Friday, February 28, 2014

Grandma Feeds Us Chicken Soup & Roasted Turkey

Yesterday the S&P 500 walked slowly past what was once the Maginot Line. It seems that everyone was too busy eating Grandma Janet's chicken soup to worrying about all the economic fears in the world. "Don't worry, if the economy slows down I'll add a bissel more dill and chicken to the broth. If we run out of onions, its OK, I'll use leeks. Grandma Janet will make everything OK."


 

"Its all right, I don't know anything more about the snow and the economy than you do, but by the way, bundle up." And just like that, the markets were assured that there is a steady hand in the kitchen, ready to cook us a way out of QE and tapering if necessary. I must admit that I was impressed by Grandma Janet Yellin.




So now the averages appear to be all in gear having barely broken through their highs. It was not an explosive rally. Rather it was just enough to make it through the day after a big meal. And we all know the basic rule, don't fight grandma, er the Fed.

But now that we trust grandma to do her culinary magic, do we trust the economy? Sure there was plenty of  tryptophan  in that turkey to make us sleepy and complacent. But what about a few days from now? What about what unfolds with the economy irrespective of Grandma?



My strategy is to play a little bit longer, but not chase extended stocks. If I see stocks that break out of decent bases I will play. But the individual stocks will have to pull me in one by one.  And I still intend to stay nimble by being ready to hit the exits at any second. After all, the market is overbought and Grandma admitted that she does not yet know whether the snow has anything significant to do with the recent economic weakening. We still have to wait and see how the economy plays out. And this morning's weak pre snowstorms GDP adjustment augers poorly for the economy.

In short, it is not time to fight the tape or the Fed, but it still is time to play small and fast. There are still plenty of unknowns about the economy and whether it will be OK despite whatever the Fed does. I will play a little, but I want to see how yesterday follows through. I want to make certain that Grandma is not boxed into a corner. Lets see how the leftovers taste.


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Thursday, February 27, 2014

S&P 500 Still Overbought At Maginot Line

The stock market is still very overbought while holding up so far at the top of the trading range as represented by the S&P 500.  My question is twofold: Will the market gently correct or rotate into different groups as some groups get extended and others come into vogue. Or will the market sell off here. I am still playing small and fast.




Some Current Market Themes

1- In each of the last few days the market has sold off sharply in the last hour to hour and one half of the trading session. This is never a good sign as day traders grab their profits early and the so called smart money sell at the end of the day. In a strong market neither group of players would be able to get away with it.



2 - The New "Nifty Fifty" Of Mostly NASDAQ 100 Stocks. In the 1960s it was the "Nifty Fifty" group of leaders led by XRX, IBM, PRD, and so on. I don't know what the number is today, but a small group of stocks like CRM,  GOOG, NFLX, PCLN, and TSLA are leading the pack.
Value never matters during these phases and its always concentrated in a small elite group.

As one can see, the NASDAQ 100 is the only major index at new highs, but the pattern is becoming more erratic. While there never are guarantees in TA land, the megaphone pattern on the $NDX chart is indicative of a skittish market. Usually these types of patterns lead to more meandering.

 
       
Some Example:

GOOG is a great company that just goes up every day. I'd like to own it, but I won't chase it in its extended state.






TSLA is the poster boy for the entire speculative market. Everyone knows the story. It has much to prove and may be having a huge financing soon to pay for its new lithium ion factory.




3 - What Me Worry? Whether it is the S&P Oscillator, the $VIX, or McClellan Oscillators, this market is short term overbought. Will the market sell off again or have some group rotation to work off the overbought condition? Whatever one does, it would be smart to avoid extended stocks like TSLA.

$VIX is very low. It is saying that no one fears this market. A contrarian would say to sell the market here.


4 - Mixed bag of economic statistics, mostly showing weakness. 90% of the economic numbers are weak. For every strong HD, there are 10 weak retailers. For every strong housing start number, there are several housing numbers showing weakness. The Fed is acting on bluster as if they know for sure that things are improving. How many times have we heard that before? The problem is that we just don't know yet.



Some Stocks I own or have Traded

CSIQ is a great stock. The crème de la crème of the solar stocks. It is breaking out right now, having popped a base and pierced it's all time high before falling back as the market sold off after 2:30PM



MONIF Is encountering some resistance here near its all time highs. I liked the way the volume fell off yesterday. I did not like the way it tried to pop today on higher volume, only to fall back into the end of the day market sell off. I'm trying to hold on for the short term, wary of the resistance at $1.39. Long term, I don't think one has to worry about a thing. 





EOG I sold EOG too soon as it has rallied all the way back to its all time highs. A great company.



PXD I am holding onto PXD but am concerned that it has not followed in lockstep with EOG as it has done in the past. The Elliot wave guys are predicting a huge price increase. I still think that they have had a few short term logistical problems, but have the largest amount of oil in the USA which will boost the name to new highs. In my opinion, they have a good chance of eventually becoming a major oil and gas company.





WTIC The price of oil has been going up and that has helped the shale plays like EOG and PXD.




PXD/EOG Overlay: Just to illustrate, one can see that EOG and PXD have traded as twins until 2014. Wake up PXD!






SCTY broke out of a small base two days ago. I bought it on the breakout yesterday and sold it into the whoosh up today for a near 10 or so point gain. I think it will go higher, but I had bought CSIQ and did not want to be overloaded in one group. I may day trade SCTY.




 




BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Monday, February 24, 2014

Not Quite In Wheel House

Today it looked like the S&P 500 was breaking out to new closing highs. But then the last hour sell programs came in only to leave us frustrated again as the SPOOs fell back down to the resistance level that it temporarily had pierced.



On top of that, just as the market was oversold less than 2 weeks ago, now it is extremely overbought. The S&P Oscillator is now plus 8.5 - the highest overbought reading in years. 



Tomorrow is another day and the market may very well follow through with a clean breakout, but this game is getting very difficult to play. There is still lots of money sloshing around out there, but the list of things that are working is becoming more narrow, more speculative and more extended. I learned a long time ago to not fight the tape, but that doesn't mean that I have to get caught up in mob psychology and eschew risk control. So I go with the flow, but control my risk by playing fast and small, while always looking for new opportunities.

I am not ashamed to say that this choppy market is not in my wheel house. I do my best when we are in up trending markets with lots of stocks in early stage breakouts. Right now we are five years into a bull run that has occurred under extraordinary circumstance. I have spoken about today's unprecedented monetary conditions and weak economy ad infinitum.  Rather than repeat, I would like to take this time to describe what I look for before I buy stocks and see how that applies today.

In general, I do my worst in indecisive choppy markets like 2014 has been. Granted that the market may be shifting to a stronger phase, but it is not there yet- not unless today's fake break out turns into the real deal. I strongly believe that a rising tide lifts all boats and the best stocks are the strongest relative strength stocks with great revenue and earnings growth or "stories."

One can find the genesis of my technical analysis thoughts in the works of William O'Neal, Marty Zweig - especially the Zweig Forecast, and Stan Weinstein. 



But I go back as far as first reading the basics of technical analysis as a college student studying Edwards and Magee plus William Jiler. After reading many books, I put my new education to the test and promptly got my ass kicked in over and over for years. I sometimes had big runs and profits. But I failed to hold onto the profits because I did not understand how to sell. Read the Market Wizards, by Jack Schweiger and you will find elements of my evolution in many of the characters. Most importantly read Reminiscences of a Stock Operator to get the idea of what Jesse Livermore went through. The same ideas apply today. The point being that I read all the books, but had to learn the hard way over a period of many years before I started to become successful. All of this deserves a more detailed exposition, which I hope to go into one day.

I believe that I can read a chart as well as anyone out there. But there is much more to trading than reading a chart. In my experience, most chart patterns do not work out and are not actionable. The typical question that reporters ask like "what does the chart tell you about AAPL here" are worthless. There simply is not an actionable answer most of the time. My job is to sift the sands and pick out the few actionable charts. One does not have to know the answer to every question. As Buffett said, one only has to wait for their pitch and essentially swing at that pitch if they know how to hit that pitch. So here is what I ideally look for:

1 - A Rising Tide. I want to see an up trending market with all indexes in gear.

2 - Favorable Fed policy.

3 - Some sort of overall market analysis that models the risk environment that we are in. The late Marty Zweig "the odds favor the bulls" was the best at this and modeled sentiment, monetary policy and the momentum of the tape in his "Zweig Forecast." Ed Hyman of ISI is the best economist with his easy to understand charts and comments. Both back tested situations that were similar to any given day's situation. No one today comes close to Zweig.

3 - Some kind of constructive Fiscal Policy like the Kennedy tax cuts, Reaganomics, Robert Rubin's great work as Treasury secretary are a few that come to mind.  Today's mess and the LBJ Vietnam War policies are not.

4 - Extremely Strong Revenue and Earnings growth, hopefully accelerating, along with a great long term story.

5 - Great relative strength as measured by someone like O'Neal.

6 - A secondary or third base on the charts that has occurred after a stock has made a great run. has digested its gains and is ready for the next leg up. This is simple supply and demand analysis within the context of a strong stock with great fundamentals or a great "story."


WDAY Example:  Here is an example of a strong growing story stock that broke out of a great secondary base a while ago. I would not chase it here, but did buy it when it broke out of the base. There are many types of bases in the Naked City, but generally they all involve a stock consolidating on lower volume after a big run. They also are accompanied by tightening Bollinger Bands and eventually take out the old highs - resistance - on much higher volume. Call WDAY a reverse head and shoulder continuation pattern or, a cup with handle or whatever you want.  The point is I want to wait for the next leg up to begin under the right circumstances before jumping on board. Sometimes I will even anticipate the breakout depending upon overall market conditions, the news and action of the stock or other issues. That is a matter of experience. 


Stocks I Own:

MONIF is close to the old highs. Will it pop through now or hit the wall and consolidate more before breaking out. I hope it does not stop and consolidate more like it did in October 2013 - circled on chart. A great long term story.



PXD Looks like it has a good chance to run to the old highs, but has some resistance around here - circled on chart - and it has this insane market to deal with. An ocean of oil and gas.





Low Priced Action:

CAK A big stock split today but testing new highs. Low priced stocks are perking up.



BLDP Another low priced stock perking up. Not great fundamentals and a herky jerky low priced trader.




KNDI China auto vending machines break out again. Great story.


XOMA The left behind biotech stock has been perking up. Another low priced stock.





In sum, my price alerts did not go off that much today. A narrow group of high priced maniacs like NFLX continued to run. As I had pointed out, the NASDAQ 100 had broken out several days ago but the other indexes lagged. Today it looked like the S&P 500 was finally in gear until the last hour sell program hit. Now the entire market is very overbought but may still continue to run. But the pickings are getting slimmer and the air is rarified. So even if the S&P 500 breaks out tomorrow, it is still a time to be nimble and cautious. 


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Friday, February 21, 2014

"Frozenomics" Bah! - PMI Report Saves The Day

Just when stocks started to correct and investors were becoming despondent over the bad economic picture, a strong PMI report was released yesterday morning and rescued the bulls. Prior to the release of the PMI report, just about every bit of economic evidence, from employment statistics through housing starts, had shown that the economy was slowing down. The bulls blamed the poor evidence on the snow. Now there is at least one piece of evidence that there is a real economic recovery going on. The S&P 500 immediately reversed back up - circled on chart below - and the rally began.


In my view one good economic report is not enough to change things, but it won at least the day for the bulls.  However, the larger battle at S&P 500 is still unresolved.  Options expiration played a part in yesterday's market and will continue to do so today. So I am just winging it until the overall situation is resolved. Of course the situation may never be resolved as we wait for Godot to rescue us.




Here are a couple of chart set ups:

PXD has been struggling this year but is still knocking on the breakout door. They have had some setbacks in terms of getting things going, but there is no doubt that the resources are in the ground and they will get there. Perhaps the $190.00 level is options related.




Note how PXD and EOG have traded in lockstep  until 2014 began - circled on overlay chart below. EOG is PXD's little twin brother and has begun to head back up while PXD has lagged. Is this just a short term situation or is something larger in play? I think that things will work out for PXD and my price alert is set at the top of the base around $191.40




MONIF may be in play, especially in light of yesterday's purchase of What's App by FB.  Here are the facts:

1 - The company has a unique mobile banking platform. They just reported 67% year over year growth in revenues and similar growth in customers.  Here is a nice British website with lots of discussions and information on MONIL

http://www.lse.co.uk/SharePrice.asp?shareprice=MONI

Note the strong revenue growth. Revenues are obviously much higher today:

Income Statement30 Jun '1330 Jun '1230 Jun '1130 Jun '1030 Jun '09
Revenue72.8036.0915.286.022.66

2 - MONIF is not profitable because it has spent a huge amount of money in R&D plus buying other companies. The losses are relatively large, but the company still has lots of cash. Amazon analogy anyone?

3 - Big chunks of  MONIF are owned by Visa, and large institutional investors like Leon Cooperman (10%). Plus they are tied to IBM in a big partnership deal.

4 - There is a very strong case being made in the world financial community that someone is going to gobble up MONIF for an astronomical premium.  There is a land rush going on right now for companies to grab a piece of the yet defined mobile pie. Look at this tweet by Reid Hoffman yesterday. If anyone has his finger on the pulse he does.

@reidhoffman 15h
“Mobile in the ‘pre-pagerank’ phase” by Pre-page rank - lots of interesting options, incl. social rank

5 - MONIF started to run yesterday after the market digested its earnings report and Doug Kass made some over the top bullish comments. I bought back a chunk at $1.16. If it crosses $1.24 it should run to the old highs or more. I have traded the swings in MONIF since last years lows when Leon Cooperman made his famous statement that MONIF is the one stock he would hold for 5 years with enough confidence to forget about.








BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Thursday, February 20, 2014

Maginot Line or Just Another Resistance Level?

Nothing should surprise anyone anymore as this market moves forward into 2014. Yesterday the market actually had an old fashioned battle at resistance levels which held for the day. Helping the bear case were the following factors:

1 - An overbought market that had rallied for several days in a row and was running out of steam

2 - A major S&P 500 resistance level that was being approached by a bullish army that was out of gas.



3 - International turmoil led by the events in The Ukraine and Venezuela.

4 - Statements in the Fed minutes that some Fed officials would consider raising rates earlier if the economy showed some strength. This was the last straw - see second circle on the tic chart below - that put the knife in the market's back. Of course, in hindsight, the statement was not a big deal, but the headline scared me at the time..



Now for a couple of news items:

TSLA - I think TSLA is a great company whose share price is overpriced and has been given a performance pass by Wall Street given its romance with Elon Musk and the potential of electronic vehicles. Yesterday's earnings were a a clean beat and the guidance was very nice. But the guidance is only calling for a 55% increase in Model S sales and that is contingent upon the battery supply issue being resolved by mid 2014. Musk said that the battery issue will be solved by then. He also projected a much greater production rate by year end. Then he stated that the roll out of the Model X would be delayed into 2015.



If he can do all of these things without a hitch, the stock may have a chance. But 55% growth is not the stuff of dreams for such a high priced stock. And the battery issue has yet to be resolved. We all know Murphy's Law. I would like to play TSLA and given the gap up, the cult status, the high number of shorts, it may be smart to stay out of the way until this move runs out of momentum. I am waiting for the opportunity to short TSLA, but may even day trade it long given the day tic chart.

FB - They bought What's App and everyone said who the heck are they? I have used What's App for years to communicate with friends and relatives in Europe for free. It is a way to text message without incurring the large costs of international texting that the phone companies charge. It is a great App and a smart move by FB. I am in no rush to buy FB here, but long term this sounds like the right thing.



I am basically flat now, having made some profits in my SPY short and given back some in PXD, which had a failed breakout during the day.

In my view, the market was due for a sell off, but it was a tough battle until the bulls caved in. It is probably time for a pause, some choppy action and maybe even a sell off. But my view as a seer has been very difficult in this psychotic market environment.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Wednesday, February 19, 2014

Another Big Test

Here we go again. The NASDAQ 100 is at new highs and the S&P 500 is now in the zone approaching its old highs. Is another "V" shaped market bottom is about to be made, or is something more afoot this time?

Here are some interesting charts:

$SPX is approaching it's old highs after a low volume "V" type of bounce as if January never happened.  Options expiration is occurring this week. I am short SPX and long some stocks. But very short term in my trading.



McClellan Oscillators and Indexes overbought and summation lagging

 
 


$VIX What me worry?

 
 
Oil Prices going up - a head wind

 
 
Amidst the uncaring attitude of the investment community still lies the essential issues

1 - This is the slowest economic recovery in post WWII history. Blame the recent worsening on the snow or is something worse going on?

2 - We have had the greatest monetary stimulus in world history. Now the Fed may be boxed into tapering with nothing to fall back on.

3 - The USA has lost control of its foreign policy. Yesterday it was the Russian military pact with Egypt. Today it is more fighting in Venezuela and the continued Russian power play in the Ukraine and former USSR nations. Iranian war ships are headed for the USA coast and the Middle East is a mess. The Iran nuclear talks are a joke.

4 - The New Generals are the only big movers. How long can this game last? will they drag everyone up or are they an indication of a more narrow market that is on its last legs for now?

TSLA Tonight TSLA reports it's earnings after an absurd gap up in price caused by a media blitz about something that occurred with AAPL one year ago. I would not be surprised to see another big percentage gain in TSLA earnings, but the price is crazy, the battery supply issue still exists and companies like AUDI (per Doug Kass) are coming up with synthetic fuel alternatives.



PCLN is a true growth champ with a low PE and PEG ratio. Earnings are due out Thursday. A bit extended. I would not be surprised by anything great that this company does



Some Chart set ups

CSIQ being held back by a secondary at $37



PXD has the greatest reserves of any oil company in the USA. But it's cost of production is relatively high. As oil goes up in price, PXD is trying to come back. It is knocking on the breakout doors. One tell is that EOG, a company in similar circumstances, has already broken out. 

 
 
HIMX


Breakouts For The Nimble Traders

CCIH



 


HZNP


SCTY




BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

 
 

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