Bill Cara's Blog for Oct 25, 2011

Les,

the style and manner in which you present your post close reports are very helpful. They bring together much of what I'm learning this year. Thank you for your time and effort.

Good morning.

09:00 Case-Shiller 20-city Index
10:00 Consumer Confidence
10:00 FHFA Housing Price Index

------

NKE - Nike initiated with a Buy at Auriga. Target $110

------

“Facts do not cease to exist because they are ignored.” -- Aldous Huxley

+1
Les, great job!

I think things look bullish and I'm long in the long term accounts (for a time being at least and may want to exit in a week or 2 if we keep getting this very overbought conditions).
The short term trading accounts is a different story and I'm bracing for a pullback. As your charts document, every time we got a cross over in MACD, there was a little shock before clear sailing.

currently 30% cash, 40 % fixed income, 30% equities, I feel like the Montreal Canadians right now, good on paper, but booed right out of the arena last night. Thinking about moving to Toronto eh?

http://advisorperspectives.com/dshort/charts/marke...

Comments?

MMM - 3M Company downgraded to Neutral from Buy at Sterne Agee.

MMM - 3M Company downgraded to Market Perform from Outperform at William Blair.

------

Case-Shiller:

WASHINGTON (MarketWatch) -- The S&P/Case-Shiller 20-city composite index rose 0.2% in August, as 10 of 20 cities saw gains. That's the fifth straight month of gains, S&P said Tuesday. On a year-on-year basis, prices are down 3.8%. The 20-city composite is down 30.8% from its peak.

BMY - target raised at Citigroup to $40. Adding Dapagliflozin sales into model. Maintain Buy rating.

DOW - estimates, target lowered at UBS. Shares of DOW now seen reaching $38. Estimates also lowered on softer macro picture and falling ethylene margins. Buy rating.

Much worse...

EU Finance Ministers Meeting Tomorrow Cancelled (story developing)

"EU Finance Ministers Meeting Tomorrow Cancelled (story developing)"

------

The can has been kicked so hard and so many times, it is now in orbit over the earth and can't be reached?

http://www.horizonnorth.ca/index.php/main/splash

A small company I have been riding for some time. It captures the exploration opportunities of Northern Canada, primarily Northern Alberta. Earnings report Nov.2 Started a dividend last quarter. Great balance sheet, and cash flows. Under the Radar.

http://www.kurzweilai.net/revealed-%e2%80%93-the-c...

Here they are...

http://www.newscientist.com/article/mg21228354.500...

NFX - estimates, target cut at Goldman. NFX estimates were reduced through 2013. Company is seeing lower production and higher cost. Buy rating and new $50 price target.

------

Consumer Confidence: declined to 39.8 in October from a September level of 46.4, which was upwardly revised from a prior estimate of 45.4.

FHFA Housing Price Index - U.S. home prices slipped 0.1% on a seasonally adjusted basis in August to drag the yearly decline to 4%.

thanks guys, but take it with a grain of salt. I use such posts to straighten out my thoughts, which in this news driven world can be flying at 100 miles an hour - doesn't mean I'm right. If what little I've learnt can help others in their understanding - so much the better.

"The real dilemma the chart presents is: how to grow wealth? I am skeptical of plunking all my money in gold or miners. The cycles seem hyper now...following the insane velocity of money slamming from one thing to the next."

In my case I'm down to "How to simply maintain my capital" rather than grow it.

I just came back from my dentist after hearing how much it will cost to replace an 18-year-old crown.

My view is that he chart seems feasible, but I see no one doing anything to reverse the direction. So far I'm maintaining gains which surpass expenses — unless of course you want to consider those dollars I still have are diminishing ever more rapidly — year by year. My house is worth less, yet my taxes are rising.

Grym

Stopped out of SVM yesterday. Any thoughts on how tight a trailing stop should be?

UMC up about 15% since 9/30 through yesterday. I mentioned looking at it in a post here 9/29

Any interest in AMD? Looks to be finishing a base.

ptt71 -

That Zurich study is bogus propaganda. Read up:

http://www.inflateordie.com/files/Super%20Entity%2...

Cheers.

Edit: Is it the Wizard of Oz atop those BANKS THAT RULE THE WORLD and behind the curtain?

http://www.youtube.com/watch?v=NecK4MwOfeI

Could it be that JPM has laid a golden egg?

http://www.kitco.com/charts/livegold.html

"Today, First World citizens consume 32 times more resources and put out 32 times more waste than Third World citizens. And now they all want our lifestyle.....In fact, if all nations consumed resources at the same rate as America today, we’d need six Earths just to survive today."

------

A new, thought provoking column from the always interesting Paul B. Farrell:

http://is.gd/ldPoJS

I think Merkel is working Sarkozy over through this on-again off-again torture, making use of her domestic political situation using them as "bad cops." She'll do this until Sarkozy agrees that his banks have to take 60% hits on Greek debt, and won't be bailed out by capital injections from the EFSF. She will stretch this out and out to to make this happen. When Sarkozy gets tired of flying to Berlin and finally admits he has to handle his own country's problems, even if that means losing the AAA rating, the deal will get done. Merkel has the money, and so she holds all the cards.

I agree with Vad though. If ever they give up trying to bail, things are going to tip right on over.

I think we have one more good bailout bullet left in the euro gun before it all goes tits up. I'm kind of feeling like selling the news when it comes out, although the Fed's noises about buying more MBS makes me hesitate just a bit. The bond market's response to their twist plan wasn't exactly according to their wishes, and the foreign central banks seem to have treated the announcement as an invitation to sell a bunch of longer term US treasury bonds. They might feel the need to monetize some more US treasury debt "to create jobs" of course.

Here's an odd outlier outcome. A whole lot of defaults in the eurozone (sovereign, bank, etc) is inherently deflationary. If the defaults really do rip through the zone without any printing by the ECB, the euro currency will skyrocket simply because of credit money destruction and the closely connected bank asset de-leveraging. Hows that for a perverse outcome? If the country whose bonds you buy doesn't actually default, short term treasuries might actually result in some pretty big gains given all the debts in euros will remain, and the dramatic decrease in actual euros after all the defaults are done.

On stop placement and trailing in general: http://blog.realitytrader.com/2007/04/stops-why-an...

On SVM in particular, latest update: http://tradinglog.realitytrader.com/2011/10/oct-24...

... and there was a series of posts on this trade ever since our entry for a swing trade on double bottom formation on daily chart, tracking every aspect of the trade management with partialing out and stop trails.

Shorts are getting oBlytherated ...

http://www.kitco.com/charts/livesilver.html

thanks for the update on UXG...i am fully loaded as well so I welcome the update!

Les,

Keep sorting out your thinking in these post close reports and don't worry as much about "being right". Your manner is instructive for some one at my level of ability. However, if you get it wrong too often Cramer's Cronies may give you a call for help!

:-) DB

Effectively immediately, Rob Gillette is no longer chief executive officer at First Solar, which just sent out a terse press release stating chairman and company founder Mike Ahearn will serve as interim CEO.

No further explanation was offered. The sector, which benefits from federal funding for alternative energy projects, has been under scrutiny following a Congressional inquiry into the financing of Solyndra, which declared bankruptcy in August. House Republicans have sought information on loan guarantees given to First Solar (FSLR) and SunPower (SPWRA).

First Solar said its board has formed a committee to search for a permanent chief exec.

Shares of the solar energy technology seller are down 21%.

How does a stock like NFLX, trade in such a tight flat range all day? this doesnt seem like a natural buy sell auction behavior.

I have seen this many times. just never understood if this was natural or made to be this way?

http://bit.ly/uSrVQ9

http://www.theglobeandmail.com/globe-investor/mark...

yeh my scale is out of wack. but still a very tight range considering the magnitude of that gap.

Lines to Withdraw Deposits Queue Up as Run on the Banks starts in Greece

With talk of 50% or 60% haircuts on Greek bonds, already mistrustful Greek citizens have queued up to pull deposits. Via Google Translate, The Bild reports Greeks Plunder their Accounts in Fear of Debt Cuts.
Monday morning, 7.40 clock in the district of Athens, "Agia Paraskevi". We, the BILD reporters are witnesses, of a queue in front of a branch of the "National Bank of Greece" right after the opening at 8:00.

"I come here to immediately pick up my pension € 300. Who knows what else happened today. My money is safe only when it is at home" said Pensioners Evagelos Dimitros age 73.

The head of an Athens bank branch told BILD: "More and more Greeks who still have some money come to get it from the bank. In my office there are a total of 5,000 customers, 2,500 of which either have their money transferred abroad or hoard it at home. If this continues, there will soon be no more money."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Ah great to hear the CC will be in my hometown.

I may have to ask Bill to include a time slot for me in the conference agenda to cook a massive pot of Risotto and osso buco for the Cara Community!!!
either that or a scotch tasting!! ;)

interesting perspective, bullishness vs. the ETF's. I note that Jesse is not yet bullish, cautioning 1720 resistance - the rising channel is clearly illustrated. See attached. Something to watch.

considering amzn mkt cap, that is a lot of waves in the pond.

no position.

careful, I think 21 is still deemed legal age in Scotland ;)

sorry, couldn't resist :P

It dropped to $185 and going up some since. I'm glad I went on a short side today. Between Europe falling apart and those high profile surprises, something very sinister is brewing. I'm only long 2 positions: GDX and PNPFF and ready to cut it as soon as they fault.

Thanks Jeff. It's good to put life in perspective a little each day and be thankful for the time we have.

I just read Vad's excellent article on stops.
An excellent point is how trade size is the key to risk tolerance, not price.

He lists two standard trade triggers. There is a third, which is trend knockouts or pullbacks from established trends.

either way, it is price volatility that dictates where stops should be AND the size of the position.

If the stock in question moves $1 a day, then it is silly to place a stop within normal volatility or noise. Stops should be placed where normal price movements won't kick you out of a good trade. I generally look at a few months of trading and pick the largest price bar and use it (more or less...this isn't science it's part ART) as the indicator of normal noise. Then when I get a pullback and re-establishment of the trend (it can be up or down) I enter and place the stop outside of this normal price movement. Like most trades, you have to be willing to take some heat and perhaps exercise some discretion. Sometimes the best trades test your stop, then reverse and make big gains.

Vad's example of risk by size is excellent. If you have a $100,000 acct and you have a 2% risk, then $2000 is the what you risk (barring gaps). So if your stock can move $1 on normal noise, you probably want to place the stop outside of that normal movement, say for example $1.50. $2000 divided by $1.50 is your position size, or 1333 shares. There is more to account for, so this is just an example.

Traders should be aware, standard (popular) set ups like breakouts have a relatively high rate of failure as a lot of people use them, so stops might be a bit tighter and (nearly) everyone will be placing stops under the breakout.

I highly recommend Vad's article.

Hi All - Pretty long in Bakken explorers, junior golds and uraniums. Not too much joy today for us holdum types. This one confounds me with newfound volume and no news. I suppose someone knows something or perhaps it was just the nice run in the metal. Happy Trading

After hours Amazon trading down 30pts on lousy earnings report.

I made a comment on AEM last week.... thanks for all who chimed in with their opinion.

AEM announced excellent production levels for the 3rd qtr. They took decisive action in dealing with the problems
at the Goldex mine, writing down the worst possible scenario and took actions which may allow remedial activities at the mine. No one got hurt. AEM will also redirect the employees, to minimize the effect on their livelihoods.
IMO, they exhibited excellent management skills in dealing with the Goldex situation.

At $45, I think the shares are priced well for those who are longer term investors. I think minimum 30% gain is more than likely as gold moves towards $2000. A return to its old high ($88) could produce a double. I added to my position today.

I also like Osisko here at a bit below $12. They have their mine up and running now and are sitting on a good deposit. Perhaps they could be a buyout candidate in the junior space.

SLW also looks good here in the low 30's. If and when silver gets rockin.... their business model should produce great gains.

Peace

Vad,

Scotch tasting? MMMMMM.....

40 minute talk on China morass well worth the listen> Imbalances, mucho misallocated capital, punishing of savers to the benefit of borrowers, rebalancing challenges: Familiar story, but good macro summary for all to keep an eye on.
http://paul.kedrosky.com/archives/2011/10/michael-...

Good summary from comments section below the article:
"This is the most insightful, thought-provoking talk on global economics that I've heard in the last year. Pettis methodically lays out the problems inherent in China's growth model -- infrastructure investment exceeding the China's per capita GDP relative to the rest of the world, strong incentives to invest as real interest rates are negative 2-3%, transfers of wealth from the household sector (savers) to state owned-enterprises and real estate developers (borrowers) and the massive growth in loans, which have for now hidden the costs of today's projects into the future.

His key point is that the household sector at 34% of GDP (I didn't realize it's so low!) must grow faster than China's overall GDP in order for the household sector to comprise a larger portion of the economy. In order for this to happen he estimates that we will see an AVERAGE growth in GDP of only 3% for China in the next decade. This will allow consumption, one of the three drivers of demand (the others being domestic investment and net exports), to play a more important role in the economy.

Not to spoil the ending, but the implications are bleak for anyone leveraged to global non-food commodities (i.e. Australia). Infrastructure investment in China must be curtailed and made up with an expansion of household wealth in excess of GDP growth. Otherwise a major financial crisis, perhaps larger than the sub-prime crisis in the U.S. (recall the total cost of write downs was $1.5 - $2T) will ensue as loans by Chinese borrowers become unserviceable."

IBM is a financially engineered consulting conglomerate posing as a 'tech' bellweather. I suppose a woman could run this FDIC insured 'bank' with some modest oversite. I rest my case on my examination of IBM's rather convoluted accounting gimmickry.

If I recall, HP also said no to the so called glass ceiling.....and now
they are saying it again!!!

I wish her (Mrs IBM) well but I think she was just handed a basket of warm steaming cow manure. Her first dictate should no doubt be firing her accounting staff and the idiots that have blessed their numbers.

It would be interesting to look at the track record of women CEO's of S&P 500 companies over say the last 10 years. I'm sure that most of them were named 'Patsy.' The Indian Guru of Pepsi...is excluded for obvious reasons. Thirsty Indians (1,000,000,000) relish a goddess that provides carmel colored sugared fizzy water at a price that even a sudra can afford.

PC-ism has even prompted the Vatican to recommend a 'World Bank.' I can only suppose that the Pope is in need of Another Bailout!

Just my take on the Circ Comedia that has been indulged by 40 years of rampant bubble debt creation. Long may we roll it over, til we can't!

Yesterday I posted some weekly charts - $INDU was indicative of potential resistance. Today I've narrowed the time frame focus a little.

$INDU - the action was a little bubbly Monday - note JNK's relentless drive higher. Bust those bollinger bands and you increase the likelihood of a reversal shortly after. Yesterday was no exception and given the uncertainty pertaining to Europe, should not be of surprise. Note the below average volume on the pullback. Not time to panic yet.

Uncle Buck - I posted the Elliot wave count of a Minyanville author yesterday, suggesting support at these levels:

http://www.minyanville.com/businessmarkets/article...

The bullish divergence in the 4 hour dollar chart might bear out the author's analysis. Something to watch.

GLD - holds 40MA support in the 4 day time frame and bounces, increasing the likelihood - but not guaranteeing - support at these levels going into EoY. Jesse notes reduced open interest as commercial traders position themselves for new CFTC limits reportedly to be put in place early 2012.

GDX - is that a gravestone doji marking the top of this rally in my 4 hour charts? That and the bearish divergence in stochastics suggests a reversal for the miners. Test of support? Sympathy sell off on market fears for Europe? Who knows? If you were buying the Oct 20 bottom then there's no need to panic yet.

TLT - bullish divergence playing out in the half day chart. 4day shows bonds back above important support. Short-term drivers will determine the strength of any bounce here.

GMCR continues its plunge as the big boys drop it. AMZN might be next. The other leaders were in tune with the indexes. PCLN shows classic bearish divergence as it makes new highs. Daytraders' paradise as volatility continues. Speaking of which, $VIX half day charts show bullish divergence which is playing out. As Jesse remarked a couple of days ago:

If you are a daytrader and can make money playing the momentum in this then good for you. But I think that most people who attempt to trade these markets will make very little on net, and are more likely to lose money. Better to stay with the longer term trends based on fundamentals. This will get worse before it gets better.

Finviz futures shows the indexes up near half a percent at 2:45am. Gold futures just made its first attempt at 1720 resistance and failed. But the day has just begun.

Watch the dollar.

"I suppose a woman could run this FDIC insured 'bank' with some modest oversite." "It would be interesting to look at the track record of women CEO's of S&P 500 companies over say the last 10 years. I'm sure that most of them were named 'Patsy.'"

Misogynistic much?

http://on.ft.com/vfkuou

RENEGOTIATION OF CONTRACTS:

The rapid drop has opened a huge gap between spot prices and quarterly contracts, pushing Chinese steelmakers to demand a renegotiation of contracts. Traders said that some steelmakers were threatening to walk away from their contracts if miners refused to accept lower prices for October-December.

FALL IN CONSTRUCTION DEMAND:

The contract at the Shanghai Futures Exchange for rebar steel, commonly used in construction, has fallen 18.1 per cent since September to Rmb4,021 a tonne on Tuesday. Last week, it hit a year-low.

ALOHA!!

Silver Lake Resources(SLR:ASX) now has a "3" handle closing at $3.09AUD on good volume up 5.1%. Closing at another record high! Yesterday there was an intraday high of $3.16AUD. A 20%+ gain since the Whistler Conference 2011.

I did sell 10,000 shares @ $2.98 AUD, nearly a 3000% long term gain. It is still about "buy low and sell high" in the end whether it's a day trade or a buy and hold!

It seems the 2011 IRS TAX CODE is rewarding long term gains for lower income taxpayers. Only long term gains though! Just do the worksheet as the devil is in the details.

Seems we are getting the path paved to bring in more gamblers from the lower income strata, like a mortgage deduction for the real estate casino, only this one is not so public. We are headed to the day when holding any kind of global currency will be looked upon as a detriment to your long term survival. Store of value has been completely destroyed. Only a few of the frogs in the pot have time to notice! How soon before you can liquidate your 401k to pay your mortgage with no tax penalty? So many government mandated perks for holding onto those liabilities! Changing tax regs does not make our money less corrupt, only more. Adding more reform laws for politics and banking and the markets does not make money less corrupt either. Just recall Tacitus!

ALOHA!!

"So true."

Another truism is when you buy quality companies and quality management in production coupled with a MONETARY SUPER TREND at $0.10USD who needs stops! It is really an unexpiring call option! So thank you US FED and your able futures and derivatives agents for your intervention into PMs!!! Ben and Tim, you're on my Christmas list!

"When the way comes to an end, then change. Having changed, you pass through."- I Ching

Somehow I doubt Obama was thinking of the I Ching every time he used the word CHANGE! The truth is recognizing when the "way" ends.

The World has to see the monetary "way" has ended otherwise we can never "pass through". That can never be legislated by government as it must be the grassroots of a resilient community. Government is always and in every case the last bastion of unlimited HUBRIS.

Look at the Middle East ...

It was quite an eye opening part of the movie RUNNING THE SHARA when a Libyan government "expert" helped the team run through Libya. Makes me wonder if this guy is still alive. He is definitely another "expert" out of a job! EYES WIDE SHUT!

LINK: http://www.runningthesahara.com/

This movie proves recovering addicts will do anything for a fix!

Running 50 miles a day for over 100 days ...