings run-up and the fact that it is violating its historic pattern should be a cause for concern. Add to that its drop below $500 and what we're seeing here, folks, is a change in investor perception. The company's armor has been pierced and it's not the invincible juggernaut of days gone by. Are the white knight's days numbered? In sector news, holiday retail sales came in better than expected. The good news bolstered many retail stocks especially Big 5 (BGFV, +13%) which received a boost from a big increase in holiday sales and Express (EXPR, +23%) which raised Q4 & FY13 guidance (the company's next earnings report is in March). The good news not only lifted the retail etfs (XRT, RTH) but raised the consumer discretionary etf (XLY) to a new all-time high (since late 1998 inception). Healthcare providers and selected regional banks continue to ride the rising tide. Turning towards commodities, platinum shot up as one of the metal's biggest miners, Anglo-American (AAUKY, -3%) announced that it is shutting down two of its largest producing African mines resulting in an annual decrease of 400k troy ounces or about 5% of global demand. Although the news sparked a jump in the other precious metals, today marked the first time in nearly a year that platinum is trading at a premium to gold. One has to wonder if today's announcement wasn't foreshadowed by platinum's recent stealth rise... In closing, it appears as if the bulls are now fully strapped in to the driver's seat as today marked a critical (and surprisingly under-reported) technical event: The Dow Transport Index (DTX) hit a new all-time high. The DTX is widely considered a leader in market direction and today's new high is considered by technicians to be a very bullish indicator. Yes, we still have the debt ceiling issue hanging over us like the Sword of Damocles but lately it does seem as if there's always a black swan waiting in the wings. Trade Tips: The bulls are running!
If you're not yet invested to the long side, now is definitely the time to begin building positions. Since volatility is very low, it's an excellent time for options players to buy LEAPs on your favorite stocks and also a good time to buy some long-term put protection--just in case. Note to Subscribers: There are two new Stock Darlings. 1:40 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.0 (falling Trin is bullish)
Average VWAPs: +64/-21 (bullish) January 14, 2013
4:00 pm ET: The market opened lower mainly on news that Apple (AAPL) is cutting back on its parts orders. Readers of this blog would have known that this was already month-old news. So now, the real question is this: What else could have accounted for Apple's fall? For one thing, reports from the Consumer Electronics Show in Las Vegas (old-timers will remember when it was called COMDEX) depicted a swirl of activity around major Apple competitor Samsung's display center as well as other mobile device manufacturers. Many attendees felt that the lack of any Apple presence hurt the company's image and product cache. Could one reason why Apple was an event no-show be that it didn't want its products to be compared with the competition fearing they might pale in comparison? Despite all the recent glowing articles regarding Apple's fundamentals, i.e., the mountain of cash it's sitting on, low industry valuation, high projected future sales etc., the market is not treating the stock nearly as kindly as the authors of these articles. The stock has shed nearly 30% of its value since its September peak of $700. Once the stock fell below $600 in late October, it was unable to crack that level again. Today it dropped just under $500 but managed to barely stay above that at the close. Will this $500 level hold? I think it will at least until it reports earnings next week (1/23 after the bell) when (hopefully!) the company will provide a clearer picture of its sales and revenue numbers and earnings forecast. It would help keep the competition (and the bears) somewhat at bay if the company could at least hint at an exciting new product line. Market & Trade Note: Facebook's press conference tomorrow
Social media giant Facebook (FB) is scheduled to make a major announcement tomorrow (Tuesday) at 1pm ET. There's a lot of speculation on what they could possibly be announcing (I'm wondering if it will be a joint venture with another tech biggie such as Microsoft (MSFT)). Whatever it is, though, it could be a major stock moving event. Spec traders might wish to take a small long position tomorrow morning; options traders could place some sort of straddle/strangle if the volatility on the options isn't too out of line. A quick note on today's market action: The Dow Transport Index (DTX), a leader in market direction, is a whisker away from breaking its all-time high of 562.77. A break of that would be cause for the bulls to break out the champagne. In other news, shares of uranium and nuclear energy etfs (PKN & URA) broke resistance and are looking to trade higher. [Full disclosure: I went long the Uranium & Nuclear energy etf (NLR) a month ago at a price of $4.52, which just so happens to be today's closing price.] Note to Subscribers: There are three new Stock Darlings. Please note that this database has purposely never been weeded out (as it was designed for medium to long term holds) but as it is growing in size and becoming cumbersome, I just might do so in the near future. 1:10 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.3
Average VWAPs: +32/-43 (neutral) January 11, 2013
4:00 pm ET: The market took the day to digest recent gains. The major averages are close to testing critical tops and as it's anyone's guess if they'll make it or not, I wouldn't advise putting on full positions until we get the all-clear sign. On the plus side, the Russell 2000 (RUT), the benchmark index for small-cap stocks, shot up to a new all-time high on the first trading day of this year. If this is an augur for how the rest of the year will go, then we're headed for fabulous gains. Not to be a party-pooper, there are still some major headwinds to consider apart from headline risk (aka Congress dealing with the debt ceiling):
1. The VIX is in contrarian territory (under 14). Historically, it doesn't stay at this level for long.
2. The SPX has a ways to go before it tests its all-time high of 1576. A break through that level would be the final confirmation needed for a rally continuation.
3. The retail investor (read: mom & pop) is entering the market while the smart money is exiting. This is rarely a bullish indication. Today's market internals are still siding with the bulls making the probability of a positive open on Monday (barring any headline risk) very good. Enjoy your weekend and take a look at today's Trade of the Day. Trade of the Day: Winnebago Industries (WGO) makes motor homes (aka campers), in case you didn't already know. The company blew out numbers when in last reported earnings in December. With payrolls seemingly on the rise, the company is poised to take advantage of more discretionary spending as well as the increasing number of baby boomers entering retirement. The stock has been rallying from $6 since November and recently bust through $17 resistance. The stock continues to climb and it won't be long before it tests its next level at $20 (then $25 after that). The company's P/E of 11 is well under 17 which is not only the P/E of one of its major competitor's, Thor (THO), but also the industry average. It doesn't hurt that the CEO has recently purchased shares. The company suspended its dividend during the 2008 credit crunch but perhaps after another good quarter (or two), it might resume paying one..? I'm not the only one bullish on Winnebago; long-time stock veteran Louis Navellier likes it, too. In evaluating the company's report card, he gives it straight A's in terms of Earnings Growth, Earnings Momentum, Analyst Earnings Revisions, Operating Margin Growth, and Sales Growth. [For further info, click here.] Note that there are options available on this stock. Note to Subscribers: There are two new Channeling Stocks and still working on Stock of the Day candidates. 12:50 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.7
Average VWAPs: +40/-35 (neutral) January 10, 2013
4:00 pm ET: My apologies for the tardiness of today's missive but when a market is so wildly bullish as it was today, it takes three times the amount of effort to slog through it. I mean, where do I begin? The market theme today was definitely risk-on , meaning that commodities, stocks, foreign currencies, and international stocks were all up at the expense of US treasuries and the greenback. Foreign stocks in particular did well. In summary: International stock fund highs: Italy (EWI--can you believe it?), Europe (VGK), EAFE (EFA), Int'l Small-cap (GWX), China Small-cap (HAO), Malaysia (EWM), Hong Kong (EWH), Turkey (TKF), Mexico (EWW). These would all make good additions to a diversified international stock portfolio. US Sector stock fund highs: Financials (XLF), Insurance (KIE), Materials (XLB), Industrials (XLI), Healthcare (IXJ, XLV), Pharma (PJP), Medical devices (IHI). Individual outperforming issues in the medical device space were highlighted here yesterday (scroll down). Notable commodity break-outs: Platinum (PPLT, PGM, PTM), Agribiz (MOO), Timber (CUT), Global shipping (SEA). Note that some of these are breaking second resistance levels on their way to new highs. Hot stock activity: Foreign banks at new highs: RBS, BBVA, MFG, SCGLY, IRE, UBS, HAFC.
Chinese internet suppliers & servicers--biggest gainers: BIDU +6%, CCIH +5%, YOKU +10%, SINA +6%. With so much bullishness both here and abroad, can we expect a continuation of this rally? As mentioned yesterday, the Dow Transport Index (DTX) is still leading the pack lending credence to the bull case. On the other hand, the volatility index (VIX) closed below 14 for the fifth day in a row, something that hasn't happened in over five years. However, the VIX has been known to stay at depressed levels for longer than traders thought possible so we can't rule out a rally continuation, especially as the DTX is looking to make a new historical high (since 1997). Of course, the looming debt ceiling will be a major concern but its effects aren't being felt--yet. As Scarlett O'Hara said, Tomorrow is another day. We shall see what transpires. Note to Subscribers: There is one new Stock Darling and I'm working on some Stock of the Day candidates. 1:30 pm ET: Intraday support/resistance:
VIX 13.3/14 (VIX in contrarian territory)
Trin range: 0.4 - 0.65 (bullish to bullish contrarian)
Average VWAPs: +57/-32 (bull/bear tug of war) January 9, 2013
4:00 pm ET: It appears as if the lather, rinse, repeat motif was short-lived. The VIX closed below 14 for the third day in a row but instead of the market moving down on the open, it moved up today, bucking the trend. What is bullish is that the Dow Transport Index (DTX)--generally considered a leader in market direction--is moving up. However, it's getting within a whisker of its all-time high that could prove to be either an area of major resistance or the beginning of a new support level. On another potentially bearish note, the volatility index (VIX) is still under 14, a fact that becomes more contrarian every day. As I stated yesterday, the direction of the market going forward hinges on two things: the results of this earnings season and the debt ceiling. Stay tuned for further developments! There were a couple of hot spots in today's trading. First off, medical device and life science tool makers were on fire. Advancing to new highs, some on much heavier than normal volume, were the following: COV, LIFE, ZMH, PKI, AMRI, CVD, DSCI, ARTC, HOLX, CSII, BIOS, TMO, SYK. Several of these issues helped lift the medical device etf (IHI) to a new all-time high. The entire healthcare and pharma space is enjoying great gains, in part due to the greying of the Baby Boomers. Sharing the rally spotlight is alternative energies where everything except coal advanced. Breaking out of recent bases are the solar etfs (TAN, KWT) and the wind etfs (FAN, PWND). Solar stocks especially enjoyed big gains, many on the order of 6-18% just today! (Canadian Solar (CSIQ) was the 18% gainer, FYI.) Now may be a good time to start building a long position in this group. Note to Subscribers: There is one new Stock Darling. 1:00 pm ET: Intraday support/resistance:
VIX 13.2/13.95 (VIX in contrarian territory)
Trin range: 0.8 - 1.4 (neutral)
Average VWAPs: +40/-48 (bull/bear tug of war) January 8, 2013
4:00 pm ET: Today's market action can be summed up by lather, rinse, repeat with today being a near-repeat of yesterday. The VIX appears to be closing the day with a test of yesterday's low of 13.71. Every time this has happened (since VIX recalibration in 2007), the VIX has popped back up meaning we could see another repeat of today's action tomorrow. Obviously, this cycle is not going to go on for much longer. The market has moved up partly because of beginning of the year portfolio rebalancing and partly because the fiscal cliff was avoided, but both of these effects are waning. So, is there any fuel left to push the market higher? Yes, and that is the upcoming earnings season which officially kicks off today. We've noted here that the valuation on the S&P 500 is getting rather heady with the P/E ratio now standing at 17. This is 13% over its historical average of 15. The only way for the market to sustain this valuation is for a rise in earnings, making this reporting season especially critical. Long-term investors in particular should keep a close eye on it and if earnings are proving to be less than stellar, then buying portfolio protection would be a prudent move. Other than continued strength seen in biotech and big pharma (pharma etf PJP continues to advance to new highs), there's not much else of major interest on the equity front. That's it for today! Note to Subscribers: There is one new Stock Darling and one new Stock of the Day. 1:10 pm ET: Intraday support/resistance:
Trin range: 1.35 - 1.9 (rising Trin is bearish but getting into contrarian ground)
Average VWAPs: +42/-51 (bull/bear tug of war) January 7, 2013
4:00 pm ET: As predicted on Friday, the market did open down while the VIX popped back over 14. However, the bears ceded their control to the bulls who managed to pull the major averages off their lows but were unable to push them back into the green. Right from the open the VIX began dropping and is closing the day back under the 14 level yet again, setting us up for another drop on tomorrow's open. Now the VIX can stay depressed but unless the major averages can push through current levels, we may see a sell-off occurring sooner rather than later. Earnings season kicks-off tomorrow and any negativity on that front could easily be the catalyst for a near-term correction as the S&P 500's (SPX) P/E ratio is rather richly valued. Trade of the Day: A semi short?: I surf hundreds and hundreds of charts daily and the worst chart to appear on today's radar screen is that of Volterra Semiconductor (VLTR). The stock has been in free-fall since it put in its all-time high of $34 back in April. Since then, it's shed over 50% of its value. Today, the stock dropped below $16 support on twice normal volume. I tried to see if there was any news to account for its decline but couldn't find anything other than that hedge funds are exiting the semiconductor space in droves. Short interest ratio is only 2.7% meaning that a short squeeze isn't very likely. You bears with some mad money to burn may wish to take a gander at this one. If the market does indeed reverse course, this stock could fall faster than the rest. Options on Volterra are rather thinly traded but there was some action today at the June 12.5 and 15 put strikes. (A covered put strategy could work well here, too .)
Risk level: Moderately speculative. Note to Subscribers: There are three new Stock Darlings and two new Stock of the Day candidates. 1:40 pm ET: Intraday support/resistance:
Trin range: 0.65 - 1.2 (rising Trin is bearish but still in neutral ground)
Average VWAPs: +37/-56 (neutral with bearish bias) January 4, 2013
12:40 pm ET: Another day and the bulls are twisting and shouting. Small-cap index RUT (Russell 2000) put in a new all-time high as the market-leading Dow Transport index (DTX) tests its all-time high. A break through this level would signal another leg up in the rally. The only possible cloud in the sky is that the volatility index (VIX) has fallen from a bearish level of 22 to a bullish contrarian level of under 14 in just four days. Historically, a close below 14 signals a turnaround in the market meaning that Monday's open could be met with selling pressure. But for now, let the good times roll! As we've mentioned previously, the sector to watch is the financials. Financials have been oversold for so long and are one of the last sectors to rebound. The New Yearly Highs list today was predominately populated by members of this sector especially those in the capital markets (investment banks and brokerages) and insurance industries. The most undervalued issues (as measured by their price/earnings ratio) hitting new highs today in the financial sector are the following. (The P/E's are all under 13.) Capital Markets: State Street (STT, $49), Goldman Sachs (GS, $134)
Commercial Banks: Southwest Bank (OKSB, $12)
Insurance: Aegon (AEG, $7), Amtrust Financial (AFSI, $30), Primerica (PRI, $32), Platinum Underwriters (PTP, $48)
Thrifts & mortgages: BOFI Holdings (BOFI, $29), Provident Financial (PROV, $19) If you're looking to add some financial issues to your holdings, start your research with some of these. It should also be noted that both the financial etf (XLF) and a bank etf (KBE) also put in new highs. In other news, airlines continue to soar. Judging from their recent bullish movement, it appears is if they have a lot more room to run (although I personally have never been a fan of this industry.) One particularly compelling company in this space is Hawaiian Airlines (HA). It just broke $7 major resistance and is looking to test the $8 level. I do think it'll pass that and from there it could easily go to $9. It's also one of the lowest P/E members in its group with a P/E of under 5. That's it for now. Have a good weekend! Note to Subscribers: There are no new entries but I'm researching some Stock of the Day candidates. 1:10 pm ET: Intraday support/resistance:
VIX 13.5/14.3 (VIX is in bullish contrarian space)
Trin range: 0.9 - 1.15 (neutral)
Average VWAPs: +44/-35 (neutral) January 3, 2013
4:00 pm ET: The market began the day tacking on gains to yesterday's humongous rally but the gemutlichkeit ended when the minutes of the previous FOMC meeting showed increasing sentiment among board governors suggesting that quantitative easing (QE) may end as early as this year. Since QE has been a major driver of the market rally, this news was as welcome as a cold shower to investors who reacted by pulling the plug on any further buying thereby allowing the bears to step in. The selling pressure was halted at the end of the day with a short-covering rally. The damage wasn't too severe as the major averages closed nearly flat on the day. The good news is that the sell-off did not trigger much of a reaction in the volatility index (VIX) leaving hope for a rally continuation. Today's bright spots included solar stocks, some of which jumped ten to fifteen percent on the news that Warren Buffett bought two solar farms from Sunpower (SPWR). Sunpower stock gained a whopping 48% on the news. However, I do think there's some irrational exuberance built into it as with anything involving the Oracle of Omaha. You bears with high-risk appetites may wish to short the stock upon any sign of price break. (FYI: The stock does have some fairly liquid options.) Turning to sectors, insurance (KIE) was today's winner as it broke $45 resistance and moved to a new yearly high. Insurers Lincoln National (LNC) and Ace LTD (ACE) also broke out to new highs. Of the two, Ace's chart is more appealing as it has been steadily rallying since 1995 (barring a few economically-induced blips). The company pays a 2.6% dividend and sports a P/E of 10 making it an attractive portfolio addition for longer-term investors. (And as always, please do your own research before investing!) My subscribers know that HCC Insurance (HCC) has been on our Stock Darlings list since October 17, 2012. Since then it's gained 6.5% and currently yields 1.7%. It, too, has a low P/E of 10. if you're considering adding some insurance names to your portfolio, there's still time to pick up either of these two quality names. Note to Subscribers: There are two new Stock Darlings. Please note that the Channeling Stocks database has been updated. 1:20 pm ET: Intraday support/resistance:
VIX 14.15/14.95 (falling VIX is bullish)
Trin range: 0.75 - 1.2 (neutral)
Average VWAPs: +72/-39 (moderately bullish) January 2, 2013
3:30 pm ET: Since 2009, the first trading day of the New Year saw a big rally and today was no exception. Of course, had Congress not reached a last-minute budget agreement, we could have seen an equally dramatic move to the downside. However, since the first order of business for every politician is to get elected or re-elected, our noble leaders were determined not to let the American people down. Who says they don't know what they're doing? Market action is heavily favoring the bulls with both commodities and stocks soaring. In commodities, the water etfs (FIW, PIO, PHO), timber fund (CUT), and agribiz (MOO) all reached new yearly highs. Almost all of the sectors advanced with homebuilders (XHB), industrials (XLI), and aerospace & defense (PPA) also touching new highs. One notable laggard was retail. Individual retail issues popped on the open but were unable to hold onto gains with many of them slipping below Monday's close. Negative action on a wildly bullish day shows that even market ebullience can't prop them up. If you're long any retail or apparel names, you may wish to review your holdings and consider taking some profits or protecting your position. The global shipping fund (SEA) broke out of its seven month channel. Although there are a lot of problems with this fund in particular, what this action is reflecting is a growing belief in global growth. Couple that with the new highs made by many foreign funds today (China, Japan, S. Korea, Mexico, emerging markets) and you have further proof of this thesis. The question is whether or not today's advance is just a one day event or the start of a new rally. Judging from the breakout in the Dow Transport index (DTX) along with the drop in the VIX back to a bullish level, I'd say that we do have the beginning of another leg up. That's the good news. The bad news is that longer term charts of the major averages are showing that we're getting close to areas of major resistance. Fundamentally, the P/E (price/earnings ratio) on the S&P 500 (SPX) is now around 17 which is over its historical average of 15. So, if you're planning on taking long positions, try to focus on undervalued stocks. Financials, especially regional banks, are a good place to start. Note to Subscribers: There is one new Stock Darling. Please note that the Channeling Stocks and Stock Darling sections will be reviewed and edited this week. 1:15 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.0
Average VWAPs: +44/-73