Saturday, October 31, 2009

S&P500 Short Term Supports (10/31/09)

We got the "dead cat bounce" that I mentioned in my previous post.
S&P500 volume was 50% higher than its average in down day, this is called institutional selling.
We are at a support (~1035) if it won't hold the next stop will be 1020 then 990-1000 which is 10% drops from high.
We could easily go down 10%; so far we dropped 5.8% we have 4.2% to go. Then we should wait to see if big guys are going to press buy button or not?

Don't be stupid and start to buy just because a support line held, wait for big institutions to start the buying frenzy then there is plenty of time for you to buy.

Thursday, October 29, 2009

Some thought on Market

S&P500 has reached my October target 1100, and pulled back exactly at level that I forecasted a couple months ago. We violated many support lines, but technically we are due for a "Dead cat bounce" by end of this week, but it's too early to say if we are going to get it anything more than a bounce or not. Here is the link to October article:
As you know consensus for 3Q GDP is 2.5 to 4 . It will be market mover on Thursday. Please note we must get above 1054-1066 very soon otherwise picture is going to become uglier. If big institutions want to move market higher they must push the S&P above 1050 on Thursday.

Related Topics:
S&P500 Possible Moves In August

Tuesday, October 27, 2009

Natural Gas Technical Analysis, (Part 5)

Natural Gas Chart:
Natural gas broke the down trend channel last month. It was very oversold and a technical rally was needed to normalize the price. On the other hand it found some problem to get above 5.20 seller were very active at $5.20 .
4.20 is the level to watch if natural gas moves below 4.20 it will damage the integrity of rally. If bulls push the gas above 5.5 it would be very positive. Note that fundamentals do not support natural gas price above $5.

UNG(United States Natural Gas) dropped below $11 if it fails to move above 11 with in next couple days bulls are in trouble. You are taking too much risk if you are a buyer at these levels. I would Wait for a pull back. Pay attention to 11.90 to 12.70 range, you should expect to see many sellers there.

Monday, October 26, 2009

Why weak dollar is not good for U.S. economy?

U.S. Dollar Chart:
Many economists argue that weak dollar is what we need, but I believe they are absolutely wrong . Consumer spending makes 70.9% of the U.S. GDP.

Where these merchandises come from? Obviously overseas.

What currency do American consumers pay with? Dollar.

What has happened to dollar? It fell significantly.

As you see lower dollar means more expensive merchandises for consumers, therefore their buying power decrease as dollar falls, on the other hand low dollar is not good for overseas manufactures their end cost increase due to increase in commodity prices and higher local currency make their production too expensive to export. If you would follow the economic data you knew that the U.S trade deficit decrease due to decreasing imports and some improvement in export due to cheap dollar. Changes in the level of imports and exports, along with the difference between the trade balance are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the dollar in the foreign exchange market.

The overall U.S. trade gap narrowed to $30.7 billion. In the latest month, exports improved by 0.2% while imports declined 0.6% . The shrinking of the trade deficit was due to a narrower petroleum shortfall which came in at $16.5 billion compared to $17.8 billion the previous month.
Foreign Central banks won't sit on their hands for ever and hope Fed to take action they manipulates their currencies as Chinese have been doing for long but problem is decline in dollar value is so steep that they can't catch up with it.
Manufacturing sector makes 12% of U.S. GDP therefore cheap dollar would not do that much for GDP. Actually it does more harm than help. Weak dollar has many negative aspects that is not the main focus of this article ,but it's good to point some. When the buying power reduce it means less production and less buying, Less buying result less tax for government. less government earring means bigger gap in deficits, Thus a vicious cycle could develop in which large deficits lead to rapid growth in debt and interest payments, which in turn adds to subsequent deficits and this vicious cycle will continue. Unfortunately Ben Bernanke does not see the danger down the road he bailout Zombie banks and printed big sum of dollar. He thinks he is smart enough to pull the trigger on time before things getting out of control, but if he was that smart, he should of seen the danger in 2006 and do something to stop the financial crisis; right?

Bernanke stuck in the mud he can’t raise the interest rate because it will kill the weak housing market, and if he keeps the rate low dollar will loose its value more and put the Treasuries in danger, because if foreign countries start to dumping our debt we are going to be in big trouble. I don't think they are going to do so ,but that is a possibility. He should of think about it before he started to bail out insolvent financial institutions like AIG, City group, and Wells Fargo… I hate to say that but we are heading the same path that Japan did in 90’s, they call it lost decade I’m afraid we end up to call next decade lost decade too.

Sunday, October 25, 2009

This week, earnings would give some outlook on job

This week, earnings from several companies with deep ties to corporate payrolls, consumer demand and the labor market will show whether employers are hiring, firing or holding off on filling vacancies.

This recession has already seen more than 7 million lost jobs. That's because shoppers slowed their spending, bank lending froze and businesses cut back on capital investments. So cash-strapped companies slashed payrolls -- and benefits -- in order to curb expenses as sales dropped.

With lending and spending still weak, companies may not be ready to start hiring again anytime soon.

The unemployment rate in September was 9.8 percent, a 26-year high. Layoffs are slowing, but joblessness is expected to peak above 10 percent early next year.

"You're looking at really sluggish growth," said Joel Naroff of Naroff Economic Advisors. Economic activity could grow 3 percent or less for years to come, he said, and productivity gains mean companies won't need to hire many people.

Private economists predict that the unemployment rate won't drop to a more normal 5 or 6 percent until 2013 or 2014.

In order for them to fill vacancies now, employers need to see increasing demand -- higher sales -- for their goods and services from U.S. shoppers and businesses.

"There's a few positive signs, but there's still a shortfall in (corporate) profits from where they were a year ago or two years ago especially," said Jeff Bergstrand, an economist at the University of Notre Dame's Mendoza College of Business. "There's still a lot of cost cutting going on."

Here's a closer look at the companies reporting and what their results can tell us about the job market:

Monster Worldwide Inc.

-- Why it's important: Monster Worldwide Inc. is a popular help-wanted Web site. Because it's used by job hunters and companies looking to hire, Monster provides a broad view of the employment market.

-- When it will report: Thursday, Oct. 29.

-- What the experts say: Monster will break even in the third quarter on revenue of $216.7 million, according to analysts surveyed by Thomson Reuters. Those results would be down from profit of 35 cents per share on revenue of $332.2 million a year earlier.

-- You'll know the economy is improving if: Monster's revenue and earnings show that more companies are contracting with Monster to post jobs and gain access to job seekers' resumes.

"I think what we're going to see from a number of employment companies, including Monster, is that the worst is behind us," said Jim Janesky, an analyst for Stifel Nicolaus.

-- You'll know the economy is not improving if: Monster's results show that staffing remains stagnant as employers continue to balk at hiring. Employment typically lags economic recoveries as employers refuse to hire until they are confident an economic upswing is sustained.

-- The quote: "There has been a ... shift going on for 10 years, of movement from print to online. That movement has not overcome the headwinds that Monster and other employment companies faced when the economy declined and unemployment rose," said Stifel Nicolaus analyst James Janesky.

WellPoint Inc. and Aetna Inc.

-- Why they're important: WellPoint has more members than any other U.S. health insurer with more than 34 million people enrolled. It operates Blue Cross and Blue Shield plans in 14 states, including California, New York, and Ohio. Aetna is the third-largest insurer based on enrollment.

Health insurers have been hurt during the recession by employer layoffs, which reduce the number of people covered by employer-sponsored group health insurance. Some companies have cut benefits entirely.

-- When they will report: WellPoint reports Wednesday, Oct. 28. Aetna reports Thursday Oct. 29.

-- What the experts say: On average, analysts polled by Thomson Reuters expect WellPoint to post a profit of $1.37 per share on revenue of $15.15 billion for the third quarter. They expect Aetna to post a profit of 66 cents per share on $8.68 billion in revenue.

-- You'll know the economy is improving if: The number of people covered by their employer-sponsored insurance grows or falls less than expected. In the second quarter, WellPoint's commercial enrollment fell 2 percent. BMO Capital Markets analyst Dave Shove said he thinks it will fall another 3.5 percent in the third quarter. Aetna's commercial enrollment, which also includes individual policies, grew 8 percent in the second quarter.

-- You'll know the economy is not improving if: Enrollment in employer-sponsored plans falls more than expected. This could mean employers are still cutting jobs. UnitedHealth Group Inc., the second-largest health insurer based on enrollment, said last week that its commercial enrollment fell 6 percent in the third quarter.

However, insurance enrollment can be what economists call a "lagging indicator" because companies sometimes wait to cut jobs until they absolutely have to. In other words, long after their business started to tank. Now, employers may be waiting to make sure the economy has recovered, or that their business is improving, before they resume hiring.

-- The quote: "You're talking about the largest health insurer in the United States, and we've always felt this about WellPoint, it really is a proxy for what's going on in health insurance" said BMO Capital Markets analyst Dave Shove.

Apollo Group Inc. and DeVry Inc.

-- Why they're important: Apollo, which operates the University of Phoenix, and DeVry are two of the largest for-profit education providers. Both have had big jumps in enrollment throughout the recession as job seekers look to bolster their resumes. The for-profit sector has been able to open new campuses and offer more online courses to meet demand for career training.

-- When they will report: Tuesday, Oct. 27.

-- What the experts say: On average, analysts polled by Thomson Reuters expect Apollo to post a profit of $1.04 per share on revenue of $1.03 billion for the fiscal fourth quarter. Analysts expect DeVry to have a fiscal first-quarter profit of 65 cents per share on revenue of $417.1 million.

-- You'll know the economy is improving if: Enrollment growth slows. These career-oriented schools often attract the unemployed and underemployed, and they saw enrollment grow by about 20 percent this year as people lost jobs. A slowdown in new student growth could signal that companies are hiring again.

-- You'll know the economy is not improving if: Enrollment rises. If Apollo and DeVry report more increases in new students, and corresponding gains in profit, that's a sign the job market is still in bad shape. Also, if bad-debt expenses rise it's an indication that students may be unable to pay their tuition.

-- The quote: "While we may be near the end of this (enrollment) run, we do not expect the party to end so soon given continued sluggish employment trends." Jeffrey Silber, BMO Capital Markets

International Paper Co.

-- Why it's important: International Paper Co. is the world's largest maker of cardboard box materials and other writing and packaging materials. The recession chopped demand for these products as companies scaled back. IP has been closing and idling plants since 2008 and it will continue into next year. Last week the company said it will eliminate 1,600 positions -- nearly 3 percent of its current payroll -- as it brings capacity in line with demand.

-- When it will report: Wednesday, Oct. 28.

-- What the experts say: Analysts polled by Thomson Reuters expect International Paper to post a profit of 24 cents per share on revenue of $5.90 billion, down from 35 cents a year earlier on revenue of $6.8 billion.

-- You'll know the economy is improving if: International Paper says stockpiles of containerboard, the material that cardboard boxes are made of, are falling -- an indication that box makers think demand for containers that hold everything from tiny porcelain dolls to big refrigerators will increase.

-- You'll know the economy is not improving if: IP reports worse-than-expected demand or bulging inventories, which could indicate companies don't think consumer demand has strengthened enough for businesses to increase orders of goods.

-- The quote: "When we look at global economic conditions today, it appears the worst is behind us," CEO John Faraci said in late July. "We have not seen any signs of sustainable progress in North America, but it appears demand has stabilized at lower levels."

Saturday, October 24, 2009

Amazon Real Rally Or Short Squeeze?

Amazon Technical Chart:

Amazon third-quarter earnings surged 68% on strong sales, led by strong North American media sales and the Kindle, which the online retailer called its "No. 1 bestselling item."
The blowout results surprised Wall Street and sent shares surging to their highest level this decade.

Amazon reported earnings of $199 million, or 45 cents a share, above year-ago earnings of $118 million, or 27 cents a share, and the average analyst estimate of 33 cents a share.
Net sales climbed 28% to $5.45 billion, above the estimate on Thomson Reuters of $5.03 billion. Currency translation shaved only a point from growth. In July, Amazon projected sales of $4.75 billion to $5.25 billion.
Electronics and other general merchandise posted a 44% sales gain, while worldwide media rose 17%. It caused a huge rally on very high volume, it's too early to say if it was a short squeeze or real rally, but I can't convince my self big institutions just start buying AMZN after 11 months rally with a 69.5X P/E, it simply does not make sense. 27.69% rally in one day is a humongous short squeeze and nothing else.

I try to look at AMZN as contrarian prospective there is some need to be concern.

1) Extremely high P/E (TTM) 69.5x, no matter how good is their earning it is unjustifiable.

2) Expanding triangle (in pink) on monthly base which is bearish formation.

3) Third completion of fifth wave, as you see in the chart AMZN is getting close to complete the wave "V" (Elliot Wave Theory) , it should get completed around $120-130. If it does that would mark the end of rally for AMZN.

On the other hand it broke 113 resistance therefore bulls could argue that it is a big deal, I agree but until AMZN retest it we can't say for sure that AMZN is going to hold it or not. If AMZN breaks the upper side the triangle but it fails to hold and drops back to triangle it would be very ugly for bulls, but if AMZN pulls back to 113 then bulls push Amazon higher it would be a new opening for Amazon.

AMZN is over valued and I would not be a buyer at these level . Many big institutions are in this trade and they can easily shoot the stock higher, just look at the Friday volume 58,305,777 it was 13.50% of total out standing Amazon shares, obviously big guys were very active and many caught short who had to cover their shorts. I don't feel comfortable to swim with big sharks, but I would go short Amazon if I see some weakness in near future.

Wednesday, October 21, 2009

U.S. Dollar Index Technical Analysis (Part-10)

U.S. Dollar Index Chart:
Dollar is bouncing around the last line of defence 75.25, it has formed the falling wedge that is very bullish, note fundamentals do not support stronger dollar ,but contrary to average investors bearish sentiment we could get short-squeeze. If dollar breaks support there is no major support until 73.97 . Note if dollar breaks 71.70 it would be very ugly.

Monday, October 19, 2009

LIBOR-OIS 3M Chart (10/19/09)

I post the LIBOR chart every fridays. Just type Libor in search box (it is located on top left corner). You will see all Libor charts.

Human right

Sunday, October 18, 2009

S&P500 Short Term Resistances/Supports (Oct/18th)

S&P500 in short term: extremely bought.
S&P500 in intermediate term: extremely overbought.
S&P500 in long term: neutral.

Short Term Supports:

Short Term Resistances:

Friday, October 16, 2009

U.S. Dollar Index Technical Analysis (Part-9)

U.S. Dollar Index Chart:
Dollar could held to last line of defence 75.33-75.25, if dollar breaks it there is no support until 73.97 . Note if dollar breaks 71.70 it would be very ugly.

Thursday, October 15, 2009

DOW JONES 10000!

DOW JONES hit the 10000, doctors recommended if Dow has erection and stays above 10000 for 4 hours or more please call 911 or see your doctor urgently, HA-HA ;-)

OK! lets get serious. Dow Jones 10000 does not mean anything from technical stand point. If Dow gets above 10300-10400 it would be very positive. In my opinion major level would be 1200 in S&P500, If we get above 1200 bears have to hibernate for very long time.

Here is two scenarios you decide which one makes more sense, I personally go with Elliot wave.

Elliott Wave Analysis, Bearish Outlook (Part-3) originally posted in August 28, 2009:

DOW JONES Inverted head and shoulders, originally posted (July 25, 2009):
Bullish scenario, Inverted Head & Shoulders Pattern

Banks Earnings: Just a Mirage?

Ken Kam CEO of Marketocracy on why laxed accounting laws are falsely propping up banks' balance sheets.

This is what I have been saying since April. FASB relaxed the mark-to-market accounting rules that allowed banks to not report their losses and come with these fictitious earnings. Please see my April 4th article "The End of Mark-to-market Accounting Rules End of Transparency Era"

Wednesday, October 14, 2009

S&P500 short-term support/resistance (oct 14th)

S&P500 in short term: extremely bought.
S&P500 in intermediate term: extremely overbought.
S&P500 in long term: neutral.

Short Term Supports:

Short Term Resistances:

Tuesday, October 13, 2009

Monday, October 12, 2009

Interview with Jospeh Stiglitz on recovery

Interview with Jospeh Stiglitz a professor at Columbia University. He is a recipient of the Nobel Prize in Economic(2001) and the John Bates Clark Medal (1979).

Friday, October 9, 2009

August Trade Data Show A Modest Improvement

The U.S. international trade deficit shrank in August due to lower oil and consumer goods imports. Petroleum import was $16.5 billion compared to $17.8 billion the previous month. on the other hand the non petroleum gap expanded to $24.3 billion from $23.6 billion in July. Overall, the August trade data show modest improvement in real terms. To me drop in imports reflects the U.S. economy stuck in the mud and there is a long way to go before we could say we are out of recession. Exports however, did rise due to weak dollar, largely on industrial supplies, services, and auto shipments to Canada. The U.S. trade gap narrowed to $30.7 billion from a revised $31.9 billion in July. Exports improved by 0.2% while imports fall by -0.6% ,please note drops in import shows a very weak consumer consumption.

Exports were up 0.2% .
Goods exports -1.6% .
Imports improved to -28.6% from -30.3% the prior month.
Price of imported oil rose to $64.75 per barrel from $62.48 in July.
Year-on-year, overall exports rose by 6.75% to -20.7% from -22.2% in July while imports improved to -28.6% from -30.3% the prior month.

Technicals look perfect to continuation of rally, to me +60% rally look bubbly ,market priced for perfection and fundamentals could not justify the rally ,but as you know market is irrational, therefore enjoy the rally while it lasts.

Thursday, October 8, 2009

Wednesday, October 7, 2009

S&P500 Possible Moves in October 09

S&P500 Monthly Perdiction Chart:
Pay attention to 1066, if S&P500 moves above 1066 it could shoot to 1100-1120, on the other hand if S&P500 drops bellow 1015 it would heads for 960 or lower.

S&P100 Possible Moves in October

S&P100 Technical Chart:
October would be hard to predict due to earning season, but here is my monthly forecast for S&P100. Note S&P100 reached my July 23rd articel's target (500)and pulled back. If it moves above 500 level it would be very positive my bullish target for S&P100 would be 517 on the other hand if S&P100 drops bellow 475 it should move at least as low as 450.

Tuesday, October 6, 2009

U.S. Dollar Index Technical Analysis (Part-8)

U.S. Dollar Index Chart:
I make it short and right to the point, chart speaks for itself. The U.S Dollar held to 76.15 support, failure to hold to ~76.15 for a day or two means dollar will head lower. Next level to watch is 75.33 support.If dollar breaks 76.15 support equity market will move higher.

Shanghai Composite Index Technical Analysis

Shanghai Composite Index Chart:
Pay attention to diagonal support line (in purple), if Shanghai index violates it, Chinese stock market will be in a big trouble. Shanghai index would be the canary in a coal mine for the U.S. equity market.

Monday, October 5, 2009

Robot war

TED Spread hit 5 years low

TED Spread Chart:
You might know the Ted Spread definition, but just in case I explain it to you. The Ted Spread is the difference between the risk-free 3-month T-bill interest rate and 3-month LIBOR, and is considered to be a indicator of the overall amount of perceived credit risk in the economy.

Recently TED Spread made a new low. It was the lowest level in 5 years. Many analysts interpret it as a positive signal, but to me it's the signal of bubbly market and too much optimism and investors wishful thinking that it does not reflect the reality. Considering Option ARM tsunami in 2010-2011, commercial real estate, credit card delinquencies and many other bumps in the road it's naive to think everything is fine and good days are back. In general Ted Spread is not a very reliable indicator when there is too much Fed intervention in market.

Sunday, October 4, 2009

S&P500 short-term support/resistance:

S&P500 in short term: over sold.
S&P500 in intermediate term: extremely overbought.
S&P500 in long term: neutral.

Short Term Supports:

Short Term Resistances:

Friday, October 2, 2009

LIBOR-OIS 3M (USD) Oct 2nd

I post the LIBOR chart every fridays. Just type Libor in search box (it is located on top left corner). You will see all Libor charts.

Thursday, October 1, 2009

Jobless Recovery!!! HA-HA

I make it short and right to the point. There is nothing like "jobless recovery" exist in real world, this is the creation of wishful sick minds of wall street crooks. When 70.9% of the U.S. GDP is consumer consumption you can not recover in a couple months while real unemployment is above 17%. Recovery will be sluggish not "V" shape. It's laughable when talking heads in CNBC talk about "jobless recovery" and new bull market.