Tag Archives: GLD

The effects of oil prices on the Markets:

Oil prices closed around the $100 per barrel today and this was part of the reason why the market’s strong opening gains were slowly eroded. Bloomberg reports NYMEX crude futures were trading at $100.27, up marginally by about .64% and gasoline prices in certain parts of California were more than $4 a gallon.
In his statement to the Congress, Fed president Ben Bernanke said the surging oil prices would not cause a permanent increase in broader inflation and is “unlikely to detail the economy… but investor confidence was not helped as fears of the Middle-East unrest could soon hit Saudi Arabia, the world’s largest exporter of oil” – Reuters.
While the political turbulence in Libya has caused oil traders to err on the side of caution, the fears of unrest in Oman, Iraq and Iran were also being factored into the outlook going forward.
Reuters also reported that rising oil prices caused investors to continue selling shares and look for new hedges to safeguard against further declines. Marathon Oil Corporation was one of the few gainers today, up 2.3%, while most other stocks closed in the red.
While the S&P closed 0.2% down, the Nikkei closed 1.63% down and the DAX and the FTSE were trading close to 1% down. Overall, most developed markets were in the red, due primarily to the rising oil prices.
Traders also hedged with Gold, closing near the highs.


Barron’s Summary - Sat Feb 12, 2011

  • The World’s Most Respected Companies – new Barron’s survey – Apple is #1, followed by AMZN and Berkshire. 
  • Pharma – companies like ABT, PFE and MDT should start shedding non-core businesses – the stocks could jump 30% or more if the companies broke themselves up.  PFE is already moving ahead w/a plan to restructure.  ABT could have the most upside if it decided to break apart.
  • InterContinental (IHG) – positive comments; the Holiday Inn revamp is almost done while the overall lodging industry is seeing rising profits and revs.  The stock may have near-term downside if an upcoming earnings report is anything but stellar.
  • Egypt – some stocks there could rally as a result of the Mubarak resignation – pos. on the broader Egyptian market as well as Orascom Construction Industries, Orascom Telecom, and Maridive & Oil Services.  Also pos. on ElSwedy Electric and Misr Duty Free.
  • Crude – a leading analyst, Charles Maxwell of Weeden, thinks crude will hit $300 by ’20.  Says nat gas prices have hit a bottom.  Bullish on oil sands companies SU and CVE.
  • Pamela Rosenau – the CIO of Rosenau/Paul – positive comments on ECT, AWK, EPB, and ARG.
  • MMI – positive review of the new MMI Atrix (although not a big fan of the phone’s laptop dock).  Says this is the best Android device on the market.
  • CSCO, NOK – both stocks are prob. dead money.
  • CSCO – downside limited and a rally into the mid $20s is plausible although it will require a surprise-free Q and a realization of a dividend.  
  • QCOM – repeats pos comments on the stock.
  • HPQ – next critical date for the stock will be Mar 14, when new CEO Leo Apotheker meets w/Wall St.
  • AMZN – negative comments; the stock is expensive and margins are shrinking as it moves into lower-margin categories.
  • AZO – neg. comments – similar story to AMZN…stock has run a lot and valuation rich.  Says demand was strong during the recession for car parts but this will slow as the economy recovers.
  • SGI – mentioned in Barron’s – no real opinion – notes that the co had blow-out earnings and the stock has rallied a lot.
  • KLAC – positive comments; the stock is cheap w/strong rev + earnings growth.
  • IP – positive comments; the stock is cheap; operations + cash flow generation are improving; the co could hike its dividend another 33% as well as buyback 10% of its shares.
  • ANR – positive comments; the MEE deal is a good one and fundamentals in met coal are strong; the stock could easily top $60 in 12 months.
  • NYX – pos. comments; the deal will prob. wind up going through and shouldn’t face any fatal anti-trust opposition; the NYX shrs now are pricing in most of the transaction’s upside although there is still some left.
  • Exchange M&A – the article speculates that CME could look to buy NDAQ; the article also postulates that NDAQ may look to buy CBOE.
  • DVN – positive comments – production and earnings growth will both be strong while valuation is cheap.  The co’s balance sheet is strong.  Stock could top $100.
  • Gold is unlikely to continue rallying at the pace seen in ’10.
  • QE2 – the program will prob. stay in place despite some skepticism from certain Fed officials.

Thursday Market Expectations - Reasons why the market doesn’t go down, for now.


NFLX - "Is it time to buy?"

Is this the beginning of the small correction I have been looking for?  Probably, but given the fight the bulls put up yesterday, they are not going to back off quietly. One might argue, buy the dips but sell the rallies more aggressively. I do not have the patience for that. I have too many other things to focus on. Either I am right and we will test 1300 in the coming days or I am wrong and we are in a fever driven hyper bull cycle that refuses to be broken.

But why? What are the positive catalysts? An improving economy. Yes things are slowly getting better. Perhaps you believe that there is still a great deal of cash to be put to work. I am not sure I agree with that one. Last I heard hedge funds were at near pre financial crisis levels of leverage and no matter how hard I try I cannot seem to get my credit card bills paid down, it is something that my wife and I are forever battling over. So near term, the catalyst for moving up is simply greed. “It worked yesterday, so I will try again today” seems to be the motto for the bulls.

As I write this it is 7:45am on Thursday and while futures indicate a negative opening on the heals of CSCO’s earnings (CSCO is trading down 10%) AKAM’s earnings (AKAM is trading down11%) TQNT’s earnings (TQNT is trading down 14%), I am amazed that the futures are not down more significantly. We await a weekly jobless claim number that should not move the needle. So here is my thesis, people have very short memories. I for one do not remember what I had for dinner when I came home last night, though I do remember polishing off a bottle of cabernet at the wine bar with a buddy, before I headed home for dinner. For some reason I think it was lasagna, but I really don’t remember. We as a species have short memories. Our memories are even shorter when it comes to recalling pain. Pain is the memory we most often repress, very logical. The traders, investors and financial spectators of the stock market, the greatest arena since the Roman Coliseum have repressed their fear, they trade with abandon as they rip the futures up 5 handles in the last 5 seconds of a day. They ignore the fact that we have not even tested the breakout “psychological levels” as support.

But I believe the time is upon us. The catalysts are not to be ignored. As I said earlier this correction will be a battle between two strong opposing forces. Leverage vs. Common sense. Fear vs. Greed. And finally a battle between the lessons of history vs. a brave new world where there is a new playbook, and perhaps my copy got lost in the mail.

Negative catalysts continue to be those I mentioned in yesterday’s Market Expectation blog. But let me add a few more. Unexpected developments in Ireland and Portugal. Forex spread gouging by major institutions. Bernanke under further attack over QE2. Our municipal bond infrastructure in jeopardy as the ratings agencies were once again, late to the game. I believe yesterday was the first right-handed body blow to the feverish bulls. Today will be a follow up cross to the left side of the jaw, the type where you hear a slight crunch, and tomorrow will be a right hook that will for the first time in months put raging bull to the mat, even if it is short-lived, at least he will remember that lost feeling of pain and markets will have an opportunity to normalize.

By the way my Aunt Beverly called me again last night, she wanted to know if i thought NFLX was cheap, needless to say i will be shorting NFLX.


Seeing a Lift Across the Board- Manufacturing Data the Highlight

Morning Notes

- Global indices are up this morning, a nice recovery perhaps led by yesterday’s action in the US markets
- Eurozone PMI came in better than expected- it was actually the highest level since April 2010
- UK PMI also came in solidly at the highest level since 1992
- However, China PMI showed a small downtick as did the German PMI
- Crude oil down small
- Gold and silver are both strong ahead of the open, trading near their highs
- Dollar showing weakness while the euro is up
- On tap for today in terms of economic data: Construction Spending at 10a; ISM Manufacturing at 10a
- S&P futures are up 7.5 handles from FV, trading on the R3 sell signal
- Spooz have been on an uptrend in the overnight session


Will the Strong ADP Number Be Enough to Push Futures into the Green?

Morning Notes

- Overseas markets are net lower today
- In China, the PBOC said that it may conduct a monthly review of reserves rates on banks
- China’s HSBC PMI came in in line
- Both Germany and Eurozone Services PMI came in solidly
- However, European markets are down
- Drop in commodities yesterday is adding noticeable pressure to the material sector, particularly in Germany
- UK Construction PMI showed a contraction
- Oil is weak again today
- Dollar is up again
- ADP Employment Change: 297K vs. 100K; prior revised down to 92K from 93K
- Latest ADP data is lifting futures as well as crude oil and dollar
- This ADP number is the highest in history
- ISM Non Manufacturing data out at 10a
- Gold is lower and making new lows ahead of the bell
- S&P futures are down 4 handles from FV ahead of the open and on the S3 buy signal


Strength Carrying Over From Yesterday’s Rally

Morning Notes

- Seeing strength again in the pre today
- In China, reports out that the gov’t may delay property tax pmts because of internal disputes, whatever that means
- Weakness in Japanese yen helped lift the Nikkei, which was closed yday and closed up 1.7% today
- Unemployment rate in Germany came in unch’d while number of those unemployed actually increased
- UK PMI came in better than expected
- FT article that the candidate that will likely become China’s premier in two years, Li Keqiang, committed the country to buy more Spanish gov’t bonds
- Eurozone CPI came in higher than expected (is now higher than ECB tgt)
- Gold is lower this morning
- Dollar is lower as well
- We have factory orders out at 10a ET
- Also have the FOMC Minutes out at 2p
- S&P futures are up 4 handles from FV; not on a pivot signal, but R3 has been a key resistance point so far in the pre (R3 is 1270)


Futures Hovering Over S4 Pivot For First Time In A Few Weeks

Spain Potential Downgrade

Morning Notes
- Overseas markets are all lower this morning following news that Moody’s may downgrade Spain
- Adding further weakness in the markets is the Tankan Survey results in Japan, which showed that business confidence in the country has fallen for the first time in two years
- JPY weakness has added little support to Nikkei, which closed down just 10bps
- Also, UK unemployment rate came in higher than expected
- Dollar up small
- Gold and oil are down
- NY Empire Manufacturing Survey: 10.57 vs. 3.00; prior was -11.14
- November Core CPI: +0.1% vs. +0.1%
- November CPI m/m: +0.1% vs. +0.2%; prior was +0.2%

- Futures not really reacting to data release
- Other economic items on the calendar for today: Industrial Production and Capacity Utilization at 9:15a ET; NAHB Housing Idx at 10a; Crude Inventories at 10:30a
- S&P futures are down about 4 handles from FV
- Tight pivots in the Spooz today- we are on the S3 buy signal , although that could change quickly given that we are hovering right above S4 and we had been on the S4 sell signal earlier in the pre


Fairly Muted Action Ahead of FOMC Rate Decision Today

Morning Notes
- Overseas markets seeing muted action ahead of FOMC rate decision today at 2:15p ET
- Asian markets were up small
- In Japan, Industrial Production and Cap Utilization were revised down

Fairly Muted Action Ahead of FOMC Rate Decision Today


- UK CPI rose slightly higher than expected
- Switzerland raised its 2011 GDP forecast
- Germany revised its 2010 and 2011 GDP forecast up
- Eurozone Industrial Production came in slightly worse than expected
- Gold up this morning
- Dollar showing weakness again
- Other economic items on the calendar for today: Business Inventories at 10a; FOMC decision at 2:15p
- Bank of India announced rate hike
- That along with BBY earnings at ~8a brought in the futures
- November Retail Sales: +0.8% vs. +0.5%; prior revised up to +1.7% from +1.2%
- November Retail Sales Ex Auto: +1.2% vs. +0.6%; prior revised up to +0.8% from +0.4%
- November PPI m/m: +0.8% vs. +0.5%; prior was +0.4%
- November Core PPI m/m: +0.3% vs. +0.2%; prior was -0.6%
- Futures recovering after the 8a pullback
- S&P futures are trading just below the R3 pivot level, up about 1.75 handles from FV
- Futures are on the R3 sell pivot signal


Month of December Off to a Solid Start in the Pre Market

Morning Notes
- Overseas markets are all up with strength being attributed to China’s better than expected PMI data (although note that the Shanghai did not really rally with this news; probably weighed down by ongoing monetary policy tightening concerns)
- Eurozone PMI came in slightly worse than expected; UK PMI came in strong (highest level in 16 years)
- Australia’s GDP came in weaker than expected; noteworthy economic item because the Australian economy was one of the few that remained resilient during the global recession
- Recovery in the euro this morning while the dollar and treasuries take a breather and are down
- ECB Pres. Trichet made comments stating he did not believe financial stability in Europe is questionable, suggesting bond purchases may be increased
- Sov debt yields have pulled back
- Gold and crude bid up as well
- A decent number of data releases today, starting with ADP Employment Change @ 8:15a ET; Nonfarm Productivity @ 8:30a; ISM and Construction Spending @ 10a; Beige Book @ 2p
- November ADP Employment Change: 93K vs. 70K; prior revised up to 82K from 43K
- This ADP number is the best level it has been at since June 2007
- Am reading this ADP number in context of Challenger Job Cuts, which came out this morning down 3.3% y/y, making it the worst level since May 2009; employers plan to cut 48K jobs, the most in eight months, primarily in gov’t positions
- Q3 Nonfarm Productivity: 2.3% vs. 2.3%
- S&P futures are currently up 15.75 handles from FV, improving with the data releases so far


Ireland Bailout News Provides Only Short Lived Relief

Morning Notes
- Ireland bailout was main catalyst in the o/n
- Bailout pkg estimated to be 95B EUR
- Now concerns are gathering around Portugal debt
- In Hong Kong, an increase of stamp duty on property added pressure to their market
- PBOC’s increase in bank reserve ratio was announced Friday after Asian mkts were closed so today’s action reflects that announcement
- Hence, Hang Seng and Shanghai Comp closed down small
- Nikkei, however, closed higher on yen weakness
- Futures have dropped significantly off its overnight highs as concerns are now directed at Portugal and Spain
- Euro also backed off its highs after spiking off Ireland news
- October Chicago Fed Manufacturing: -0.28; prior was -0.52
- S&P futures down about 6 handles from FV now trading right above the S4 pivot level
- Gold up a smidge; crude flat
- No other economic news on the calendar for today