Wednesday, October 31, 2007
PS: I put a note over here today as I capitulated out of my shorts.
Monday, October 29, 2007
I took a position here today in an act of willing the breakout to complete. MGN is not one of my favorite miners and certainly would not be considered "core", but experience has told me that when/if this break happens, this stock hauls a$$ quite quickly. The chart, on both the daily and weekly is one that gets me a little, er, excited. No recommendation and I may sell this at any moment if things do not proceed as expected.
Saturday, October 27, 2007
As noted, there was little chance that the most recent leg down was going to be the big one and instead, it was just more manic behavior by the alternately greedy and fearful bulls. Now we witness a quick reversal to the opposite pole. Do you think this is healthy behavior? I took new short positions this past week with the assumption that our scenario (support and a bounce to noted resistance) would hold. We are there now but to complicate matters we have a Fed that is being seen as the embodiment of everything we thought we knew about Heli-Ben to begin with. It appears he will err on the side of rampant liquidity creation; a luxury afforded him by the something-for-nothing fiat regime in force throughout his academic career and which he apparently does not question, along with perhaps 90% of the public and official sectors.
Without further delay, on to some charts. First up we have the S&P 500. In last week's note the Dow was shown. Here we take a look at the broad S&P 500. Support at 1490 held with no problem, except in the minds of manic and emotional bulls. But now we watch resistance at 1540, a weekly close above which would get me looking for the exit signs on my short trade (SDS ultra short SPX) on this index. But again, there is nothing here as yet other than a predictable bounce and some still turned-down momentum and trend indicators for the bulls to hold onto. The bulls refuse to loosen their grip on Dr. Bernanke's punch bowl. This is one FOMC meeting that is very important in that it could well decide whether the broad market rejoins other assets in blow off mode. But if that committee ever grows a collective backbone and at least acts like it cares about the US Dollar, watch out below. In other words no rate cut = no continued party (in the short term) for the bulls. In the meantime, along with the bearish momentum indicators on the chart the bulls face a still-bullish (bearish for the markets) VIX, possible double bottoming long term treasury rates and a put/call ratio 20 day moving average that appears to have bottomed and is turning up (.94 exponential and .90 simple).
The next chart I would like to look at is the NDX, of which I am short via QID (ultra short QQQQ). This is a chart that kept me tempered on the short side once I saw that inverted head and shoulders formation beginning to form (those who cared to open their eyes could see what the bulls were up to back in early September). And here is a chart from mid September that clearly shows when the bulls took control as they held the inverted H&S neck line. That is the 'whites of the bulls' eyes' if I have ever seen it - a glint of greed and fury that would not be denied. But the formation has expressed itself to our target and is forming a small, tight reverse symmetrical triangle, which being of modest duration is not cause for any great bearish projections. In fact, I would be happy to get the two noted gaps filled and then go back to a more routine risk management regime (after all, I am primarily short the market to protect gold and silver miner positions for which the macro becomes better every time Bernanke's backbone looks a bit rubbery) as the performance of some of the captains of the NDX like Google, Apple and R.I.M. is very impressive. I also took a new long position in Texas Instruments (TXN) on the day it was torpedoed, as owning this semiconductor (I am aware the SOX is bearish) company is akin to holding a bit of relative value against being short an index of high fliers. It should be noted however that if this does indeed whip itself into a bull frenzy/mania, the high fliers are likely going a lot higher relative to the likes of TXN. But until the bulls show me the whites of their crazy, lunatic eyes, I'll hold short the index here. The whites of their eyes would likely be a break above the top line of the reverse symm-tri.
Next up is oil, another asset rising in bullish fury but which is in reality likely another manifestation of the sacrificial status of US Dollar. I am bullish on oil (and any other precious commodity) for the longer term, but folks, this thing is rising now in a furious and desperate speculative environment. In my book the rise in stocks, oil, the Euro... they are no different than what is happening in China, and what is happening in China is a bubble. A bubble that I have shorted - in very modest doses - of late. I think the US Fed's true nature has been exposed; they simply cannot wait to save the day for asset owners and leveraged risk takers at the continued expense of savers and non-speculators (if you own what you think are sound mutual funds but haven't gone through all their holdings with a fine tooth comb, you are a speculator - and a risk taker). People managing other peoples' money tend to go for the gusto; go for the performance. But sometimes performance and sound risk management are mutually exclusive. But back to oil; the goopy stuff continues to frustrate me as a good chunk of my investment stance is predicated on oil topping out and/or declining (like any energy-dependent business, the gold miners do NOT like higher oil [edit: or more accurately, higher oil vs. their product, gold]). Biiwii.com guest writer Bob Hoye's Institutional Advisors have been constructive on uranium vs. oil, and as far as energy goes, my few holdings are indeed in the u3o8 sector.
The airlines have not yet gotten the memo and remain a bearish divergence for oil as long as the short term uptrend remains intact. I am long JBLU and LUV until such time as the XAL breaks down. Painful as it has been, the grind continues and I remain bullish until the chart tells me not to be. As noted on the blog, this Airline trade has been a grind. But that is the life of a bottom feeder, which in trading practice I tend to be (as opposed to a momentum or new highs breakout trader). Patience and ultimately having to possibly admit I was wrong are part of the equation.
Next we have a chart for gold, a traditionally counter-cyclical asset that is either aboard the speculative blow-off trade or is simply biding time as it prepares to decouple from all the other nonsense on fiat planet (think Euro). But if the Dollar ever catches a bid - and catches the multitudes of Dollar bears on the wrong side of the trade, gold will receive one of those hard whacks that its ongoing bull market is noted for. I had projected $900 off of an ascending triangle break but a symmetrical triangle works as well or better and targets the same level. This is among the reasons I hold my core gold stocks no matter what.
The gold bug camp appears have a lot of people who consider it healthier for silver to lead the bull market in precious metals. But gold is the 'monetary' metal and its real bull market is and has been marked by its enduring value in the face of the wholesale compromise of global fiat currencies. Again, I would like to emphasize the value that Bob Hoye and fellow Biiwii.com guest writer Steve Saville (there are others I am sure, but they are a minority) have provided to those willing to open their eyes - as they in my opinion correctly analyze the dynamics of gold as counter cyclical and counter confidence and the importance of the gold/silver ratio in divining whether we have a real gold bull or merely a rising component in the commodity complex. As long as broad market participants choose to believe all will turn out well, Google can make them rich and silver is going to $100 any time soon, then gold will not distinguish itself. I am not bearish on silver by any means. But in a contraction environment, which I believe will persist, I am less bullish silver than gold. Our often-watched gold/silver ratio remains in an uptrend. But that fact and others, like the bullish stance of the Yen are merely inconvenient and boring details as the bulls prepare for a hoped for next leg up in their fantasy where an all powerful Fed actually can micro manage assets of all kinds to the inflationary heavens and a certain despised debt note to the gates of hell.
But what if the GSR continues upward, the Yen continues upward, long term treasuries do not make a lower low and the manic whites of the bulls' eyes once again turn yellow? This is not a doom and gloom forecast, but it is best keep your feet on the ground, understand the risks and proceed with your eyes wide open. Money is scared right now and it is stampeding into the hottest plays it can find. But it is not sound money, it is just too much funny munny, created out of thin air and seeking to transform itself into something real and productive. Funny munny fuels private equity. Funny munny promotes stock buy backs, funny munny creates Euro and China bubbles. Some of the munny will manage to become money, first and foremost by denominating itself in gold. But also silver, oil and productive resources of all kinds. This munny will also hide in good, solid debt free technologies that enable the interconnected world we are heading toward. So you won't find me writing a total Armageddon piece. Look at it this way, in an age where the world's reserve currency has come under the gun and its major competitors are not much better intrinsically, this is a game of musical chairs and the time is now to have your eyes on the chair you plan to sit in. When the music stops you do not want to be stuck with the wrong 'assets' or obligations.
Secular changes are at hand in how we define 'value'. The above is a TA piece that became a bit long winded (it's not the first time). I am interested in effective short term trading/investing and in fact enjoy few things more. But I always operate against a backdrop where I keep a sober eye on the macro framework. In a soon to come weekly letter, this framework will be kept in focus along with shorter term trends and trading ideas. If you are interested in joining me, watch the website, TA blog and Commentary blog for details.
PS: As if his ears were burning at the sound of the bubble talk above, yet another Biiwii.com guest writer, Clif Droke checks in this morning with his views on matter. Mr. Droke, while maintaining a differing perspective from my own as to the implications of liquidity creation, has been one of the most consistently correct analysts I have seen in recent years as far as calling the direction of what he would call a market and I might call a casino.
Wednesday, October 24, 2007
Oct 24 (Reuters) - USEC Inc (USU.N: Quote, Profile, Research) said it signed a contract valued at about $400 million with Korea Hydro & Nuclear Power Co Ltd to sell separative work units of enriched uranium for the utility's light-water nuclear power reactors.
The new contract with the Seoul-based utility runs through 2013 and covers new deliveries of enriched uranium, as well as improved terms on existing commitments, USEC said. (Reporting by Jennifer Robin Raj in Bangalore)
Monday, October 22, 2007
Saturday, October 20, 2007
- All the hype surrounding the anniversary of the Crash of '87.
- The fact that I own gold stocks that are holding up very well.
- Healthy cash & equivalents on hand.
- Healthy short gains this week and I refuse to give them back. I have fought the pig too many times and lost to get greedy (I fought the pig and the... the pig won, I fought the pi-ig and the... da da da da... pig won).
- 'Dave the Bear' is sending me rather confident sounding emails ;-) and finally...
- The charts are approaching levels where we may get a counter-trend rebound.
Regarding the chart, we see the Dow, carrying a ship of fools, dropping to an area where uncommitted, lazy and convention worshiping bulls may lose their nerve - this would be called an emotional support level, again figuring in the hyperbole and noise of the dreaded October crash hysteria (this would be the first crash on record that was seen in advance with a macro-telephoto lens. Manic bulls have gone from greed and complacency to fear and discord in a remarkably short period of time. I love those predictable bulls.
Here is the fun part, at least if this unfolds as I think it may (warning: trying to exert one's will over the market usually does not end well, so we will just say this is my stance or game plan for the time being). I think the market may catch a bid here in the next few days and run back up to the noted resistance area. A nice little whipsaw for bulls and bears alike. Momentum indicators show we are getting to short term over sold already. So be alert to this possibility. But there is likely unfinished business on the downside, to the 200 day moving average at a minimum. Then it will be time to reevaluate and factor in macro data like the state of the USD, long term interest rates (yes I know, my rates rising call stinks - thus far), Yen and of course the state of the credit markets, which are or should be in perilous position. But in an age of infinite fiat we remain aware that if indeed something can be papered over, 'they' will give it the old college try. Hence the gold stock positions which would be added to upon the broad market's next leg down, later this month or into early November.
Separately, here is a Kudlow spot where Biiwii.com guest writer Michael Panzner is pitted against raging bull Don Luskin. It is from April, '07, just before the summer of discontent set in. Note the hubris on Mr. Luskin's part vs. the steady common sense of Mr. Panzner. Funny thing is, Luskin got the rate cuts he insisted would not happen and yet the bulls took it and ran with it anyway. It's all good for the bulls. Economic threats are great enough to drive down short term rates and yet all that does is highlight the punch bowl. It still says here that no matter what happens in the intermediate term (our view remains bullish for nominal stock prices beyond the next couple months), this is a mess. A drunken, debt enabled mess.
Thursday, October 18, 2007
Edit (3:45) This, in a nutshell is what the airlines and by association, I face. Wall Street is very bullish oil because as is typical, Wall St. is very good at telling us what has transpired and extrapolating forward. The way we make money is by getting contrary and being patient. I may end up wrong here, but then again I am comforted by the entire world's drum beat for higher oil and the $XAL's stubborn refusal (thus far) to submit.
(AP) The Amex Airline Index fell 2 percent to 45.76. The Dow Jones industrials also declined, falling 0.3 percent to 13,849.13.
Oil prices again surged: Light, sweet crude for November delivery rose $1.07 to $88.47 on the New York Mercantile Exchange. Airline shares often respond to oil price swings because jet fuel, which is refined from crude oil, represents one of the industry's biggest costs.
Continental Airlines Inc. was among the sector's biggest decliners, losing nearly 4 percent after its third-quarter earnings fell 2 cents per share short of Wall Street expectations. The carrier said profit grew 2 percent during the quarter to $2.15 per share. Revenue was up 9 percent.
Continental shares lost $1.35 to $34.88.
Southwest Airlines Co.'s earnings growth was more robust. Its profit jumped to $162 million, or 22 cents per share, from $48 million, or 6 cents per share, previously. It beat analysts' forecasts by a penny per share. However, the company noted that unit costs, which have long benefited from shrewd fuel hedging, edged higher.
"We think this release evidences LUV's continued challenges in its attempts to offset a growing fuel headwind," Goldman Sachs analyst Robert Barry said in a note to investors.
Southwest shares fell 30 cents, or 2.1 percent, to $14.26.
JPMorgan analyst Jamie Baker called both companies' third-quarter results "unremarkable" and noted that their fourth-quarter forecasts suggest the next round of earnings may be below current Wall Street expectations.
Other big decliners included American Airlines parent AMR Corp., which reported sharply higher third-quarter profit Wednesday. Goldman Sachs' Barry said the stock, which he rates "Sell," could fall as speculation of a possible spin-off fades.
AMR shares dropped 98 cents, or 3.8 percent, to $24.14.Edit (4:15) I am spending entirely too much time nursing this trade and hope you, dear reader are not going "What's up with this guy? Get off the friggin' airlines already!", but here is another chart comparing XAL & oil over a longer term. Oil skies but do the airlines go into a tailspin? Not as yet. We wait. In the interim, I need to get back to my gold stocks which I have started to ignore in favor of this would-be successful contrary bottom feed.
Wednesday, October 17, 2007
Tuesday, October 16, 2007
Monday, October 15, 2007
BUT, I also realize that gold miners are not gold. An old friend once said they are like race cars. You run the crap out of them and when they break down you put them in the shop for repairs. People who hold bullion don't tend to do that. When I buy through the BullionVault link on the right there, I don't even check the POG. I simply cycle the USD, Pounds or Euros into bullion as commissions (thanks you) come in. And yes, I store it in the Zurich vault.
But here we talk a lot about 'da minas'. They are accelerating upward into blue sky territory. This is great, but as I mentioned the risk is increasing - both to the momo's who are outside looking in and to the holders. I will say again it is up to you the individual to know whether you are a trader, holder, risk manager, bag holder... what have you. As you know, I am a bottom feeder very comfortable at identifying bottoms. I will buy before many become aware and sell to them as they lust after what I've got. As noted over on the other blog, I did some recycling of a few bottle rockets into non starters last week and still hold my core as well. I am certainly not a bag holder anymore. Trading and risk management are back in my play book along with core miners I will hold when this run finally blows out and corrects.
Enjoy, have a good week and stay grounded.
Edit (1:43) Email received today:
Your blog is one of a couple I check regularly. I am also a subscriber to Jack Chan. I was thinking that perhaps you have misinterpreted Jack's system. Jack has a trading portion as well as an investing/core positions portion. It just seems you think Jack is all trading and no core. While the trading positions did get stopped out, Jack still has core positions right now. Anyhow, talk to you later.
I was not aware of that Steve. Thanks for the clarification. Now I respect the guy even more in that he is able to divide his disciplines. I like that. For the purposes of the point I was trying to make, it is the trading system I am interested in.
Friday, October 12, 2007
Thursday, October 11, 2007
Tuesday, October 9, 2007
With its acquisition strategy (I first took serious note of AUY after they gobbled up my former favorite miner, Desert Sun - a fledgling South American Producer). My particular strengths are in technical analysis and macro-fundamentals (watch the TA Blog & Commentary Blog for ongoing analysis of Gold-Silver ratios, Gold-Oil ratios and Dow-Gold ratios and many other macro signposts). I have neither the interest nor the time to bore too deeply into the micro-fundamentals of individual companies, but here is a rather entertaining look at the AUY-NTO-MDG courtship from biiwii.com friend Mark Turner, Latin American equities analyst with Hallgarten & Company. Again, AUY is a good company and getting better. It is up to the reader to make 'value' decisions.
But on to the techicals where I am most comfortable:
The daily chart shows what could be a nice inverted head & shoulders set up in making. This stock has gotten out of step with the sector largely because of its (in)digestion of Meridian and Northern Orion. I like the way AUY has broken the daily (and weekly) down trend and held above the blue line. This keeps the H&S in play. PPO and MACD have long since taken pure traders out of the stock and the up trend is weakening. But this consolidation is happening on declining volume and in fact 'on balance' volume remains very positive. This is one premium miner that is not over bought and that is not a statement that can be made for many of the major gold stocks.
I plan to follow the progress of the 'potential' H&S and monitor momentum indicators like the RSI & PPO and if the neck line is exceeded on a closing basis, the target becomes 17 plus. Meanwhile, AUY will continue to deal with support near the 50 day moving average and resistance near the 200 dma. I am not trying to make a prediction as AUY will ultimately be subject to the direction of the sector in the short term. But the chart currently looks very interesting.
Edit (4:29) Today helped further define the potential 2nd shoulder.
Edit (10/10 @ 12:23) Looking better yet. Reminder: Inverted H&S not confirmed until solid close and hold above neck line.
I am long AUY.
Sunday, October 7, 2007
Friday, October 5, 2007
Breakout in process and if it holds, it bodes well for us bottom feeders. I added a few options positions yesterday after JBLU pooped the sector. Red dotted line shows what should be some hefty resistance however. Biiwii.com guest writer Steve Saville has noted the seasonal tendencies of the Airlines. Now the chart gives us more reason to be optimistic for a trade.
Thursday, October 4, 2007
Let's just say that I am not convinced. If I am short term bearish on oil, and gold is rising in sympathy with it then I am short term bearish on gold too. I totally disagree with the thinking that says rising oil is inflationary, but since the market thinks that and since the market controls short term direction, if I am bearish on oil I am bearish on gold. That's where fundmentals come in and since I am holding my favorite miners I am delighted by a day like today. It's just that nothing has convinced me that buying opportunities at previously noted levels are not in the making. This proxy for oil (USO) looks eerily like our favorite gold proxy (GLD). Gold is in the realm of the monetary now and somewhere during the next credit barf fest I expect that to become evident. Is today's move a monetary event or just in step with the commodity complex?
Wednesday, October 3, 2007
Anyway, this quiz linking my answers to the prez candidates has basically turned my world upside down. I knew I liked Tancredo (3), but McCain (1) & Giuliani (2)? Rudy's a #%$! Yankee fan! Way down there on the list resides Ron Paul (12). I am a disgrace to the Libertarians. :-). Thank God only one Democrat shows up in my top 10 (Richardson @ 8) and Hillary, Edwards, Gravel & Dodd are way down at the bottom. BTW, I am happy to support Ron Paul, despite the differences (and to be honest, they are generally not strongly held differences on my part) because what I want is honesty, consistency and of course someone schooled in Austrian economics which is the school of an honest monetary system and productivity based economics, as opposed to financial wizardry in the service of 'something for nothing' (inflationary based) economics. I don't think the poll gives proper weight to the issues I care about most which are the issues that launched the website and blog.
Edit (4:19) A commentary blog is now launched: http://biiwiicom.blogspot.com/
PS: Go Sox!