Cara's Commentary & Community Chat, Tuesday, Jun 30, 2009

"Phosphorus Famine: The Threat to Our Food Supply"

http://www.scientificamerican.com/article.cfm?id=p...

http://blogs.wsj.com/economics/2009/06/29/70-oil-b...

speculators playing games.

Good morning.

New Coverage:

EXC - Oppenheimer Initiates Coverage with an Outperform. Price Target = $61
JCP - Robert W. Baird Initiates Coverage with a Neutral. Price Target = $29
NOK - BMO Initiates Coverage with an Underperform. Price Target = $11
QCOM - BMO Initiates Coverage with an Outperform. Price Target = $60
RIMM - BMO Initiates Coverage with an Outperform. Price Target = $100

The chart on SLW was posted yesterday morning so it's not up to date through yesterday's trading - but the pattern looks like it's taking form.

SLW chart: http://chart.ly/r9p559

Here's a chart of DUG. http://chart.ly/zmhgpm

Added at 13.82

Was reminded when I subscribed that I had already downloaded a test period. Remember that I didn't have a clue how to read a chart at the time. Better now. Lots of multiple overlays possible - sweet.

Craig- Is there news driving the drop in UNG (are contracts being rolled over)?

Might be better set-ups in the broad market today.

No positions right now, all cash.

SAN'A, Yemen - A passenger jet carrying 153 people crashed into the Indian Ocean in bad weather early Tuesday while trying to land at the island nation of Comoros. Search teams rescued a child from the sea, officials said, but there was no word on other survivors.

The Airbus 310 operated by Yemenia was flying the last leg of a journey taking passengers from Paris and Marseille

I'm beginning to think there's something wrong with these Airbusses. They crash harder than the Sex Pistols after a world tour.

ToddinFL
Download this pic of DUG last night [forgot which blog]. Lines up with your chart of DUG.

Interesting, Bev.

There are so many people out there who are watching the same charts and deriving different scenarios.

For DUG, I could see it pulling back a tad lower, maybe to 18ish or just slightly under. The other day I posted a chart of WTIC on either TwitPic or chart.ly (can't remember) where I saw a possible topping pattern.

Who knows how this will all play out ? I just watch the charts ...

Craig- A little busy with a work report, but back in at 13.85. I like the fact that this trade is not dominating the media still.

reverse stock July 9th, 1:10 on Faz and 1:5 on Fas

http://xml.10kwizard.com/filing_raw.php?repo=te...

Wow, look at APOL, DV, STRA, and the lot... (Schools up 5.69%)

:( Now you show me that - I'm in TBT now. Well, maybe it will be a short ride while the RS on TLT forms :) Nah...TBT is the right place to be for the longer term!

ERTS - Upgraded at Merrill/BofA from Neutral to Buy. $26 price target. Expect the company to exceed earnings expectations the next couple of quarters and also benefit from the launch of Sims 3.

I am tired of fighting the Fed. How are we ever supposed to win in such a rigged game?

Just when I was about to start covering my shorts, consumer confidence takes a dip. Boy, now that's timing. Unfortunately I'd also bought some KGC, so any celebration would be premature.

Thanks Bev- A lot more fun than watching my miners this morning...yikes.

I think it's just getting caught in the downdraft. The buck is soaring today, and the SPX has been dropping hard (14 points?) ever since the confidence numbers came out at 10:00.

Now you might ask why the buck went up when confidence numbers go down. Heck if I know.

"Just when I thought I was out, they pulled me back in!"

ToddinFL what does your chart look like for SLW? I still have a H&S on mine.

http://tinyurl.com/lnpxho

Geez, I've been stopped out of almost all longs.
It's not so much an effort to kill gold but and effort to strengthen $USD.
I guess it depends on which pointy end of your tin foil hat you wear to the front...

Of course now that I'm stopped out it clears the way for a rally.

1/2 way there...

http://tinyurl.com/m7wjjj

for their project, although all trend lines are heading down ( on small vol.).. just a toss out.. I'm not in, but looking for a reversal soon...

MarkW, I think you mentioned last week that you were expecting to get an update over the weekend. Could you share please?

too much bullish consensus on the gold boards, Jim Sinclair as much as i respect his efforts and calls on gold is calling for the US dollar to collaspe in 128 days.

too many people assuming support would hold and gold must jump above and beyond $1000 because of all this alleged money printing. i agree with Bill's take on Colin Twiggs and the resistance/support sentiments and how gold could move both ways.

not enough people asking "if all this money printing is happening and has been happening for so long, why isnt gold already much higher? and why is the US dollar still well above its lows of 2008?".

too much talk of the US dollar collapse, and hyper inflation. it may happen, but those watching the daily moves in the market act as if they can hit a switch and jump on the gold train. we have been in a monetary stimulus environment for almost a year, gold is not much off where it was last year, the USD is higher, and commodities are still struggling to retrun to last years levels.... explain to me what exactly the inflationists believe will happen as thus far, nothing has come true from these schools of thought.

remember that one, nothing has come true from the schools of thought that said inflation is coming, commodities are the place to be, gold will go to the moon and survive an equity crash. for the vast majority of gold bugs out there and you know who you are sitting on a pile of mining companies you must look yourselves in the mirror and ask why you still believe the US is going to hell in a hand basket while China still buys their bonds, does business with them, and ads on TV admonish people to buy gold because the US dollar is going to the crapper.... hmmmmm....

as always i side long term with the bullish gold camp, but for different reasons than many of them claim...

people talking about central banks holding down the POG are under the spell of forces that dont have your interest in mind. GATA and the like continue to chant manipulation but only when its downwards, and claim to have "inside" sources as if there exists a secret cabal of gold manipulators that would leak info to the largest gold conspiracy group in the world... for free.

wake up gang, gold is manipulated all right, but in both directions, and so is everything else, so in a sense nothing is manipulated because the game itself is manipulation. next time someone shouts that bankers dont want higher gold, ask them:

1. if this is true, why would central banks hold so much of something they want to go down?

2. if this is true, how did gold triple in price the past 8 years?

3. if this is true, why do nations like Canada, south africa, russia and the US dedicate billions to precious metal exploration and acquisition if the underlying asset is something they wish to see go lower?

4. if this is true, why do we infer that they will successfully bring the price down? we all believe CB's to be manipulators, could their anti-gold rumblings be just a false flag? or even worse a double false flag?

5. if this were true, it would represent the first and only instance in teh history of political economy where the worlds powers not only agreed unanimously on something, but acted in complete coordination to bring it to fruition. if the CB's are scared of a higher gold price, it would require that any and all CB's wish gold lower, for the first to break the pact and acquire more gold would break the chain...

6. but wait... banks are buying gold, china is buying gold, so why isnt the gold price going higher and higher? why is it still over 2 years since its last high? CB's are either successful or have no control over gold... or maybe, just mabey, they have successfully convinced us that they hate gold, but are fearful of its possible rise, adding more luster to its already precious nature....

by then the person will have walked away or run away from you because they have never met an anti-gold bug so well armed against their sad tirade of unproven emotional arguments.

remember, most gold "experts" are wealthy selling newsletters, not trading gold according to their own predictions otherwise they'd be just like you and me on a free message board asking what the group thinks of ABC-123 gold on the Venture Exchange... and i maintain there's better TA and fundamental analysis freely exchanged here than most paid websites...

peace

Doc,

Great post!

Just curious, you state "as always i side long term with the bullish gold camp, but for different reasons than many of them claim..."

What are your reasons? If it is not inflation or the FED driving the POG then what is, in your opinion?

Thanks.

Hi Chris- Will do after work...

TIN - Just how much longer can this corrugated fiberboard manufacturer continue to defy the forces of gravity? One might think consumer goods manufacturing has fully recovered judging by the price of this stock (Formerly a part of the ailing Guarantee Financial).

Just what gives?

Huge volume the other day was Russell 3000 addition of stock. I just sold all at 3.81 bought at 4.07. I see no short term catalyst for the stock here.

The most interesting thing is the institutions that own it are solid, but as always its OPM.

My bad the other day for not thinking of the russell re balancing the other day. I should have sold the day I bought in after hours when it essentially closed unchanged for the day on huge volume. Again my bad, but glad to be rid of it.

It is kind of a screwed up day as all my positions are down. I'm very tempted to sell all but my gold holdings and re-access things with a clear mind.

i remember reading about china has it's gas price fuel price hike...
shouldn't...

Gold has bumped its head against $1000 FOUR times, whereas gains from the start of the decade to $1000 came relatively easily. The anti-gold forces have drawn their line in the sand. Unless they lose control, I think we're stuck~! Gold only gets interesting if/when it breaks and holds above $1000.

If we're headed for deflation, that seems likely. If we're headed for double digit inflation, that seems likely. But what if our fate is stag-flation: persistent, moderate inflation, low to no growth as far as the eye can see?

In that case, I can see the anti-gold forces maintaining control, and keeping the yellow metal under $1000.

There could also be a curious longer-term turn of events. China is now the biggest gold-producing country, stealthily accumulating reserves. Russia wants to regain its former glory as lead gold producer (as it was in 1849). Among oligarchs, getting into gold mining seems to be "flavor of the month".)

Both countries are talking about a role for gold in future international trade, perhaps alongside IMF Special drawing rights, baskets of currencies, etc.

If this gradually comes into being, would China and Russia want to put official gold on their books at the current US rate of $42/oz.? NO. They'd want to book it at market prices.

Who would benefit from this? Not only Russia, China and gold investors - UNCLE SAM would - to the extent his "world's largest gold" holdings at Fort Knox are really there, that is. The value of these holdings would increase by 24 times.

So, if and when an eventual de-throning of the US$ looks inevitable, maybe the US would hop on board, cease his anti-gold market intervention, and proclaim, "I'm going to be SOLVENT again. God bless the yellow metal!"

Dumped the last of naked short puts for small profit. Always looking to get back in however, so hopefully GLD will become quite oversold at which time I'll start building another unhedged long position

1) Central banks use gold to manipulate price of gold.
2) Central banks will use the point of resistance,whatever that point might be in time,to hold price down.
3) They need the physical gold to hold down price, inorder to keep their currency up.
4) False flag
5) All CBs are holding on to power by keeping the price of gold down, it is in all their self-interest to hold the price of gold down, all nations are printing money.
6) Only by manipulation can the banks or countries have it both ways, buy gold and used some of it to keep the price down.

Just an opinion, I did go grocery shopping this weekend and food seems awfully high.

"Gold only gets interesting if/when it breaks and holds above $1000.

If we're headed for deflation, that seems likely. If we're headed for double digit inflation, that seems likely. But what if our fate is stag-flation: persistent, moderate inflation, low to no growth as far as the eye can see? "

I'm not quite sure I could support an argument for how gold would increase in value over the dollar in a deflationary environment. I would think the opposite would be the case.

As for stagflation, doesn't the standard cure usually involve much higher rates?

It recently occured to me that since the recent versions of Waxman-Markey Carbon legislation seek to levy the steepest taxes on upstream refiners, the recent bull run in oil may be a response to the changes in the bill which previously sought to levy higher taxes downstream (utilities,etc.)

In other words, since the upstream refining production will be heavily taxed (within the current version of Waxman-Markey), the oil market is pricing in those carbon tax costs into the NYMEX Crude Oil price. The extra taxes will be levied in the total cost at the pipe in Cushing (rather than further downstream) thus there may be some extra perceived value in the long end of the crude oil curve.

Pookie -

Gold was the best performing asset in the great depression - the world's largest ever bout with deflation. You might reply, "ah, but the price of gold was fixed then, while all other prices declined. Now the price of gold is not fixed."

From what I've read, people during the depression expected the price of gold even to rise. And given the unprecedented worldwide money printing we are experiencing, I think the millenia-old, pro-gold emotions in the parts of the world recently gaining riches (China, Russia, India, Middle East) would come to the fore.

Of course, history never repeats, it just "rhymes". And thinking about such macro changes is mostly speculation. Still, I think gold would do better than "trashed cash" in a future deflation. Who knows if I'm right. The benefit of such speculation is mostly in stretching your mind to encompass various possible scenarios. Only the evolving charts will tell us the truth ...

Since there are a lot of comments on gold, the following is taken from a Market Edge Weekly report last Friday:

"Gold has been receiving a fair amount of play in the financial media lately with many observers debating its future direction. Currently, persuasive fundamental cases can be made both for and against gold. At times when there are valid arguments for the bulls and the bears alike, technical tools can be extremely helpful in determining an investment strategy.

In a nutshell, fundamental analysis lets you know what people are saying. Technical analysis lets you know how people are actually voting with their investment dollars. Both schools of analysis are important to making investment decisions. If forced to pick just one, this writer prefers technical analysis because sharing your viewpoint is one thing, where you put your money is more telling. Fortunately, investors don't have to choose. Investors have the luxury of combining both branches of analysis to maximize profit potential.

While the fundamentals are split when it comes to gold, the technicals offer an unequivocal picture. The charts depict a double top for gold. The first top was made in late February at $993 an ounce. The second top occurred on June 1 at $987 an ounce. Gold now trades near $940 an ounce. Thus, regardless of whether one is a bull or a bear on the fundamental arguments, the course of action is clear.

From a technical perspective, one would not want to go long gold unless and until it can breakout above the double top at $990, the price area which it has been unable to surpass in more than year. Allowing for the obsession that markets have with hitting round numbers, add $10 to the double top area of $990. Disciples of technical analysis would want to go long gold if and only if the precious metal closes above $1000 an ounce. At the same time, that level of voting with investment dollars would be reason for bears to cover short positions, if any. Under the same reasoning, gold would have to break under $750 an ounce to make a convincing bearish case.

Until one of these two events occur, we will continue to have a range bound commodity indicating that neither the bullish case nor the bearish case has been adopted by the market."

I wonder what effect the outcome will have when they begin to realize the a) economic stifle or b) inflationary effect the new energy taxes will have.

Are these taxes scheduled for levy prior to a) economic recovery, or b) in response to recovery?

"Some central banks are selling gold, price manipulation?"

Perhaps they are simply paying their debts in gold because their creditors are demanding something other than paper?

CP: "I always do my best to throw them as many curve-balls as possible."

Hah! _I just do my normal thing - trying to throw fastballs - and they end up as pathetic 'lil curveballs. :P

"Just how much longer can this corrugated fiberboard manufacturer continue to defy the forces of gravity?"

Maybe all the foreclosed homeless are building corrugated fibreboard shanty towns? Or maybe it's useful in packing up stuff when moving out? Or maybe it's just being propped-up because it's "green" manufacturing technology?

I would ask Dave- I think he has a handle on which positions can be driven up to keep the sector afloat.

does it stand to reason that corn feed will be in greater demand ? Tapioca, cassava and palm kernel are substitutes, but don't carry the same protein... so, maybe SEED would benefit ??

Dave, I asked 2nd if he had any clues about SRS and its being lower despite lower housing stocks in general

and he said "I would ask Dave- I think he has a handle on which positions can be driven up to keep the sector afloat."

It is not down as much presently,1423 ET, and this is on low volume, I guess for this time of day. Do you agree? What do you see? I feel housing is not in as great a shape as CNBC remarks even today.

Chart: I was looking at the gallery view and sharp chart and it looks like SRS fell in early march, which is when the latest bull started...what do you make of this?

TIA

SRS isn't about home builders, its about REITs - shopping malls, commercial real estate, etc.

XHB is an ETF that's more homebuilder focused, but it's not a 2x. I don't know of any 2x ETF for homebuilders.

My feeling is that XHB (and homebuilders in general) are on the cusp of trying to decide if this bear market rally was all just a nice interlude and now it's back to the cellar, or if the green shoots of recovery really are going to take over. Right now it's on the fence - probably along with the rest of us.

EDIT: you might consider how low 10-year rates (very helpful to drive a housing recovery) can exist alongside an actual recovery. Honestly, IMO what will cause housing to recover is an improvement in nominal incomes. Higher nominal incomes means ability to service more debt. And since housing is a debt-financed purchase, increased ability to service debt is critical to higher home prices.

NYSE Regulation team has announced the Decommissioning of the Daily Program Trading Report (DPTR)

http://tinyurl.com/myud48

If you want to call and complain...

Robert Airo, Senior Vice President, NYSE Euronext at (212) 656-5663 or
Aleksandra Radakovic, Vice President, NYSE Regulation at (212) 656-4144

looks like a sell based on trendlines and the hs top, but who knows with the way these markets have been. The usd seems to have found support per the long term chart I use so maybe the tse chart is correct. A summer correction ?

Going to watch the finish from the sidelines.

Thanks for the heads up 2nd....

ERX out at 29.31

Wonder what day 1, Q3 brings?

I'm betting up, cause everyone else is betting down. There appears to be no one to stop the black boxes. Not sure anything changes tomorrow.

SPX doesn't look like damaged goods in my amateur eyes.

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=1&dy=0&id=p22235562359

night all.

Looks like the S&P decided to exit near the 920 mark rather than the EOQ target on my road map. Mmmmm.... Next week I expect will be the moment of truth. This chop chop back and forth has gone on too long.

Dave,

Yes, servicing debt is critical. I believe it's ALL about jobs right now.

Obama can promise jobs, but aside from the increase in people working for the government the continuing losses show a sorry picture.

Several secular bears are highlighted. Makes it look like ours ain't over yet:

http://www.ritholtz.com/blog/2009/06/monthly-sp500...

with corn reversal today / with crude reversal today

"Gold can't rally"

Well, today balanced out yesterday. Current positions are holding fine.

Buy Signals: PFF, EWZ, and XLP
Sell Signal: SSG

Note that the 2x inverse funds are all getting sell signals. I hear all of the head and shoulders talk about the big drop coming, but I think more upside will come first. Hope so!

Bill, hope your shoulder gets well soon.

MK

Thank you Bill...glad you are doing better.

I just play it one day at a time. I hope my signals do help some of your bloggers or at least inspire them to do their own research. One thing I learned early on (the hard way) you must take emotion out of it of the market will destroy your portfolio...

I am eager to buy into financials, but it is just too early.

MK

How many times in the past year has it paid off to wait? What if you had exited the market at 1500, and done nothing since, apart from read the daily headlines?

Waiting is hard work (albeit of a very different nature).

I've traded almost every day the past two months, and all I really have to show for it is an increase in sleep debt along with some guilt over lack of time spent with my family. To add insult to injury, adding up a string of minor losses puts me down almost 2% since mid-May. Is there a rat race for traders?

I'm going to try trading the forest in place of the trees. Taking the minimalist approach. I'm guessing I'll be happier- hopefully more successful. We'll see.

100% cash. And headed for the trail instead of the Nikkei ;)

I sent you an email, but haven't heard back. I'm ready to settle the bet.

Hmm, you guys make some good points. Trading in a trendless market, where only HB&B knows which lucky sector will receive the rotation in, is a recipe for losing money. Something to think about.

2nd/Dave/Mac/David- Glad to see I'm not alone...For the past month I've been buying counter-trend stocks looking for a 5-8% gains. This has worked fairly well, but takes a lot of time and effort. If I get trapped (SLW/AUY), no problem as all of these positions fairly small and still about 70% cash. So I'm only cashing winners (TBT, KGC, UNG, etc) while I wait on the others.

So right now it's back to the same...TBT, SLW, AUY, KGC, UNG, ERX. I expect to cash ERX tomorrow (currently +3.43%) and perhaps UNG. AUY/KGC is a wash and SLW is down 7.28%. All positions sizes about equal. I'm looking a little further down field with TBT.

Keeping a close eye on these tomorrow...

Has anyone heard of Shiller's short and long individual home price ETF's: UMM (Up major market) and DMM (down major market)? This sounds whacked! Man, oh man, do investors need to return to the basics of investing - you know: savings, interest, dividends, compounding, value, growth, risk, etc. I hate to think how much malinvestment is being made in these kinds of speciality ETFs and what a huge drain it is on the economy.

http://tinyurl.com/m4dnsk (Shiller on Bloomberg)

LOL! One family is enough for me....you'd do better with the pick. When I mentioned it it was approx. $25.25 earning roughly 7% div ($2.00 annual, $.50 quarter) and went to $27. Recently pulled back to $26.21, today $26.50 or so.

Consolidation continues. The new expected daily range is between 915-935 as can be seen on the 1-mo/60-min and 2-mo/60-min charts. The 8-month/daily chart shows that the SPX is currently above the 20-day MA. For a head & shoulders (H&S) pattern to qualify, the right shoulder must be a lower high and the neckline break must be confirmed. Leave your mind open to the possibility that we may not even be forming a H&S pattern. The market remains 'neutral'.

I've also added the SPRD select sector charts, and collectively as a whole, they support my neutral rating on the market. The sectors are not moving in tandem. The materials and energy sectors may be forming small bear flags. Health care, tech, and utilities are in ascending channels. Cons. discretionary, cons. staples, financials, and industrials are in neutral ranges.

http://weeklyta.blogspot.com/

Take MK's buy and sell signals as your guide KC. He's not keen on the leveraged inverses as of yesterday evening. Shorting on an intraday basis might work. But after this whiplashing reversal its clear that caution is required.

Thank you MK.

A little long overdue reading on chart signals with your buys and sells is a great aid in recognising signs of reversal. Obviously in this tight range bound one needs to take the signals with a grain of caution, as I found out today.

But I would argue contrary to your assertions that you hope your signals help or at least inspire. I want to be inspired to learn, you know, teach a man to fish ...

What's your notion of "too early" on financials? The BB's have tightened up considerably on XLF. Are you awaiting a breakout anytime soon? Or are you thinking fundamentals?