Bill Cara’s Blog for May 27, 2010 [See post-close report]

Good morning.

MCD - Sterne Agee Initiates Coverage with a Buy.

MSFT - Upgraded to Outperform @ FBR. PT Raised from $31 to $32

NE - Downgraded to Market Perform @ BMO. The firm downgraded the stock to reflect its concerns about the effect of a long moratorium on Gulf drilling on the company, as well as the firm's outlook for subdued oil prices. Target $41.

SBUX - Credit Suisse Initiates Coverage with an Outperform. PT = $34

Spain's unemployment rate is double that of the U.S., so it's not all roses.

How do we sign up for the cara select funds again?

Bull Hunter, Mark H,

U.S. unemployment is double what is admitted. I wonder if Spain is any more honest than we are.

The average American is trying austerity, but not by choice. Politicians don't have the guts to do it. It's time to deflate the windbags.

Not midsummer yet, but...

"What fools these mortals be."

It's quite simple. I wrote some puts early in the week on MSFT and JPM. Then panicked out when the market plunged 250 pts the next day instead of doubling down like I should have. Would have made some nice coin, but instead lost yet a little more. I've never been more confused. Going to cash except for a few core holdings until I can get my head straight on this crazy market.

KC

Hi Grym,

I've been wondering the same thing....I can't seem to find out how Spain figures their unemployment percentage.

Do they also use "happy assumption" birth/death models? Pad their employment with Census jobs? Have they defined long term discouraged workers out of existence?

Real unemployment here is around 22% using the SGS Alternate Unemployment Rate.

I wonder where Spain's actual unemployment stands.

Regards,
BH

(EU) Italian PM Berlusconi: United European action has defeated attacks on the euro by speculators

Great news this morning. They stopped trading at 10;12 and didn't resume until 11:15. Most people thought it was a takeover offer but it turned out to be a powerful drilling update underground which confirms a zone thickness on the same scale of all the other major mines in the Red Lake District. On that release I took a profit in excess of 10%.
You know what they say, sell the news and rebuy on a recycle. That I will do. Right now RBY has come off its high.
I am still waiting for UXG to recycle. Currently, my only mining position is Exeter, XRA, and adding on price dips.
In reviewing my notes at the Hard Assets Conference, I noted the following:
2009 Gold Source: Scrap 37%
Official Sector Sales (Central Banks, etc.) 1%
Mine Production 62%

2009 World Gold Demand: Investment 44%
Jewelry 41%
Dehedging 6%
Other Fabrication 9%
Have a good day.

those related equities... http://www.detnews.com/article/20100527/AUTO01/527...

I don't see any chance at all that gold will close up at all, today, but to be honest, it doesn't make any sense to me that gold isn't up with the dollar collapsing.

Why are the miners up, then????

My guess is they sneak gold up over the holiday weekend when nobody here has the option to buy till after it is already a done deal.

HEADS UP, Monday is a Holiday in US Markets. Last few years, three days weekends have seen lots of shenanigans.

Another thought on the Elliot Wave 5 waves. By observation, not recital of the "bible". Lets say wave 1 starts up, then a number of participants jump on long after they see the move started, maybe they get filled at about half of the run up. Then wave 2 comes, retracing 61% of wave 1.....if those wave one buyers set their stop tight, they get stopped out. Then, after getting burned, they are afraid to jump on long again, and thus miss the wave 3.

Waves that retrace and that overlap make it very hard to trade small moves...i.e. to "get in" with a safe stop. And with the high volatility of late...if you set your stop too loose, you have a high likelihood of waking up to a stupendous loss.

This is the market we currently have....being gunned up and down, affected greatly by Forex, in particular the Euro. But being gunned for the sake of stopping bears and bulls alike.

Bullish factors -- Cup and Handle and Inverse Head and Shoulders. The Bollinger bands are getting tight...that means energy is building for a big move.....direction is not known from the Bollinger, as with the McC Oscillator.

http://screencast.com/t/YjkxZWVh

Euro has been pounded, its about ready for a rally and sure looks to be starting one.

BP might just get this well capped with mud, then with concrete.-- some news does move the market. Some people state that news is fabricated to explain market moves, and in a great majority of cases that is true.

But their are large structural events that get reported on also, and these do affect the pyschology of the participants, their emotions, and the fundamentals of our economy.

Steveo , Avery accurate description of a very treacherous market . " Another thought on the Elliot Wave 5 waves. By observation, not recital of the "bible". Lets say wave 1 starts up, then a number of participants jump on long after they see the move started, maybe they get filled at about half of the run up. Then wave 2 comes, retracing 61% of wave 1.....if those wave one buyers set their stop tight, they get stopped out. Then, after getting burned, they are afraid to jump on long again, and thus miss the wave 3.

Waves that retrace and that overlap make it very hard to trade small moves...i.e. to "get in" with a safe stop. And with the high volatility of late...if you set your stop too loose, you have a high likelihood of waking up to a stupendous loss. " Bob

BillySundance,

GDX was flat yesterday against a rising gold price because of the USD.
today w/ the USD down and gold hovering around the same are the miners are up.

we see the same occur on the XGD and other canadian listed mining shares.

as noted the broad pattern for the past 3 years or so has been one of declining value of the miners vs. gold, so you will see larger drops as gold falls and lighter gains as gold rises. those large moves up in the miners that everyone talks about as being the sign they are back are temporary, the moment gold stalls or tracks sideways the miners quickly loose momentum and fall.

GDX:GLD says about everything one needs to know about this situation.

Cosa - I agree. USD was up and would not weaken, which is eventually what led to equities failing to hold morning gains and then taking a nosedive at end of day. Gold miners taken down with all the equities but were about flat at end of day whereas S&P ended about -0.70%.

GDX:GLD long term trend is indeed down, however, we are (in my opinion) in a intermediate and very gradual upward trend that began in early February. We made two higher lows this week as shown in this chart. Today we moved back to the 50 day moving average of GDX:GLD where we are hovering and waiting for the next move from the USD and the S&P to determine which way we break.

http://tinyurl.com/34fveba

I for one think that the GDX:GLD relationship will eventually reverse but it may be quite awhile. I do think we are slowly stabilizing and that within the next 2 years the GDX:GLD 500 Day moving average will eventually flatten and begin to reverse. Pin-pointing this event is like shooting fish in a barrel so for the time being I choose to follow the current uptrend while being observant of the risk of reverting to the long-term downward trend.

Since the gold bull started ten years ago, the miners outperformed gold for the first three years, then paced gold for the next four years. 2008 saw gold outperform the miners, but the miners have been catching up since. Pull up a performance chart showing gold and gdx or hui; since late 2000 the gdx is up 623%, hui is up 1,085%, and gold is up 357% . I'll take the miners.

http://www.youtube.com/watch?v=TIpNL1Ckuno&feature...

Pz-

Cleared ST positions in FIDSX/FSENX at the close, for a combined gain of 4.41% (over 2 days). Of course, Fidelity will be taxing me 0.75% for closing both positions within 30 days, leaving me with 3.66%. That still leaves the total port up 1.83% in two days (positions were taken in the 'buy-and-hold' half of the port).

Some kind of wonderful? Yeah, I kind of feel like the guy banging away on the sticks.

Nice 2nd!

I was cursing my tight stops right at the open and throughout the day. LOL Opportunity lost not cash. In this market it could have gapped down 200. My weekend starts in 2 hours. Hope everyone has a great(and SAFE) holiday weekend!!

China’s main sovereign wealth fund is “very concerned” about short-term market fluctuations resulting from instability in the eurozone, according to the fund’s president.

However, Gao Xiqing, president of China Investment Corp, told Chinese state media that the ongoing debt crisis would not seriously affect China’s overseas investment in Europe. “[China Investment Corp] will keep its investment level in Europe, no more, no less. Short-term fluctuations won’t bring serious effect on us,” he said.

Nonetheless, Xinhua, the official Chinese news agency, paraphrased Mr Gao as saying: “CIC is very concerned about the short-term market fluctuations amid threatened eurozone stability.”

http://bit.ly/a9qf3l

I think what Vad's getting at is that gaming traders' reactions to any news is far more reliable than gaming the actual news.

Human reactions/responses follow fairly predictable patterns. If you see a certain pattern developing in real time, you can probably predict (with better than even odds) how the price action will unfold.

ALOHA!!

At the US TREASURY, as of May 26th, the total "outlays" for FY2010 so far, over the past 7.5 months, comes to $7.3TRIL USD($7.28T). If there are 304 million people in the USA then that is $24,000USD per every man, woman and child. For a family of four that would be $96,000USD. Seems like if Obama really wanted to solve the consumer debt issue and put people back to work he'd consider where those enormous sums of spending are going. Instead of citizens pockets these funds are going to the US military, infrastructure, insolvent banks, insolvent corporations, market interventions, foreigners and a bevy of more entangling laws and regulations designed to grow government and suppress the Middle Class. Total government mismanagement will be the end result, so does it even matter that $7.3TRIL went directly into US citizens pockets for once? Besides that is only 7.5 months of outlays, not even an entire year, so let the rest of the government, military and banks and special interest live off the other 4.5 months for once. In the end what would it matter? Since we aren't going to pay this debt off anyway, who cares? Seems an entire Nation of cashed up citizens would then instantly stimulate the Keynesian Consumer Vortex thereby bringing the jobless numbers way down.

If anything this little mental exercise sheds some light on the massive spending now going on over at the US TREASURY on our behalf. Who, supposedly, owns the US TREASURY? Just cut out all those "middlemen" ...

After reading post-close report, I must add this to my previous post.

From the report: Do you really think the Chinese would tell the whole world they were going to sell Euro denominated assets before they actually disposed of them?

Beware of "obvious"... Things are rarely, if ever, go along the lines of obvious.

Just imagine you have an enormous amount of shares to sell - are you going to advertise it to the whole world so that sellers run to cut their holdings ahead of you and buyers withdraw their bids? There was a reason why Livermore broke his accounts between many brokers, hiding his whole operation and making it difficult for others to front-run him.

When someone informs the world of upcoming operation of such scale, something is not right. Politics? Threats? Misunderstanding? Press distortion? Public musings mistaken for official policy? Could be any of those, plus couple dozens more.

Just to pile on here, remember when George Soros talked about how gold was a big bubble, at the very same time he was later revealed to have been buying more gold? Then after this was pointed out to him, he (lamely) explained that everyone knows the best time to invest in something is when its in a bubble. There's also Buffet and his Goldman investment - first derivatives are weapons of financial mass destruction, and now? Not a peep.

Everyone with a big book talks with a keen awareness of their book. The Chinese have a very, very big book and from what I can tell about their operations from outside observation, they are not stupid people. And one more thing: egregious, public misconduct in the Chinese government service is occasionally punishable by death. I'm guessing that pronouncements of an impending euro bond liquidation by the Chinese Government has a clear, explainable purpose within that government that goes beyond the simple statement of intent. "Yes Comrade, we just wanted to send a message to those guys in the Spanish government they'd better buckle down on that austerity program or we'll sell their bonds so hard that ECB printing press won't be able to print fast enough to soak them all up. A few hours later, message having been delivered, we denied it all of course."

Of course.

the weight-loss market just became a little more competitive.... http://kdka.com/health/FDA.warnings.Alli.2.1719289...

And, of course, the Euro ' debt crisis ' has everything to do with the low rates, and not HB&B trying to dump inventory !!.. http://finance.yahoo.com/news/Mortgage-rates-are-b...

Ageas, the Belgian insurance group formerly known as Fortis Holding, has offloaded €4.8bn ($5.9bn) of southern European government bonds in just 11 days in an effort to reassure investors over the quality of its investment portfolio.

Shares in the company closed up 14.42 per cent at €2.13, as Ageas said it had sold €1.7bn of Greek bonds, €2.1bn of Italian bonds, €900m of Portuguese bonds and €100m of Spanish paper in the two weeks ending last Friday.