TCM Notes : 4/30/09

• FOMC came and went, and all I got was no interest on my cash! We are still quantitative easing to the tune of 1.25 Trillion for agency mbs paper, 200b for agency debt by the end of the year, and 300b for treasury securities by autumn. By them not expanding the amount for Treasury paper TLT broke down, and TBT shot up. Clearly breaking out of their ranges. Traders are calling the bluff of the Fed as they doubt that the Fed can monetize all that paper the Treasury is pumping out. However, with 30yr fixed rates at 4.8%, any pressure on that to the upside could evoke the Fed into an expansion of their Treasury securities purchases. The saga continues.. http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm
• Ken Lewis lost the chairman's role at BAC. At least he still has his job......for now. From banker of the year to sacrificial goat. Way to go there Kenny boy!
• DNDN : Keeping with this gunslinger stock it reopened today near 27 and faded into the 22s. Up 94%. Those lucky bastards that bought that 40 second free fall Tuesday before the halt.......kudos. The casino is open!
• Copper < $2lb again. Leading many to blame the "flu pig" and claim the move seen in base metals recently was nothing more than a bear market bounce.
• Chemicals industry is starting to rebound.
• MGM : "waiver of financial covenant requirements and leverage restrictions on its $7 billion senior credit line has been extended to June 30. The previous temporary waiver was set to expire on May 15." Article is in the shared items section. Bankruptcy has been avoided for the moment, so they got that going for them.
• GDP contracted 6.1% is a number I had thrown out 6 months ago. I think Jamie Dimon is where I got that from and it seems to have been spot on. The other thing that accompanied that prediction was that it would be the trough of the cycle. Things are stabilizing somewhat so we'll see if this is the case.
• Remember when we were oversold and it stayed that way for an agonizing amount of time? Well markets can remain overbought for similar periods. And the futures are indicating now that the target of 88.40 for SPY will be realized today.
• Still following ideas mentioned in previous notes.
• Oh, and Chrysler may file for bankruptcy today. 40+ hedge funds would not budge on their debt they hold. Word is Obama is ready with two speeches.......just in case.

TCM Notes : 4/29/09

• Today is a FOMC statement day. This is not the non-event that some traders are thinking. Of course they aren't going to change their 0-25bp quantitative easing stance, but they may just expand that balance sheet some more for an acronym of their liking. And they could ratchet up their monetization of the Treasury department with a few more 100 billion here and there. So those long TBT or short TLT may be in for quite the move tomorrow following the statement. Remember what happened last time? Perhaps those 3x beta treasury etfs will get some volume off the announcement. Those are not seeing the sponsorship I thought they would, but it's still early.
• Amongst all this are earnings announcements from a broad swath of companies. Too many industries to name, but Commercial RE is going to be in play tomorrow for sure. http://www.earnings.com/earning.asp?date=20090429&client=cb
• DNDN : Did you see the reindeer games played in this one yesterday? This is why I choose not to play in biotech. It's a crap shoot. Obviously there was a rumor floated that ran contrary to the actual release of the Provenge data. This resulted in the stock breaking from 24 to 8 in about 40 seconds! Even a stop loss wouldn't have saved you. Stock was halted. Thought I saw a 22 cross in the after hours, but I'm not sure if it was legit. We'll see today what happens. These are the types of plays that keep traders focused on the action, because they prove that anything can happen in a market dominated by fear and greed. And sometimes fundamental data.
• VRTX saw heavy call buying at the May 35 strike. Rumor is JNJ is sniffing around. Caveat emptor.
• CBG : my notes say, "is it time yet?" They report today and I'll tune into that call. More than likely the answer is no, but some of the big names are getting off successful secondaries. Like I said earlier, today we'll be hearing from PLD, BXP, BDN, AVB, and several others.
• Arlen Specter is a disgraceful old fool. A populist chaser! Doesn't want to ruin his track record. I find that laughable since his career path was to be a lowly bureaucrat! I loathe all of these types.
• IBM is giving the nod to BRCD as far as switches for servers are concerned. CSCO getting into the server market has made IBM uncomfortable, so they will not aid CSCO by buying their gear for their stuff. HP is mad about it too. This benefits JNPR as well as they replace CSCO as a supplier. Would it be wise for CSCO and EMC to merge now? Hmmm.
• STAR saw profit taking on heavier volume after a Cantor Fitzgerald downgrade. The downgrade came b/c of the analyst's 19 price target. My target is the 200dma of 21. And that is just an intermediate target. Demand for wireless data services is not slowing down. My guess is their trading desk didn't have enough of the stock yet.
• I've seen too many articles about the strength in TIPs is signaling inflation. Could be. You know what really signals inflation? Velocity of money. And we still don't have that yet.
• David Tice of the Prudent Bear Fund was interviewed and he is still as bearish as one who runs a bear fund can be. He claims it will get worse b/c there was no capitulation that took place, and that retail sellers have not sold all yet due to the recent rally. SP500 at 400 is what he was espousing. Out of all his talking the chart that accompanies his fund displays one gigantic head and shoulders topping formation. And charts while they can trick you for extended periods of time. The truth always emerges at the the most inopportune time. Depending on how you are positioned!
• As of now Uptick Fever still persists. SPY closed Tuesday on it's weekly pivot of 85.57. 88.40 is R1 on a weekly....which would be new highs. Keep that in mind. And perhaps by coincidence SSO and UYG both are only .04 under their weekly pivots. SSO weekly pivot 22.72. UYG weekly pivot 3.35.
• 71% of SP500 stocks are above their 20dma. Big money still pushing and supporting.
• MELI takeover chatter was muted by comments from EBAY via their CC the other day. There's a snippet on that in the shared items to the right.

TCM Notes : 4/28/09

• There was nothing of any substance in my notes for today.
• Unless you want to know that I watched The Beautiful Truth recently and it makes me very upset with MON, DD, DOW, SYT, Bayer, and Con Agra. The fact that these fascists are working on seed termination technology is not surprising to me at all. Seeing as these are all herbicide companies that want plants to be able to withstand their chemical applications. The GMO (genetically modified organism), msg, and all the crap these corporations are putting in our food is literally KILLING US. MSG is the crack of the masses. And it's in almost everything that's not 100% organic. http://en.wikipedia.org/wiki/Monosodium_glutamate
• The Top Gun incident with AirForce One in NYC is just another example of how this administration will do anything for a "photo-op." What's sad is America is run on almost nothing but photo-ops, bullshit, and scandals. And I don't see that changing anytime soon. If ever. Of course they'll say, "the people couldn't handle the truth." To which I say, "they can't handle the reaction of the people when they finally tell us the truth!" So they beat us down with lies, and more damn lies until the day comes when they finally give us the truth. And the people have nothing more than a complacent sigh of relief. Pathetic. I digress though.

TCM Notes : 4/27/09

• Swine Flu fears are all the rage across the headlines. Homeland security is involved now. It's rattling the overseas markets, and US futures are pointing lower. There is a probability that we gap lower on the open and trade higher. However, since we've closed strong the last several sessions we may have another S3 close like we did last Monday on 4/20. Only Mr. Market knows.
• John Thain cares only about John Thain. Never forget that. Because he won't!!! Smug jerk.
• Waiting for leaks to come out of the banks involved in the stess tests.
• Looking for trades in SSO and UYG. S1 or S2 levels on the weekly pivots would be my zone. S2 would be in the zone with a 38% retracement from recent highs, and would correspond with the 50dma. So the support is defined clearly.
• Market remains in a confirmed rally based on March 12's follow through day, with distribution days still keeping their distance. Of course this could change this week, but it's better to trade with the trend. Which remains positive still at this moment. We'll see if the market catches the pig flu very soon.

The Patriot and the Banker by Ambrose Bierce

A PATRIOT who had taken office poor and retired rich was introduced at a bank where he desired to open an account.
"With pleasure," said the Honest Banker; "we shall be glad to do business with you; but first you must make yourself an honest man by restoring what you stole from the Government."
"Good heavens!" cried the Patriot; "if I do that, I shall have nothing to deposit with you."
"I don't see that," the Honest Banker replied. "We are not the whole American people."
"Ah, I understand," said the Patriot, musing. "At what sum do you estimate this bank's proportion of the country's loss by me?"
"About a dollar," answered the Honest Banker.
And with a proud consciousness of serving his country wisely and well he charged that sum to the account.

Ambrose Bierce aka "Bitter Bierce"
http://en.wikipedia.org/wiki/Ambrose_Bierce

Fantastic Fables by Ambrose Bierce 1898



One of Bierce's more famous stories to which I recall reading in the 8th grade is "An Occurence At Owl Creek Bridge." The Twilight Zone aired the following episode on February 28, 1964 putting a cinematic backdrop to Bierce's well written story.



No subtitles, but also no sound as this uploader chose to put a haunting soundtrack over the original film.

TCM Notes : 4/24/09

• "Commercial-property loans, including construction and development, account for 22% of American bank loans, up from an average of 14% in the 1980s and 1990s."
• Does Time magazine piece confirm the double top in the VIX from October - November 2008? http://www.time.com/time/business/article/0,8599,1893085,00.html
• CME reports they saw increased volumes from algorithmic traders versus others. So those that don't believe how much power these quants can wield. The proof is in the volumes. All though they got it handed to them on the March up move. Couldn't happen to a nicer group!
• Coercion to commit securities fraud? Why that's our plan to instill confidence!!! Seriously though you may have heard about this. Ken Lewis wanted the Merrill deal rescinded. M.A.C. denied! Andrew Cuomo is heading down a path he may soon regret. The way this administration is going he may find himself up in Washington being asked to keep quiet. When I was throwing out comparisons of Paulson's tactics to those of J.P. Morgan it seems I was dead on. Bernanke was involved but has invoked the bank examination privilege. Now there's talk of indictments for Lewis, Paulson, and Bernanke. That's the type of noise that doesn't instill too much confidence. More than enough to come. Read Mish's piece on the shared items section.
• IMF looking for a first half recovery in 2010 as long as there is resumption in credit flows. Looking for a 1.3% reduction in 2009. 1.9% expansion in 2010.
• First time in 60 years the global economy has shrank. World trade forecast worst collapse since WWII.
• Treasury is looking to put out 101 billion in bonds next week. Most of which the Fed will be buying with their 300b commitment.
• Drugs and Tech are where all the M&A activity continues to be. Why? Because they have cash, and growth. And that's what all this is about. Cash and Growth.
• Correction on distribution days. 3 for Dow, 2 for S&P500, and 1 for nasdaq.
• And for those that like watching video on their phone. STAR (mentioned the other day) reported their quarter after the close and the stock is trading higher by 10% in the after hours. IBD has this one as a cup with handle setup with a 17.85 buy point. Traded 17.50 in the after hours. We'll see if it can break out on high volume today. Usually these little "hot" IBD stocks that are this price go to 23...then 28.....then 30+ and then you get a major correction. It is up more than 100% from it's lows, so be very careful if you trade this one.

TCM Notes : 4/23/09

• End of day reversal for SP500 resulted in a higher volume distribution day number 3. 5 to 6 of these and we have a problem.
• Mish pointed out an important fact that will go overlooked perhaps up until May 4. THEY ARE LYING TO YOU. Government? Lie? Never! So the leaks will start in earnest on Friday. Look for more catch words, fantastic rumors, and creative headlines in the trade rags and on the tube. I think the Fed along with their largest depositors (the big 19) are about to go on a government approved acquisition spree. The regional players that are weak are about to become very vulnerable. If they are not forced into a deal with a larger bank then they will certainly be diluting the current shareholder base on an equity raise. In Mish's piece (found in the reader on the right) a simulated test using potentially low end metrics produced 56% reduction in Tier 1 capital. Dilution to follow....again. Good thing that yield curve keeps steepening. They need all the net interest margin they can get. http://globaleconomicanalysis.blogspot.com/2009/04/leaking-and-reeking-of-stress.html
• Tech has most cash and least borrowing relative to total assets among 10 industries.
• AKAM calls are in play....stock is above 200dma,86,50,20,and 9. It broke out on high volume back in February.
• ANR has call activity and rumors around it. Tightening up on a daily, but the weekly needs to clear 22.16$ to get anything really going. ANR and CLF were trying to do a deal last year early on before everything turned south.
• 15% cash to market cap was a ratio I heard thrown out on the SP500.
• Proshares is rolling out 3x beta products now. Seeking approval on 27 new ones. There was a good piece on how these leveraged products are influencing the last 10 minutes of trading as swaps have to be balanced into the close. As usual preferred clients get the nod first on what's out of balance and front run the individual stocks the etfs are comprised of. If you think that sort of thing doesn't happen every second of the day you should leave now while you still have your shirt! The piece went on to say on trending days going into the close there will always be one massive final push to a closing high or low.....depending on the trend for the day. That strategy is a little tougher on a chop day like yesterday, but the signs were there going into the close as the re balance took place to the downside. And what usually happens is a gap in the opposite direction the following open.
• STAR has a roe of 24%, 1.17 cash flow, 0 debt, 57% management ownership, and probably has legs to 21 in the short term. EPS numbers on this one have been and continue to look strong going forward. Shares have doubled since November, and it's on the IBD screens. So be aware of the crowd.
• LPX is seeing call bets that it will be at 5$ by mid June. I'm thinking since HD is looking better there may be logical reasoning for this play. Next thing you know I'll be saying XHB is breaking out on a daily and weekly chart. It is? Damn. Now I've gone and done it! HD is at resistance here at 26 on a weekly via the 86dma. XHB has another 1 to 1.5$ to the upside before serious resistance on a daily and weekly. LPX looks like clear sailing to 4.62 - 5.50 range.
• LFT continues to move higher since mentioned. YTEC could be interesting if money rolls out of LFT and goes towards YTEC. Last time Yucheng had heavy upside volume was during the final throes of the bull market 2007. It doubled so fast....perhaps a redeux is in order. Depending on how it finishes out the week, it could be a candidate for a 3 weeks tight pattern. With the 9dma looking to cross over the 20dma it could be a powerful set up.

TCM Notes : 4/22/09

• So Geithner says "most have adequate capital" and then the "Geithner Goose" of the market ensues. That's fine, but now the news tonight is that the Fed is favoring "securities based" big banks in the stress test. And regional banks are seen to be the ones who are going to be in trouble as they have a higher percentage of loans. Loans that continue to come under the non-performing category. RF today said they have 1.6b non-performing. Loss provisions continue higher, and we still have details about the test coming Friday. Results May 4. Volatility will continue. Also, I read that every $1 short these banks are on capital they have to shrink lending by 8 to $12.
• ORCL broke through the 19.45 level, so we'll call it a triple top breakout and flip to a long bias. I didn't realize that the deal is about strengthening their SQL language. Now they have IBM scrambling with rumors of a hookup with SAP are now surfacing. When I'm wrong I'll admit it, so ORCL is not a short. I forgot Larry Ellison is a student of the Art of War. http://en.wikipedia.org/wiki/SQL
• Same can be said about DNDN. This thing had a 50% gap up and has boxed out the 8 to 16 range. Now it's locked between 16 to 22 with the time stretch in the 9dma closing in another 1.20 to 15.20. So 16 will be clear support soon, and as the averages catch up the market could keep in trading in a channel of 16 to 22.
• Bob Shireman is the new deputy under secretary of the Department of Education. He is the founder of the Institute for College Access & Success. They seek to study the negative implications of rising student debt levels. This is what the shorts have been positioning for and Credit Suisse cut the ratings on APOL, ESI, and LINC today. Regulation to come. Margins to compress. And potential criminal conduct to be reviewed by some for accounting shenanigans.
• SEA ~ FAN ~ TAN. No this is not a children's book line. It's the lazy approach to Shipping, Wind energy, and Solar energy plays. All starting to see improving bases and the beginnings of trend changes to the upside.
• DAG vs. AGA : Soft commodities here. DAG gets you long .... AGA gets you short. DAG gets the nod here as we head into the beginning of the growing season. These are double beta notes.
• OCN picked by Treasury for foreclosure mitigation.

TCM Notes : 4/21/09

• Well that comment on "loan to common equity conversion" caused the bid side of the market to dry up yesterday. While it seemed like a distribution day NYSE volume was lower than Friday's session. The Nasdaq as well skirted a distribution day yesterday. How? Volume was clearly higher than Friday's and Nasdaq was off 3.88%, so how does that not qualify. IBD points out you need to remove the excess volume seen in ORCL and JAVA. Once that is adjusted back to average volumes then Nasdaq volume comes in lower than Friday's. Which leads me to.......
• ORCL / JAVA for 7.4b or 9.50 cash. What is Larry doing? Bailing KKR out of a stupid investment? Some may think the candle formed Monday in ORCL is bullish. I beg to differ and if 17.45 is violated a short to 15.25 could be warranted. This deal somewhat explains the double topping action recently seen on a daily at exactly 19.45. Perhaps some folks knew a deal was imminent? Nah. That type of stuff doesn't happen on Wall St.
• The FAS/FAZ featured last Thursday at about $9 each has seen that spread blow out as of today. Equal dollars were deployed and equal amounts of shares were achieved. This one will be interesting to monitor because we will get to see the negative compounding workout on these. Now that FAZ is above 11 and FAS below 7 this could get interesting on 10-30% days. Target is 40 for either one.
• DNDN had a blowout move on provenge news last week. There is still short covering happening at these levels, so those buying up here are in for a rude awakening when that pressure subsides. Analyst fluff could keep it buoyed, but chances are their firm's trading desk is selling upside calls and buying a put spread. They wouldn't! Oh, but they would! 9dma is at 14 stock is at 19.52.....that's a time stretch if ever there was one. And they are aways off until they have trial data. I don't do drug companies because of the headline risk involved. You can get rich or blow up just like that. Perhaps that's a foolish view, but doing this for awhile now I've seen a few of these things. They are literally lottery tickets.
• A new etf focusing on convertible bonds is available now. CWB. Consists of BAA3/BA1 rated bonds. The pitch is it offers the safety of bonds with the potential gains of a stock. The thing is if it saw many defaults, or some other factors the holdings may never convert. Again with these new issues. I like to see some interest develop through increased volumes, then moving average development, and ultimately a chart pattern. Only then can I measure risk/reward on these ideas. As of the moment it's just an idea. Only the market can tell if it's a valid idea.
• Seems my prediction of the IMF becoming the Fed of the world is gaining acceptance everyday. If you'll recall the Fed's balance sheet was 800b going into the crisis. Now it's over 2 Trillion. G20 decided to give the IMF an "allocation" of 750b! Taking their funny money is still seen internationally as extreme weakness since they are the global lender of last resort. Folks don't know about the Fed enough to wrap their heads around it though. Just know their agenda is not aligned with yours. More than likely they will be a seller of gold. http://en.wikipedia.org/wiki/International_Monetary_Fund
• Speak of the devil : http://www.cnbc.com//id/30319965

TCM Notes : 4/20/09

• Slide of hand nationalization is creeping back into the investment mosaic after an unnamed official said they could avoid asking congress for more money by converting the loans into common equity. That's what I call dilution on the horizon, and they may very well tell the "big 19" that they can't give the money back right now. We'll have to see how Mr. Market feels about this.
• Details on stress test this Friday. Results on May 4th.
• Under the radar last Thursday Direxion launched the 3x leveraged Treasury etfs based on the 10 and 30 year bonds. 10yr bull = TYD, 10yr bear = TYO. 30yr bull = TMF, 30yr bear = TMV. The volumes are non existent at this point, but I think that's do to nobody knowing these things launched. Look for the volume to pick up dramatically from this point forward. So far it seems the 30yr bear, TMV, is getting the attention. I suspect this will continue as even the Fed has said it's harder to control the long end of the curve. What's a good price on these? I don't know. I need to see a chart pattern/ base/ or moving average support develop before I can get a feel for risk/reward. This is essential with these types of etfs no matter how worthy the theme may seem.
• Adding to the Treasury theme for me (and perhaps conflicting me somewhat) are my notes from this evening. Supply of Treasuries only matter in a bear market, and the safety of guaranteed money is still functioning as a haven for many; despite the rally we are seeing. Perhaps even more so is the fact that real yields have started to increase due to risk assets performing better these days. Tie into this the 60minutes piece on 401k plans this evening and there may be a new dynamic. We may have lost a generation of risk takers with this most recent meltdown, much like the one that was lost after the depression. Boomers may then seek more lower yield "safe" investments with guarantees attached to them in order to feel better about their financial security. This would provide a continued bid in the market to address this enormous supply coming out of Treasury. And with the Fed monetizing Treasury's debts too it adds yet another factor to the equation. Waiting for velocity of money to kick into gear, and a fed rate hike would be the best scenario for going short treasuries. In my opinion.
• MGM - Apparently Ichan owns 500m of the 7b of non bank debt. He's pushing for a restructuring which to me sounds like a losing proposition for current equity holders.
• Keep an eye on tech. It actually led and confirmed this recent move up. A reversal in tech could cause distribution to emerge in all the indexes. QQQQ
• 20 years of CNBC with a loose Fed at the steering wheel. A study in bubbles as it pertains to behavioral economics in a 24/7 news flow seems in order.
• MELI could be a growth by acquisition play for EBAY.
• 28% move in 6 weeks. If we are going to mimic 1938 in the SP500 the total move then was 62%. All my moving averages continue to move higher. With the 9 and 20 crossing up through the 86dma on the SPY. The target is the 200dma which is up there around 107. Selling too soon and arrogantly prognosticating a top has been my folly the past few weeks. Don't let it be yours. Trade with the intermediate trend, and let the averages take you out of the trade if they are violated to the downside. Easier said than done it seems.
• Saturn Confidence Plan - yet another study in behavioral economics. They will pay your note for 9 months if you lose your job after you buy a car. Somehow they will be able to know your job security? Based on what data I would love to see. As would the rest of the market. I think it has something to do with a certain government backstopped GMAC, and a non existent fed fund rate. But what do I know?
• Dogs of Q1 were the XLE, XLP, XLU, and XLV sectors. That's energy, staples, utilities, and health care. There's various reasons for this from demand destruction, currency losses, supply gluts, and a threat of governmental margin squeezes (think health care.) Out of them all I think XLU probably offers the best risk/reward. The risk in my eyes is the capital expenditures for grid improvements. The reward strangely enough could come from that as well if the government finances it all, and you could get the benefit of increased Industrial Production.....if and when that happens.
• Iron ore swaps are coming soon. This comes at a time when the ore producers may have to cut prices by 50%. Of course this comes on the heels of several years of astronomical prices hikes. I suspect this has been know for a while as the steel stocks have started to improve. While they continue to cut production their input costs are falling faster than their finished product. When demand picks up there will be a lag as supply comes back on. That's when you'll see the margin improvements that will move eps upward. This industry should be troughing soon if not now. Dependent upon autos, commercial RE, as well as industrial production, and oil prices. China can't carry the world.....remember there is no such thing as decoupling.
• Venture capital investments down by 61%. Lowest in 12 years.
• PBS' Frontline had a great piece on the meltdown. If you lived it tick by tick like me it's the best depiction of exactly what happened. Seems that all the ranting I was doing back then was not in vein. My favorite quote from a friend came on Sep. 7th when they took FNM and FRE into conservatorship. "What do you care it's not going to effect you." The inter connectivity of 5T of mortgage debt does effect me and us all when banks and other hold preferred shares as capital on their balance sheets. That became clear when Lehman imploded 8 days later. Honestly I felt like a doomsday sayer back then. Now I'm more optimistic and it seems with all these explanatory pieces out the understanding of the masses has finally developed. And you never want to go with the crowd for any sustained period. They are prone to fads and usually buy the top and sell the bottom....every time! http://www.pbs.org/wgbh/pages/frontline/meltdown/view/
• A paired trade I ran across that could be of interest is shorting emerging markets and getting long the SP500. This could be achieved by either shorting EEM and buying SPY. Or you could buy EEV and buy SPY. My issue with this could be the timing, but then again that may be the brilliance behind it. Hmmmmm.
• Quants got whipsawed in March. Surprise, surprise! So there is two ways to read this. The move up was a huge short squeeze hence all the 90% up days that we saw. Or you could read it as the rally will continue on as the quants are all positioned long and will keep pushing long as pensions and funds put money back to work.