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.