Sunday, August 28, 2011

More green ahead, or hot air?

Last week the bots tried to push the market down, but buyers won the match, pushing the ES up a good 50+ handles on no real positive news. This is starting to become a new thing “buy on no news” still don’t understand why because nothing has changed. Not been on twitter as much as I would like last week (maybe that’s a good thing) been busy trying to socialize with the new teammates. As far as trading goes, went for a long shot on $DRYS limit @ 2.55 on Friday, got to 2.56 then straight up to 2.8 after the Bernanke rally on Friday. Have to say, was definitely not expecting a turn around like that, I know most were expecting a selloff, but we have been ramping all week so why stop there?

Above is a chart of DryShips ($DRYS) line @ 2.55 seemed to hold and bounced off for the last two weeks.

This week I will be focused on earnings. Up for reports are: $PVH and $CPB

Phillips Van Heusen $PVH is in the clothing retail business and the parent company of Tommy Hilfiger, Calvin Klein, Bass, IZOD, Nautica and many other well-known mid to upper class names. Looking at their income statement, Revenues y-o-y have more than doubled with increasing sales, though net income is down from 161M to 53M. Expenses, especially selling, have more than doubled from 2010 (2.21B v. 938M), along with a large increase in interest expense. I’m giving them a neutral hold, and would not be buying the stock before earnings release Tuesday. Retail is very sticky to trade right now, especially with the increased volatility we have seen.

Above is a chart of $PVH; there have been a lot of violent swings, from $70 to $50 then back to $60 all in a months time. Trade what you see.

Campbell Soup Company $CPB not only makes soups but is also the parent owner of Pepperidge Farm (Goldfish Crackers). One can pretty much say that is a home run with the Goldfish Crackers in the Tomato soup, right? I like this company a lot and it has been beaten up pretty bad. It holds pretty steady and pays a nice fat yield 3.75% while you wait. Recession-proof as well; a very defensive name; people are going to want something relatively cheap to eat, why not some Chicken Noodle? Looking at their net income, it has been on the decline since October’s report last year, about 40% of last October’s net was reported in May. They are keeping costs down and have been cutting quite a bit, but cannot get the revenue boost. Quarterly revenue from Jan to May is 2.1B v. 1.8B. The revenue number doesn’t really bother me, I’m sure they will beat last quarter easily, stock price is cheap @ $30 the machines have been behind the 10% unnecessary selloff this month. Forward P/E of 12 also signaled as cheap. I have it as a buy; will probably be trading it this week, time allotted.

Above chart of $CPB notice huge dropoff this month on absolutely no news whatsoever of the company, just your HFT at work, (hint hint buying opp.)

That’s all for this week guys, stay safe and make some $ this week. For more on trading ideas get at me via twitter: @peter_eller10

Sunday, August 21, 2011

"Short" and to the point

Well that was a calm week wasn’t it? The markets reared their ugly heads once again this past Thursday and Friday contributing to a 6% loss and ending down 4.7% this week for the major averages. We saw the lowest trading volume of the year on Wednesday where 3.3 Billion shares traded hands on the consolidated NYSE tape; this was considered the calm before the storm. Thursday was a filled day with data. Up first at 8:30 were the jobless claims which came out up 9,000 to 408K (last week’s # was revised up to 399K, breaking the 4+ month cycle of 400K). CPI then followed with a smaller than expected increase of .5% (food+energy) increase of .2% (ex. food+energy); expected .3%. Y-o-y continues to increase 1.8% core CPI, very much shows signs of inflation, rather stagflation. Stagflation is where inflation rate is high but economic growth rate is low.
Philly Fed also came out blowing the markets down even more with the worst month-over-month in 2.5 yrs.

Negative sentiment seems to still be in place for the upcoming week, as I type we are up 8 handles, but I would be very cautious; the fact we sold into Friday’s close tells me could go lower, possibly test 1,070. Europe is badly damaged right now; unless they have their elephant gun loaded for this something this week, expect red.

We have a lot of housing data coming out this week, with another look at GDP and Big Ben Bernanke speaking Friday (expect increased volatility, he tends to rock the boat)

I’d like to write more but extremely busy with being back at school, made a $ARO trade lost some $ ended up profiting 10 whopping dollars on 4 day trades this summer, trying to tell myself I'm still an amateur at this; have a good week everyone, don’t be an all-star, go for those base hits.

Sunday, August 14, 2011

Calm week approaching us?

What a wild week it was, hard to believe we are relatively flat to down 1% on the major indexes since Monday after some huge gyrations. S&P began week right on the 1,200 level, with intraday bounces all week of upwards of 100 handles. Volume heaviest since October ’08; HFT’s were a very big contributor. I was mostly sitting on the sidelines, though made one attempt at a trade and came out positive. What I have been doing all week is tracking down earnings reports releases, and positioning myself either upside or downside to make a few bucks. Many of these companies have strong fundamentals and outstanding reports every quarter, but ended up getting dragged down with the broader market. Take Starbucks ($SBUX), for example. The coffee market has been brewing hot for quite a while now, still very high demand with some supply shortages. People need/want their coffee so they will fork over a few extra cents for that cup. There is no reason why the coffee market would drop off due to a S&P downgrade or European Contaign.

Above is a $SBUX chart, in 3 days we saw it move from a 40 handle to a 34 handle, on no particular news about the company at all. P/E of 24 is still respectable for a growth company like this one. Under $35 was basically a bargain after their last quarterly report showed continuing growth. Buyers stepped in and drove it up under $34 intraday Tuesday to over 10% by Friday to a respectable mid-37 handle.

My in-and-out trade this week was Cisco Systems ($CSCO). Looking at this chart, it has pretty much been beaten to death with a lead pole, run over by a truck and thrown into a hot fire pit. Damage has been done, and it seemed impossible for this company to break to new 10 year lows. The $14.00 level appeared to be support (Mar ’09 low). We broke below $14 last wk to under 13.5 then back up on Tuesday. I bought some Wednesday evening limit @ $14, sold out @ $15.75 for a minimal profit after a better than expected earnings report. Picture below shows $14 support

This week: I’m looking for the ES to be range bound between 1,160 and 1,200 as long as there are no new news stories that could have a drastic effect. We saw Friday that the HFT’s were pretty much done bouncing us around, but that can always change. Expect us to move higher or go unchanged on much lighter volume than last week, fear seems to be gone for now. Any long $VXX calls I’d get out of.

Look out for earnings and potential pops in these names to get in-and-out of for a little $:

Be safe this week everyone.

Sunday, August 7, 2011

Tomorrow = volatility x infinity

The time has finally come, our “fearless” leaders in congress have finally done it. Taking weeks to resolve a debt issue, Standard and Poors have decided on Friday night, minutes following AH trading, to downgrade US credit rating from AAA to AA+ watch negative. This is a huge blow for our self-esteem, along with it being the first time in history this has happened. Personally, I did not think S&P has the guts to do this, but it was necessary. Congress could not solve an important issue and were so self-centered on their own campaigns during the debt ceiling fiasco.

Prior to this, we have witnessed the markets sell off quite substantially. The S&P 500 has been down nine out of the last ten days, on fear of European contagion. As far as resistance levels, on Friday we broke 1,200. Looking at a $SPY chart, I can see that this is an exact 50% retracement from 1,050 when QE2 began. I stressed this level on my last post.

The chart above shows the S&P 500 with 1,200 1,150 and 1,050 levels with horizontal lines. The S2 pivot is 1,159, we got within 9 handles of S2 intra-day Friday then bounced on news of a European bond buying program. Granted if that announcement did not take place, we could have easily breached 1,160 eventually to 1,150. The ultimate “get out and go home” level is S3 1,118. This would be a 90 handle selloff from Friday’s close, I don’t anticipate this happening, but with the swings we have been seeing this past week, anything is possible.

Above is another great photo, this shows circuit breakers in the Dow Jones Industrial Average; pretty straightforward. Never have we been here, but it has been close in the past, (2008). If we get a nice HFT arcade machine going tomorrow, anything is possible. 5% limit down in YM futures would be 570 pts keep that # in mind too.

No doubt we are going to see a LOT of volatility tomorrow. Friday we traded almost 9 Billion shares just on the NYSE consolidated. Average volume today, now that Citigroup has 1:10 split is something under 4 Billion. The picture below shows the $VXX ETN, seeing record volume last week and huge breaks to the upside. I am not putting any money to work this week, because I tried last week and failed at a bottom, but calls on the 35.00 are hot hot hot right now, still, levels are more than 7 pts off the March spike. The SMA 100 and 50 day have contracted quite a bit this past week also signaling a golden cross in the short term.

I want to close with a positive mood, know the levels, trade them, and maybe you can be like Jay Z “Double your money and make a stack”

Thursday, August 4, 2011

What Happened today?

Headlines all over "panic" "chaos" ect. Why? I will tell you why this is definitely a needed correction and new short-term trading range in 3 parts:

1. Quantitative Easing: those 2 feared words spoken by the Bernank himself. It was almost a year ago he made that speech in Jackson Hole WY that inflated equity markets so much, while devaluing our base currency $US. Devaluing the dollar leads to higher profits (cheaper exports to large corporations) and easier money to be passed around. Basically this was a market band-aid stimulus package. Printing more currency will not solve our problem, we don’t want to be paying $100 for a loaf of bread now do we?

Shown above is a 1 yr $SPY chart (Exchange Traded Fund that tracks S&P 500). circled in Red is the Speech made by Ben Bernanke in Jackson Hole about the second round of QE. This bond-buying program ended June 30th, since then we have seen downside. Circled in blue is price action in the last 2 weeks. Is 1,050 real market value? At these rates, it appears we are heading for that level.

2. Unemployment Rate and jobs: Well now, when Obama came into office he was all about “jobs, jobs, jobs” but I have not seen any yet. With the Non-Farm Payroll report coming out tomorrow at 8:30AM, I expect a minimal gain or loss. Revisions will most likely make this another losing month; especially the all-important but always missed birth/death adjustment. No job growth= no economic growth = lower market prices, it is not really that hard. You can’t survive an economy on 10% unemployment, it doesn’t work and that is why we are tanking.

Pictured above are the non-farm payroll reports from the decline in 2008 into current June 2011

This is the main adjustment number for Non-Farm Payrolls, Birth/Death. Quoted from Investopedia: “A figure that represents the net number of jobs provided from newly started businesses (births) and business closings (deaths) during a period of time, typically a month in conjunction with government-sponsored jobs reports.” Basically a Positive Birth/Death you would subtract from NFP # and Negative Birth/Death you add to NFP #, these positive revisions negate the NFP #

3. High-Frequency Trading, machines, bots, algos, HFT’s whatever you want to call them, they rule the market. We have definitely seen this the past few days when $ES_F will flail around +-5 handles at a time, you know that’s a program doing that, no human in retail, or the institutional guys on the floor can do that. There are times when I still wonder why these things are still legal? I know I’m not really a fan of government intervention in these markets, but some of these stocks, ETF’s ect. are people’s (including mine) IRA’s and income that they live off of. I believe the determination and guts to invest in this market should be rewarding, but at times, have some rough patches. High yielding accounts are still holding up well for those who want safety.

One last note, I have been analyzing these markets and trading them since the Summer of ’08, and I know what is like on days like today. September of ’08 was a real bloodbath; no one really knew where the bottom was. It is highly unlikely we will see Dow 6.5K and S&P 666 (<-yes the omen low) because that would basically mean corporations are earning no money and are trading almost all cash. I’m long in a new trading range in the indexes. Stay alert, but most of all, enjoy life, go home and crack one open on the bad days to relax and let yourself know you made it out alive.

Wednesday, August 3, 2011

Strike 1 out of..4?

Yes, that is right four strikes and your out. Of course, that isn't how the game is usually played, but the first week of the month is always interesting to see the data we are presented with. What I am referring to are the four unemployment numbers we receive from Wednesday-Friday. We just got the Challenger report on layoffs for month of July which was higher than expected, (66.4K vs. 41.4K). Majority of layoffs were from Cisco, Borders and Merck; margins have been hurting their bottom line, jobs cuts were almost imminent. In 30 minutes, we will be receiving ADP report on private sector jobs, I expect a strike two there with either a decrease or, once again, very minimal increase. Thursday's jobless claims back above 400K (strike three), and finally Friday's unemployment report (strike four) will put the nail in the coffin. ZeroHedge has a nice post on this with a chart showing sector-by-sector layoffs (

Since we are done with the debt fiasco and our congress finally grew a pair (sort of), we can not be assured, for now, that the US dollar is a safe haven play. We saw huge move in the $FAZ on decent volume to the upside, closing at the highest level since last December. I was watching the 52 level, very key if broken to more upside. We are up again in the pre, more red in S&P's = more green here.