First: As you might see from my previous post, I was expecting today to be a big day, but it wasn't. In all the market ended less than 2% down from where it opened on Monday. That leads me too....
They say that you should never judge a book by its cover. Well that might work for books, but I think that's it. (OK, might work for people too.) If this week had its own book cover, what would it look like? It show that the past two weeks have been rocky as the markets have been being tugged in every direction, but this week would provide some much needed data, and therefore, direction. Well, we stalled all week to get to PPI, then got stuck in a showdown until CPI, and then moved higher, lower, higher, and then lower before the final buzzer. So to tie back to the opening, a quick look at this weeks cover would have made you think that the market would end up with a swift move up or down. Now after flipping through the pages, it turns out to be a pretty boring book. Of course I'm sure market purists could find plenty of reasons why this was such an interesting week.
Sure, we may have received a bunch of data and reports, but nobody knows what to do with it. I guess the next step would be to see what the FOMC decides. Actually, unless you're missing half your head, we all know what is going to be decided. (Hint: Interest rates remain unchanged.) Why? Can't raise rates because the economy appears to be slowing and that would cool things off even further. Can't cut rates because inflation hasn't found a hole to hide in yet. So if you take a step forward and a step backwards, where do you end up? The same place you started! The words behind the words is what has the potential to move the market. Almost as if it is a different language, we will all wait to see what the Fed says. Will his words give a hint about possible future direction? Only his mouth knows for now. So until then we will see.
Friday, March 16, 2007
Thursday, March 15, 2007
Land of the Rising Sun and Bouncing Yen
Just for the record, before our big day tomorrow we have S&P and Nasdaq futures down about 4-6 points, the Yen slightly south of 117, and the Nikkei down 155. Of course a lot can happen between bedtime and my alarm sounding in the morning. It will be interesting to see when the market finds itself going into the CPI release.
Who Shot the Sheriff?
Somebody must have shot the Sheriff because there isn't anybody watching over the market. I think it has gone off its meds because it is definitely developing multiple personalities. Of course the market usually have different moods, but on an intraday basis, it can start one way and end totally different. I think we have reached some kind of tipping points. There isn't a big enough crowd to move us one way or another. We have enough issues here at home. We have some economic data showing us that corporate earnings are slowing and that the economy might be starting to cool off, but then we still have some data showing that we might still have inflation worries. I guess that means that everything will be expensive and we'll all be unemployed. Well...probably not that bad, at least I hope not. However, it is something interesting.
I think that there is absolutely no way the Fed will change interest rates at the FOMC meeting next week. If for anything, because who in the heck knows where to move them too. We have inflation worries on one hand and housing issues in the other. Certainly, there is more than just those two issues, but I needed two for an example so there you are.
Actually, I think that we are at a transition point at the moment. We are in between a rapidly growing economy and a slowing one. I don't think we are going to continue to go gang busters, but I don't think we'll go into a recession either. We are seeing information that can lead us to either side, but I think the confusion simply means that we are starting a new of the cycle.
We seem to be rather range bound lately, but I think that will easily end when ever something comes along to give it a reason to move. A non-trending market is like a trending market, by way of it is what it is until it isn't. We have no idea where the economy is going from here and the market is equally confused.
Even with all of the stuff going on here, a lot of our ebb and flow seems to be dependent on the Yen. I heard a stat on CNBC that said that according to a study done by one of the big brokerage houses that our markets have had a 90% correlation with the Yen in the past week or two. Actually I think that was more last week since we have had a little more economic data this week.
Now for the final act, of the week, CPI. After the PPI was released everybody just stared at each other waiting for somebody to make a move and nobody did. So, everybody agreed that we would wait for the more important CPI before we make a move. So tomorrow will be a duel. I have no idea if this is accurate, I actually am skeptical, but they said that there has never been a down 3rd Friday of the month. Even without that "fact" tomorrow should be wildly interesting. Quick summary: volatile past two weeks + mixed economic data + range bound markets + carry trade + sub-prime + option expiration= ??? Some of these might not directly affect tomorrow, but they will all definitely be on the mind of traders. So find your trades, set your stops, and good luck.
I think that there is absolutely no way the Fed will change interest rates at the FOMC meeting next week. If for anything, because who in the heck knows where to move them too. We have inflation worries on one hand and housing issues in the other. Certainly, there is more than just those two issues, but I needed two for an example so there you are.
Actually, I think that we are at a transition point at the moment. We are in between a rapidly growing economy and a slowing one. I don't think we are going to continue to go gang busters, but I don't think we'll go into a recession either. We are seeing information that can lead us to either side, but I think the confusion simply means that we are starting a new of the cycle.
We seem to be rather range bound lately, but I think that will easily end when ever something comes along to give it a reason to move. A non-trending market is like a trending market, by way of it is what it is until it isn't. We have no idea where the economy is going from here and the market is equally confused.
Even with all of the stuff going on here, a lot of our ebb and flow seems to be dependent on the Yen. I heard a stat on CNBC that said that according to a study done by one of the big brokerage houses that our markets have had a 90% correlation with the Yen in the past week or two. Actually I think that was more last week since we have had a little more economic data this week.
Now for the final act, of the week, CPI. After the PPI was released everybody just stared at each other waiting for somebody to make a move and nobody did. So, everybody agreed that we would wait for the more important CPI before we make a move. So tomorrow will be a duel. I have no idea if this is accurate, I actually am skeptical, but they said that there has never been a down 3rd Friday of the month. Even without that "fact" tomorrow should be wildly interesting. Quick summary: volatile past two weeks + mixed economic data + range bound markets + carry trade + sub-prime + option expiration= ??? Some of these might not directly affect tomorrow, but they will all definitely be on the mind of traders. So find your trades, set your stops, and good luck.
Saturday, March 10, 2007
Turnaround Report (Week 1)
Let's take a look at how my turnaround stocks are doing. First let's keep in mind that for such a volatile week, we don't have much, up or down, to show for it except for a little to the upside. So let's take a look at how these three stocks performed...
Home Depot (HD) (0.51%)
Dell (DELL) (0.44%)
Motorola (MOT) (0.16%)
For those of you that are unaware, parentheses mean negative. So, considering all the "stuff" that is going around, not a big deal. There has been a recent "flight to quality." Obviously, these turnaround stocks aren't going to qualify for that right now. So in all, the portfolio as a whole is only down .37%, which equals $112. Seems acceptable so far, as long as you weren't hoping for a day or swing trade. Let's see how these stock perform with all of the action that's going to hit the streets next week.
Home Depot (HD) (0.51%)
Dell (DELL) (0.44%)
Motorola (MOT) (0.16%)
For those of you that are unaware, parentheses mean negative. So, considering all the "stuff" that is going around, not a big deal. There has been a recent "flight to quality." Obviously, these turnaround stocks aren't going to qualify for that right now. So in all, the portfolio as a whole is only down .37%, which equals $112. Seems acceptable so far, as long as you weren't hoping for a day or swing trade. Let's see how these stock perform with all of the action that's going to hit the streets next week.
Tuesday, March 6, 2007
Help Wanted: Three Stocks Looking for Love
I'd like to propose three stocks. I have grown to prefer to be more of a trader than an investor. I am much too interested in the markets to just sit and watch day after day. However, every once in awhile I like to pick some stocks that I'd like to hold for the long-term. I have three stocks in particular that have really been slammed hard over the past few weeks.
Home Depot (HD)
First, we have Home Depot (HD). Falling behind Lowe's and having a handful of problems, HD's new CEO has plenty to improve upon. What began as the nation's top "Do-It-Yourself" store now has become a customer service nightmare. The darkening of the housing market has hit them too, but it's time to innovate or die.
Dell (DELL)
Next, Dell (DELL) is in a similar boat. With Michael Dell back at the helm, I believe he can bring his company back to glory. He (hopefully) knows that Dell's current business model isn't cutting it anymore. Lucky for investors, Michael started this thing from his garage and turned it into a leading desktop computer retailer. The question is can he put Dell back on top again?
Motorola (MOT)
Finally, we have Motorola. In mid-October the stock peaked at about $26 and now trades for $18.50. Margins have been squeezed and there have been some issues within top management. Considering every other person I see on the street is talking on a Razr, what happened here? They tried to swing for the fences again with a few successor models to the Razr, but none have gained the popularity they were hoping for. Like Superman without the tights, Icann has decided to start buying up shares. Men like Icann usually don't take large positions in companies if they don't plan to do something. So I guess we'll see if he can lean on upper management to improve margins and produce another winner like the Razr.
Buy Time
Considering how far these stocks have fallen in the past few weeks, months, etc., it would have been a good time to buy two weeks ago. Lucky for you we've had this "correction," "Shanghai Surprise," or whatever you want to call it. This has knocked another couple of percentage points of the price. These might not be an overnight sensation, but give it 6-months to a year. In order to quantify my recommendation, let's create a portfolio of these three stocks. Starting with $30k and an equal 1/3 investment in each let's see how these picks do week to week.
Stock Cost FMV(3/5/07) Gain/(Loss)
Home Depot (HD) $9,990 $9,990 -
Dell (DELL) $10,003 $10,003 -
Motorola (MOT) $9,990 $9,990 -
Details:
Purchases prices as of close on 3/06/2007:
257shs (HD) @ 38.87
444shs (DELL) @22.53
540shs (MOT) @ 18.5
Home Depot (HD)
First, we have Home Depot (HD). Falling behind Lowe's and having a handful of problems, HD's new CEO has plenty to improve upon. What began as the nation's top "Do-It-Yourself" store now has become a customer service nightmare. The darkening of the housing market has hit them too, but it's time to innovate or die.
Dell (DELL)
Next, Dell (DELL) is in a similar boat. With Michael Dell back at the helm, I believe he can bring his company back to glory. He (hopefully) knows that Dell's current business model isn't cutting it anymore. Lucky for investors, Michael started this thing from his garage and turned it into a leading desktop computer retailer. The question is can he put Dell back on top again?
Motorola (MOT)
Finally, we have Motorola. In mid-October the stock peaked at about $26 and now trades for $18.50. Margins have been squeezed and there have been some issues within top management. Considering every other person I see on the street is talking on a Razr, what happened here? They tried to swing for the fences again with a few successor models to the Razr, but none have gained the popularity they were hoping for. Like Superman without the tights, Icann has decided to start buying up shares. Men like Icann usually don't take large positions in companies if they don't plan to do something. So I guess we'll see if he can lean on upper management to improve margins and produce another winner like the Razr.
Buy Time
Considering how far these stocks have fallen in the past few weeks, months, etc., it would have been a good time to buy two weeks ago. Lucky for you we've had this "correction," "Shanghai Surprise," or whatever you want to call it. This has knocked another couple of percentage points of the price. These might not be an overnight sensation, but give it 6-months to a year. In order to quantify my recommendation, let's create a portfolio of these three stocks. Starting with $30k and an equal 1/3 investment in each let's see how these picks do week to week.
Stock Cost FMV(3/5/07) Gain/(Loss)
Home Depot (HD) $9,990 $9,990 -
Dell (DELL) $10,003 $10,003 -
Motorola (MOT) $9,990 $9,990 -
Details:
Purchases prices as of close on 3/06/2007:
257shs (HD) @ 38.87
444shs (DELL) @22.53
540shs (MOT) @ 18.5
Monday, March 5, 2007
It's a Whole New Ballgame
Wow! Another unpredictable day. It may be impossible to predict where the market will end up, but it's starting to become like deja vu waking up every morning. It seems like every morning I wake up to the same low futures prices. Today was no exception. Losses accelerated into the opening only to studder sideways and move to largely unchanged. Actually, soon before the non-manufacturing ISM numbers were reported, the market was marching into positive territory nicely. Unfortunately, the numbers were a little weaker than what the bulls were hoping for so the market started to retreat. For the rest of the day the market traded in a channel until seeing the bottom fall out into the close. (In case you missed it, the Dow ended down 64 points (.5%) with the Nasdaq and S&P 500 trimming about a percent.)
It's amazing how much the market mood seems to effect the way it interprets economic data. Until last Tuesday's free fall, the bulls seemed to be bullet-proof. They managed to plow right ever every bit of bearish data. Now the mood has definitely changed. Two weeks ago almost everybody acknowledged the economy was in great shape, but we were in need of a correction so that the indices can continue to shoot to the moon. Now the "greatest story never told" that CNBC's Kudlow can't seem to shutup about seems a little more vulnerable. Much to Bernanke's delight, the economy does seem to be cooling. We've seen the labor market loosening up and ISM reports lightening up to name two. GDP, even after its revision downward, is still strong and corporate profits are looking healthy as well.
Of course not everybody can get along. What a boring market that would make! Some argue that we will overshoot our "soft landing" and fall into a recession while others believe inflationary pressures are still running rampant. (At least crude dropped about $1 today. That should make you SUV drivers feel better.) Of course many of these problems seem like problems at the end of the tunnel. What should you be worried about now? Well, we have the Yen carry-trade. Who knows how much capital we have holding up our markets due to selling the Yen and buying higher yielding assets. The stronger the Yen gets, the less profitable this carry-trade becomes. In order to get out, these people, presumably hedge funds, are going to have to dump the assets they now own so that they can close out their short Yen positions. The strengthening of the Yen could be further exacerbated by the nearing fiscal year-end in which many Japanese companies will be bringing profits back to Japan.
Next, we also have the whole sub-prime issue. I would have said on the brink of becoming a major problem, but nobody, including myself, has any true idea if mortgage defaults will move up the chain. I wouldn't be surprised if it did though. You have to expect this sub-prime fiasco. Banks were loaning money to whoever asked for it without any due diligence. As far as defaults among higher qualified borrows, anything is possible. We have started to live on impulse buying and financing everything. Combine that with a negative savings rate and of course you'll have issues.
You know what, forget everything I just said. All that matters is what the market tells you that matters. Right now, the Asia market looks green and US futures are up. Will the market follow Asia up like it has followed it down? Only the market knows.
It's amazing how much the market mood seems to effect the way it interprets economic data. Until last Tuesday's free fall, the bulls seemed to be bullet-proof. They managed to plow right ever every bit of bearish data. Now the mood has definitely changed. Two weeks ago almost everybody acknowledged the economy was in great shape, but we were in need of a correction so that the indices can continue to shoot to the moon. Now the "greatest story never told" that CNBC's Kudlow can't seem to shutup about seems a little more vulnerable. Much to Bernanke's delight, the economy does seem to be cooling. We've seen the labor market loosening up and ISM reports lightening up to name two. GDP, even after its revision downward, is still strong and corporate profits are looking healthy as well.
Of course not everybody can get along. What a boring market that would make! Some argue that we will overshoot our "soft landing" and fall into a recession while others believe inflationary pressures are still running rampant. (At least crude dropped about $1 today. That should make you SUV drivers feel better.) Of course many of these problems seem like problems at the end of the tunnel. What should you be worried about now? Well, we have the Yen carry-trade. Who knows how much capital we have holding up our markets due to selling the Yen and buying higher yielding assets. The stronger the Yen gets, the less profitable this carry-trade becomes. In order to get out, these people, presumably hedge funds, are going to have to dump the assets they now own so that they can close out their short Yen positions. The strengthening of the Yen could be further exacerbated by the nearing fiscal year-end in which many Japanese companies will be bringing profits back to Japan.
Next, we also have the whole sub-prime issue. I would have said on the brink of becoming a major problem, but nobody, including myself, has any true idea if mortgage defaults will move up the chain. I wouldn't be surprised if it did though. You have to expect this sub-prime fiasco. Banks were loaning money to whoever asked for it without any due diligence. As far as defaults among higher qualified borrows, anything is possible. We have started to live on impulse buying and financing everything. Combine that with a negative savings rate and of course you'll have issues.
You know what, forget everything I just said. All that matters is what the market tells you that matters. Right now, the Asia market looks green and US futures are up. Will the market follow Asia up like it has followed it down? Only the market knows.
Sunday, March 4, 2007
Daily Lineup for March 5-9
Tomorrow's Monday is a very different Monday than two weeks ago. The market environment has certainly changed. Before the "Shanghai Surprise" inflation was all the market was concerned about, but now, it's hard to tell what is going to be the biggest market driver. This week we have a lot of economic data due to be released. Let's take a look....
Monday
Monday will be a light economic day with just the non-Manufacturing ISM report being released at 10:00AM ET. Similar to the manufacturing ISM report, a reading above 50 indicates expansion and a reading below 50 indicated contraction. Last month a reading of 59 was reported. February's consensus is currently at 57.5. However, with markets being closed for the weekend and a recent turbulent world-wide market will ensure that money will probably be both volatile and unpredictable. Currently as I type, the Nikkei is down about 2% with Australia and New Zealand down about 1%.
Tuesday
Tuesday brings non-farm Productivity at 8:30AM ET and Factory Orders at 10:00AM ET. Non-farm Productivity is expected to be reported at 1.7% after a previous number of 3%. Factory Orders are expected to drop to -4% from 2.4% previously. While on their own, none of these numbers usually create much excitement in the market, however, combined with other factors, it should provide another layer of information that can be use to forecast the market's health.
Wednesday
Next, Crude Inventories from the previous week will be reported at 10:30AM ET. Then the Fed's Beige Book will be released at 2:00PM ET. Finally, Consumer Credit will be released at 3:00PM ET. Bottom line with this is that $6B in December and consensus says $7B in January. This report really has little effect since it usually doesn't report anything the market doesn't already know and tends to have dramatic swings.
Thursday
All Thursday has to offer, as far as economic news goes, are Initial Claims (8:30AM ET) for the prior week. According to concensus estimates, Initial Claims should be slightly lowered (335K) than the previous week (338K), however, over the past few weeks claims have been rising. This could be signs that the labor marketing is loosening. Part of this could be due to construction layoffs due to the colder weather. It will be interesting to see what last weeks number is at and how the market reacts.
This should hold you over for now. Check back again for Friday's economic releases.
Monday
Monday will be a light economic day with just the non-Manufacturing ISM report being released at 10:00AM ET. Similar to the manufacturing ISM report, a reading above 50 indicates expansion and a reading below 50 indicated contraction. Last month a reading of 59 was reported. February's consensus is currently at 57.5. However, with markets being closed for the weekend and a recent turbulent world-wide market will ensure that money will probably be both volatile and unpredictable. Currently as I type, the Nikkei is down about 2% with Australia and New Zealand down about 1%.
Tuesday
Tuesday brings non-farm Productivity at 8:30AM ET and Factory Orders at 10:00AM ET. Non-farm Productivity is expected to be reported at 1.7% after a previous number of 3%. Factory Orders are expected to drop to -4% from 2.4% previously. While on their own, none of these numbers usually create much excitement in the market, however, combined with other factors, it should provide another layer of information that can be use to forecast the market's health.
Wednesday
Next, Crude Inventories from the previous week will be reported at 10:30AM ET. Then the Fed's Beige Book will be released at 2:00PM ET. Finally, Consumer Credit will be released at 3:00PM ET. Bottom line with this is that $6B in December and consensus says $7B in January. This report really has little effect since it usually doesn't report anything the market doesn't already know and tends to have dramatic swings.
Thursday
All Thursday has to offer, as far as economic news goes, are Initial Claims (8:30AM ET) for the prior week. According to concensus estimates, Initial Claims should be slightly lowered (335K) than the previous week (338K), however, over the past few weeks claims have been rising. This could be signs that the labor marketing is loosening. Part of this could be due to construction layoffs due to the colder weather. It will be interesting to see what last weeks number is at and how the market reacts.
This should hold you over for now. Check back again for Friday's economic releases.
Welcome
Welcome all! Hopefully this post will be the first of many. My goal here is to share my insights and opinions on current market events. With that said, I am no professional, however, as anyone that watches CNBC knows, even so-called professionals don't know the answers half the time. So on that note, I figure I have at least a 50-50 shot of being right. Bottom line is, you can agree or disagree with me, it's up to you. As far as format goes, I plan on posting daily, but given my busy schedule I can't promise anything. Now on to Prometheus' introduction...
Prometheus is an ancient Greek god whose name means "forethought." I guess that adds a bid of irony since everybody believes they can foresee what will happen with the market. Prometheus was also known for being intelligent and cunning, both important qualities in trading. So hopefully I'll be successful in "channeling" Prometheus' powers. He was also punished by Zeus, but never mind that.
That's all for now. Be sure to come back soon.
Prometheus at Rockefeller Center
Prometheus is an ancient Greek god whose name means "forethought." I guess that adds a bid of irony since everybody believes they can foresee what will happen with the market. Prometheus was also known for being intelligent and cunning, both important qualities in trading. So hopefully I'll be successful in "channeling" Prometheus' powers. He was also punished by Zeus, but never mind that.
That's all for now. Be sure to come back soon.
Prometheus at Rockefeller Center
Subscribe to:
Posts (Atom)