Morning Call [8:57am ET]
Which investment style you use is both a matter of choice, but also what works. In today’s report from Credit Suisse, I note that the best performing investing styles 2010 YTD are (i) quality growth, (ii) earnings momentum, and (iii) high dividend yield.
Here’s what CS had to say:
Quality Growth:
We prefer big cap as we believe the drag on relative performance from narrowing credit spreads and falling VIX is over (big caps have better credit ratings and more diversified business models); current economic and credit conditions are worse for small cap and big cap outperforms as economic momentum peaks; big cap's 2010E P/E is 20-25% below small and mid cap with a 2010E DY more than 100bps higher. We recommend long FTSE 100/short FTSE 250, long LCXE/short SCXE and long SPX/short RTY.
Earnings Momentum:
The earnings revisions style normally outperforms 75% of the time, but underperformed by 30% last year (it also underperformed in the first six months of the last bull market); it was one of the best performing styles during the 2004 correction and currently trades abnormally cheaply. Outperform-rated BHP, Xstrata, Mondi, Gilead and Apple are in the best EPS revisions quintile.
High Dividend Yield:
Dividend yield (on a sector neutral basis) was one of the best performing styles during the 2004 correction and out-performed in the first two years of the last Bull market. Since 1900, 70% of total equity returns have come from dividends. Outperform-rated high-yield stocks that also have positive earnings revisions are Vodafone, BT, Santander, Entergy and Mattel.
I'm in agreement. During unstable markets, as we have today, investors are best advised to focus on quality growth and avoid high leverage. This is not a good time to be aggressive.
It looks to me like there is a trading range for the S&P 500 between 1085 and 1110, and that with the index sitting at 1108, we are near the top. There could be a move higher to maybe 1120 if the $USD (80.55) weakens here, but that is looking less likely now that an intermediate-term (~9 months) cycle high of 81.34 was put in last week, and will be tested again this week.
Should the Dollar move higher, the steels, base metals, precious metals are likely going to pull back. In recent blogs and WIRs, I had forecasted a pop, which we had in precious metals, then a crack, or sharp pull-back, as the Dollar continued to gain strength.
Note the GDX (Goldminer ETF) has been in a three-month Bear phase (lower lows followed by lower highs). You have to expect that with the strengthening Dollar. Note the time of the Dollar's turn. Yes, it was the same time Goldminers peaked.
Watch the Freeport-McMoRan (FCX) to see if it can hold this level. I think not, as the price is tucked right below the 50-day Moving Average (resistance), and if the stock should fall here, then the precious metal Bulls will be in trouble.
Also, with a stronger Dollar, the Bonds (TLT 89.08) look like they are forming a base here, and maybe a put write would perform well. Maybe the puts are too cheap here (ie, premium you would earn would be too small) and you might just want to consider buying the TLT.
Have a great day.
CTA Trading Desk Post-Close Report
As we suspected last evening, the equity market ran out of gas today, with volume again expanding significantly on a downside probe, increasing the likelihood that S&P 1080 will be tested in the coming days.
While a weaker than expected consumer confidence number spurred widespread selling on top of very weak first hour of trading, the futures later rallied to close 7 points off intra-day lows, at S&P -1.21%. There was a small cluster of support (8- and 20-day exponential Moving Average, and 89-day simple Moving Average) that held on a closing basis.
The US Dollar (DXY +0.51%) and US Treasuries (TLT +1.53%) attracted substantial capital in-flows with investors aggressively shunning risk, apparently content to park investment funds on the sidelines until the sovereign debt situation is resolved.
It makes no sense increasing risk exposure with the market at a crossroads here. Although the rally seems to be faltering; until it closes below 1080, traders have to see both sides of a trade.
Lower secondary highs are a prerequisite for large declines; so, if the S&P were to take out 1040 in the next few weeks, the Bears will have an ideal set up.
The bigger question will be; can they capitalize on this opportunity and actually drive prices lower for the fist time in nearly one year. A sell-off exceeding 10% would represent the largest decline since the Bear market lows and a sign to traders that the intermediate trend has switched from bull to bear.
Stay tuned for further developments.
Have a great night.
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Comments
Speaking of 50 day MAs
Anyone who sold FSLR when it touched it's 50-day last week is looking like a genius. As of today's pre-market action that's a 14% drop in just three days.
So, does the smart money buy this morning? I'll paper trade and see what happens. ;)
SEED chart - 60 minute
I've got a nice trade going in SEED (which can turn bad fast given its extreme volatility). But one thing that stands out about recent trading is the volume behind the price moves up. I've attached a 60 minute chart to illustrate.
Hindsight being 20-20, a great place to take a profit would have been that spike up four days in the $9.75 range. If the trend holds, then $10 looks like another good short-term target.
Re: Speaking of 50 day MAs/'Smart' money
n2s-
(a) What you refer to as 'smart' money is of course money in the hands of those with more information/power than we have. A better term might be 'privileged' money.
(b) Smart money (in reference to short-term trading capital) is in cash. IMO.
Re: Speaking of 50 day MAs/'Smart' money
What do I know from smart money, 2nd? ;)
Good to see you!
P.S. SEED dropped like a rock on the open (on light volume) to that support line. Ah, the magic of TA!
URR capitulation trade
close to a capitulation trade.
Do your own homework.
No position.
BRCD capitulation trade
keep eye on BRCD. Looks like it's setting up for a low in the low 4's. Max pain is 10 for March/April.
No position.
LIZ
added a little bit more to my LIZ position at $6.3. They had pretty weak sales in their earnings, but their gross margins were good and operating performance is getting close to break even. The company is getting a $175 Million or so tax refund that they will use to pay down debt, they are closing stores, and they have licensed almost all of their lines to JC Penney. I expect them to also get rid of the Mexx line that is killing operating performance (Mexx had same store sales growth of -20+% whereas the rest of the company's lines of business had -3 to -10%). They also shed a ton of inventory and had cash from operating activities of over $200 Million, which they used to pay down debt.
This is a turnaround story, clearly.
Re: Speaking of 50 day MAs
I agree, that was a great opportunity to sell or short. Looking at a weekly chart
of FSLR you get a descending triangle with major support around 100 back 4Q09 and
1Q10. RSI triple screen is not yet in oversold area.
Cara 100 Update (Final)
FSLR - Downgraded to Underperform @ Wedbush Morgan. PT Lowered from $110 to $90
its crystal clear
gold has moved up on weak volume when looking at the GLD. high volume into the trough, and declining volume on the way up...
same w/ the gold shares, even more so w/ the small and mid-caps as a group. dont be fooled by people mentioning that their pet small cap jumped despite gold falling, thats gambling not investing as you want to see the JR's as a group make a move which hasnt happened and will not likley happen short of gold moving above and beyond 1400.
dont be fooled, nothing has changed, if the market is weak gold and the shares will be weak. yes gold might fall less and recover faster but it will go down if the USD moves up during a crisis.
the upcoming PDAC will feature the usual bullish predictions while insisting that gold shares will be the way to go.
the question is... why?
why now and why not 3 years ago?
when people say "chinese demand" ask them what that means, and if they say its higher, ask them "higher than what" and if increased chinese buying is just a nice way of saying "increased western selling", because gold has been moving down for some time now, which we wouldnt expect in such wildly bullish conditions.
no gold stocks just like oil stocks arent keeping pace or moving up because all the nonsense about upcoming shortages simply arent true, they are propaganda. if oil is set to run out very simply these stocks would soar, so would the price of oil but its not so the rest is just a way for journalists to make money. theres no money in books proclaiming "theres enough oil gang!", no only shock and awe make headlines.
people drive a gas guzzler to a farmers market thinking they are helping the environment, or that buying local is better. if you think crops grown in Ontario along side major roadways using a host of pesticides is somehow better for our economy id like to know. farming is for all intents not economically productive compared to other regions w/ better weather and more targeted production approaches with better yeilds. why use land for crops that only can be grown with government subsidy and assistance?
there are no food shortages, these are manufactured myths that feed into the commodities boom sayers that continue to claim teh panic is coming but its not... theres no shortage of food, there are local shortages which is normal and price spikes which are normal but there is nothing that shows a decline in food, only a decline in demand.
every year we hear about panics for future crops, but unless the price jumps we know it is at best propaganda. farmers have been speaking of crop crises for decades... and yet you can buy a sack of rice the size of a small adult for $5 at costco, enough to feed a family for a week. hmmm.....
Banks at risk of going bust tops 700"
"The names of the banks on the list are never made available to the general public by regulators out of fear that depositors at those institutions may prompt a so-called "run on the bank."
http://bit.ly/90cDzf
Is this not manipulation, coercion, hiding important data?
TLT @ 89.77
"Also, with a stronger Dollar, the Bonds (TLT 89.08) look like they are forming a base here, and maybe a put write would perform well. Maybe the puts are too cheap here (ie, premium you would earn would be too small) and you might just want to consider buying the TLT."
I like that idea as an alternative to cash, and just bought some at 89.77.
Re: LIZ
Stopped out at $6.14...no conviction.
Re: its crystal clear
With options expiry at 1:30 pm today, it would appear that the bullion banks would prefer to have gold below specific levels. This month it is $1100 gold and $16 silver. Such take-downs occur monthly in NY. The big question is why such monthly take-downs occur in the first place under the supposed watchful eye of the regulators? The joke is that the CFTC's own Enforcement Division has been investigating all fraudulent behavior with regard to silver all the while these highly suspect monthly events occur.
The juniors have been underperforming for about 3 years because of a similar same root cause as above. The Venture Exchange is currently trading well below levels compared to a few years ago despite gold and silver (not so much silver due to heavier suppression) presently being near record levels. Considering the historical leverage possessed by juniors, this might seem a bit odd for those with a neutral outlook.
Nothing to see here - move along!
CRM vs. RNOW
I think a good paired trade is long RNOW, short CRM. It appears that RNOW is growing quite fast and possibly at the expense of CRM. CRM is trading at a pretty lofty valuation (even when looking at P/CF which is the metric people are using more than P/E).
GNMA as an alternative to cash?
Anyone with an opinion on GNMAs at this point in time?
Re: CRM vs. RNOW
Entered a very small short position on CRM at $68.35 based on valuation and what I think is a good entry point, given that it bounced off an oversold position up to its 50 DMA which could provide some resistance. Stop is at $70.3
Re: Banks at risk of going bust tops 700"
There is a 'unofficial problem bank' list which totals close to 617 and is compiled from public sources. It's published on the calculated risk blog.
If you want to see if your bank is on the list, it is a good place to start.
Re: its crystal clear
"The juniors have been underperforming for about 3 years because of a similar same root cause as above. The Venture Exchange is currently trading well below levels compared to a few years ago despite gold and silver (not so much silver due to heavier suppression) presently being near record levels. Considering the historical leverage possessed by juniors, this might seem a bit odd for those with a neutral outlook. "
Fireworks
Looking back, I think that the junior PM stocks were really suffering over the last few years from a credit market that was slowly deteriorating and then came with a death blow. It became more and more difficult for junior companies (which generally generate little or no revenue) to access the short term debt markets at economical prices.
As a result, many of the junior PM stocks were forced to make very costly deals in order to fund their operations/exploration, even those who were holding valuable physical assets. This include participation in very dilutive equity sales and warrant issuances and borrowing at interest rates that ruined future returns on their projects. Their are many examples of companies that played their cards terribly wrong and lost their valuable assets to stronger companies. To top it off, most juniors who held enough cash to weather the storm became overly aggressive and invested in risky assets like auction rate securities, suffering severe capital losses.
The credit events of the last few years caused irreparable damage to the juniors such that the historical charts are largely irrelevant now, especially when looking at an individual junior.
Re: its crystal clear
Dr Cosa -
Allow me to address your daily rant which, in all honesty, I thoroughly enjoy as a challenge to my mindset.
Deep breath: Chinese demand in gold is relative to its peg to the dollar and increased Western selling is by the bullion banks' paper gold trade in support of Uncle Ben's QE as China, et al., unload their U.S. debt positions. Pucker factor now 10. Today is a good example leading up to options expiration as is the normal manipulation. Oh, wait, you think GATA's data is bluff and bluster. Nevermind.
In regard to oil, no one with knowledge of 'peak oil' is saying we will "run out" as I'm guessing you already know. Production is simply peaking with a hostile U.S. energy policy toward homegrown production. Consider further the tapped out condition of the 60-year-old mega fields in Saudi Arabia, BRIC demand, and you've got yourself a secular trend.
http://www.indexmundi.com/commodities/?commodity=c...
No food shortages? Tell that to Obama's brother in the shanti town outside Nairobi. I've been there. It's real but just not apparent at your local Costco (China's outlet to the American consumer). MSM and GS have manipulated and control momentum of soft commodities for more than a century while today, for example, cattle gets shipped from Australia or while the U.S. gov't subsidizes corn production as prices climb. That's all just madness, not surplus. Enjoy that cheap rice and corn syrup laced crap at your Costco while it lasts because, again, the secular trend defies surplus. What next, infanticide or no medical care for the burgeoning diabetic population in the U.S.?
http://www.indexmundi.com/commodities/?commodity=r...
Perhaps you could short gold, oil, and the softs. It appears you're caught in the middle without a happy place.
Cheers.
300 employees get an email saying they are fired come Friday
Be interesting to see what Calvin Hamler and the rest of the upper management walks away with........
Four days notice, and your job is gone!
http://ml-implode.com/info/assurity-close.pdf
http://ml-implode.com/imploded/lender_AssurityFina...
Rogoff predicts sovereign defaults
What does he know? Harvard econ prof, former IMF Chief Economist (btw, how many of those ARE there?) Author of "This time it's different" a study of 60+ financial crises across the centuries, also predicted the (recent) fall of major US investment banks. Worth reading and heeding:
http://www.bloomberg.com/apps/news?pid=20601087&si...
Observation
Everyone could see that volatility was very oversold, so that's not newsworthy. I was also tracking RSI7 momentum divergences, using:
High = highest high of eight days
RSI7 < RSI7 three days ago
Yesterday spiked up, suggesting a warning of a reversal.
Not any Holy Grail, just an observation.
Best to all.
Re: 300 employees get an email saying they are fired come ...
Classy way to let your hard working flesh go. Life is a circle/cycle. One day this A-Hole will need something from someone, and one of the fired, will be on the other end.
Re: its crystal clear
A few valid points. It was just over a year ago that the main reason the juniors were down was believed to be the high cost of energy, mainly crude, that seemed to cut into profits. As one excuse after another falls short, the invisible hand of a few banksters and their hedge fund associates cannot be ruled out. After all, if a few bullion banks can control the GLOBAL gold and silver markets, then it probably is not a stretch for the same bunch to suppress a few juniors or even the entire Venture exchange as a whole.
Cheers
TLT
Well Bill certainly called the TLT puts today. I was thinking about getting some,but got distracted. Oops. :)
Re: its crystal clear
thx for the detailed response,
allow me to retort:
starvation and food shortages have been occurring in nature and for man since our evolution. today's situation on a macro level reveals that in fact food is not scarce at all, nor is it becoming more scarce. in some states this is the sad fact but is due to other factors, certinaly not a lack of food.
while some staples may run up in price due to shortages, others fall due to excess.
when oil or other commodities jump we consider the supply/demand situation of the commodity itself, or inflation but fail to consider the possibilities of speculative inflow's that have made many an asset class pop and fizzle over the history of stock market speculation.
consider the charts, we see higher prices now compared to a decade ago but a strong collapse from the hype of a few years ago, these charts tell us the mania blow-off is over and a steady uptrend is resuming, not a sudden shortage is noted in these charts. if there is a food crisis looming, no one seems to be putting their money where their mouths are:
http://www.commoditycharts.com/ccharts.asp?sym=ZWH...
http://www.commoditycharts.com/ccharts.asp?sym=ZCH...
http://www.commoditycharts.com/ccharts.asp?sym=SH0...
a great article dispelling the myths of chinese treasury dumping, which isnt happening:
http://mpettis.com/2010/02/what-the-pboc-cannot-do...
________
myths herr doctor, these are all well crafted narratives that are fantasy.
oil is well below its peak of a few years ago, and shows no sign of spiking back up. look at the volume and chart patterns of the big oils... do you see a nice recovery from a collapse or the sign of impending doom in oil?
no i dont see a short for these commodities, only that life goes on in $75 oil when 5 years ago it was thought that $75 would bankrupt us and cause massive protests.
a recent article about gas hitting $1.12 in canada, up from its current $0.99 astounds me, the "analyst" claimed that above ground supplies are so high refiners are cutting back and nat gas remains low. and yet the price of gas could move up $0.13... people will get angry, wondering how gas goes up when oil is down, luckily the peak oilists will be out in full force saying "get used to it, soo it will be $2 and then armageddon will break out", though we forget they said taht about $1 gas some time ago along side $100 oil....
sadly that $5 bag of rice from costco is many times higher than the price of rice in poorer nations like india and africa. we know this because if people earn $5 a month, they would soon die if they could only afford enough rice for a weeks food and no rent or other costs. this occurs in soem places but is by no means the majority of the planet. a weak economy making farming unprofitable is different from shortage of food constantly portrayed by the doomsdayers.
Re: its crystal clear / china dumping treasuries
dr.cosa, In reading over econoday's Treasury International Capital summary from last week, it appeared that the Chinese are indeed dumping US treasuries. Its a pretty reputable source.
http://mam.econoday.com/byshoweventfull.asp?fid=44...
EDIT: after reading dr. cosa's article, I understand a bit more about his thinking. However, this article misses the point that China may well have converted the dollar surplus into another currency entirely, so while its balance sheet increases by the size of the trade surplus, it may have increased in euros, not dollars.
It was an interesting article, however. It helped me understand the mechanics of central bank currency interventions and what reserves really are.
Another intraday bear flag forming on EUR/JPN.
I think we are going lower into the close. Watch 1091 for support on ES. I say if we get there it will not hold.
AIG up as much as 11% yesterday
Today is another day though.......
Under the terms set out in TARP, AIG was supposed to be dismantled. Here we are 13 months in the future and it's business as usual for the to big to fail. Although there was a step forward when TARP was extended into the middle of 2010 instead of expiring at the end of January 2010.
There should have never been a life line throwout to these to big to fail institutions.
http://www.bloomberg.com/apps/news?pid=20601208&si...
Changes to the Cara 100
I am adding UXG, NGD, AEM and AUY (US tickers) to the Cara 100 along with GG, KGC and SLW. I dropped BVN.
I feel that seven in 100 gold and silver miners is ok because we live in a new world where the precious metals will be a globally active currency hedge, and will also be in demand by debt-free major investors who will hoard the bullion in defense of government over-spending, unnecessary warfare, and political intervention in what seems to be every aspect of our lives.
In the Cara 100, I now have a total of 14 miners out of 100, which along with 11 in Oil and Gas gives us 25 out of 100 that are miners or oilers in the Model Portfolio candidates list.
As soon as the final list is available, it will be published.
Btw, I am a long-term Bull in the precious metals, but in the past few days I saw that spec money was being pulled out, so I sold 100% of my NGD and UXG positions. After the $USD is pushed through the roof, at some point this year, there will be a lot of pain among the Gold Bulls. I plan to be ready to re-load when the market condition improves.
The Toyota Chronicles
Testimony has begun in Congress over the acceleration problem found in the Toyota product line, after a three week media effort to pump up the drama over the issue. Today a woman in tears told of her experience with a Lexus and unintended acceleration. She said God saved her from harm. A professor from Illinois claims the problem is not with the mechanical pedal but an electronic malfunction in the computer control device. The professor induced resistance to the two circuits which monitor the accelerator/ throttle body and was able to induce the problem. The computer did not register any malfunction upon subsequent analysis. He sent this information to Toyota last week. Toyota has a couple of studies saying there no problem with the electronics.
So now the drama escalates and the Toyota fix is in question.
Fox Business News is also running a story on GM and their new world car, the Chevy Cruise, which is targeted to
compete with Toyota's best selling Corolla. GM is hiring 1500 workers to produce them at an existing plant in Lordstown, OH. The Fox reporter at the factory inspecting the car said " Oh.. is that leather....it looks like leather"
Apparently leather is now available in this econobox. Or maybe its pleather?
So the media is demonizing Toyota while pumping up GM, now owned by the Government.
Money plus media equals manipulation. This circus of media manipulation grows more disgusting day by day.
Phony statistics, faulty analysis, outright lies laced with drama is our daily dose. It all makes me nauseous.
Was Legg Mason first to apply for active-managed ETF's in US?
http://blogs.wsj.com/financial-adviser/2010/02/23/...
The WSJ article today was unclear as to whether Legg Mason is trying to get a Letter ruling from the SEC to be the first to offer exchange-listed actively managed ETF's. If anybody finds out, please send me an email, and post here too.
TIA
Re: its crystal clear
Dr Cosa, I love your posts. You are one of a kind! Keep it up ;-)
Re: Changes to the Cara 100
Bill
"... but in the past few days I saw that spec money was being pulled out.."
Are you able to tell us how to watch for this ourselves?
Thanks if you can.
Changes to the Cara 100
I am delighted to see your changes in the Cara 100, especially the addition of UXG! I do have more news on UXG but nothing earthbreaking. A move back down to $2.40-2.50 wouldn't be all that bad. In my view UXG will be a significant silver play due primarily to the Mexican sites. I think that the Nevada property, in time, will probably be sold to Goldcorp or some other major to help fill those companies reserve needs for gold. McEwen knows what to do.
All the other miners I am familar with and will add technical updates to them. For the longterm outlook, they look good. Short term, go with the flow. Remember "Jack be nimble, Jack be quick".
Re: Changes to the Cara 100
Hi Bill,
May I ask for the reasoning for including UXG? We all know what Rob Mcewen has done at Goldcorp, but UXG is still in exploration stages. As far as I know, it has no operating mines (I could be wrong...)
Also, its average volume on the AMEX is under 1 million shares, so I wonder about the liquidity of the stock... Today in TSX, only ~12000 shares changed hands.
I guess I personally find it puzzling when comparing UXG to the other companies that are in the Cara 100...
Thanks,
-Dave
Disclosure - I've been holding a speculative position UXG since $4 for 3+ years. I'm biased because I'm not impressed by its performance at all.
Re: TLT @ 89.77/ Off @ 90.50
Wasn't planning on a day trade. However-
(a) It was enough for a 0.3% return on the total portfolio for the day (the trade was structured as an alternative to cash, so a larger than normal position was taken), and
(b) I'm not seeing the acceleration in the market sell-off I initially expected.
NLS
Looking really strong. They have earnings coming up after the close on Monday. Is anyone else still in this?
Re: LIZ
teamonfuego I owe you some thanks. I didn't catch your comment until right before that kangaroo-tail reversal around 11 AM on LIZ. After checking the stochastics and confirming I liked the technicals, I entered right around the low of the day. I'm still in as of right now. We'll see how the gap is tomorrow.
Also hi, everyone.
Re: LIZ
ha...great timing...i was stopped out after it broke below it's early morning lows.
Charlie Munger in Slate Magazine ...
Offers a parable equating derivatives to bucket shops and that we're all screwed. Interesting and funny coming from Buffett's longtime sounding board. Obviously, he's attempting to put this mess into simple terms so that the common man will get a leg up on what's happened here. Parable format allows him not to name names. Worth reading as it's only two pages.
http://www.slate.com/id/2245328
Cheers.
JPM - Outside day developing
http://chart.ly/n9t69a.
No direct position in JPM.
Re: its crystal clear
dr cosa -
Retort to your retort:
Do we use quantitative easing to fund our zero-bounty forays into the Middle East and is this an economic model for cheap oil? Have you been to Europe in the past 20 years and observed their little diesels running about on $8 fuel? OPEC will massage supply, leave us unaware of production realities, and hold a barrel around $75 until the music stops and all hell breaks loose between Israel and the Muslim world. Who's side will the U.S. be on then? Is this a static $75 barrel world when oil starts trading in a new regional currency next year? C'mon. This narrative may be well hewn but tell that to a U.S. Marine in Afganistan fighting for .... Democratic power?
As for the $5 bag of rice being affordable here in the U.S. based on high median daily wages, I'll take that bet that inflation will make that bag cost close to the daily wage here in the U.S. if economic reform doesn't happen soo ... too late.
Perhaps I'm a victim of well hewn narratives and short-term cycle obliviousness. I'll give you that but Rome essentially started its decline when the Senators stabbed Julius Ceaser to death near the forum on the ides of March, 44 BC, thereby transforming from a highly successful 450-year-old Republic (perhaps more peaceful than U.S. with only two centuries so far and more wars) into a brutal Empire for more than five centuries. Hitler was thinking of Rome when he said the Third Reich will last a thousand years. It fell short some 980 years. Well, I'm here for another 40 years at most and I believe the United States has endured a previous century of world wars and is now about to embark onto a new path as a result of currency debasement and excessive debt, just as the Roman's did some 1,500 years ago.
Know your history.
Re: Changes to the Cara 100
davelee,
The Cara 100 is intended to represent Quality Growth, and US Gold is, admittedly, a company with no production, no revenue. But the Cara 100 is also just a watchlist for trading; it’s a list of companies whose shares are followed closely by the marketplace, including many institutional analysts. I use the Cara 100 for more than trading; I use it to explain the workings of the market.
There is in fact 29% institutional ownership, and institutions account for that same percentage of trading. However, insiders (mostly Rob McEwen with 21%) own over 26%, leaving only 74% in the tradeable float, which means the retail investor owns just 48%. The float is only 90 million shares, and yet the average volume is close to 1 million shares a day.
The promoter McEwen is everything you want in a chairman running an exploration company. He been successful at everything he’s done in his adult life, and he is a model citizen. He is a friend of mine, although we meet only infrequently, but I trade his stock. I do that in and out for now until the company reports a significant resource estimate that would lead me to believe he has a mine in the making. I think he does. Over time, trading off the risk/reward model, I intend to grow a position in UXG.
Sometimes it’s important to trade the shares of small companies as a way of seeing how “hot” money is moving in and out. Recently, we purchased a large number of shares in New Gold (NGD) at US$3.80. Last week, on Wednesday, I noticed that the stock made about five runs to the $4.85 level but could not beat it to test the slightly higher level it had just put in. I watched the volume, and what was going on with other goldminer stocks that day, which I didn’t like, so we sold 100% of our holding at $4.82. Four days later, NGD closed today at $4.25, trading as low as $4.21. After the NGD trade, I thought there might be another run left in UXG, so I waited and then sold at $2.64. With the risks in the market, at this point, as I see it anyway, I prefer to stand aside. I may return soon.
If I didn’t trade UXG at all, I would not have put the company into the Cara 100. But, it’s more than that. By trading the stock, I need to follow the company closely, and I have on my team two mining analyst experts who also know Rob McEwen, and will help me build my knowledge over the years. I intend to use that knowledge, not just to trade, but to teach. I will write Briefs, and discuss the company and the stock in the blog and the WIR’s. Over time, I think that some of that will rub off on a lot of people, and that will help them become better traders and managers of their portfolios.
Btw, the following notes on US Gold were issued today by Canaccord:
US Gold is well positioned in two precious metal mining districts: Cortez Hills in Nevada and Magistral in Sinaloa, Mexico. The company released further drill results from an aggressive 100,000 metre exploration program on its El Gallo project in Mexico:
• Drilling in the Magistral Eastern Area (Figure 35) returned the most significant hole to date: GAX-055 intercepted 390.3 gpt Ag over 117.9 metres, from a depth of 32 metres, including 2,225.1 gpt Ag over 14.4 metres at a depth of 112.6 metres. Drilling around this area extended the mineralization approximately 30 metres east; prospective areas further east also remain untested.
• Exploration in the Central Area has been focused on expanding the mineralization laterally, toward the south. Hole GAX-056 intercepted mineralization from surface, and included 659 gpt Ag over a 29.1 metre interval from 64.5 metres down hole. Targets in the Western Area also returned attractive results due to the potential for near-surface mineralization. Mineralization in the Western Area remains open towards the southwest.
• El Gallo is part of the Magistral District, acquired by US Gold from Nevada Pacific Gold in 2007. The property includes the Magistral mine, which operated and produced approximately 70,000 ounces of gold from 2002 to 2004, and covers approximately 38 square miles of mineral concessions. The company already has NI 43-101 compliant resources at the Magistral mine (0.45 Moz Au M+I). Unlike many classic high-grade silver deposits in Mexico generally hosted in large vein systems, El Gallo mineralization is hosted in quartz stockwork and breccia zones associated with moderate to strong silicification. The zones are situated along structures and lithological contacts with variable orientations.
• We are encouraged by the continued expansion of the extent of mineralization suggesting the potential for a significant resource; the initial resource estimate for El Gallo is now expected in Q2/10.
Hope that helps explain my reasons. I know I don’t have to, but I think it’s educational. Hope so, anyway.
Politics
Just find the politicians that represent you and see how they have voted on issues you care about.
http://www.ontheissues.org/default.htm
Re: JPM - Outside day developing
Excuse the naivete, but what is an outside day? I think I have an idea but clarification would be appreciated.
interesting movement in
immu.... being worked for the past 3 months, but is a potential viable competitor to hgsi.... several new patents... as usual, equities such as this require a lot of patience and long term thought...it left penny land many moons ago, but is a traders favorite... No recommendation, but in disclosure, entered lower, last month...
SPX 1040
After hours Bill said .... "so, if the S&P were to take out 1040 in the next few weeks, the Bears will have an ideal set up."
FWIW, my rather new subscription algorithm service has a number close to that as a point which will flip the long term outlook from bull to bear. Today both the intermediate and short term closed bear but both were flip/flopping during the day around tipping points which were close together.
They define short term as days to weeks, intermediate as weeks to months and long term as months to years. As to the long term, the algorithm produced what they call a "bottom spotter" in early March 2009 which, of course has not been challenged. FD: I was not a subscriber then as the trading tool was in beta form but that is what they are still showing.
Re: Changes to Cara 100
"Hope that helps explain my reasons. I know I don’t have to, but I think it’s educational. Hope so, anyway"
Bill
It's great to hear how and why you make trading decisions..Thanks
More good minds echo Bill's potential stagflation/inflation
thoughts....from Bill fleckenstein tonight. ' our leading indicator for central bank activity ought to be Englands Mervyn King who already backed away from Q.E., and who was quoted today on Bloomberg... " Monetary policy can either be more expansionary or more contractionary as the situation demands. We stand ready to do whatever seems appropiate " .. Fleckenstein goes on to say, " That's what I pretty much expect Bernanke to say soon, if things get a little more squish here, or if rates start rising, as they have been in the gilt bond market.... as if on que, Fed head Janet Yellen, speaking in San Diego, made the DJ headline " Fed won't rule out MBS Buying if Conditions warrant "... Fleck also gave some good information from Dennis Gartman, per inflation indicators, quoting FoodBusinessNews and the jump in sugar prices affecting many other prices...
euro: trash in new york, cash in asia
This is the Nth time I'm seeing the euro getting a strong bid in asia, after being pounded down in New York. What's up with that? Perhaps someone in asia is comparing the two central banks, and contrasting the new German resolve to constitutionally require a balanced budget by 2016 with Obama's "austerity plan" which cuts 25 billion from our 1.6 Trillion deficit and is using the Greek Problem to move some reserves around.
But what do I know? I"m not a central banker, just a trader.
Re: JPM - Outside day developing
I believe it's when one days high is higher than the previous days high, and the days low is lower than the previous days low, and the close for that day is lower than the previous low. After an extended run it can signal a change in trend. A recent example is if you look at a chart for copper on a monthly basis Jan would be considered an outside month (instead of outside day).
You could also have an outside day after a downtrend except the close would be higher (not lower) than the previous close.
Outside Days -
"An Outside Day or Outside Bar is a situation where the high low range of the bar is outside the range of the previous bar."
An outside day to the upside, meaning prices are trading above (outside) the previous day's range have a bullish bias.
An outside day to the downside, (prices trading below the previous day's range) is bearishly biased.
An inside day is when prices trade inside the hi-low of the previous day's range, implying a possible range bound day.
Notice the use of "bias" abounds here, because nothing is perfect. But pretty useful nonetheless, especially on the broad market futures.
Thanks for all your great posts Teamon...
Income
Glad to hear more talk around here about dividends. Whether it's allocating your $ to a company stock, buying a bond, or lending to a bank/broker (cash), hasn't this game always been about receiving investment income? All this market noise can become paralyzing! Could it all be, merely, as simple as putting your $ where it's appreciated and has the potential to be rewarded with a rational, real return? One that beats our #1 enemy - inflation?
Re: Changes to the Cara 100
Thanks for your post, Bill. I know you don't have to do any of the helpful things you do here, but it is much appreciated.
XLF may have started the reversal here..
Here is an interesting TA chart I saw on the web...
http://stockcharts.com/h-sc/ui?s=XLF&p=D&yr=0&mn=3...
Re: Changes to the Cara 100
Seconding the thought...
Thanks again Bill for your continued insight and advocacy. It is indeed much appreciated!
Re: Outside Days -
I wonder if it would make sense for there to be separate teaching forums on this site for topics like this and other technical analysis tools you all use and fundamental analysis that people like myself rely more on...I'd be interested in learning more about tech analysis.
Re: XLF may have started the reversal here..
Financials have been sucking wind for a while. So i wouldnt say xlf was the turning point.
However here is a similar looking chart i posted earlier this afternoon of JPM, http://chart.ly/n9t69a.
It needs to be confirmed tomorrow.
Re: JPM - Outside day developing
I am still in the early learning stage.
Google: "bearish three outside down candlestick"
stockcharts blog: http://bit.ly/aJkN5m
also: http://bit.ly/9Rmuyi
also: http://bit.ly/azkzq4
My summary would be my eyes are drawn to wide body candles, on higher vol days, where that day's candle completely engulfs the previous one. And it has to be what seems to be after a trend is in place. But the next day's bar must confirm, and often when confirmed, will signal how big the reversal will be depending on how big the body is.