Wednesday, October 1, 2014

10/1/14 Days Like This

'Over the past 16 years, buying the close on SPY (the S&P 500 ETF) on the last day of the month and selling one day later would result in a successful trade 63% of the time with an average return of 0.37% (as opposed to 0.03% and a 50%-50% success rate if you buy any random day during this period). Various conditions take place that improve this result significantly. For instance, one time I was visiting Victor’s office on the first day of a month and one of his traders showed me a system and said, “If you show this to anyone we will have to kill you.” Basically, the system was: If the last half of the last day of the month was negative and the first half of the first day of the month was negative, buy at 11 a.m. and hold for the rest of the day. “This is an ATM machine” the trader told me. I leave it to the reader to test this system.'

Not today, bro.


93 comments:

  1. Replies
    1. OREX - Good amount of insider buying, something up?

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  2. Replies
    1. wow impressive

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    2. CP, we had it and just needed to be patient. The plan was there and they were starting to execute. Oh well, can't win them all.

      Warren Buffet - "The stock market is designed to transfer money from the active to the patient."

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  3. I still think there are pretty massive imbalances in this market that need to be wrung out. For example, the valuations are just completely out of whack on so many of these recent IPOs it is kind of a joke. Take a look at some of the most recent IPOs like GPRO, RWLK, and today's IPO VSLR. They're all trading at massive price to sales / earnings (or losses) etc. I mean massive. VSLR trades at like 85 times their run rate of revenues, for example.

    And there has been so much supply of shares offered in the past year that I think it will take some time to digest.

    Additionally the fact that the Fed is getting out of the QE game most likely has to matter from a sentiment standpoint. I don't think it has created much of an effect on the economy but I think it has improved sentiment greatly, allowing people to bid stuff up higher than they otherwise would have. I don't know if this reverses itself now but its worth considering.

    I really don't know if this will result in a 10% correction or whatever people are saying but I think its important to keep in mind that the market is much more vulnerable now than it has been for the past 24 months or so.

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    1. I think that there are risks to both being in and out of the market at this time. For example, if the ECB announces QE this morning, we could be off to the races.

      While there are some overvalued stocks like the IPO's you mentioned, there always are and the broad market is pretty reasonable - Tepper said the S&P is under 15 times 2015 earnings and Europe is something like 12.

      I've still got a lot of cash (25%), so am not super comfortable with the market and want to be prepared, but I also have quite a few what I think are good stocks in case the market does go up. The way I like to trade is buy stuff in downtrends, so I will likely just keep adding if the market continues down, so hopefully will be well-positioned for when it does turn, because you never really know when it will.

      Your way of jumping in and out quickly may mean you miss some gains, but also some losses and obviously it works very well for you.

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  4. Tepper on Bloomberg yesterday - worth a listen:

    http://www.bloomberg.com/video/david-tepper-on-stocks-bonds-fannie-and-freddie-s~bPsCBFSWOmHYM5aPnTFw.html

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    1. Can't download that from here but noticed JNK has been dropping. Not sure what's up with FNMA, dead meat I guess.

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  5. Buffet getting into cars. Probably means this is a good part of the economy for investments - "This is just the beginning for Berkshire Hathaway Automotive, " Berkshire Hathaway's Chairman and Chief Executive Warren Buffett said in a statement.

    http://www.marketwatch.com/story/berkshire-hathaway-to-buy-auto-dealership-van-tuyl-group-2014-10-02

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    1. That's interesting. I remember when he was buying up real estate brokerages at the lows in 2011 I think.

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    2. KAR - Was looking at this chart recently, H&S

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  6. Took cybr off pre market

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  7. DB gaping down, ECB must be soft trying not to disturb the arian Germans?

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    1. DB has been hanging in quite well considering the markets, as has my other Euro bank, ING.

      Could be an indicator of where to look for buys when the market turns.

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    2. I own both as well. ING in particular is holding strong and I plan to add soon. In 2015 they will repay the last tranche of money owed to the Dutch government and will likely reinstate a dividend. I think these two factors are key for ING. The chart looks really good too. Add the recently announced ECB asset purchases, and I think European banks could do well (barring some kind of stock market meltdown, of course).

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  8. BXE - Only thing I keep coming back too is oil production is in oversupply.

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    1. Oil getting crushed this morning as the Saudi's reduced their prices to keep production up. Maybe oil is in for a bad period - it has had them in the past. I think it was the late 70's / early 80's when oil went from $45 to $12 over years.

      When I read about the new fracing approach stocks like JONE (which I still own) are doing with better success, I think that is great for JONE, but wonder what it means for the broad oil market if everyone starts doing this.

      I personally would not sell any energy stocks at current prices, but am also starting to wonder if the bounce back will be years, not months. Although we are in the shoulder season and Carmer's buddy, Dan Dicker was on CNBC yesterday call for $120+ oil as the supply risks are much greater than the market perceives.

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    2. I can see a potential for a move to $7.20 and if I added here could break even but I feel the chances are too small for the risk. Good night BXE, off the cliff.....

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    3. Size of ask is big too, so there are sellers trying to exit.

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    4. I figured Saudi's would supply more oil, considering their budget deficit is growing and loss of exports to North America.

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    5. Can't understand why MOG doesn't see it though, that's strange and gives me hope.

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    6. Interesting we hear all this noise about how BXE botched their capital raise and nothing about oversupply, no mention of oversupply/demand in those cheerful forecasts from oil patch experts.

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  9. TOF,

    Buffet also bought BNSF back in 2007 before the current rail boom took off.

    The other interesting thing is he said their internal pensions are 100% equities, 0% bonds, plus of course cash to handle current payout requirements.

    Re CP's comment on junk bonds, he said they have bought them in the past when they were attractive but do not own any now.

    Basically, his theory is if you look out 10 years, stocks will almost certainly do better than the current yield's available on bonds.

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  10. Looking at Europe (down 1.5 to 2%) I don't think this small bounce today holds. More selling to come, IMHO.

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    1. That's not helping oil, either. China slowing as well. Yep, I agree more selling to come.

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  11. Brad, do you like any other Euro-stocks? I would like to increase my exposure there as I think this whole deflation scare over there is a buying opportunity.

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    1. Hi BB.

      On a speculative basis, I like Bankia, a Spanish bank that was (is?) essentially bankrupt until it got bailed out by the Spanish government. It's now run by a professional banker, ex-CEO of BBVA: https://en.wikipedia.org/wiki/Jos%C3%A9_Ignacio_Goirigolzarri. I think he has the experience and connections to turn that thing around, but it may take some time. Bankia still has a lot of problems and substantial bad debts (though they passed most of them on to the government-funded Real Estate rescue fund, SAREB - https://en.wikipedia.org/wiki/SAREB). Also, the government still holds a sizeable pct. of the shares, and is looking to sell them on the market, so there is an overhang there.

      Another possibility is Tesco in the UK (us ADR is TSCDY), which is trading at all time lows after missing sales estimates by a whopping 250 billion pounds (http://finance.yahoo.com/news/tescos-250-mln-pound-black-060000881.html). I own some (not much) betting on a turn around. However, it could go wrong as they are under heavy pressure by other supermarket chains, especially the German companies Lidl and Aldi, which offer a low-cost, decent quality model that is pressuring more mainstream supermarket chains. Buffet made a big investment in Tesco last year, but sold some in the spring of this year. I made good money a few years ago buying Olympus in Japan after an accounting scandal and I'm hoping that Tesco will eventually work out.

      By the way, I live in Spain and I have a Lidl right in front of my apartment. If I could buy shares in them I would, but they are privately held.

      I think there are lots of good European companies (check out the EuroStoxx 50) that pay good dividends. However, I am more interested in buying them on a decent sized pullback, which may be happening as we speak.

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    2. I mean 250 million pounds! Not billion (that would be some miss, eh!)

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    3. Yep, slight difference, LOL... :)

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  12. XCO. Wow, I know the debt structure sucks, and Ross must as well, but this baby is getting priced for BK.

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    1. Ahh..News related. They've announced their earnings date.

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    2. Wilbur Ross? I caught something he said recently about deflation being an increasing risk. Ross owns XCO, eh?

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    3. I think he owns like 10%. Was a lot of money and one point. Not so much now.

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    4. Wilbur Ross must be having a really rough year. Shows you that no one is invincible huh?

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    5. Yep, sure does. Seems like some of these guys might get into this stuff without thinking it through or their time horizon is considerably longer than I imagine. As you point out re: Buffett.

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  13. oversold? you ain't seen nothing yet is for whatever reason the first thought on my mind.

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    Replies
    1. Yep, was shocked to hear Buffett said he was a big buyer yesterday, wasn't long ago he said market is fairly priced.

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    2. Tough to do here but I bought SPXS at $25.85 avg.

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    3. CP - he plays a much longer time frame than we do so any selloff is a buying opp.

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  14. BXE - Seriously, you guys are riding this one down like this? Serious beating every single day, no up days at all to speak of..

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  15. jeez look at AKS and X. nutty moves in those stocks this year.

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  16. AA - Aluminum-Lithium? My broker upgraded this one a couple days ago... Questionable timing seems like but I just saw this: " Alcoa Opens Worlds Largest Aluminum-Lithium Aerospace Plant in Indiana Business Wire"

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  17. Was looking through Meb Faber's site for the rankings of cheapest markets worldwide and Italy was at the top. Was reading some more about the ECB bond purchase program and this note came across that stuck with me:

    "Italy, in its third recession in six years, is going through a slump which the government says has now led to an economic contraction deeper than the Great Depression of 1929 with the south of Italy particularly severely affected. "

    Anyone have any direct plays on Italy, other than EWI? FIATY has a big presence there right?

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    1. Yep, if you want a reliable beater at a good price you probably drive a Fiat I think. I love the Maserati logo and the cars are quite nice IMO. Citroen and Peugeot are euro vehicles as well, quite popular.

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  18. Sold some SPXS at $26.3

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  19. Long TNA keeping in mind the possibility that the Russell 2000 just had a false breakdown.

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    1. Not giving this much room though.

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    2. Seems to me that we should bounce here given the dollar has fallen the past two days, putting in at least some short term positive divergences for stocks.

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    3. Peeled this off

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  20. Definitely getting some strength in the market now. Look at YELP and LNKD

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  21. Long GOOGL at $580.7

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  22. Long AKS at $7.57

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    Replies
    1. Offed it at $7.70. Not sure why probably should bounce higher but I'm not sold yet on this rally sticking yet so I'd prefer to be safe.

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  23. Went long EDC at $25.89.

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  24. PKX looks very tempting for a big cap

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  25. KB - Nice round trip the past few months. Question is, where from here?

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    Replies
    1. I honestly don't trust anything in this market. Probably shouldn't be so skittish as things are oversold and due for a bounce but my gut tells me we see more selling.

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  26. I notice a number of potential 'outside reversal' patterns in Emerging Markets ETFs and stocks. An outside day is one where both the current day's low and high exceeds that of the previous day, often a indication of a change in direction. EWZ (Brazil), for instance, traded between 42 and 43 yesterday. Today’s range currently extends from 41.38 to 42.83. It’s currently trading around 42.5x, and I’m taking a position. PBR (Petrobras) is another example: 13.21 to 13.92 yesterday, and 13.01 to 13.71 today.

    EEM displays a similar pattern: Wednesday’s range was 40.70 to 41.38, and today’s low/high=40.38/41.25. Taking a position @ 41.01.

    Normally I would wait for confirmation, but both assets are vastly oversold at this point and it’s worth a shot.

    I will probably open a position in RYEUX (Rydex Europe) at the close based purely on negative sentiment. The Euro Stoxx 50 Index closed down -2.77% this morning, with Germany’s DAX -2% + France’s CAC -2.8% + the UK FTSE -1.7%.

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    1. Technically I believe the outside reversal day has to close above the highs (or lows) of the prior day/week/month...whatever time frame you're looking at. So those didn't put one in but instead may just be a pause on the way to more losses. I don't put a ton of weight on these patterns that technical traders look at. Not enough consistency in my opinion, but this one seems to be a bit more reliable in my experience in the very near term.

      I'm holding a very small position in EDC and a larger position in GOOGL overnight, but at this point I think we get a choppy mess for the next day or two then lower prices. Not really excited about holding anything right now until we see some bases being established.

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    2. You're correct. That's why I added 'waiting for confirmation.' Sometimes a 'near miss' is good enough.

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  27. Wow, 2.36 on XCO? If capitulation means anything at all this must have been it.

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    1. so many charts like that man. economically sensitive ones too. BID, LVS, WYNN, GM, F...makes you wonder if something is going on maybe after the fed exits QE? maybe a slowdown is coming?

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    2. I think what's going on is Europe is about to puke a hair ball. Could just be my lunch doesn't agree, not sure.

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    3. End of QE may also be a buying opportunity. Perhaps all the funds who are cautious on the market because QE is ending will see it is business as usual and then buy aggressively into year end.

      In thinking about it, could make a lot of sense if it is a "Sell the news" type event, in this case meaning buy the market.

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    4. BB - yeah would love to see some more downside heading into the end of QE as fund managers get squeamish.

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    5. PLus I believe October is year end for many funds, so they may want to show certain things on or off their books

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  28. Some interesting stats on GOOGL:

    Year Gross Profit % Change Y-O-Y
    2005 1732
    2006 3561 105.60%
    2007 6380 79.16%
    2008 9945 55.88%
    2009 13174 32.47%
    2010 14807 12.40%
    2011 18904 27.67%
    2012 24717 30.75%
    2013 29541 19.52%
    2014 33967 14.98%

    Here are the anualized returns of the stock since Dec 31,

    2005 -12.13%
    2006 -12.26%
    2007 - 7.66%
    2008 - 24.73%
    2009 - 13.35%
    2010 - 18.21%
    2011 - 21.55%
    2012 - 28.73%

    And here is the annualized growth in gross profit over the years:
    2005 -39.19%
    2006 -32.57%
    2007 -26.98%
    2008 -22.72%
    2009 -20.86%
    2010 -23.07%
    2011 -21.57%
    2012 -17.23%

    Since the 2007 peak, profits rose 26.98% while the stock has only risen 7.66% annually. Obviously valuation plays a role but this is one of the most durable business models I can think of longer term. I think it deserves the highest premium out of any stock in the market, relative to its long term growth potential.

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  29. TLT - That's been a big move this past month but PIMCO was busily dumping I think so not sure what to believe. Thx, Bill Gross, for allowing me out of TBT at $60 with my ass still in tact.

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  30. SPY - I'm looking at this chart and thinking we could see another new high that I plan on shorting this time.

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  31. BXE - So we were down $0.30 at one point and I've noticed we usually don't lose more than a dime each session so If I'd been scalping these $0.20~$0.30 drops I could be near even.
    FLWS again, saw near +10% at one point today.

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  32. Thanks for the info Brad. I will take a look. Nice to have commentary from someone actually in Spain.

    I held Iberdrola for the last couple of years and sold it for a nice profit (due to lack of upside and rising rates), but I generally am positive on Spain as the restructuring going on there seems ahead of countries like France and Italy.

    I also like the Netherlands as they have a good economy and responsible government, but I don't think they get the credit they should as they are a smaller country. I own ING and AON there. Philps (PHG) may also be a good buy now with the splitting off of their lights division, but not sure.

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  33. CNN Fear and Greed index showing most fear in 3 years - bodes well for at least a bounce (unless of course we crash):

    http://money.cnn.com/data/fear-and-greed/

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  34. FWIW, reminiscenses guy bought more BXE. Says production could be 60,000 boe/d by end of 2015. That would be 25% higher than the current plan of 48,000 at the end of 2014, so will usually drive the stock price higher unless we really are in an era of lower energy prices. But on the other hand, BXE has a lot of nat gas which is holding in better pricewise.

    Always commodity risk with energy/miners.

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    1. There are two gaps on the charts, one from 4.4x on US chart and one from $5? on Canadian chart? I plan to add under there if it happens.

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  35. Guy on CNBC calling for $75 oil earlier today. That's a good sign.

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  36. Interesting blog:
    http://traderfeed.blogspot.sg/

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  37. Ebola is at our doorsteps boyz.

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    1. Flight from Syria to West Africa to Dallas (because those fucks have no idea what they are doing), and you have a one man biological suicide terrorist.

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    2. That's why I've been posting about TKMR and other biocuriosities.

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  38. AA - The July gap up was closed, how about that for cleaning up a chart?

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  39. Beautiful outside day in the Hang Seng, which plummeted -367 points (-1.6%) in the opening moments, then rallied in the afternoon session to close up +132 points (+0.57%).

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    1. Boom! Looking good now. I'm going to add to edc today

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    2. Added to EDC at $26.1 this morning.

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  40. Not sure if you guys have noticed but a lot of Israeli stocks seem to have been doing well lately. RDCM, CYBR, MLNX, MBLY come to mind

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  41. Excellent jobs report today. Even if the dollar is spiking this should provide a nice bounce. Looks like that Russell 2000 drop yesterday was a big buying opp

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  42. The other point about Canadian energy companies like BXE is, even though the price of WTI is down a lot, the price Canadian energy companies actually get is actually up this year mainly because transportation to is improving, so the discount for Canadian oil has decreased

    So, for example,Canadian Light Sweet Crude was selling for $599.42 at the start of the year and now is $606.25 (price per cubic meter = 6.29 barrells - love the metric system!)

    http://www.nrcan.gc.ca/energy/fuel-prices/crude/15085
    http://www.nrcan.gc.ca/energy/fuel-prices/crude/16606

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  43. I picked up that cybr pre market at 29.4. That thing is a hot potato. It's a cyber security recent ipo and "only" trades at 10x sales vs others at 20 and it is profitable. I have no target on it but think it could be a momentum stock bc of this and it's low float

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