Friday, August 21, 2009

Gone but not Forgotten

I apologize for slacking off on my writing time over the past two months but I went from no work to way too much work in a very short amount of time. Went from 10 hours a week of work to over 70 hours a week. While I do appreciate it, I do not have much time for the extra-curricular activities such as blogging. And even sadder, I have made 4 trades in the last 6 weeks. 4. That is less than the number of fingers on a hand. Sad, but at the same time, lost very little money to my broker. :)

Where are my thoughts these days? Still watching the VIX. While I can't see it ever getting back up in the 40-50 range in the next 6 or more years, I think we will be hover in the 25-30 range for a very long time which is a much higher number than historically it is used to. It means we should expect unexpected wild swings in the market coming up and it will all be news driven.

What was interesting about the fall in the market earlier this week is that there was not follow through. On Monday, I expected that perhaps some panic would hit the market and the fall under 990 would be followed soon by 980 and 970 rather quickly. Yet the market had a decent close on Monday considering the poor day and has been up 3 days straight since then. Resilient for sure.

I am bullish (yes, bullish) on energy. Energy stocks may be the leader for the next 12 months. Natural Gas is going to be one of the leaders in this sector long term. Probably right behind solar. I don't think Oil will be a leader due to reduced dependency on oil and less demand.

I think financials will be flat for the next 12 months at best. This should provide a very nice opportunity for traders to be short FAS and FAZ. Both should deteriorate over time and should provide pretty easy money.

Tech should outpace other industries which is not to say tech will be up, but it will be less down than other sectors.

As I told many for a long time, I think the presumption that the P2 wave was over or near over was just a wish and dream that was way too early. Primary waves take many many months if not years. a 6 month Primary wave was a total dream. That said, I still would not be long this market in general. But there are pockets out there to pick out.

I like Gold, Energy and I hate regional banks still (KRE). I think Tech will be dead money for awhile (until Holiday season).

OK, hopefully I will post more than once a month but I am seriously bogged down and haven't been keeping up with things lately.

Thursday, August 6, 2009

SRS: Primed for a bounce

I am not a big fan of SRS, especially for long term plays due to getting burned in the past but if there is ever a time to play SRS, now is it. The leveraging mechanisms for this ETF can cause a large percentage increase if there are any corrections in the market around REIT's and CRE exposed smaller financial institutions.

I have to pound the table on this one. SRS could see a 40% increase in the very short term. But don't hold it too long. You have to take your profits in these leveraged ETF's when you can. Don't get greedy.

The only leveraged ETF I can recommend that does not appear to have nearly the time decay as others is SDS. But again, not as a long term play.

Another great play right now would be to short or play puts on FAS. It has had quite a run up and any correction in financials will cause a pretty big correction in this triple leveraged ETF.

Tuesday, August 4, 2009


It's time. Finally a spot to pull the trigger on some short positions. I was stopped out early on shorting AmEx and KRE. Stayed out of the market other than playing TBT and UNG. But now is the time to enter short positions. I base this on technicals of charts as well as reality that the market is overbought in a difficult economy. I think we go back to test 930 before a bounce brings us back to the upper '900's. We will see.

On the positive front, I am running into people who are openly spending money. Installing a pool, buying cars, upgrading the house, etc. At the same time, many friends and family who have been out of work still are. Some have been out of work for more than 10 months. Sooner or later this will catch up the economy. I feel like this is a period of false hope and in the end, many will get burned by over spending or being complacent.

Tech is on fire. I won't touch it either way. It really needs to correct but I won't get in front of that train. You have to have some sort of inflation trade. TBT or GLD have got to be in your portfolio. I still like nat gas plays as a long term play but if you are not keeping up with what the gov't is trying to do with futures activity around energy, well, all I can say is playing UNG is risky at best since it may not be able to track to future prices anymore.

Wednesday, July 29, 2009

The Rumors of My Demise...

No, I am not dead. Still hear, still kicking, but have been sitting and waiting, not chasing the run up and not trying to time the top. Instead, waiting for indications that the market is tiring or the market is clearly going higher.

I think we have had a decent signal over the last couple of days that the market is tired. Economists are coming out and saying, while beating earnings is good, top line numbers are not good and the potential for growth is low. We can not have a jobless recovery. Not only that, but the lack of growth in the U.S. will have adverse effects in emerging markets which has been the trendy thing to invest in and talk about.

The U.S. markets have always been the leading indicator of where things are headed in the short term. But perhaps that trend is changing. Last night, China's markets had a big correction. It was not due to the U.S. markets. It was due to China equities being over bought. The market corrected. And I have a feeling the U.S. markets will follow. Perhaps this is a new trend we will begin to see.

The other indicator is the SPX appears to show technical signs that a reversal is coming with a doji cross being formed yesterday. Well, not only that but it got way ahead of its 20 and 50 day ma's. We have to expect the SPX will touch the 20 day ma before it will bounce back and move higher so we are looking at an SPX in the 930 range then we will see what the bounce looks like.

The VIX is showing some strength albeit relative strength. It is still week and indicates that the market is settling down. Even the move up the last few days has been relative small, it is moving closer to its 20 and 50 day ma's which I expect it will pass without much resistance assuming there is a correction in the market.

The market is not only due for a move back, it is fundamentally necessary given the poor top line numbers in the earnings this quarter. Investors are betting on stocks which are showing negative growth but since they are beating the bottom line, I guess it gives them hope. We should see two more quarters of improved bottom line numbers only because last years numbers were so bad. But top line numbers have got to grow in order for stocks to justify their current lofty evaluations given the economic climate.

Thursday, July 23, 2009

On the Bench

You may have been wondering why I have not been posting much. Well, that is because I am basically on the sidelines waiting for the dust to settle. I do have a position in TBT, UNG and short KRE. Other than that, the waters are too dangerous here. Can't play short with the technicals clearly indicating a strong market right now. That will change, and soon, but we could see a 990 s&p before that happens.

May be time to move out some long positions from college funds and 401K's. Earnings reports are good on the bottom line but I am not impressed with top line numbers. Commercial RE will be the target after the dust settles. That means, short KRE, playing SRS on a trading basis, and trading some regional banks such as Regions, SunTrust, BB&T, etc.

VIX is very week, so another indication you can't put a lot on the short side right now. Too late to play long. good luck

Friday, July 17, 2009

The Spin on Dr. Death

Did anyone catch the spin machines churning on the Nouriel Roubini comments today? I found it fascinating. Just before 2pm, CNBC reported that Roubini said the worst is behind us and we will have a recovery this year. The market clearly reacted to this news as it tracked up steadily into the close after the report.

And CNBC continued to bring up this news every 10 or 15 minutes. They could not let it go, using it as a catalyst for pumping the market.

But, around 5:20pm, CNBC had a breaking news story where they reported Roubini claims he did not say what was being reported and it was taken out of context. He continues to believe we will have a struggling economy and if there is a recovery, it will be slow and small.

What I found fascinating was all the CNBC talking heads who just a few minutes before were claiming how important Roubini's comments were, were now saying Roubini's comments/thoughts are insignificant. Kind of funny to watch the bulltard reporters back track everything they had said all day.

Now, to be fair, when Roubini's comments were reported just before 2pm, the bears were coming out and saying Roubini's comments were not important. And when the retractment report came out after 5pm, the bears came out in droves to say, Roubini really knows his stuff.

It's all a manipulation game and you have to expect the unexpected. The market will always lean toward optimism so spinning news to the optimistic side is an easy way to move the market up.


And speaking of that, after the bell GOOG reported earnings and things were not as good as expected. But notice Jim Goldman's report on GOOG went through 4 minutes of positive comments and then mentioned in the last 10 seconds that they numbers were below expectation causing the stock to move down after hours. Goldman did his best being a spin master but it didn't work. Perhaps investors (even after-hours investors) are brighter than I give them.

AXP is defying gravity. I got stopped out early today and I was surprised it happened. But you gotta set stops and take your loses when you know you are beat.

I have not been reporting on the VIX lately because... well, not much to report other than it is retesting its recent lows. It could be a sign of stability in the market. I still think this is a head fake and when bulls start to really jump in, all hell will break loose.

Tech could save the day but eventually the housing price crash, commercial RE, unemployment and dismal retail will catch up and be reflected in stock prices across the board. Regional banks will crash before the end of the year. The big guys will survive due to gov't aid, but CIT Group shows us that the gov't is not interested in saving all of the banks.

Thursday, July 16, 2009

Housing Costs are Higher???

First, sorry for not posting as much. Very busy with projects at the house and determining my next career move which may be rejoining my old company who needs me back. A few options so its no sweat. I never even had to stand in an unemployment line.

Anyways, the market is really showing signs of strength based on earnings and ... economic data? Yes, it is gaining on economic data showing that the economy is improving, or so we are told. Lets take one piece of data. CPI. This gives an indication of weather we are moving into inflationary or deflationary territory or if things are stabilizing. This is a number that the government calculates based on a wide range of data points. One of them is housing or rent costs. Basically, how much does it cost you to live where you live. And according to the CPI data, housing costs went up in Q2 relative to Q2 2008??? Say what? Yep, even with house prices plummeting and everyone and their brothers are refi'ing, in order to reduce monthly payments, the government is telling us we are paying more for housing now than we were last year.

Talk about totally discrediting this once thought of important data point. This proves you can not trust any of the numbers coming from the government. This is nothing more than trying to stimulate the economy by cooking the books. It may work, but how can we trust anything that the government is telling us.

Another piece of data. The Fed released it's meeting notes and in them, it said they expect unemployment to reach 9.7% this year and 8.8% next year. Are they all living in a cave? we will hit 9.7% within a month and 10% by October. Next year, unemployment is not going down unless they stop counting those who have been unemployed for more than 6 months and are no longer eligible for unemployment.

So, let the market run. Tech is doing well and big banks should do well. Healthcare may do well. Outside of that, retail, real estate, consumer discretionary, are all going to get hit hard once the real data comes out. It may not be until August until that happens.

Remember, just a few days ago the market was in the 870 range and all the TV analysts who were targeting a move to 850 or lower are now saying 950 or higher. It all changes quickly in an environment like this. don't fall in love with a trend. In this market, the trend may be your enemy, not your friend.


As pointed out TBT was a steal. Should continue to climb to the 55-56 range.

UNG is starting to look tasty again at these levels for a long term play. I like Oct and Dec calls. Nat Gas is at historic lows and could easily double by end of year.

I like AXP as a short position big time once this rally looses momentum. AXP is a dog and they can continue to cut jobs to offset loses and fool the investor but sooner or later, that will bite them.

Wow, look at SRS. I bought at 20.30, sold at 23.10 and bought back in today right at 19.00. Its a great play to swing with this one. Don't fall in love with it though as we have learned in the past. Take that 15% gain and be happy.

Tuesday, July 14, 2009

American Express Presents Opportunity

I have not played AXP in awhile but was surprised to see yesterdays jump based on data/information that is, sketchy at best. AXP has presented a great opportunity here, technically, with the chart showing a clear sign that AXP needs to go down from here.

First, the 20 day MA is below the 50 day MA and the stock jumped past the 20 MA and touched the 50 MA. Stocks do not do this and maintain the gain. Especially stocks whose business relies on a sector that is unstable at best.

AXP should bounce off that 50 MA and back below the 20 MA within the next two days and continue its downward trend. In fact, it should steadily fall until it hits or goes below the lower Bollinger band line which is around 22 before it bounces back (if it does bounce back).

Bottom line... AXP. A great short right now.

Monday, July 13, 2009

Clarity Clouded by Caution

As noted the last couple of weeks, this drop in the market is as expected, is needed and makes perfect fundamentally as well as technical sense. There is a breakdown in technicals which clearly show the market has a fault line which could crack at any moment. Even if it doesn't, the market should see the lower 800's soon enough.

Sure it all seems clear when you look at the charts for SPX, NYSE, SSO, SKF, SRS, etc. etc. etc. But whenever things become complacent and seems too easy, you should be cautious. This is a game and the game makers always try to make it as difficult as possible. So we may see a bit of a jump in the market coming up especially this week with bank earnings coming out this week and next. Good reports from banks could lift the market (a.k.a. prop it up again) with false hope. This could cause a short squeeze and thus a higher market going into August.

So use some caution here. I have to stay leaning short but with plenty of leverage and money on the side to take advantage of any significant move up. We will see the low 800's but it is up to the game makers and PPT to decide how long they can keep things propped up.

Some Thoughts....

GOOG could be a great short if the market makes another grand move up. Keep an eye on it. More competition coming into the search and online ad business.

BTW, has anyone noticed TBT? Wow. Go figure. Talk about a great buy for a longer term hold (3 months).

I did my part this week in helping the economy. I went to Best Buy to price out some home theater equipment. These on-floor sales guys are hurting. They really are becoming aggressive. Once I told them I would not be buying today, they tried to get me to talk with their manager. Sorry guys. First, this is not a car dealership. Second, I don't buy retail. I just shop at retail locations and then find it online for a lot less.

Anyway, after leaving, I did my online shopping and found a couple of killer deals on a Yamaha receiver and on some Klipsch speakers. Well, I thought I would go back to Best Buy and give them one shot at matching these deals. After about 10-15 minutes and some time from the manager, they not only met the prices, the slightly beat them. Their point... They have to move inventory and they want me and my friends coming back.

So, kudos to the bad economy in letting me get the home theater sound system I wanted for a lot less than I thought. Everyone should be looking for killer deals right now, not only to benefit themselves, but to help jump-start the economy because God only knows Obama's stimulus is not going to do it.

Friday, July 10, 2009

If This is a Head Fake, Call Me Fooled

As I have been writing, technicals are clearly breaking down across the board. Things like Simon Property Group (SPG), American Express (AXP), KRE, SPX, you name it, all are showing signs of breakdown.

On the flip side, the short and ultrashort ETF technicals are showing clear signs of breaking out. That includes SKF, SDS, SRS, SZK, even the emerging markets ultrashort ETF, EEV. Analysts have been jumping all over the trendy emerging markets plays but they are getting beat up pretty good and that may very well continue.

All technicals for most equities and long etf's are showing clear signs of a breakdown. If this is a head fake, I am one of the fooled. This will not be a straight move down but a long zig zag move steadily down near 800. As we get closer to 800, I think we will see more volatility and depending on the economic conditions at that time, we could go down further or retrace most, if not all of the losses.

Wednesday, July 8, 2009

Technicals Continue to Fall Apart

All the stars are aligning and pointing to a potential market collapse. I find it interesting the timing of these technical breakdowns happening just before earnings season hits full stride. I have to believe that it is a sign of things to come.

  1. The VIX is going through the 20 day ma with no problems. Today it broke through the 50 day ma without flinching. A clear bearish signal that this is not just protection by bulls, but purchases of options at higher premiums, thus indicating some rough rodes ahead.
  2. The SPX fell through all moving averages including the 200 day ma.
  3. The SPX 20 day ma is crossing the 50 day ma and the 200 day ma
  4. For you SRS fans, SRS has broken through the 50 day ma with conviction today. Not only that, SPG has had a severe technical breakdown crossing all ma's and looks like the 20 and 50 day ma's are breaking through the 200 day ma. All very bearish for SPG which is the only REIT that may be standing in 12 months.

We have so much confirmation now that we are entering the next leg of the bear market, that any moves up in the market will be short lived. We are headed to the low 800's for sure. The question is, will financials lead, follow or not participate? Will energy and tech and retail lead us down?

shorting SDS is probably the safest play here but SRS sure looks good and SKF may be worth a look for a short term trade here and there. Energy will rebound but not until technicals give a better picture. Tech will be the first to rebound from this next leg down and will probably outperform other areas rather easily. I would rather be overweight in tech than in financials for sure. Therefore, if I were to short, it has to be the overall market (SDS) or financials (SKF, SRS, short KRE)

Tuesday, July 7, 2009

On the Verge of a Major Breakdown

I know I am seen as a perma-bear and perhaps I tend to lean to the bearish side when looking at charts and options actions but looking at all the key indicators, it sure does look like we are on the verge of a major breakdown in the market.

  1. The VIX has shown recently it is no longer afraid of the 20 day MA and crosses that residence like it is no resistance at all.
  2. The VIX is now starting to sniff the 50 day MA and appears to be building strength to cross that resistance in the not so distant future.
  3. The S&P has bounced off of the 887 key resistance yesterday and is now messing with it again. I suspect 887 will hold once again and bounce but the next time it will not. The next stop after 887 is around 850 but that resistance is not strong and the gap to 810 should get filled.

Also looking at SRS, it appears to be in ready for a breakout. This bodes well for shorting KRE and IYR.

UNG (along with oil) had a technical breakdown late last week. Better days will come for UNG but not today. Not until it can break back through the 20 day MA which may not be until late July. Even so, I will hold onto my Oct. options since they are quite cheap at this time.

I think the two key areas to be effected by the breakdown of the market will be financials and tech. Both have had great runs this year but now they have to show true earnings and not beating watered down earnings. I think they will struggle in this regard and will lead the market down to 810 or lower.

The credit crunch is starting to take effect. Credit defaults are rising much faster than anticipated. In fact, many experts had been expecting not only a slow down, but a reversal in credit defaults in Q3. Now we are seeing that there is no reversal in sight. For this, I think AmEx is going to be a great short again, just on the heals of yesterdays upgrade. BAC will also get hit hard by the credit crunch. Should also be a good short over the next few months.

And for those of you fortunate enough to be employed, get back to work and be productive to help get this economy going again. Its slackers like you who read financial blogs during the day which drag down the economy. :) Well, OK, maybe it has something to do with the mortgage crisis, credit defaults and unemployment. But you get the picture.

Monday, July 6, 2009

Rested and Relaxed

After a few days away from the real world and coming back to focus on the market, I find the charts rather interesting and seemingly on the verge of a technical breakdown. The S&P crossed the 50 day MA and it appears imminent that the 20 ma will soon cross the 50 ma on the down side which could signify a major downturn in the market.

887 is the key support level that must hold. The VIX is showing weakness for the most part but it has made a nice run since the 25 area and is only a point from crossing the 20 ma. So I want to see that cross and see 887 be broken before feeling more comfortable with short positions.

I feel strongly that regional banks are going to roll over. Shorting KRE just seems like a no brainer here which probably means I am dead wrong. It just seems too easy. SRS may be a good short term play here as well but not as solid as shorting KRE. But it has more potential for larger gains while shorting KRE has limited opportunities.

That's all for now. I am still in vacation mode so can't spend too much time on free thoughts. :)

Tuesday, June 30, 2009

Vacation Time

Sorry I have not had much time to post here. Two reasons though. One, on vacation. Second, there is not really any news around the market to report and the status quo stands... We are in a trading range until we hit the meat of earnings season. We are in a topping process that will eventually give away to bears but when that happens is hard to say. The easiest thing to say is when market gets in the 925 range, it is time to sell or go short. When it gets in the 900 range, cover or perhaps buy a few things but remember, we are topping out so you don't want too many eggs in the long basket.

Good luck. Headed out to the boat now. I will look for a job later. My mind is not into it yet.

Friday, June 26, 2009

Zig When They Zag

If you sit and listen to financial radio, or watch the talking heads on TV, when the market has a down day, they all say we are headed lower and you should be taking profits. When the market goes higher they all pound the table saying the market is going to explode. What would be fun is to tape their shows and play them back the next day instead of watching/listening the live shows for that day. They might get it right.

We are in a trading range and nothing else and you have to play it that way. Like the Stooges, you have to Zig when they Zag and you have to Zag when they Zig. It is hard to stay disciplined and do it but that is how the market is being run.

Today should be an opportunity to sell into strength. when we get back down to 895, an opportunity to cover shorts or buy into weekness. This will continue until we get seriously into earnings season and that will dictate which direction we go.

Wednesday, June 24, 2009

Why Some Technicians Are Confused

I am a bit surprised by the confusion I see some of the market technicians having. Both professional and amateur. They are tending to change their predicted direction of the market daily and getting it wrong almost every day. Not all of them, but quite a few.

What I find is, we are seeing the market becoming more of a short term play by retail and professional investors and thus, technicians are using hourly and even minute charts to track out their trend lines and waves and analysis.

I am not a professional, but stick an hourly chart in front of me and you may as well give me a fork to eat tomato soup. Its a tool, but it isn't really helpful.

Looking at any daily or weekly chart, there is enough evidence that the market is exhausted. But it does not mean we are headed down from here. What it means is, on every move up, it just creates a better shorting opportunity. You have to sell on any strength and we are probably going to stay in a 890-925 range until earnings season so don't expect a big move before then.

The VIX is bouncing above and below the 20 ma and I think think is signaling that the mountain is going to blow but when? Wouldn't we all like to know...

Tuesday, June 23, 2009

We Won't Be Fooled Again

Don't assume this is a big move down. This is a perfect scenario for the market makers to pull in bears who think this is going to be a big move down. We are at some key resistance/support levels on the market and in key sectors. The market can go either way. Better off waiting for more data and more confirmation.

I believe we are in a trading range which has just widened and you have to play the market that way. Buy on big dips, sell on big moves up. Could be a fun time ahead for traders.

Monday, June 22, 2009


The VIX seemed to be on its way for a nice run above the 20 dma mid last week as it vaulted and confirmed the move on Tuesday. But a slide Wednesday thru Friday put it right back to its lower resistance line of 28. A break of this line would appear to tell us the market is stabalizing or going higher, not lower.

It is very difficult to determine the direction of this market right now so caution has to be taken. I continue to stay away from U.S. securities. I like emergining markets very much and I really like Nat Gas via UNG for a longer term play.

TBT seems like a nice buying opportunity here. There is plenty of support at the 51-52 level so downward risk is very low and upward potential is very good.

KRE has a pretty clear bearish looking chart. I am playing it short but with stops at 21. If it were to hit that number, the 20 dma may re-cross the 50 dma and i don't want to play that game. But I suspect KRE is a pretty good short here but maybe stabalize in the short term. 3 months it should see 15 or lower.

If you want to believe the hype of the smart phones, go right ahead. I really wanted to short RIMM last week due to its incredible run creating a bubble. But I just did not have the guts since it is a risky play to get in the way of a runaway train. I think RIMM and APPL are both headed for a correction. Apple wants you to believe there is a mad rush for the 3Gs and there is good sales, but it is not in the order of magnitude that the stock price would indicate. I went to an AT&T store today about upgrading one of our phones. I asked about the iPhone sales and they said they are good but it is not nearly as powerful as the intro of the 3G. Just one data point but I have heard the same about other stores.

Watch the dollar. The dollar and energy will drive this market one way or the other. I believe a weeker dollar will be good for TBT and UNG and perhaps not so good for the market.

Happy Fathers day and good luck in this very difficult market.

Wednesday, June 17, 2009

Don't Light That Match!


Natural Gas is about to explode. Demand is low, supplies are high, so why would nat gas go higher? Two things. The dollar and money coming out of the market as it goes down may move to commodities and energy as an inflation play. It makes no fundamental sense, but it makes perfect technical sense. Also making perfect technical sense is the chart on UNG. It has clearly shown a bottoming pattern and the beginning of an upward curve. It also has passed key resistance and is bound for the 200 dma.

KRE is doing what it should be doing in times of higher interest rates. But this should just be the beginning. Interest rates have been rising for weeks but KRE is just now hitting the tip of the iceberg. KRE will be at 15 before the end of July if not sooner. Sept 15 puts look really good here.

SRS is starting to look really good again. Breaking the 20 dma resistance and onward to the 50 dma which is running close with the 20 dma. we should see a cross of the 50 dma by the 20 dma which could mean a move to the 200 dma soon after. but I still hesitate to move anything more into SRS since shorting KRE seems to be a better and safer play.

The VIX has confirmed it wants to stay above the 20 dma. I hesitate to say it but this sure does feel like a real reversal to me, not a fake one. So many technical indicators are screaming that the bull run is over. How far do you want to take it so early? Thats up to you.

Tuesday, June 16, 2009

The One Thing Obama Could Not Control

The Obama administration has done a noble job of trying to control the market via trying to show that the economy was getting better with marginal data. They are hiding the mess of the banking disaster, they are trying to make it sound like unemployment is under control, they are pumping money all over wall street. And all have worked in propping up the market.

The one thing Obama does not have control over is oil. And that is what is taking the wind out of any sails the economy has. With oil and gas prices up, it leads to less spending by individuals and inflation. The combination of the too can create a devastating consequence on the market and on the economy.

People will still buy their iPhones and Blackberry's because communication is still the essential means of growth, relationships and even survival. But outside of that and some entertainment, individuals are not going to be spending much for the remainder of the year until inflation is in check and unemployment reverses direction.

And oil has a lot to do with all of it, unfortunately.

Could It Be?

It may very well could be. The VIX closed above the 20 dma yesterday and today there is a very good chance of it confirming a change in market sentiment if it can have an up day. This, along with the SPX chart showing a breakdown by breaking through the 20 dma and the 200 dma just 6 pts away. A break of 909 could signify a major retracement.

But this could also be a head fake trying to luer the bears back in as it marches up. If not, then I find it interesting the rally came to a fizzle instead of a bang, much like the drop to 666 where everyone expected a big bang to signify the end of the downward movement. to me, that is just telling us that this is indeed a bear market and the lows will be tested and probably broken this year.

But lets wait and see before we get carried away. I am still playing it cautious with things like TBT, EEM and CAF, with just a little bit of SRS. I am short KRE and AXP.

Watch the dollar. I have to believe on any significant move down in the market, it is probably just following the dollar moving down and oil moving up

Sunday, June 14, 2009

Unemployment? Count Me In!!!

So I hear the unemployment numbers are looking good. Only lost about 400K more jobs. Only at 9.4% unemployment. Things are looking better. I heard it from CNBC, I read it on the Internet, and Mr. Obama even said it.

Well, as far as the unemployment number goes, count me in. I was just notified this weekend that our company is going to do a re-organization and unfortunately, as a senior level person, I am the odd man out due to seniority in the company. Yep, the unemployment bug got me. Bitter? Maybe. Surprised? Not really.

You see, Mr. Obama has virtually put a halt to our business. With his threats of health care insurance reform and nationalizing health care and health care insurance, our business fell off the face of the earth. Thank you Mr. Obama for this wonderful job creation stimulus package. I feel so lucky to have you as our president, creating jobs. I guess it doesn't apply to everyone, including the 15 million unemployed and underemployed. But for the 400K jobs he is going to create, I am sure they are right around the corner.

Well, I guess it gives me more time to write blogs. I will keep you all posted on my progress and how long the lines are once severance is over. In the mean time, keep believing what you want to believe about green shoots and a new bull market. For this bear, it is back to pounding the concrete in search of the next great adventure.

Thursday, June 11, 2009

Surf's Up!!!!

Here we are at a point in the market which is very telling. We are riding a wave so don't try to swim out of it.

Given today's action, it is clear the market wants to go higher and will go higher if only because no one is willing to make it go down. We are hitting a breakout level on the S&P with the 20 day SMA passing the 200 day. Very bullish and confirms the recent move of the SPX above the 200 day. You can't be short here except for small positions on select items. The bulls have taken over and will likely cause a nice run. No need to get in the way.

I continue to play the market in a way that I am not exposed to U.S. individual companies. TBT, UNG, EEM and CAF are my primary holdings. I have not been able to get into a short position on KRE as my brokerage firm has none available. Lucky me. KRE should even have a run here which will present a better shorting opportunity.

The VIX is dropping below key resistance and thus, I have to believe will go lower, perhaps to 24 or 25. This opens the door for an S&P above 980. At that point, I will have to move to the sidelines on emerging markets EEM and CAF by buying puts on them in a defensive move. I will continue to hold TBT and UNG for a longer period and think they are great plays for the long haul.

As we approach 980, it is time to look for the really overvalued stuff. I think RIMM is overvalued now but I won't fight the tape. I want to see a peak of the market around 980 or more and then wait for technicals to start breaking down. When they do, it will probably break down fast. If you miss it, don't sweat it, there will be plenty of time to ride the slide down. Don't try to time to the top. Technicals will give clear indication of when it is time.

Even AXP which is down over a point today in a surging market is staying in a bullish technical pattern. AXP will see 15 by end of September but I will wait until this little run is over before re-entering a short position. I got out at 24 since it did not technically break down. AXP could see 30 before it breaks down but I suspect it will stay in the 25 range for the next two weeks even if the market surges.

Good luck and enjoy this wave up. It is a good opportunity to make money on the way up and will provide big opportunities to ride the wave down. Make sure you don't get caught in the under-current.

Tuesday, June 9, 2009

The Demise of Commercial Real Estate - How to Play it

The demise of commercial real estate will be slow, painful and certain. And many of us have played and/or held SRS, to a fault, anticipating this event. We all know it is coming, but we jumped in too early and held too long if you did not get out before early March. After the crash in October, commercial real estate has had a bumpy ride but IYR and the regional bank ETF, KRE have had a nice move up, while SRS has slowly and steadily fallen since early March, party due to decay.

BTW, the picture above was taken by me (sorry for the blurriness of my camera phone). Click on it to get a really good view of where commercial real estate is headed. I was driving down one of the busier roads in a city nearby and this strip mall caught my eye. It is completely empty. Nothing but weeds growing in the parking lot. Not even a For Lease sign in the front. All hope was given up on this little piece of commercial real estate. It has been there for 1 1/2 years and never had a single tenant.

OK, back to the purpose of this article. SRS may turn out to be a good play but as we all know, holding it long term in its depressed state will just lead to decay until it eventually does turn around.

Another way, and clearly a less risky way to play commercial real estate is to short the IYR ETF. This is obvious for anyone understanding ETF's and I won't go into a long explanation on why this is a safer play. But the problem is, technically, IYR does not appear to be a good short. See the chart below and notice that the 20 day MA is still well above the 50 day MA and the stock price is above the 20 day MA. Therefore, it is in a bullish trend. It may be peaking here, but too many traders have lost a lot of money trying to time the top. So you really need to wait for the technical indicators of first, the price go below the 20 day MA, and second, the 20 day MA crossing the 50 day MA.

So, for now, IYR is not a good short candidate.

But, I found this gem the other day and have been watching it and reading about it and thought, well dagammit (that's southern for, "gee wiz"), this may be a darn good way to play commercial real estate short. And tonight while listening to Bloomberg, an analyst described why this gem is a great way to short commercial real estate and as he described exactly what I had been pondering, it gave me goose bumps.

The play is to short KRE. KRE is the regional bank ETF and there is nothing with more exposure to commercial real estate as a percentage of their business than regional banks. The big banks have a lot of exposure to commercial real estate but they also have a wide variety of money making businesses to offset their CRE losses. But regionals do not. Some regionals were built on CRE. And as CRE crumbles, so will these regional banks. We have already seen this over the past couple of months but there will be more to come in the next 12-18 months.

Look at the chart below. KRE is already met my two criteria for clear indication of a short play. It crossed the 20 day MA and the 20 day MA has crossed the 50 day MA. A very very bearish indicator.

So rather than dealing with decay and time constraints, if you want a really good long term play to short CRE, short KRE or play some long term puts. Shorting IYR will be next but I will wait for technical signals before jumping on that.

VIX - The Story Teller

Once again the VIX bounced off of the 20 dma from last week and slid lower. I know you are tired of hearing it but clearly this is a key resistance and until it breaks this trend, the market will continue to edge higher. Yesterday and today both provided opportunity to shorts to get out of their positions and the VIX clearly showed that the market is settling in at current levels with very little selling pressure.

We should see the SPX move higher from here. Any move down is probably a head fake unless the VIX can pass the 31 mark. I don't think that will happen. You have to avoid being overly short here and you have to consider commodities and emerging markets right now as really good plays at least for the short term.

I think we are creating quite a powder keg. Once the VIX does pass the 20 dma, I think we will see a significant downward move in the market which may last a couple of months. Until then, you need to avoid over extending short positions. This may coincide with the EWT'ers who are pronouncing a P3 wave coming up and perhaps it is but the difference between what I am saying and what EWT'ers are saying is, I think this will be a move down based on fundamentals and technicals in an overpriced market. I also think we are currently in a very long term P3 wave that started in 2007 so I am looking at EWT as a much longer term wave structure as in years, rather than months.

I am keeping a close eye on Natural Gas. The chart is very interesting and it appears ready for a breakout to the up side but it needs an impetus. Why would natural gas go up when demand is low and supply is high? Well, that would be a great questions and fundamentals would say it should be low. But it is already low. So my view is that natural gas is the forgotten commodity that has some catching up to do.

Monday, June 8, 2009

VIX breakout?

VIX is currently at 31.86 which is well over its 20 dma which is 31.04. It has not closed over its 20 dma since March 30th. Is this just longs buying protection, or will this signify a breakout.

I would not draw to conclusions yet. I want to see it close above the 20 dma two days straight. Notice how it did indeed fend off the 28.80 resistance the other day and appears to be more than a dead cat bounce today. But have to watch into the close.

Friday, June 5, 2009

SRS vs. Long Term Rates

I wanted to overlay long term interest rates with SRS. You can see that SRS tends to react to interest rates when interest rates make a significant move. June shows a big spike in rates. Will SRS follow?

Lets Talk SRS

I have not really discussed SRS much since technicals really are not giving us any indication that it has life. But, I think now is the time to start putting a bit into the long term portfolio, despite the so-called decay syndrome.

It may not do much for the next month or two or three, but there is a big red flag out there right now that may be a leading indicator that REITs are headed for troubled waters.

Interest rates. Interest rates are rising quickly and to the point that refinancing and getting loans in general are less attractive. REITs had their day with the fed's move of purchasing treasuries and driving down long term rates to a very attractive and affordable 4.50% range. Now they are well above 5.50% and pushing 5.75%.

I believe the drop in interest rates to 4.50% gave REITs and commercial real estate some hope. But as I always mention, every action has an equal and opposite reaction and with rates now back to more reasonable levels, the reaction may be that REITs really struggle in the months to come.

That said, the gov't is standing by to try to help bailout CRE if necessary. So far it has not been necessary because of low interest rates. And they can't ask congress for another trillion dollars to bail them out. So they have to wait to really insure banks are stable before offering help in CRE. Therefore, before jumping "all-in" on SRS, always keep that in mind.

My suggestion is, wait until SRS crosses its 20 day moving average before jumping in much. Whether you hit the bottom at 17 or at 20 really won't matter much if SRS gets back to more historical levels of 75-120. Notice the chart above. Decay really is not as big of a factor with SRS. It is being impacted dramatically by low Q1 interest rates which are now gone. I suspect we will re-enter the 75-120 range by end of Q3 as 5.75% interest rates take effect.

SRS is not dead, it is just hibernating and interest rates may be the ticket for its return. The CRE market is totally irrational now but it has been hiding behind the low interest rates as its safe haven. It can't do that any longer and thus cash flows will be shrinking, and quickly once the **it hits the fan.

Thursday, June 4, 2009

A VIX Chart Of Interest

As I have mentioned many times, I am not a chartists but I do watch charts closely. I found this interesting and hacked it up to show what I am seeing.

If the VIX just completed a 5 wave move down, then resistance at 28.80 will hold and the upper trend line will be broken soon, followed by the 20 dma. I would be surprised if the 28.80 resistance is broken. If it is, the SPX will see 1000. Otherwise, we may be in for a correction that so many have been looking for.

The VIX Pattern Continues... Or Does It?

As expected, the VIX continued its pattern of bouncing off of the 20 dma as the market has rebounded each and every time an attempt at the VIX 20 dma has happened since March 9th. Typically, after the VIX touches the 20 dma, within a few days the VIX hits another new 3 month low.

I don't expect that trend to stop here. I think the VIX is primed to dip below the 28.80 mark perhaps as early as tomorrow since the VIX is typically week on Fridays especially in a market rally.

But, if the VIX can hold 28.80 and make another run at the 20 dma, I think it will finally cross it and perhaps signal the end of the 3 month bear market rally. But until that happens, I will not make a play anticipating it.

I continue to stay heavy on energy, china and gold. Also going to run with TBT as a long term play. I really really really want to short something but until the VIX gives a signal or until the SPX gives a signal with a convergence of its 20 and 50 dma, I will continue to stay out of general U.S. company equities.

Wednesday, June 3, 2009

Dead Cats and Such

If you are thinking this is the beginning of a big decline, guess again. This is not it. Today's action was clearly just a normal pull back (reverse dead cat bounce) to an otherwise upward market. The VIX continues to bounce off of the continuing declining 20 dma just as it did today. The VIX at least touched it but bounced right off telling us the market is still not ready for a significant correction.

The SPX also is technically not showing signs it is totally exhausted. So you can be locked and loaded for bear here. You have to let the market continue its strength until the technicals clearly tell us a sell off is here
I hope you all were able to scalp off 10% on SKF or SRS today from Mondays prices where I mentioned a 10% gain was there for you. I took mine as soon as the VIX bounced off the 20dma and knew it was time to take profits.

UNG slide today which presented an interesting opportunity on July and Oct calls. I like the July 15's and the Oct 20's. I think UNG is going to be stellar this summer lets see.

Beware the VIX

The VIX is once again kissing the 20 dma. Every time it has done this in the current 3 month rally, it has fallen back. Nothing feels different right now than it has for 3 months so you have to expect the same will happen. Keep an eye on 31.60 for the VIX, if we don't pass this by end of day, you have to assume the VIX will bounce back down. If we do pass this above 32, perhaps this is the signal.

And isn't it interesting to see the terrible numbers on mortgages and the media spins it as though, we really should have known this was coming so it should not be a surprise. Well, guess what, it is a surprise and it will be damaging to banks. Refi's are way down but so are approved mortgages on houses. Thus, we will see continued declines in home prices, more foreclosures and less new homes being built.

Green shoot my ass.

The Pinnacle of Technicals

I am not a chartist in that I don't create charts and I don't have any fancy subscriptions to create charts. But I do pay very close attention to charts.

What I am seeing for so many indices, stocks, ETFs is that they appear to be on the verge of a technical reversal. The SPX has the 20 and 50 day MA's converging and the SPX itself, on any down move, will likely fall below the 20 dma and soon after the 50 dma. It may not happen in the next week or so, but it is close.

Look at SRS and SKF. All are tracking with the 20 dma and on any moves up, will cross and likely cause the 20 dma's to cross the 50 dma's.

Look at UNG. It is my current favorite because it has already crossed critical technical indicators. The price has crossed both the 20 and 50 dma's, and the 20 dma has crossed the 50 dma.

The VIX is just tracking below the 20 dma with the 50 not too far away. A cross the of the 20dma will be followed by the cross of the 50, yada yada yada...

And my other favorite is AXP. It is trying hard to break through its 20 dma and soon after the 50 dma, along with the same crossing of the 20 and 60 dma's.

Is this coincidence? Or are all of these on the verge of a reversal? Don't jump too soon because this trend could continue in a consolidation phase for awhile longer before the technicals show a clear breakout.

Tuesday, June 2, 2009

Simon Property Group (SPG) : The next WorldCom?

This may be a conspiracy theory but the more I read about Simon Property Group, the more things do not add up. As a REIT, they base their earnings on Funds From Operations (FFO) such as rental income, royalties, sale of properties, etc., rather than earnings per share.

As you look at SPG's earnings reports and history, it is quite amazing how their FFO grows rather dramatically each quarter despite other REIT's struggling to stay in business. SPG's business model is not much different. They own similar properties, particularly malls and super-malls. They are exposed to the same toxic assets as the others. They have similar short and long term debt issues as the others.

Yet, their FFO grows while others fall. General Growth Properties (GGP) went bankrupt in April as it was obvious they could not keep up with upcoming debt maturities. there were no lines of credit available to them to refinance their debt. There was not enough equity to sell more shares to generate capital to pay off the debt.

For SPG, they were able to tap into more credit lines and also offer a secondary offering on the market due to the stock price so high based on FFO performance.

But is SPG really performing? Are they really generating higher rental income in the worst recession we have seen in our lifetime? Are they somehow able to reduce operation costs that much to offset lower rental income? Are their commercial properties really not losing value?

This goes against not only what experts are saying about commercial real estate, but also against the actions of SPG itself.
  • They issued a secondary offering which diluted their shares by close to 20% in order to raise enough cash to pay off some due short term debt.
  • They reduced their dividends from .90 to .60. But not only that, it is also no longer a cash dividend but a dividend in mostly stock but a little bit of cash, further diluting their shares by adding to the float.
  • Yet despite these actions, they claim to have record FFO and earnings.

Why does a company have to dilute stock if they have record growth in earnings? It is because their debt far outweighs their capital. SPG will have to have blow out earnings for many quarters to come in order to manage the growing debt and reduced values of properties. To do this, they have to show they are reducing costs and growing revenues from rents. And you can't tell me they are increasing rent growth.

This smells very much like a cooking of the books. I suspect SPG, if they continue to show 10% growth in FFO each quarter, has to be a red flag to the SEC. I am not long or short SPG although I do trade SRS once in awhile but I think SPG is a stock to keep your eye on for a possible WorldCom type collapse in not so distant future.

The other issue with SPG is by reducing the dividend and moving it mostly to stock, it may create a bubble for SPG. As the stock goes up more investors may be diving in buying SPG wanting the stock dividend. This may be what we are seeing today. At the same time, insiders will be selling their shares to the company perhaps to payout the stock dividends. But in months to come, if SPG even falls 10% or more, it can create a spiral effect as investors heavy in SPG may opt out since their stock dividends are getting smaller and more risky. A stock like this will fall very quickly without regard to resistance levels.

SRS and SKF a Good Short Term Play?

First, the VIX continues its trend of teasing the 20 dma and then bouncing off. Today it opens less than 2 pts from the 20 dma and would seem primed to cross it as the market is clearly overbought. But the bulls seem to be clearly in control or bears just don't have it in them. You have to continue to play that trend and I think the VIX will likely move up close to a point today or tomorrow to once again sniff the 20 dma and then drop off once again.

So, from that, I think SRS and SKF could be good short term 10% plays today/tomorrow. But you can't play them longer term than that until the VIX does cross the 20 dma (yeah you are sick of me saying that but its just the way it is).

I took profits yesterday on UNG but plan a re-entry today. UNG may be technically breaking out and you really need to look at this ETF. It broke the 20 dma yesterday and the 20 dma broke the 50 dma late last week. Two very bullish indicators.

China and emerging markets continue to roll and if you missed it, you didn't miss it. These are good longer term plays that you have to have somewhere in your long term portfolio. The hell with the U.S. equities. They will underperform emerging markets and especially China.

I think Gold is due for a pullback here but not a big one. Perhaps fill a gap to 940 but for those playing GLL expecting a collapse in Gold, you are swimming upstream.

Bad data will come out today in the form of housing data and auto data. The question isn't whether the data is bad. The question is, how bad and how will the media spin it and how will market react. I will buy SRS at the open and watch for SRS to spike after 10am and if it does, it would be a good selling point or a point to hedge with puts or covered calls.

Monday, June 1, 2009

Why Not to Read Too Much Into VIX on Big Market Up Day

Today the market is making a pretty significant move, yet the VIX is up. Many will read that as a sign the move is a fake move and thus, it is time to move heavy into shorting stocks.

Don't read too much into the VIX moving up on a Monday when the market is moving up. The VIX is just showing that there is instability in the market making such a quick move and will probably have some sort of correction soon. The problem is, that correction could be small.

I do agree that longs should sell into this strength and the VIX is indicating this. But it does not mean it is time to short stocks or take a full bear stance. As I have been pounding and pounding, DO NOT take a big short stance until the VIX crosses the 20 dma. I can't stress this enough and so many people have been going all in on the short side expecting the market has topped. It is fine to play some on the short side and I have been all along but until the VIX gives a clear indicator that the sentiment has changed, you just can't over extend.

2 key indicators that the market is going to take a lot of the gains back...

1. The VIX passes the 20 dma for 2 days straight
2. the SPX 20 dma passes the 50 dma on the negative side.

Those two are sure TA signs that the market sentiment has changed. Until then, you have to sell into rallies and buy on dips.

For me, I am selling the small long positions I have as I write and also buying SDS looking for a 10% gain and then exit.

Hitting the Ceiling?

Here we are. The day we knew would come eventually and the day many have said the S&P was magnetized to. We will hit the 200 day MA today on the S&P. Theoretically, and the odds are that it will bounce off this number at least the first time since a 200 day MA is a strong resistance especially when it has been below the 200 dma for so long.

But the VIX remains solidly below it's 20 dma which would indicate the market is still not ready for a real correction.

So, we stay in a trading market where longs have to take profits on moves up and shorts have to take profits on moves down and I will continue to do this until the VIX breaks its 20 dma.

I have really moved mostly out of the U.S. equities and focused on energy, nat. gas, gold, china, and emerging markets. I exited my TBT positions early last week and looking to re-enter those this week at 52 or even lower.

Financials continue to be way to volatile and a completely unknown commodity. Some experts say the banks will have record earnings, others say the toxic assets (that no one is talking about) will eat them from within.

Long term, the market will have a huge correction and I still believe it will be this summer, starting in June. Unless you believe markets go straight up with unemployment at record levels, you can't bet on the markets continuing their march.

Thursday, May 28, 2009

Nat Gas And Other Ways To Play a Neutral Market

While I do believe we are at the cusp of a large move down in the market over the next 4 months, there is no guarantees on where the market is headed. Playing sectors is basically playing the market and playing individual stocks can be frustrating.

But there are some plays I have been pointing out that really should be considered. First and foremost is Natural Gas. UNG is a really good way to play it and it just seems like it is time for Natural Gas. If you are a chartist, you have to absolutely love UNG's chart. The 20 day and 50 day MA's are running in parallel and the price of UNG is at the cusp (I have used cusp twice now) of crossing both at the same time which would represent a very bullish trend and likely to head to the 200 day MA from there.

Also notice how UNG does not follow the market so if you are not sure where the market is going, UNG is a great play both for long term and for day trading. UNG has lagged OIL and other energy components and historically lags. So I am loving UNG right now especially if it can get above 15.

Another play as I mentioned over the last few weeks is TBT which is the short treasury ETF. As I mentioned just the other day, TBT should be exhausted right now and treasuries will probably level out for awhile so TBT is probably not a great play at current levels. A good entry is probably around 51 which is going to be a key resistance.

GLD of course is a good market neutral play and is more of an inflation and anti-dollar play. I think GLD is a bit pricey right now and no sense chasing. Look for a pull back of about 5% for a re-entry. Gold at 900/oz is going to be a good entry for buying bullion and GLD. I have been selling some of my bullion on ebay recently. It has been perhaps one of my best investments since January.

Two other ETF's which should move regardless of the market are EEM and CAF. EEM is an emerging markets ETF and has performed extremely well for me in my trading account as well as my college accounts and 401K. It should continue its steady climb and is a great anti-dollar trade as well.

CAF is a bit more risky but you have to believe China banks are in better shape with the slide of the dollar and the fact China stayed away from the toxic debt other countries seemed to race each other to get into. China must, and will lead the world economy out of the mess we are in and the China banks will be at the forefront.

The VIX stayed within range of the 20 dma and perhaps is finally primed to cross it. Todays bounce in the market did not erase yesterdays losses so I expect the market to move lower on Friday and follow up on Monday. I believe on Monday the VIX finally crosses the 20 dma and we begin in earnest the move below 875.

Wednesday, May 27, 2009

Knock, Knock, Knockin' on Heavens Door

Here we are. At the door step of the correction we have been expecting and waiting for. SPX is near many technical indicators and support levels. VIX is knocking at the door of the 20 dma. If the SPX can fall to 875 or lower, and the VIX break through that elusive 20 dma, we are headed for a fall to the 820 or lower area.

But every time we have come to this place, the market has rebounded. So until it happens, I am not convinced we are going lower. How many times can the market bounce off of this? Lets see over the next couple of days. I suspect we fall through tomorrow based on housing, unemployment data and treasury auctions. I think the house of cards is about to fall and it will fall first in financials.

If support holds, financials will rebound hard so that is why financials are so risky here. Better stay nimble but I would not set stops very close because it will be quite a battle and stops will be knocked out too soon.

Post Op Analysis

Sorry I have not been posting much. Busy weekend and I had surgery on my elbow yesterday so I was pretty much out of it all day and night.

The VIX had some wild swings yesterday which at least shows it has life and will cross the 20 dma once the s&p falls below the 875 resistance. Those 2 things should happen in unison.

Today, TA tells us we may go to 914 before this run by the bulls ends and we head back down. The real data (unemployment, housing, credit debt) still shows we are not recovering. Consumer confidence says we are. Consumer confidence, unfortunately, does not pay the bills.

If we go below 900, we are entering that area between 875-900 which is proving so far to be an opportunity to go long for the rebound. Again, until we break 875 and the VIX 20 dma which is around 34 now, this will remain to be a trading bound market. I don't see breaking 925.

China had a big night last night. TBT may have exhausted itself. And REITs continue to be resilient in an absolute abysmal market. Go figure.

Sunday, May 24, 2009

Why I Would Buy Apple

Sounds contrarian after my last blog, but this is what makes markets and what cause stocks to spike. Apple's sales of iPhones are not increasing as they would like especially with the introduction of selling via Walmart stores. This is mostly due to the exclusive contract with AT&T and the fees AT&T are charging for the iPhone service. iPhones are targeted toward the casual user, not the business user. These casual users want the iPhone for texting, music/videos, and surfing the web. Not necessarily for email.

Yet for a casual user of the iPhone, even with a small data plan of, say, 500 minutes, they will get charged $40 for the plan, $20 for unlimited texting and $30 for data. Only the $20 for texting is optional. That would be a $70 minimal plan and if you add more minutes or texting, you are talking $100.

Many casual iPhone users are not going to pay that in this economy when they can find a phone as good or better for a lower rate, especially for data usage.

But, this is old news. What if AT&T came out with an exclusive iPhone package which included unlimited texting and data at $30 plus whatever phone plan you choose? That is a $20 per month reduction. I think that would draw in a lot of potential iPhone buyers and boost Apple's sales of iPhones dramatically, including at Walmart. Yours truly included.

AT&T have already been discussing this and are working with Apple on a suitable plan to meet both companies needs. If AT&T came out with such a package, hoards of buyers would come in, and thus, the stock of Apple would have a quick spike up.

So, in this scenario, I would be a buyer of AAPL. I sure would not be short APPL with news like this a possibility.

OK, all of that said, personally I would not own AAPL right now because it will be driven by news or lack of news.

Saturday, May 23, 2009

Why I Would Sell Apple

I have held APPL long on and off over the past 10 years. I sold my shares that I had held for over a year back in March on its recent runup and missed out on some additional gains. I have been looking for a re-entry point but something happened this week that made me so mad at Apple that not only would I not buy APPL stock right now, I am thinking of shorting it.

In these economic times, people may be making purchases, but they are going to look for bargains. They are also going to keep monthly expenses at a minimum. Cut out the waste, keep the essentials.

Well, I was going to get my son an iPhone as a grade school graduation present. I actually went to order it. Had it picked out, entering all the paperwork, etc. But, the At&t rep dropped the bomb on me. He said we had to sign up for the non-optional $30/month data plan for the entire 2 year contract. Say what? This is on top of the $20/month unlimited texting plan. This is for a 14 year old???


I asked what we get for $30 and the key difference from that and the $10 data plan is the $30 plan includes enterprise email. My son doesn't even use email. It doesn't matter. Still costs $30 a month and it is not an option.

Fine, well, I do have an option. I just won't buy it. I bought an LG instead which is cooler than the iPhone and includes the touch screen and a slider keyboard and my son liked it better.

I have to believe this exclusive deal with At&t will really hurt Apple. The iPhone is a huge part of Apple's revenues. There are way too many options for people to choose from. The rep even said a lot of people are opting out of their iPhones now due to the $30/month and the iPhone really is not the best quality.

I think we will see Apple struggle in the upcoming quarters to meet revenue expectations based on the iPhone sales dropping, and I believe less people are willing to pay additional money for a Mac these days than they did even 3 months ago.

So, this is not based on fundamentals. It is based on market research, albeit a personal one.

Thursday, May 21, 2009

Communication Breakdown?

Looks like we have a breakdown in the market as the SPX goes below the 20 day MA for the first time since March 11th. This breaks a key resistance level but the market is not closed yet. A close below 885 and a confirmation on Friday would signal that it is safe to short again.

VIX is closing in on the 20 day MA also for the first time since mid-March. Fundamentals are overtaking hope.

Are You Ready?

Call me what you want. A perma-bear, a gloom-and-doomer, a realist. One thing I do practice is caution. I like to wait for some indications via TA that there is a clear direction for an equity or the market. We are not getting that right now. TA is not clearly telling us an up or down move. It is however leaning to a lower market in the near future. But it is not clear what happens given different circumstances.

When the market gets like this and TA and the VIX and other indicators are not telling us much, I revert back to fundamentals and instinct. And to this perma-bear, gloom-and-doomer, realist, we are on the verge of beginning a slide to not only test the lows, but go lower in a capitulative move. I base this on a slew of information.

  1. Unemployment is not slowing, at all. This is huge and something economists, the fed and the banks did not count on. A recovery was suppose to be starting but unemployment is not letting that happen and any recovery has to have a significant slowing unemployment number.
  2. Housing numbers as a whole, including new home starts, home sales, average home prices, are not improving. The entire plan by the fed was to get real estate prices to stabilize. It has not happened, mostly due to #1 above.
  3. The Fed came out and admitted we are heading to a deeper recession than first thought. This is not good news for the bank stress tests. Any company exposed to debt, including banks, credit cards, REITs are gonna be hurting in the next 6 months.
  4. The dollar is getting weaker every day. This works in a strong economy but it is very risky in a week economy, especially if the economy gets worse. It can cause a spiral effect of worsening economic conditions within the U.S.
  5. State governments are in deep trouble. The Fed is going to have to bail them out or millions of jobs will be lost and the recession will turn into a depression very quickly.
  6. World economies besides China are about to implode. China can be self-sufficient and have proven they can grow without relying on the world economy. But other countries can not. The IBF will have to focus on this disaster to avoid a world wide depression.

There are many more but I am tired and want to get to my dreams soon tonight hoping I am wrong and the economy will suddenly improve. But I don't see it.

I am sticking my neck out and saying the S&P will see 700 by Sept 1 and will test the lows by Nov 1. What I hope for is the market tests the lows and bounces off and the economy actually does pickup about that time. Then, you will see this realist be the biggest bull you have ever met. We need a double bottom and we need a true recovery to happen in order to justify investing anything in this market.

I have set out my strategy. I am and have been moving into china. ETF's and Mutual Funds focused on China growth and China banks. Why China and why play China long while going short the U.S. market? Well, it is sort of a hedge, but I believe China will go down much slower than U.S market and perhaps stay stable if U.S. market slides, but China will definitely go up much faster than U.S. market so in case I am wrong, China will save me.

I am also banking on natural gas to have a significant move up based on alternative fuels coming to the forefront and nat gas to be a backup to things like solar, water, wind energy and perhaps even where Detroit will go with the new line of cars in 3-4 years. Nat gas has taken a big hit this past year and it is cyclically ready to move back.

I will be playing certain leveraged long ETF's short via puts. I will also be playing some short ETFs and double leveraged short etf's with hedges via long term puts.

I will be betting against the dollar and betting on gold.

I will not be betting against treasuries as I have been. TBT has been very good to me but is a bit pricey right now and treasuries may make a bit of a comeback short term.

But, I will do this slowly and have already started, until I see some technical indicators validate what I believe we are about to see. You can call it P3 or whatever, but I call it, fundamentals and reality.