Saturday, January 30, 2010

Odds of Correction Are Extreme, Yet Some Go For Leverage, Guess Who is on The Other Side of That Trade

Would you invest in the stock market after it has gone up over 60% from its lows in less than a year? The odds are staggering that a correction is in the cards. Some foreign markets are up over 100%. Please see our global ETF tracking live. It makes very little sense to be in equities at all, unless one is a fool or hedged at extreme, or knows exactly what will happen (as certain financial companies do).

SPX long term chart:

Mish Shedlock believes that US and foreign equities are going to take a huge haircut. He thinks that real estate returns are likely to be negative, perhaps quite significantly. "Returns on fixed income will vary huge by quality. Junk bonds and municipals are likely to get clobbered. High quality corporates held to maturity will be OK".

To those who use leverage:

Incidentally, in the same piece Mish discusses the fact that the state of Wisconsin has just given the nod to use leverage on their pension plans. Wisconsin believes that there is a free lunch. There is no such thing and anyone who believes it is indeed a fool.

"Use of leverage self-sows seeds of its own failure. Even if the trade is a good one, leverage will eventually cause problems. [...] one needs multiply the size of the trade knowing every pension plan in the country, is doing the same thing, to the tune of hundreds of billions of dollars (or more). [...] Who is on the other side of trade? Let me ask it a different way: What happens to all those geniuses who believe in the "free lunch theory" when the trades start to go the other way?I will tell you what happens - Goldman Sachs and hedged funds not involved will bet against it, in size. The system inherently takes advantage of leverage and weakness. That is what sunk Bear Stearns".

Japan Similarities:

(please click to enlarge, this is Japan)

Mish also mentions that fundamentally, the S&P 500 can easily fall to 500 or below. Alternatively, stocks might languish for years. He cites the Japanese Stock Market being 25% of what it was close to 20 years ago. "It does not pay to be fully invested here, regardless of what the stampede of bulls say. These are the same bulls who were saying exactly the same thing right at the October 2007 high".

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Friday, January 29, 2010

The Best And Worst Days of The Week To Invest

I compiled the daily ups and downs of the S&P500 since the beginning of 2009. There have been reports circulating that Mondays are good days for the market, and that Fridays are bad days. So this study will shed some light on whether this is fact or fiction.

1. Number of positive days versus negative days:

2. Monday to Friday percentage of positive returns versus negative returns since March 15 2009 (same table as above, but in percentages):

2. Average daily returns since January 2 2009 and since March 15 2009:

So, since March 2009, clearly Mondays have been the best days of the week in terms of ROI (+0.35% on average), closely followed by Thursdays (+0.30%).

However, in terms of the best chance to get a positive day, that honor belongs to Thursdays, when 64.4% of the the time there were positive returns.

The worst day is Tuesdays, both in terms of ROI (average -0.03%, this on wildly positive period) and in terms of chances of losing money (47.8%).

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Thursday, January 28, 2010

If Geithner "Had Removed HImself" And Was Not Doing His Job At The NY Fed during AIG Bailout, Then Why Was He Being Paid A Salary?

Representative Darrell Issa said today in a radio interview that Treasury Secretary Timothy F. Geithner was “simply not doing his job” in his last weeks as president of the Federal Reserve Bank of New York.

Geithner said that in retrospect he wish he'd known, "frankly,” “But after Nov. 24, I appropriately removed myself from decisions about a whole range of policy issues and the Fed was dealing with that.”

Issa says that by withdrawing from day-to-day matters at the New York Fed in late November without formalizing the arrangement in a signed document, Geithner left it unclear who was in charge.

If he had removed himself and was not doing his job, as he claims, then was he being paid a salary?

Bloomberg interview.

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Nasdaq Breaks Trendline Support: Watch Out Below

A great video - must see and scary- just released by INO on the Nasdaq composite (COMP):

You see the trendline touching three points, but then do you see the price breaking below the trendline? Almost an 11-months trend broken. The longer the trend was when broken, the more important it is. Potential to go down all the way to 1,671, or 1,796 (currently it is 2,179!).

We are in form a good pullback, it does not look good at all. The monthly signal is about to turn red.

Watch video.

To get access to the tool (risk-free trial), please use this link. I have access to the tool and the link gives two months bonus.

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Big Mining Companies Agressively Going After Potash: Athabasca Potash Acquired by BHP

Athabasca Potash, API, has been acquired by BHP Billiton. The stock has jumped 25% today:

We have written about API on several occasions. Jul 2009, Jan 2008, Oct 2009, and others.

With Vale's annoucement last week of its own potash fertilizer acquisition, there is clearly a trend happening. The question is which is the next small fertilizer company to be acquired.

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T is For Trouble: Profit With Toyota Options for 2010

What a sticky matter. Ford (F) offers cash for those bad used Toyotas (TM), Hyundai points out their quality improvements while asking their customers to look at what happened across the street.

Toyota has dropped 14% in 2 days and volume has skyrocketed.

(please click to enlarge)

With prices as of EOD yesterday, here are straddles for February, March, April, and June:

(please click to enlarge)

These were computed with Computed with StraddlesCalc Tool which shows the maximum moves required to achieve profitabiity. The actual move needed ma be smaller as there is plenty of time to expiration.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Wednesday, January 27, 2010

Mish: Bernanke Buys Votes To Keep His Job

Mish Shedlock has a colorful note about Bernanke today. Apparently, Bernanke has met with 24 senators to secure votes to keep his job. Citing Bloomberg, he says:

"“In all my years of doing this, and I have been doing this since 1996, I have never seen a Fed chairman put a full court press on Congress, especially on the Senate Banking Committee,” said Ken Thomas, a lecturer in finance at the University of Pennsylvania’s Wharton School who routinely reviews the daybooks of Fed chairmen."

“This is unprecedented political contact for a Fed chairman in such a short period,” Thomas said, “especially considering Bernanke’s vow before his first Senate confirmation hearing that ‘I will be strictly independent of all political influences.’”

Mish adds:

"The list of politicians and bank CEOs Bernanke met with in the article is stunning. The key point however, is Bernanke broken vow ‘I will be strictly independent of all political influences.’That makes Bernanke a liar as well as a hypocrite."

"However, the key point is Bernanke will only honor promises if they are in the best interests of the big banks.Other than protecting the Big banks interests, the only other thing Bernanke cares about is retaining his position as Fed chairman. If that takes political pandering, lies, and hypocrisy, Bernanke has more than proven to be capable of the task."


Read the whole story.

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The Apple iPad - A Giant iPhone or a Kindle Slayer: Apple and Amazon Straddles

Unless you are a kangaroo, I don't think it will fit in your pocket, but Apple released its tablet PC today, pricing it at $499. Is it a giant iPhone, or is it a Kindle killer? Well, at least it will likely kill its price as there is little comparison between the devices.

“At that price, they’ll sell millions,” said Hakim Kriout, a portfolio manager at New York-based Grigsby & Associates, which owns Apple shares. “It’s very, very affordable for what it does. This is going to add a huge revenue stream for Apple.” " Bloomberg.

Plese see our other posts on Apple vs Google and on the tablet itself.

Whoever wins, here are Straddles for APPL and AMZN. With these an investor can profit with the stocks going either up or down.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

Computed with StraddlesCalc Tool

iPad: the iPhone for Kangaroos. Easily fits in your pocket.

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Fed Holds Rates But Decision Was Not Unanimous: Gold Plays

The Fed, with Bernanke in limbo, decided to hold interest rates, but there was one dissenter who wanted higher rates:



Vote was 9-1 to keep rates on hold (Hoenig dissented)

  • Hoenig believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.
  • MBS to end in March as scheduled
  • Inflation to be subdued for sometime; Bank lending continues to contract
  • Deterioration in the labor market is slowing
  • In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1.
  • The Federal Reserve is in the process of winding down its Term Auction Facility: $50B in 28-day credit will be offered on February 8 and $25B in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral.

    Here are gold straddles for February, for GLD and our favorite, Yamana, AUY:

    Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

    Computed with StraddlesCalc Tool

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New ETFs Launched Today: Emerging Markets and Income

iShares has just announced the arrival of 6 new ETFs in Canada. They are:

  • XBZ, Brazil
  • XCN, China
  • XID,India
  • XLA, Latin America
  • XHY, US High Yield CAD hedged
  • XIG, US Corporate Bond CAD hedged
The MER on the top 4 is between 0.65% and 0.85% and on the last two is 0.30% and 0.60%. Top holdings are not yet available.

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Join our Daily Market Session on Skype

Those of you interested in joining our live stock market session chat on Skype public chat, please access our SkypeStreamer site and follow the instructions.

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ADRs That Trade in The NYSE Are Under Extreme Conditions

All ADRs that trade in the NYSE are tracked live here.

Because of extreme oversold and oversold conditions and the high volatility of recent days, here is an update on the current state of the ADRs that trade in the NYSE (over 260 of them). There are many that are in extreme oversold and overbought conditions.

Top 35 Oversold (short term):

(please click to enlarge tables)

An RSI of 6 is extreme. of course the companies could still be heading for bankruptcy. If not, these conditions will eventually revert. NPD is a a retail drugstore chain in China. BTM is the Brazilian Telecom operator.

Top 35 Overbought (short term):

HTX is provider of mobile and fixed-line telecommunications services in Thailand, Sri Lanka, Israel among others.

Top 35 Oversold (long term):

Not many are oversold in the long term though. Lloyds and RBS are not exactly attractive financials to buy. Now, WH is a manufacturer of seamless Oil Country Tubular Goods (OCTG), including casing, tubing and drill pipes used for oil and natural gas exploration, drilling and extraction.

Top 35 Overbought (long term):

Many here are under extreme overbought conditions. EBR is in the Brazilian nuclear, hydroelectric and fossil fuel electric power industry. SAN is Santander Bank in Chile. BCA is another bank in Chile.

Chile, home of the fabulous SQM, is definitely a hot place to be, see the Tale of two countries.

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool.

Please do your due diligence!

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Apple: Amazon Killer, Great Tablet Features, Allowing Publishers to Tap Into Ad Revenue

Bloomberg reports that Apple's (AAPL) soon to be launched tablet computer will lure publishers away from Amazon and Sony, as it has features that Inc.’s Kindle (AMZN) and Sony Corp.’s (SNE) electronic readers lack, such as color photos, video and author interviews.

According to the article, Hearst Corp., McGraw-Hill Cos. and Hachette Book Group have held talks about featuring their content on Apple’s tablet.

“Apple is in a killer position,” McQuivey said. “The majority of reading we do cannot be done on current e-readers. The Apple tablet will be first to make the claim that you can read everything from Sesame Street to Dan Brown to the Atlantic to the Denver Post, all on the same device.”’s Kindle and Sony’s e-readers, which dominate the market today, have black-and-white screens and can’t display video.

Apple’s device will let publishers tap new sources of revenue by offering premium features to an audience that is deserting print publications for the Internet, said Rich Maggiotto, chief executive officer of Zinio LLC, a San Francisco-based distributor of digital books and magazines.

While the e-reader market isn’t large enough yet to significantly boost publishers’ revenue, the Apple tablet may increase the popularity of e-readers over the longer term, said Randy Bennett, senior vice president of public policy for the Newspaper Association of America.

About 6 million e-readers will be sold this year, up from 3 million last year, Forrester estimates.’s Kindle has about 60 percent of the market, while Sony’s products have 35 percent, Forrester says.

It’s unrealistic to think that new devices alone will transform the industry, Maggiotto said. Publishers will also have to invest in creating content that is unique for these devices, he said.
“It’s one thing to shovel print content onto a screen,” he said. “It’s another thing to think about how to reinvent your content for that medium. That’s the publisher’s responsibility.”

The Apple tablet will also have a back-lit screen, which will drain the battery more quickly than current electronic readers, and it may cost more, McQuivey said.

Digital Textbooks Anyone?

Still, Apple’s tablet is likely to boost demand for digital textbooks, said Frank Lyman, executive vice president at San Mateo, California-based CourseSmart LLC, an online marketplace started by five publishing companies to sell textbooks. By 2012, digital versions of textbooks may account for as much as 15 percent of total textbook sales, up from less than 3 percent today, according to data from members of the National Association of College Stores.

“Apple has a history of growing markets,” Lyman said. “They’ve grown the smartphone market. They’ve grown the personal-computer market. The tablet will capture that next group of students who haven’t yet had that light bulb go off.”

Older publishers are taking note. National Geographic Society said yesterday that its namesake magazine will be available on Zinio’s service. National Geographic, founded in 1888, plans to add audio and video to its digital magazine later this year.

“All the current e-reader devices will fall to the bottom of people’s Christmas lists this year when they see what a full- color reading device will do,” McQuivey said."

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Commodities Will Be Very Volatile in 2010, Fertilizers Top Bet

We track all commodity ETFs live here.

ScotiaBank says that commodity prices have ended their exceptional run in 2009 with a bang, but will be susceptible to increased volatility in 2010. Values are expected to trend higher however.

There is growing interest by funds and speculators in commodities, as a way to profit from China's growth and the "emerging Asia story," as ScotiaBank's Patricia Mohr says.

Investment funds pumped $60B into resource investments in 2009. From under $10B in year 2000, global commodity assets under management have now risen to about US$235B.

Not copper.

Aluminum, posted even bigger increases than copper in December (from US88¢ to US99¢ a pound) despite inventories reaching record levels on major futures exchanges. However, prices of several commodities have since pulled back after a run-up that continued into early January.

She says: " I think actual fundamentals will be better this year than last, but you get big shifts in money from time to time. That's why I think there'll be more price volatility."

China's recent moves to tighten credit and slow its economy will hurt global growth and demand for commodities. China's economy is still growing at an advertised 9.5% rate. Ms Mohr says this will "underpin prices in the first half of the year" "as will recovering demand from Group of Seven countries".


However there may be another pullback in prices if and when when the U.S. Federal Reserve begins to lift the Fed funds rate. "I think that for investors the best place to put your money in 2010 is probably in fertilizers, iron ore and coking coal,".

She adds that farmers in the United States are now buying again, setting up prices for a rebound from their current bottom of US$345 a tonne,

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Avatar: New Film Record, but Not Inflation Adjusted

The total global revenue for 20th Century Fox's new movie now is $1.859B after Monday's sales, already beating the $1.843B earned up by "Titanic" in 1997-1998.

20th Century Fox is owned by News Corp. The stock is up 36% since January 2009:

The movie earnings data are not adjusted for inflation though, which as we know, make a big difference (it is like saying gold is a record high now).

Avatar broke the previous record set by Titanic in just six weeks,

It is the top movie in North American box offices and is also leading in France, China, Germany and Russia and many other nations.

The film took more than five years to make and was reportedly one of the most expensive films, with a budget of at least $300M.

Expects many Oscars.

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Google vs Apple, Google Scores Again With Google Voice on the iPhone

In another chapter of the Google-Apple wars, of which we have written a few times about (post, post), Google (GOOG) said a new version of Google Voice works on browsers on iPhone 3.0 (and Palm Inc Web OS smartphones). Therefore, the GoogleVoice does not need to be certified as a native iPhone app. Apple (AAPL) had rejected the app, although it says it is "under review".

After Apple made that decision, Google CEO Eric Schmidt resigned from Apple's board of directors in August.

The U.S. Federal Communications Commission is investigating and requested more information from the companies on the matter.

Google Voice is a fabulous app that allows users to make cheap long-distance calls and to forward calls from a single phone number to multiple phones.

Of course this month, Google began selling the Nexus One smartphone.

The browser-based version of Google Voice has the ability to listen to voice mails directly from within the browser and to dial phone numbers on an interactive on-screen keypad.

Please see the above posts for options to profit from these wars.

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The End of the Great Depression Was World War II, is This Where Are Headed?

The very well-known Mish Shedlock from Global Economic Analysis talks today about something we have discussed here a few times, and our greatest fear. The current country debts will never be repaid unless they are wiped out (officially, or by currency devaluation/inflation, fast or slow).

Devaluation against what is the question, since all major economies are in the same boat. Unless we are willing to concede that the new world reserve currency will be based on India's China's and Brazil's. Those countries may not be happy, nor ready, for that.

Mish says that Greenspan had two choices in 2003:

1 - Take a hard recession then
2 - Take a depression later

He chose number 2. We are not in it right now, it does seems as it has been postponed in the hope that it is averted. However, Mish says the current economic recovery is a mirage.

"Mistakes of 1937 did not sink the US back into depression. The plain fact of the matter is: It is virtually impossible to spend ones way out of a popped credit bubble.Do not mistake Federal spending for a recovery. Indeed this "recovery" is a mirage. There can never be a clear recovery financed by debt when the problem is excess debt in the first place. Logically the idea is nonsense".

"All stimulus did back then was create housing and debt bubbles. Then it crashed anyway. Now supposedly the cure is more spending?This is what we face now: As soon as stimulus is taken away, the downslide begins. How many times can you pave a road or grant cash-for-clunkers? Eventually what little pent-up-demand there was is exhausted, and the stimulus ceases to have an effect.

This idea of Keynesian "priming the pump" is sheer nonsense. It has never worked and it never will work. Japan and its national debt to the extent of 200% of GDP should be proof enough. The only thing that can possibly work is the writeoff of bad debts, something both the administration and the Fed are reluctant to do. We can either do this now, or drag it out for two decades like Japan, only to end up deeper in debt.

What ended the great depression, and let's hope it does not come to that again, was WWII and the destruction of capacity everywhere but the US.Spending $5 trillion dollars would not do a damn thing now other than wreck the dollar and create another bubble. Look in the mirror and repeat after me "It is impossible to spend one's way out of a debt bubble". Given that it is impossible, it's ridiculous to try.

Thus the real lesson of 1937 is don't blow debt bubbles in the first place".

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Tuesday, January 26, 2010

800 ETFs In The U.S.: The Top 25 To Buy and To Sell

There are over 800 ETFs in the U.S. We computed the relative strength values of all of them and then sorted by the monthly value. This provides a very good indication of what is oversold and overbought.

The average of all three time periods is also shows (RSIA).

Top 25 Most Oversold:

The top oversold are ZSL (ultra short silver, meaning silver itself as commodity is overbought) and DPK, a "Developed Markets Bear 3x Shares". A 3X ETF is something to stay away from, specially for any long term period (as it longer than a couple of hours!).

Top 25 Most Overbought:

The top two overbought are PVI and BIL.

PVI is the Tax-Free Weekly Portfolio (the Fund) is based on the Thomson Municipal Market Data VRDO Index (the Index). The Index is designed to track the performance of a pool of short-term, tax-exempt, variable-rate demand obligations (VRDOs) issued by municipalities in the United States.

BIL is Capital 1-3 Month T-Bill ETF (please see our post earlier today on the Treasuries auction).

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

These are the ETF names:

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IMF Warns Against Bubbles Forming, Countries Still Need To Remove Toxic Assets

The International Monetary Fund (IMF) warned today that the difference in the rates of growth in different regions of the world poses significant challenges for governments, as developing countries are facing the risk that the surge in inflows lead to new asset bubbles. This at a time when many advanced economies continue to depend measures to support financial, monetary and tax rates.

The IMF says these unprecedented measures to support increased fears about sovereign debts, but warned that "a premature exit and inconsistent stimulus policies could weaken global growth and its recovery.

In its World Economic Outlook, the IMF recognizes that it will be difficult to design exit strategies. When private demand become sustainable, countries must take into account the concerns about debt levels, the bubbles in asset prices and exchange rate appreciation, Emerging economies to deal with the sharp increase in capital flows face a complex task and the response should depend on the circumstances, such as tightening fiscal policy or allowing currency appreciation.

However, the bank insists that increases in reserves or capital controls could be appropriate to deal with transient and at the same time significant changes. Given the increasing concerns about the levels of public debt, the Fund recommends that countries fully implement the fiscal stimulus this year, while drawing up plans viable fiscal sustainability.

On the monetary front, the Fund said that many central banks can keep interest rates low this year, given expectations of low inflation. The countries that recover more quickly will have to tighten earlier.

On financial front, the advanced countries and emerging economies most affected still have to address the restructuring of banks and removal of toxic assets. The authorities should remove the financial support and gradually advance reforms that will reduce the financial risk and make banking more efficient and resilient.

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Today's Treasury Bill Auction Results: 'Strong Demand" For... 0.0% Rate!

That is right, the rate was 0.00, zip, zero, nada.

You leave your money for 4 weeks, earning nothing, and losing value to whatever inflation is out there.
Shocked indeed.

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Bill Gross: Go For Brazil, India, China and Canada, Must Avoid U.K.

Bill Grs is recommending less-levered countries such as Brazil, China, India, his words are that these are countries 'less prone to bubbling'!

“Go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come,” Gross wrote in a monthly investment outlook published on Newport Beach, California-based Pimco’s Web site. “The old established G-7 and their look-alikes as they de-lever have lost their position as drivers of the global economy.”

We track all global ETFs live.

Go for Brazil, India, China

He recommends that investors should look for “a savings-oriented economy, which would gradually evolve into a consumer-focused economy,” adding that miniature examples of China, India and Brazil would be excellent examples.

Avoid U.K.

The U.K. is “a must to avoid,” “Its gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors.”

Canada, Germany

“Given enough liquidity and current yields, I would prefer to invest money in Canada,” he says, adding that “Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country.”

“Germany is the safest, most liquid sovereign alternative,” but warsn that “its leadership and the EU’s potential stance toward the bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament.”

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The Stock Market in Trouble: Dow Analysis, Key Level 9,678

Today there is a great new video from INO analysing the DJIA and the markets in general, explains how the Dow is in thin air at the moment. What is going on is very negative.

9,678 is the key level to watch for the Dow (watch out below).

Watch video.

Access tool (risk-free trial). The tool is just great and it shows you all the alerts, I use it. You can also watch the videos (100% free).

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Monday, January 25, 2010

Countries' Debt Skyrocket: No.1 Japan, No.2 U.K., No. 3 Spain

From McKinsey Global Institute:

(please click to enlarge)

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Home Sales Drop Significantly, Again

Existing-home sales numbers were released today. The numbers plunged in December, to much "lower than expected". However, this was more than expected, as reported here previously. The home tax credit is what was causing the increases in the previous three months.

The National Association of Realtors said that home resales dropped16.7% to a 5.45M annual rate from 6.54M in November. The news clearly affected the stock market, wcich was rebounding from severely oversold short term conditions.

Inventories dropped, and prices rose year over year for the first time in more than two years.

For all of 2009, there were 5.16M home sales, up 4.9% from 4.91M in 2008, the first annual sales gain since 2005.

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Goldman Sachs: Fed Should Not Raises Interest Rates (Disaster if They Do)

Business Insider reports that Goldman Sachs is saying that the Fed and Bernanke should NOT raise interest rates. Business insider's title is "Goldmans says it'll be a disaster if Bernanke raises rates")

Their points:

Jobless rate remains unchanged. "[...] Real GDP growth probably accelerated to nearly 6% (annualized) in the fourth quarter; despite December’s worse-than-expected payroll employment report, job losses have slowed sharply over the past year; the jobless rate has been essentially unchanged for the last three months; and the stock market is up more than 60% from the lows of March 2009."

Inflation is low. "But in our view, serious consideration of a true “exit”—i.e., not just an end to the Fed’s liquidity support and asset purchases but an actual tightening of monetary policy—is still highly premature. Not only is inflation already modestly below the Fed’s 1½%-2% target, but the level of activity is so far below its potential that strong growth for an extended period is needed before tightening becomes appropriate.[...]"

Banks are not profiting from low rates (really?). "For one thing, the benefit of a hike is highly uncertain. It is difficult to believe that much arbitrage is currently going on given how sharply discount window borrowings have fallen in recent months. [...] Moreover, most banks are currently able to obtain financing at rates well below 0.5% in the interbank market."

No need to drain liquidity. "We also are not sure that Fed officials will need to raise the discount rate in order to facilitate draining excess reserves. [...] Our own view is that the volume of excess reserves does not have important effects on the broad financial system and the economy, at least now that the payment of interest on reserves enables the FOMC to raise short-term interest rates without having to match the demand and supply of reserves. Moreover, even if Fed officials do introduce a term deposit facility that is priced attractively enough to mop up a significant share of the current $1 trillion excess, the rate on this facility would likely be well below 0.5% given the current slope of the yield curve. This would make arbitrage unattractive even without a higher discount rate."

Read whole story.

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Profit From Oil Going Up or Down With Straddles For 2010 and 2011

Oil is expected to drop back to the 60s, or lower later this year because there simply is not demand for it. However, if the US dollar continues to collapse, it is unlikely that the oil producers will be happy accepting less and less for watch barrel of oil.

Straddles are ideal for these situations where the underlying stock may go up or down. Here are straddles for USO, for February, March, July, and also January 2011. As long as the stock moves the indicated amounts the positions will be profitable. If USO does not move, or goes up and then back down (or vice-versa) and the investor does not sell, then the positions loses money.

(please click to enlarge)

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

Computed with StraddlesCalc Tool, which shows the maximum moves required to achieve profitability.

You may also receive technical analysis and alerts of USO, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool

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Top ADRs to Buy and To Sell: Analysis of All 200+ ADRs That Trade in New York: Near Extreme Oversold/Overbought Conditions

We track all ADRs that trade in New York live as one of our newest TrackingLive sites. The following table shows the best performing since Jan 2009, ROI since then is in the last column, and also YTD 2010 shown (2nd last column):

The top ADRs of all is MTL Mechel Steel, with an ROI of 462%. In the tracking live site you can see the complete list, plus names and country. Here are the long term alerts on MTL for the last 5 years:

Above chart by the great alert tool by INO.


We computed the RSI values of all the ADRS, for three time frames, short term (daily), medium term (weekly), and long term (monthly).

The average RSIs - of all ADRs - are:

  • Daily: 34.59
  • Weekly: 49.06
  • Monthly: 58.76

Given the number of ADRs (246), these numbers are bordering on extreme, extreme low for the daily, and extreme high for the monthly. Please take a look at the following tables:

Short term


There are currently 107 ADRs that are oversold (that's 43.4%!)

(please click to enlarge)


There are only 7 ADRs that are overbought.



There are only 2 ADRs currently oversold (RSI lower than 30).


There are 60 ADRs currently overbought.

Note: You may receive technical analysis and alerts of these ADRs, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool.

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Sunday, January 24, 2010

Current Results Google and AAPL Straddles: +31%, +26%

These straddles were originally posted on January 11. Here are current positions, with prices as of EOD Friday:

(please click to enlarge)

Computed with StraddlesCalc Tool

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Current Results EWZ (Brazil ETF) Straddles for February: +55.8%

And here are the current results for EWZ straddles for both February and March months, originally ppsted on January 6. Prices computed at EOD froday.

Stay tuned!

Note: You may receive technical analysis and alerts on EWZ sent automatically to you by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Computed with StraddlesCalc Tool

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Results Ford February Straddles +28.5%

Here are current results for the Ford straddles we posted a couple of weeks ago, with prices at the close of Friday, for February, March, and June:

The closests months achieved the greatest profits, as expected. Those are the ones with the greatest risk as well.

Note: You may receive technical analysis of F or any other stock sent automatically to you by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Computed with StraddlesCalc Tool

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Saturday, January 23, 2010

The Current Best Oil ETFs To Buy (or Sell)

We track all oil ETFs live in our Tracking Live site. It is great way to visualize what is going with oil ETFs. This is a screen capture as of Friday jan 22:

We computed the Relative strength indicators values of all oil ETFs on the market. By ordering the results either by RSI daily or RSI monthy, we can get a very good view of which ETFs are oversold and which ones are overbought.

Here they are. The top table shows the ETFs ordered by RSI7d, the bottom table, ordered by RSi7-m:

(please click to enlarge)

In the short term, the most oversold are UHN, UCO, OLO, and the popular USO. DUG and SZO are the top overbought.

In the long term, only DUG is slightly oversold, while there are no overbought ETFs.

These are very good indications of which ones should correct or should climb, depending on the investment timeframe.

As for oil itself, there is still a long term buy signal, but there are short term sells:

(look at the green triangles on the chart, and the red signals on the legend). The reds are for daily and weekly timeframes.

These are the ETF names:

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Google's Founders to Sell 5M Shares, or $2.7B Each: Has Google Peaked? Full Analysis

The Wall Street Journal reports today that Larry Page and Sergey Brin have filed to sell 5M shares each of the company they founded, Google (GOOG). They intend to do so over the next 5 years. This would reduce their number of shares they own to 47.7M ($26.2B). Investors are already asking if this is related to China.

At the last closing price of $549, that is $2.745B for each (enough to feed all of Haiti for years, likely reconstruct the whole country with what they have. I hope this is what they will do).

Google has been hot lately. We have recently discussed Google, its new Nexus phone, and the battles with Baidu (BIDU) Apple (AAPL) and Rim (RIMM).



Earnings per share and net income growth


(please click to enlarge)

Buy or Sell Alerts

Google shows presently a long term buy signal (trade triangles):

However, the short term signal is negative:

See the last red arrow, the signal quite accurate too since it was issued.

Current backtesting of the long term buy and sell signals, based strictly on the trade triangles, results show an ROI of +119.43%:

The numbers correspond to an initial investment of $10,000.00)

If you wish to run the tool yourself, please use this link for 2 months bonus access, risk-free trial, guaranteed.


Technical Indicators:

  • 20 and 50 day moving averages indicate that GOOG may be in a bullish trend. This is because the 20 day moving average is above the 50 day moving average.
  • However, GOOG is below its 20 day MA. This bearish sign is even more significant because the moving average is also trending lower.
  • Bollinger Band: GOOG is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.
  • Volatility: GOOG's recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility.
  • Yesterday (Jan 22 2010), GOOG gapped -3.17% lower at the start of trading. Shares have continued to fall and the last sale was 550.01.
  • MACD: The MACD is presently offering a bearish signal because it is below the signal line, a 9 day moving average, and less than 0, which means that the underlying moving averages are trending lower.
  • OBV: The On Balance Volume indicator (OBV) presently offers a bearish signal. This is because the slope of the indicator is negative and shows that there is a lack of buying interest.
  • Stochastic Oscillator: The Stochastic Oscillator is registering a bearish signal as the %K is below the %D. However, GOOG is neither overbought nor oversold.
  • Volume Rate of Change: The Volume Rate of Change is not presently giving a clear signal.

RSI Signals

The daily RSI 7 is 19.37, indicating a very oversold condition. The weekly is 39.99 (neutral), and the monthly RSI 7 is 64.93, which is very close to overbought.

While the daily may not mean that the stock will begin to rally, it could also mean that a bottom may be forming.

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