Thursday, July 30, 2009

Natural Gas and UNG Ahead of Inventories Report: Selling Shorts Today




Last Thursday we posted an article saying that we were shorting natural gas again. This is the chart of UNG since then:






Inventories will be announced today. I have placed sell limit orders for my UNG puts and HND.to.

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Tuesday, July 28, 2009

Roubini: Risk of Double Dip Recession

Nouriel Roubini is being called an "expert" for predicting the financial crisis last year. Now, he is saying that in spite of the current bullish markets, there is a rish of a double dip into recession.

Of course there is Dr. Roubini. The current rally may well be a dead cat bounce. The crisis, is being avoided by printing of trillions of dollars which will simply never be repaid (unless the money is severely devalued, which it will be regardless).

Roubini says we may fall back into recession in late 2010 or 2011 because of "government debt, higher oil prices, lack of jobs"). He says unemployment will rise above 11%. Yes it will. Unemployed people do not spend. And house prices, already off by about 50% off their inflated peak levels, will continue to drop. Those ATMs are dry.

Roubini does say however, that emerging markets will fare better. Looks like Roubini is in full agreement with this blog in this regard.

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Monday, July 27, 2009

S&P500 is Overbought: 330 Overbought Companies, Only 6 Oversold

Report for July 27 2009.

The S&P500 is now overbought. There are now 330 overbought companies and only 6 oversold. The average RSI7 is 72.08. Here is the list.

72.08689412 Average

Overbought companies:

94.35531641 IR
93.95176819 ISRG
93.67535822 CA
92.95538638 EMN
91.55025441 IPG
91.36622566 DOW
91.2917605 MMM
91.03557812 JWN
90.93592066 IP
90.92362673 PPG
90.84611074 GT
90.8403163 WPO
90.39577148 GCI
90.22724981 ROK
90.15190378 NI
89.96736852 BDK
89.64908826 RL
89.21305094 MCHP
89.14816919 RSH
89.01676078 KLAC
88.95222343 ADSK
88.86082079 CRM
88.78215775 AGN
88.74147813 MWV
88.57257068 SNI
88.40945737 PLL
88.1097981 SCG
87.90668934 SNA
87.73591398 CVG
87.67036033 TEG
87.51944574 AN
87.5070947 PTV
87.50627934 SEE
87.45964934 SLE
87.25613215 ALTR
87.20546513 HPQ
87.17241296 HOG
87.10821216 CSCO
87.05643344 ADBE
86.98605657 CVS
86.97126282 TMO
86.88158743 LOW
86.81519618 COF
86.78530193 FCX
86.7655412 EBAY
86.57350345 HIG
86.43684945 DD
86.30445933 PFE
86.23696342 PXD
86.12444466 TE
86.08044019 UNM
85.97825222 XRX
85.95357975 MTW
85.9081161 BEN
85.89217272 MU
85.890197 AAPL
85.86645401 APD
85.86108933 TYC
85.81002012 CSX
85.69675407 ETN
85.66022253 PH
85.61001427 A
85.60121235 MAS
85.51632707 MWW
85.49577904 USB
85.48956434 PBI
85.46516903 CAT
85.45913755 PFG
85.24563934 RRC
85.20308098 LUK
85.09498664 JNJ
85.09203022 R
85.0605874 ADI
85.06019656 KMB
85.00004052 GAS
84.86924793 CLX
84.85178209 EMR
84.83110197 HNZ
84.5970872 INTC
84.55967626 CMI
84.48561657 WYE
84.38860797 OI
84.35694085 WY
84.28481346 ITW
84.24231032 CB
84.20573712 TGT
84.12034942 PDCO
84.11590989 JBL
84.0804081 KBH
83.92564146 JCI
83.91195021 VFC
83.8611604 EXPE
83.77797267 DO
83.76726821 OXY
83.76088939 IFF
83.48840792 FAST
83.44611228 COH
83.31397807 XEL
83.30596399 AVY
83.19759556 FO
83.02413203 NTAP
83.00802313 BMY
82.91131465 TXT
82.90877135 MA
82.86597774 DTE
82.81706907 CTSH
82.81436463 CAM
82.77497224 SRE
82.75735826 SBUX
82.7456179 CIEN
82.72821559 AVP
82.55785427 AFL
82.55280984 IGT
82.51828004 DHI
82.31093801 PM
82.2835985 MRK
82.21864156 ANF
82.17264362 HAL
82.14586849 HRS
82.0908973 WFMI
82.02962318 L
81.90713593 NSC
81.88334473 FISV
81.83593058 BHI
81.83576603 BXP
81.71721533 LLTC
81.71355475 GME
81.70468049 MFE
81.63335585 TRV
81.62850336 SWN
81.48088172 NOV
81.27408531 LEN
81.25439457 PRU
81.2454309 CAH
81.10462322 TMK
81.07562851 MOLX
81.00828207 RRD
80.99666478 DUK
80.99505332 KSS
80.9651069 MET
80.92087181 HCN
80.9193359 JNPR
80.88708483 DF
80.84117357 CEG
80.83474744 M
80.83329426 NWL
80.82156541 MON
80.81025369 SWK
80.73843946 PEG
80.73124892 NVDA
80.6022546 CNP
80.59186851 HCP
80.56370789 NSM
80.45658771 BLL
80.41396745 STR
80.34741803 ECL
80.29056558 NVLS
80.24853726 WEC
80.24473947 YHOO
80.23293249 EL
80.22259548 RAI
80.08454429 GS
80.07033249 BNI
80.06518464 LIFE
80.0523328 IBM
80.03163602 UNH
80.00835235 CTAS
79.9668971 TXN
79.96610351 AMGN
79.89755086 EMC
79.83065872 COP
79.81055523 MYL
79.80927483 TIF
79.79744091 DFS
79.78778798 RSG
79.75082746 AES
79.73034417 SYMC
79.71372419 APC
79.69656912 NYT
79.6725426 SE
79.66003274 GWW
79.6561291 PX
79.55468379 MEE
79.49166167 SPLS
79.27092896 TWC
79.19764317 ETR
79.03445928 FE
78.99648742 VZ
78.93673915 CELG
78.92522835 CHK
78.90971029 MHS
78.90152013 MCK
78.89904177 XL
78.8914782 FLS
78.83970141 VNO
78.77196491 ZMH
78.76364952 CBS
78.68317383 EOG
78.68296996 RHI
78.66362418 WLP
78.65274281 CINF
78.62206767 DIS
78.58656519 D
78.48675478 PNW
78.45559435 ED
78.29908349 PGN
78.22910451 MRO
78.12713535 FDX
78.12666307 EQT
78.08535638 VMC
77.93454579 FPL
77.92843573 TJX
77.79909266 TER
77.78127898 DPS
77.71312708 AXP
77.66066658 HSY
77.63495046 DVN
77.59189661 XOM
77.51536505 ADM
77.30299904 ADP
77.14347462 CVX
77.13924261 HD
77.09397527 SGP
76.93233154 PCG
76.82537288 APA
76.78747865 VTR
76.72446673 CF
76.58764871 NU
76.54228572 PLD
76.42210871 DTV
76.395783 BBBY
76.37224608 RDC
76.35867664 WMI
76.35166468 IRM
76.34550439 AIZ
76.2894346 LTD
76.20130686 FRX
76.1130417 ESRX
76.10270502 COST
76.02742329 ITT
76.02128886 EXC
75.90919413 HAS
75.88371875 X
75.83599309 FLR
75.82164007 IVZ
75.65703971 FITB
75.61648827 CCE
75.50581658 XLNX
75.45356094 EIX
75.38856542 AEP
75.33205406 AEE
75.30804332 PHM
75.29779181 INTU
75.21082601 SO
75.08765252 ODP
75.08512805 CMS
75.0690811 LNC
75.00823439 TAP
74.99820658 CTX
74.95363114 XTO
74.94841806 CSC
74.91895602 ALL
74.85591465 JPM
74.83925677 TROW
74.83654524 VLO
74.74663854 DE
74.72986459 AYE
74.69101223 TLAB
74.66485931 F
74.654408 MUR
74.61683314 WPI
74.61182021 COG
74.59707684 WAT
74.58386543 SJM
74.57397777 EP
74.49332661 T
74.44301944 PCL
74.39587301 PAYX
74.38497053 AMAT
74.20428344 EXPD
74.16205185 LO
74.14522168 POM
74.03374595 CI
73.99344155 ESV
73.96354991 THC
73.88150617 CPWR
73.72555006 DNR
73.655892 VRSN
73.58453073 PCAR
73.50738588 JNS
73.49332939 NOVL
73.32878267 PGR
73.2894383 BJS
73.281222 GOOG
73.24444141 PG
73.17165533 WMB
73.12235156 CPB
73.0216371 CL
72.99200481 PKI
72.95461191 FIS
72.85780864 SUN
72.83692738 ETFC
72.74579052 CCL
72.6459755 PSA
72.64053828 CBE
72.63271567 HON
72.55506171 CBG
72.25676286 UPS
72.22411056 MDP
71.97570347 GLW
71.92195748 LH
71.92170774 ORCL
71.78377017 VAR
71.77261428 TSO
71.6689346 ORLY
71.27995055 CVH
71.25342914 CAG
71.04240444 OMC
70.71251054 LUV
70.69657001 AMT
70.68729815 BIG
70.66884079 JEC
70.50858419 WU
70.4967626 AKAM
70.33750355 WYN
70.23960719 LM
70.13689026 KFT
70.11582277 LLL
70.08132683 GILD
70.00916989 BSX
70.00586066 MO


Oversold:

29.73144599 LXK
29.47892986 RX
28.37472746 LMT
27.14290966 BK
26.26047308 PNC
25.81996309 ATI

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H1N1 is Big Business: Stock Market Opportunities

The H1N1 virus has very serious human consequences which are more important than any economics or profits.

From a strictly stock market point of view, the virus will have significant effects on the profits of many companies, both positive and negative. We reported on Friday June 12 that Novartis had developed ithe first successful vaccine, Novartis. The Ottawa Citizen reports today that makers of vaccines and anti-viral medications are already seeing exponential rises in sales. Glaxo-SmithKline reported better than expected quarterly profits mainly due to sales of the anti-viral Relenza, which jumped 2,000% compared to the previous year.

Gilead Sciences also said that Q2 royalties and revenues increased 29%, mainly due to sales of Tamiflu by Roche. Roche said its sales rose 200%. Analysts say this is just the beginning. At least 50 countries have placed orders or are negotiating purchases. Baxter said it has taken orders from 5 contries for 80,000,000 doses.

Because of the spread of H1N1 has been so rapid, new technologies are being developed, including for example, adjuvants, made by Novartis and Glaxo. Protein Sciences Corp, and Novavax are using insect cells, a faster method than conventional chicken egg technology.

Farmacies such as Walgreen, CVS stores, Shoppers Drugmart, will see increased sales of reliever medicines, masks, and of course also checkout merchansdise.

Negative Effects on Profits.

A rapid spread - and fear - of H1N1 will have many effects on the overall health system. People will stay away from hospitals and will postpone elective surgeries such as hip replacements or cataracts, or even routing exams such as colonocopies. During SARS in 207, elective surgeries were redcued by 22%.

Hospital supply distributors will be afected (Henry Schein, PSS World Medical)

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Sunday, July 26, 2009

Best Strategy to Trade USO, S&P500, USD/Yen

INO has a new video today on predictions of how high the S&P500 will go. While they have something to sell, they offer these videos free. Several of the INO videos are actually very useful.
Best strategy to trade USO: Watch video

Ignore "garbage news", Fibonacci works, these are captures from the videos:








S&P500

Predicting the new height of the S&P: Watch video


USD/Yen:

Revisiting and reanalyzing the USD/JPY Watch video

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Saturday, July 25, 2009

Nortel Wireless Unit Sold to Ericsson for $1.13B


It was announced this morning that Ericsson will buy the wireless unit of Nortel for $1.13B, beating bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC. The wireless unit includes the CDMA and LTE (Long Term Evolution) product lines and technologies. The latter is key for Ericsson as the technology is expected to greatly expand in North America.

Out of the three bidders, Ericsson was the most surprising winner as it does not have a significant CDMA business. It is thought that whay they really want is the market for evolution of CDMA into LTE, as well as not allowing its big competitor Nokia get a foothold in North America. For this reason, it is a tremendous win.

Also key to this whether the Canadian government will approve the transaction as it is the least likely to keep Canadian jobs.

"Licensing LTE technology to handset makers may be worth as much as $2.9 billion in royalties during the next 15 years, based on Nortel’s own predictions, JP Morgan Securities said last month."

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Thursday, July 23, 2009

Natural Gas Collapses, Again: Do Not Go Long Until Hurricane Season

Exactly one week ago we posted an article stating that the market had given us another opportunity to short natural gas and UNG.

Today natural gas prices collapsed again, dropping between 6 and 7%. UNG dropped today 6.67%:







On July 17 UNG reached a high of $13.61, today it closed at $12.88. HND.to moved up 14.04%.


Storage inventory figures released today this week showed a build-up of 66Bcf, which is not that large, however, the issue continues to be that inventories are too large, and specially too large compared with last year's and with the 5-year average:



Note the red line sticking way out of the top of the 5-year channel. Inventories are 23.8% larger than in 2008, and 18.3% larger than the 5-year average. My opinion continues to be to stay away from natural gas until hurricane season starts, and then it would be strictly for short term and speculative purposes.

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Tuesday, July 21, 2009

Dollar Reaches New Low vs Real, Dollar down 47% Since September


The USD closed yesterday at 1.90 Brazilian Reais. This is the lowest level since September 2008.

The BZF, Brazilian real currency ETF, is down 12% in the last 1 year, and is up an astounding 47% since September:

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Monday, July 20, 2009

S&P 500 Report: 115 Overbought Companies, Only 1 Oversold.


The average RSI7 is now 63.71, inching closer to overbought territory.

However, there are 155 overbought companies, and only 1 oversold, and that company is CIT!

Overbought companies (RSI7 shows sorted in decreasing order):

HAR 89.77
LXK 88.30
MCHP 87.86
WHR 86.76
GCI 86.63
INTC 86.25
PPG 85.29
SNDK 85.19
CSCO 84.89
NVLS 84.65
IBM 84.30
KLAC 83.48
SEE 82.75
PG 82.70
AMAT 82.63
TYC 82.46
CTXS 82.33
TXN 82.32
AAPL 81.74
HOG 81.72
RSG 81.00
YHOO 80.80
CTSH 80.71
WFMI 80.57
RAI 80.47
EBAY 80.46
GT 80.40
MA 80.08
NTAP 80.07
NSM 80.06
IGT 79.94
DF 79.86
SNI 79.81
UNP 79.63
BRCM 79.58
ROK 79.38
LSI 79.13
AXP 79.10
MAT 79.07
FCX 79.05
CSX 79.05
NSC 78.97
FISV 78.96
MO 78.87
NVDA 78.73
ADBE 78.50
TJX 78.43
BBBY 78.32
SLE 78.32
DPS 78.32
JNJ 78.26
COF 77.99
GPC 77.90
LOW 77.59
MU 77.54
HPQ 77.52
BDK 77.16
HAS 76.90
LLTC 76.72
HRS 76.69
COG 76.69
WPO 76.69
MHP 76.61
NWL 76.60
TER 76.54
DD 76.53
A 76.22
JWN 76.12
HSY 76.12
HD 76.05
ALTR 76.04
GLW 75.86
SHW 75.82
ITW 75.79
IP 75.78
EMC 75.78
MWV 75.75
LEG 75.72
QCOM 75.71
RRC 75.63
MCO 75.59
CLX 75.49
DOW 75.24
IPG 75.23
SWK 75.18
VRSN 75.18
JNPR 75.02
BTU 75.00
NBR 74.98
DHI 74.93
CA 74.87
PLL 74.82
MEE 74.56
AMGN 74.56
BBY 74.48
KSS 74.27
EMN 74.26
NI 74.22
CPWR 74.22
JBL 74.20
QLGC 74.19
MCK 74.07
RL 73.97
BHI 73.94
XTO 73.93
ADI 73.92
AVP 73.80
TDC 73.76
CSC 73.71
BJS 73.67
WU 73.63
GILD 73.59
FIS 73.42
GS 73.34
CRM 73.15
JPM 73.09
TEG 73.06
CVS 73.05
ITT 73.01
MMM 72.95
PH 72.94
BMS 72.80
OXY 72.57
X 72.56
LEN 72.53
HNZ 72.53
SLB 72.04
OI 72.02
MFE 72.01
EOG 71.74
SWN 71.74
AKS 71.63
CAM 71.56
WFR 71.51
VFC 71.50
GWW 71.26
KMB 71.17
TIF 71.13
NOV 71.02
PHM 71.02
AMZN 70.94
ADM 70.91
AMD 70.86
AN 70.79
CTX 70.66
FII 70.62
APA 70.59
FDX 70.52
SCG 70.52
HAL 70.46
BNI 70.43
MAS 70.37
CVG 70.37
HRB 70.29
EXPE 70.21
KBH 70.21


Oversold:

CIT 27.80


Other ETFs ad indices we follows

UNG 54.80
SPY 74.13
IWM 69.00
XLF 63.15
DIA 75.55
USO 51.15
^VIX 30.87


Note the VIX is practically oversold, which matches the S&P being overbought.

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Friday, July 17, 2009

Ontario Gives $10K Cash for Residents Buy Electric Vehicles.


In a bizarre and very controversial move, the Ontario government announced it is giving $10k cash rebates to residents who buy electric vehicles. There are many issues with this. Toyota is slamming the government as the move is seen as a boost to GM's Volt vehicle, as reported by the Financial Post. Ontario now owns part of GM as part of its bailout.

" the move looks like a deliberate ploy to help General Motors Co. -- of which the provincial and federal governments are now minority shareholders."

The announcement was made at a GM dealership on Toronto. One wonders what was Mr. McGuinty thinking (election?). Absolutely puzzling. The article is right in mentioning that the technology is not proven or reliable. However, what the article fails to mention is that Ontario suffers from lack of hydro capacity a peak times. It's hydro infrastructure has not been modernized or expanded in many years. Where exactly they think the energy that will be needed by the vehicles will come from is anyone's guess. Imagine if a good number of vehicles is suddenly hydro-powered! This is sure to backfire. In addition, the province faxes a mounting deficit. Who will eventually pay these $10k? Current or future residents, that's who.

I would love to own an electric vehicle, not because it does not use gasoline, but because it is quiet, and does not have many parts that break in the modern cars: coils, pistons, oxygen sensors, etc. However, the ramifications of this idea are not well-thought out, and these 10k are eventually coming off the residents own pocket - through taxes.

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Thursday, July 16, 2009

Potash: Athabasca Selling Parts of the Company

Reported here in early 2008, API.to, Athabasca Potash is up big today on news it is selling parts of the company. IPO was at $4.25. Current price $5.25:

Check out the volume and spike:



Says the Financial Post: "A number of other companies have been scouting for potash assets and earlier on Thursday Canada's Athabasca Potash Inc said it is exploring a possible sale of all or part of the company."

Reuters says:

" * Says exploring possible sale of the company

* Shares soar 42 percent in early trade"

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Vale Rumoured to Buy Mosaic

Brazilian newspaper O Estado de Sao Paulo reports today that Vale may bid for fertilizer company Mosaic. Mosaic, is one of the world's largest producers of concentrated phosphate and potash, the primary nutrients required to grow food grains and other crops.

Mosaic shares are up 12% on the news on very large volume:.




"Global interest in potash has risen sharply in the last couple of years, as a very small group of companies controls about 75% of global supply, and the price has until recently remained stubbornly high."

O Estado de S. Paulo estimates the deal could be worth about US$25-billion, or US$56 per share.

"From a big-picture perspective it fits with Brazil's stated strategy of becoming self-sufficient in fertilizer," said Morningstar analyst Ben Johnson. "Mosaic would be the best fit in terms of the assets that are out there, given that they have got substantial potash and phosphate assets and a distribution network that is already in place."
Earlier this year, Vale spent US$850-million on the purchase of potash assets in Argentina and Canada.

Mosaic, based in Minessota, is a joint venture between Cargill and agricultural firm IMC Global, and has operations in several U.S. states, in Canada's potash-rich Saskatchewan, and controls 62% of Brazilian fertilizer producer Fospar, as well as owning a 42% stake in the Cubatao Fertilizer Industry, which mixes and distributes fertilizers in Brazil, and has a nearly 20% stake in local fertilizer heavyweight Fosfertil.

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Natural Gas Report: Time to Short UNG Again

Natural gas inventories were reported this morning, rising 91Bcf. The storage curve remains well above the top of the 5-year channel, and well above last' years numbers:



Storage is 25% above last year, and 18.6% above the 5-year average.


The market responded by pumping prices by 7%. This is a gift too goo to pass. Therefore, I just went short natural gas again. Timeframe is one to 2 weeks, ahead of hurriocanes. Do your DD please.

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S&P500 Report: Zero Oversold Companies, 7 Overbought

After the significant rally in recent days, the S&P500 is now closing on short term overbought, with an average RSI7 of 63.3 There are zero oversold companies, which is the first time I have seen, and 112 overbought. This is buyer beware.

In terms of RSI14, the average is 55.6, which is neither overbought, neither oversold.

Here are the companies and their current RSI values:


RSI7: Average 63.30

Overbought: 112

LXK 87.48
HAR 85.15
GCI 83.54
WHR 83.27
AMAT 82.17
INTC 81.56
SEE 81.14
MCHP 80.91
COF 80.45
NVLS 79.80
HCBK 79.72
AXP 79.28
KLAC 79.13
MFE 78.91
CSCO 78.63
SCG 78.58
GPC 77.82
SLE 77.73
LLTC 77.59
ROK 77.54
JNPR 77.45
TJX 77.32
WPO 77.08
SYMC 77.03
RSG 76.98
JNJ 76.92
ORLY 76.87
DF 76.73
DPS 76.66
CEG 76.64
AES 76.62
PG 76.49
UNP 76.26
MWV 76.23
HCN 76.01
ALTR 75.85
CTXS 75.83
GT 75.80
KO 75.78
SNI 75.71
CSX 75.61
NTAP 75.58
BRCM 75.51
PPG 75.46
HSY 75.32
TYC 75.23
BMS 75.22
SNDK 75.20
NTRS 75.18
MHP 75.08
PLL 74.85
VFC 74.79
EBAY 74.68
GOOG 74.51
ESV 74.50
BDK 74.46
NSC 74.40
WFMI 74.39
KFT 74.36
FISV 74.13
MCO 74.06
AAPL 74.06
SWK 73.87
SJM 73.78
MMM 73.68
AMT 73.62
IP 73.54
JWN 73.48
MU 73.36
EK 73.26
TER 73.17
VRSN 73.17
CTSH 72.93
HOG 72.84
IRM 72.74
LUV 72.69
CA 72.64
CMA 72.56
DD 72.54
ITW 72.43
KSS 72.42
LOW 72.25
MOT 72.16
FE 72.08
BBBY 72.04
CLX 72.00
DOW 72.00
ADBE 71.97
A 71.97
XEL 71.88
HRS 71.86
PH 71.77
AEP 71.73
WYE 71.61
APD 71.57
PEP 71.56
LSI 71.38
TXN 71.36
MTB 71.32
GS 71.28
BLL 71.20
LEG 71.15
HRB 71.09
NWL 70.86
MA 70.85
EXPE 70.75
ASH 70.67
UTX 70.57
CCL 70.54
JPM 70.44
EXC 70.39
TEG 70.37
GIS 70.32
DTV 70.31


Oversold: 0 (zero)


RSI14: average 55.6

Overbought: 7

LXK 72.23
WHR 71.43
INTC 71.39
SJM 71.11
HAR 70.81
SLE 70.75
SCG 70.04


Oversold: 1

ABC 26.37

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Wednesday, July 15, 2009

Tim Hortons Strikes New York



Tim Hortons announced that is is continuing to expand in the US and is expanding 12 stores in New York City. The company may be unknown to our US readers, but it is a darling in Canada. It is very common (and very annoying) to see traffic backlogs caused by customers entering and leaving its stores. The sight of Him Horton's mugs, as the one shown above, is very common. This extremely popular brand has been quietly expanding into the US.

Tim Horton's trades under the symbol THI on the NYSE:





Tim Hortons Inc. is a Canadian quick service restaurant chain offering coffee, flavoured cappuccinos, specialty teas, home-style soups, fresh sandwiches and fresh baked goods, including its famous donuts. The Company directly owns and operates (without franchisees) about 1% number of restaurants in Canada and the United States, with the rest being franchisses. It also has warehouse and distribution operations that supply paper and dry goods to its Canadian restaurants, and supply frozen baked goods and some refrigerated products to most of its Ontario restaurants. In the United States, the Company supplies products to system restaurants through third-party distributors. Its operations also include a coffee roasting plant, a joint-venture bakery, and a fondant and fills manufacturing facility.

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Monday, July 13, 2009

Natural Gas: UNG Cannot Issue New Shares, Price to Deviate From The Commodity


A fellow by the name Patrick Watson had an article on SeekingAlpha where he says the price of UNG is likely to deviate from the natural gas market "until such time as UNG is able to issue new shares. Today, it is trading at nearly a 2% premium to its indicative value. In effect, UNG is now operating almost like a closed-end fund with a fixed number of shares".

You can clearly see the difference in prices between UNG and Natural gas futures, and the very high volatility of UNG lately, in the 5-day charts below:

UNG:




Nat Gas Futures ($NGAS NYME):



(click to enlarge please; note that Nat gas futures are already trading today)
This, and the fact that it reached our profit targets, is precisely the reason that we posted last week that we exited all shorts on natural gas, although natural gas remains a bear market until hurricanes starts. Then, it will be a good speculative option for short term trades.
UNG however, due to these issues and to its sheers size, joins the group of ETFs to stay away from as its price will not reflect fundamentals.

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S&P500 Overbought/Oversold Report for July 13

The S&P500 is nether oversold nor oversold in terms of average RSI7 (average of 39.2), however, there are only 3 overbought companies (defined as RSI over 70) while there are 83 oversold companies (RSI under 30).



RSI7:

Average: 39.26

Overbought: 3

LXK 80.38
HAR 72.13
AMGN 71.59

Oversold: 83

NOC 29.93
PFE 29.83
EQT 29.81
XRX 29.70
PEG 29.59
CTL 29.21
PAYX 29.13
KIM 29.06
TSS 28.96
CF 28.89
CAH 28.65
ANF 28.63
X 28.62
SYY 28.59
SII 28.52
MON 28.46
CHK 28.43
VLO 28.43
KG 28.37
FLIR 28.30
MAR 28.27
T 28.16
NYX 28.15
BA 28.08
SPG 27.86
WIN 27.81
EL 27.71
GME 27.70
PNC 27.62
CA 27.52
COL 27.43
SWY 27.40
DNR 27.29
TROW 27.03
LUK 27.02
SYK 26.77
CBS 26.36
GILD 26.32
USB 26.18
ATI 26.04
ETN 25.96
NEM 25.92
NDAQ 25.89
TRV 25.82
SHLD 25.80
COH 25.51
DOW 25.48
FTR 25.22
GD 24.71
CNX 24.55
VAR 24.55
ABC 24.50
DVN 24.46
CAT 24.25
PLD 24.17
VZ 23.91
GCI 23.86
FII 23.74
ZMH 23.69
BEN 23.62
CIT 23.48
HES 23.48
HAL 23.01
FLS 22.97
MTW 22.72
TIE 22.72
AYE 22.71
LTD 22.38
TSO 21.96
AIV 21.86
GE 21.42
EQR 20.64
NYT 20.53
XOM 20.52
ISRG 20.52
CVX 19.94
DE 18.88
MMC 18.83
MBI 18.38
C 18.21
ICE 17.22
BMC 16.24
CME 16.01



RSI14:

In terms of RSI14, the S&P500 is neither overbought nor oversold, with an average of 43.7. However, there are zero overbought companies and 9 oversold companies.

RSI 14s:

Average RSI: 43.73

Overbought: None

Oversold: 9

DE 29.97
CME 29.70
ICE 29.57
CIT 28.81
GE 28.49
TSO 27.72
MBI 26.92
C 26.68
ABC 21.56

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Friday, July 10, 2009

World's Largest Companies in 2009, Fortune 500 Top 10


Fortune Magazine has just released its Fortune 500 list, the world's largest companies. The economic crisis has produced signifcant chnages. Out of the top 10, 7 are oil producers (Shell, Exxon, BP, Chevron, COP, Total, SinoPec), one is a financial (ING), one a retailer (WMT), and one an auto mfg. (Toyota).

Top 10:

1 - Royal Dutch Shell: Oil; US$ 458B
2 - Exxon Mobil: Oil; US$ 442B
3 - Wal-Mart: Retailer; US$ 405B
4 - BP: Oil; US$ 367B
5 - Chevron: Oil; US$ 263B
6 - Total: Oil; US$ 234B
7 - ConocoPhillips: Oil; US$ 230B
8 - ING: Financial; US$ 226B
9 - Sinopec: Oil; US$ 207B
10 - Toyota Motors: Automobile

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Thursday, July 9, 2009

The New World Currencies: Trade in Local Currencies not USD

Brian Parkin in Berlin reports on the current world currencies discussions on Bloomberg today.

He says that world leaders have agreed to avoid devaluing their own currencies (in order to gain an advantage by making their exports cheaper). Such a move move trigger retaliatory moves and cause further chaos in the current currencies issues.

The root cause of the current currency issues is the US and other G7 countries' use of the printing presses to issue new debt, debt which I have opined will never be repaid.

"With officials from Brazil, India, China and Russia pushing consideration of alternatives to the dollar as the world’s dominant reserve currency, the draft called for a “stable” monetary system, according to a German official who read the language to reporters today. [...] They also agreed to “promote a stable and well-functioning international monetary system.”

The BRIC countries have been talking about a new world reserve currency to replace the dollar. However, they know that is avery long term proposition, and it won't happen overnight. Brazil’s President is advocating wants that the BRIC use their own currencies in settling trade accounts (as reported in trades with China earlier in the year).

This is only part of the problem, a really big problem. I believe the BRIC nations will eventually indeed stop using the USD as their main exchange currency because the risks on the USD are too big. The world clearly needs a stable currency exchange mechanism. Gold's global reserves are to small (see post). The US debt will cause a sudden devaluation of the USD (by the way, causing pain to all those holding or parking their money in money markets). Switching to other currencies is only logical. A "New USD" will be eventually born.

Remember that such stranger things have happened in recent months.

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Wednesday, July 8, 2009

UNG and UCO July Straddles: ROI of +40% and +46%


Here is an update on the UNG and UCO July straddles, with prices as of 2:50PM. Current ROIs are +40% and +46%:

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S&P500: Near Oversold, but not Quite: 4/183 OB/OS, P/E Average of 42.0

Here is the S&P500 RSI7 Overbought/Oversold report. The average RSI7 of the S&P500 companies is 35.57, still not in fuly oversold conditions.


Overbought companies:

GIS 79.11
DF 75.90
K 72.90
DVA 70.07


Oversold companies:

HOG 29.81
LEG 29.71
MET 29.68
FPL 29.68
VMC 29.67
CA 29.67
HD 29.62
CSX 29.52
IPG 29.49
PBI 29.44
AIV 29.25
WYN 29.11
MUR 29.07
ADBE 28.96
VAR 28.95
RHI 28.94
WY 28.93
BRCM 28.92
ITT 28.91
UTX 28.85
RL 28.85
EQR 28.84
RTN 28.82
IWM 28.75
GT 28.70
SYY 28.67
WMI 28.67
CTXS 28.66
TXT 28.59
MON 28.53
CVG 28.47
MOLX 28.26
ABC 28.07
FII 28.01
SWY 27.97
APD 27.93
UNM 27.88
MS 27.87
NTAP 27.75
XLNX 27.69
TWX 27.61
COH 27.43
DIA 27.42
CTAS 27.33
AIZ 27.33
NOC 27.19
CMCSA 27.16
TLAB 27.09
BIIB 27.04
TROW 27.01
KBH 26.96
MI 26.95
SBUX 26.93
PAYX 26.92
YHOO 26.90
HAS 26.89
EMN 26.84
SPY 26.81
AYE 26.78
ISRG 26.67
ZION 26.67
XOM 26.66
FLR 26.64
MYL 26.60
AMZN 26.43
NVDA 26.36
OXY 26.30
BJS 26.26
DOW 26.25
AMD 26.20
NBR 26.08
GD 26.08
HBAN 26.07
FDO 26.05
EXPE 26.00
TRV 25.86
TGT 25.84
NYX 25.82
X 25.81
DOV 25.75
GOOG 25.69
BBY 25.69
MRO 25.44
JEC 25.41
NYT 25.37
BEN 25.35
FCX 25.35
IGT 25.25
DO 25.12
EBAY 25.01
EMR 24.99
ICE 24.94
CRM 24.93
R 24.88
PX 24.70
ETN 24.52
BIG 24.50
DHR 24.45
CAM 24.40
ZMH 24.38
MBI 24.35
COG 24.19
MDP 23.84
GLW 23.76
USO 23.70
HES 23.57
PXD 23.56
BNI 23.47
EQT 23.35
NDAQ 23.35
GCI 23.29
SPLS 23.21
ALTR 23.14
COP 23.11
WFMI 23.07
WMB 22.98
ESV 22.81
PH 22.75
NBL 22.63
MAS 22.63
MTW 22.53
MEE 22.47
APC 22.44
EP 22.27
BTU 22.24
NSM 22.20
CPWR 21.99
CIEN 21.93
CVX 21.92
STR 21.57
XRX 21.48
TSO 21.34
ADP 21.25
DE 21.20
HOT 21.15
LUK 21.14
HON 21.14
MAR 21.09
GME 21.00
SLB 20.87
MWW 20.84
NUE 20.81
BDK 20.76
DHI 20.32
ANF 20.22
SUN 19.99
RDC 19.67
JDSU 19.63
FAST 19.54
COL 19.50
TIE 19.50
MMC 19.43
PCP 19.24
DNR 19.13
FLIR 19.06
CAT 19.01
CNX 19.00
IBM 18.97
BMC 18.92
SWN 18.58
UNG 18.57
BHI 18.27
NOV 18.21
SII 18.09
RRD 18.00
BA 17.54
WFR 17.25
GE 17.16
CME 17.14
LLL 17.01
SVU 16.10
CBS 15.69
CHK 15.67
HAL 15.54
SWK 15.28
EOG 14.83
APA 14.22
XTO 14.12
DVN 14.08
FLS 11.62
RRC 11.22
ADSK 11.22
SNA 10.97
C 10.21

P/E Ratios

The current average PE of the S&P500 as reported by Google is 42.0, and that is only if you count the companies with positive earnings, which is only 182 of them! http://nexalogic.com/sp500.html (click on sorted July 7)

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Tuesday, July 7, 2009

Goldman Sachs: Stolen Code Can Be Used to Manipulate Markets!

Bloomberg reports this bomb today:

"The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways”

Well, excuse us if only GS is allowed to manipulate the markets. We are sure it is only in "fair" ways then.


"July 7 (Bloomberg) -- Goldman Sachs Group Inc. may lose its investment in a proprietary trading code and millions of dollars from increased competition if software allegedly stolen by a former employee gets into the wrong hands, a prosecutor said.
Sergey Aleynikov, a 39-year-old ex-Goldman Sachs computer programmer, was arrested July 3 after arriving at Liberty International Airport in Newark, New Jersey, U.S. officials said. Aleynikov, a citizen of America and Russia who joined the bank in 2007, is charged in a criminal complaint with stealing the trading software. Teza Technologies LLC, a Chicago-based firm co-founded by a former Citadel Investment Group LLC trader, said it suspended Aleynikov, who started there on July 2.
At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft -- the largest breach ever at the bank -- poses a risk to U.S. markets. Aleynikov transferred the code, worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public yesterday. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”


Are the SEC and the police investigating how GS uses this code?

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Natural Gas and UNG are Caput: Exit Shorts; Next is Hurricanes

On June 22 we posted a straddle on UNG . It is currently returning 34%:




UNG is now again badly breaking down and reaching an all-time low:




Note the very high volume as mom & pop investors and traders are sucked into buying UNG (in spite of our numerous warnings!). Today I exited short positions on natural gas.

There are still no immediate compelling reasons to go long on natural gas, particularly on something like UNG which suffers from contango and contract rollovers. Stay away! However, we exited our shorts as the profits were simply too big to ignore. The trade is done.

We will be looking later in July at establishing long positions, which are strictly weather plays (hurricane season).

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Financial Times: Brazil Dancing Through the Crisis: Stable, Mature, and Growing



Yesterday we posted a note discussing the record high sales of new vehicles in Brazil so far this year. Coincidentally, today the Financial Times of London has an article on Brazil: "Dancing Through the Economic Crisis". The article discusses what we said yesterday and expands on the Brazilian economy in general:

"It is a mature democracy with a diversified economy, a young, adaptable population revelling in increasingly stable employment and rising incomes. It is also a rising power in food and industrial commodities, a big future exporter of oil and home to the world’s fourth biggest derivatives and equities exchange."

"The country has been following broadly the same economic policies for the past 15 years, under one centre-right and one left-wing administration. [...] Brazil, unlike Russia, India and China, with which it is constantly compared as a member of the Bric group of big emerging nations, is not only a mature, stable and diversified economy but also one largely unthreatened by social, demographic or economic upheavals."

"... Brazil’s huge domestic market of 190m people, a market capable of supporting not only distinct brands but also entire industries. Take the “flex-fuel” car. More than 90 per cent of new cars sold in Brazil have “flex” engines, capable of running on gasoline or ethanol or any mixture of the two. This means motorists running on gasoline or ethanol or any mixture of the two. This means motorists can decide at the pump which fuel to buy, depending on price. Flex-fuel cars have helped Brazil become the world’s sixth biggest auto producer but they are made almost entirely for Brazilians."

"And the global crisis? It hit the auto industry hard, because sales depend on credit and credit disappeared from Brazil last year as it did from the rest of the world. But the government pumped liquidity into the economy by releasing R$100bn from banks’ reserve requirements – the share of their deposits they must park at the central bank – and temporarily removed vehicle sales taxes."


Green Shoots

"...But if talk of green shoots makes sense anywhere in the world it is in Brazil, an emerging world leader in farming, mining, oil, even investment banking, and with a home market its rivals can only dream of."

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Monday, July 6, 2009

Brazil's Vehicle Sales Hit Record High During January-June 2009

Results clearly show the strength of the internal market.

The Brazilian Association of Vehicle Producers reported today that Brazilian vehicle sales hit 300,157 unit in June 2009, 17.2% higher than June 2008, bringing the total of Jan-June 2009 to 1,449,787 units, 3% higher than in 2008.

Flex fuel vehicles sales totalled 1,230,994 units, or 88,3% of the total.

From January to June vehicle production was 1,463,707 units, which is 13.6% lower than last year. Exports were US$ 0.61B in June, an increase of 1.5% compared to May, but a decline of 52.7% compared to 2008.

Exports for Jan-June 2009 were $3.3B, 51% less than last year.

Automobile sector employment was 119,511, a drop of 0.7% compared to May, and 5.6% with June 2009.

Clearly, the internal market more than compensated for the drop in the external market. Government incentives seemed to have been quite effective.

As we stated eqrlier, a safer place to invest is not in treasuries or money markets, it is in econonies that are growing. North american economies will not grow for many years to come. Their debts cannot be repaid unless (their currencies are devalued).

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Goldman Sachs Algorithmic Trading Theft: Programmer's Bail Set at $750,000.00


Reuters reports that Sergey Aleynikov, the Goldman Sachs computer programmer who alledgedly stole secret trading algorithms and software from the bank was being held in federal custody on Monday, pending the posting of $750,000.00 bail.
The bond also includes $75,000 in cash. Mr. Aleynikov was ordered to surrender his passport. Aleynikov is a Russian immigrant living in New Jersey.

Authorities claim that Aleynikov copied proprietary computer code and then uploaded it to a server in Germany.

The case is extremely interesting as the markets have risen recently but trading volumes have continue to drop. With low columes, algorithmic, or computer trading now constitutes a good chunk of all trading (possible majority), and Goldman Sachs is responsible to the majority of this algoritmic trading. In other words, it is possible that Goldman Sachs controls the markets and can make them go up or down at will.

The bizarre behavior of the markets lately, at a time when financial institutions were desperate to raise funds and keep their shares and the markets up, might well be explained by Goldman Sachs computer trading.

Investors and technical analysis traders would like nothing more than the return of some trading normalcy, and for these computer trades to disappear.

We want full disclosure!

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15 for Federer, No Economic Crisis in Wimbledon



Roger Federer won his 15th Grand Slam title yesterday at Wimbledon, becoming the most successful tenis player in history.
The economic crisis seems to have bypassed Wimbledon altogether:
- 33,000 additional spectators than last year
- 46,826 spectators on Wednesday, a record.
- tickets for Sunday's final were being sold for 2,000 Euros by scalpers.
- 17,000Kg of strawberries were sold the first week, plus 12,000 champagne bottles

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Friday, July 3, 2009

S&P500 Complete List of Overbought and Oversold Companies July 3

At the end of this week, we have 8 overbought companies and 90 oversold companies. The average RSI7 of the S&P500 companies is 40.11, which is neither oversold nor overbought.

Overbought (RSI7 shown im brackets):


GIS 80.88
AIG 78.13
BLL 75.57
PEP 75.35
BAX 74.48
DF 74.43
MTB 72.00
HRB 70.33

Oversold:

IPG 29.88
BBT 29.85
STR 29.84
WU 29.80
UNM 29.78
PAYX 29.75
LUK 29.68
EBAY 29.61
TWC 29.58
CVX 29.39
UTX 29.33
TGT 29.33
CME 29.28
DOW 29.00
FAST 28.94
SYK 28.82
CTL 28.80
BJS 28.78
MET 28.45
FHN 28.38
COST 28.37
PNC 28.32
NSM 28.18
MI 28.12
EQR 28.04
BIIB 27.95
HOT 27.89
RRD 27.53
S 27.41
FII 27.29
ESV 27.29
FDO 27.27
ADP 27.25
NUE 27.19
ZMH 27.08
JDSU 26.93
COL 26.91
APC 26.90
DNR 26.89
MMC 26.79
CBS 26.78
SHW 26.71
MAR 26.52
SPLS 26.43
VFC 26.42
GME 26.32
TMK 26.23
CAT 25.98
ZION 25.97
SII 25.50
GCI 25.41
FLIR 25.36
VRSN 25.35
HES 25.16
MDP 24.84
BHI 24.72
GE 24.69
IBM 24.26
DO 24.21
KSS 24.14
WAG 23.95
ANF 23.89
NOV 23.79
CNX 23.71
BA 23.46
SYY 23.36
AVB 23.11
RDC 23.08
EOG 22.44
SWN 22.36
CHK 22.24
SWK 22.01
ABC 20.65
XTO 20.63
FLS 20.47
SWY 20.35
MON 19.77
SNI 19.73
HAL 19.70
LLL 19.67
APA 19.44
MBI 19.43
RRC 19.09
DVN 18.89
PCP 18.30
SNA 18.22
C 17.47
SVU 16.47
TRV 16.04
CIT 15.22
ADSK 11.68

The lower the RSI7, the more oversold the company is. We use thresholds of 30 and 70 to indicate oversold and oversold conditions. They are arbitrary, but provide a good indication of the current market conditions.

RSI14

In terms of a longer term RSI14, we have 2 overbought companies (RSI14 shown in brackets):

AIG 78.82
GIS 72.93


We also have 7 oversold companies:

CIT 29.43
MON 29.33
MBI 28.80
LLL 28.78
ADSK 27.22
SVU 25.15
ABC 19.75

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Thursday, July 2, 2009

Natural Gas Report July 2nd: Short Term Bounce But We Remain Bearish

Natural gas inventories were reported today, showing a drawdown of 70Bcf.

Here is the chart comparing 2008 and 2009 inventories:
As you can see, we are still well above the top of the 5-year average channel.

This week's report is actually short term bullish, so we expect a bounce, but we remain short until late July, or early August. Incidentally, UNG is trading very near it's all-time low:





UPDATE 3:40PM

Please see the UNG chart for today:



There was the bounce at 10:30AM, and it was all downhill from there. UNG is indeed reaching its all time low now:




The 3 month chart clearly shows the low:

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Dollar Suffers Biggest Loss Since 1999 vs Real.

In Q2 2009 the US dolar suffer its biggest quarterly loss since 1999 versus the Brazilian Real. On May 1st of this year the exchange rate was 2.29 (1 USD = 2.29 Real). On June 30, the same exchange rate was 1.95. Yesterday the dollar fell further to 1.93.

The following chart shows the quarterly performance of the USD versus the Brazilian Real since 1999.


(Please click to enlarge)


The Brazilian Real is rising due in great part to the strength of Brazilian exports and increases on prices of commodities which have caused the Brazilian trade surplus to increase. In June the surplus was USD $4.6B.

Why this matters to US investors? Because the huge US debt may never be repaid. The only way to take care of the debt is to devalue the currency, either through inflation, or by a change of currency. Cash and money markets may not be safe. The safest investments are on growing and stable economies with strong surplusses and rising currencies, not under the mattress. This is extremely important and will be the subject of future posts.

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Wednesday, July 1, 2009

Happy Canada Day

A Very Happy Canada Day!

Here are some pictures and videos that I took today July 1st 2009, of the big party in Ottawa:
















The Snowbirds flew by several times:


video


Night Fireworks:


video

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