Wednesday, October 15, 2014

10/15/14 Throwback

DJIA/ NDQ futes down -0.93% (-152 points)/ -1.2%.  SPX futes -1.3% (down 'twenty handles').  Euro Stoxx 50 -1.6%.  German DAX off -2.15% to a new 52-wk low.  UK FTSE -1.6%, French CAC -2.3%.  Long bond gapping up an incredible +1.3%.  Gold up $2/oz.

What's it all mean?  I think we're close to a throwback rally.

101 comments:

  1. BXE update cuts current month production mainly due to third party processing constraints plus reduced yearend forecast from 48,000 to 46,000 BOE

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  2. Seems to be a trend in place, the sort investors don't particularly adore. Thinking of switching to something else, like JONE or ETP

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  3. CXO - Was $93 and I couldn't get my order in before it jumped.

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  4. There was a time when I would have been all over this morning's selloff.

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    1. I'm just not fast enough maybe, my bids were too low and by the time the bottom was printed prices shot up. So how do you know where to buy?

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    2. I'm actually contemplating loading up on SPXS which I know is probably the wrong move. Sticking with what I have and keeping cash. Watching stuff closely though, especially oil.

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  5. The simple way is just look for stuff that's already been downgraded if you want to find the bottom.
    RUT still hasn't reached the 942 target, going to wait it out instead of allowing the market to trick me.

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  6. BXE - There's the -$0.10 drop we get every day. Don't expect this one to turn green any day soon.

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  7. Don't the health care professionals in Texas watch TV? How many times have we seen the protective gear the workers in W. Africa wear? I would have said...'and you think I'm going to wear this POS'?

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    1. Dude read this shit:
      http://www.cnn.com/2014/10/15/health/texas-ebola-nurses-union-claims/index.html?hpt=hp_t1

      So messed up.

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    2. I'm not surprised by that article in the least.

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  8. 'We are experiencing technical difficulties
    The full MarketWatch site will return shortly.'

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  9. "UPDATE: Second Diagnosed Health Care Worker Flew Frontier Flight 1143 Cleveland to DFW on October 13 with 132 Passengers on Board"

    "CDC Says Reaching Out to Passengers Who Shared Frontier Airlines Flight with Second Dalls Nurse Infected With Ebola, on October 13"

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  10. Interesting tweets from someone who was in the SARS crisis - seems that is where we are now where everyone is starting to get very serious about Ebola very quickly - it's a good thing and will help stop the spread.


    Helene Meisler @hmeisler · Oct 6
    2/2 One week later I go back. They are dressed head to toe masks, rubber gloves, the works. Fear everywhere.
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    Helene Meisler @hmeisler · Oct 6
    (1/2) I went to airline ticket office in April '03 in Shanghai.I inquired wld they cancel flights? No, why? Me: SARS. Scoffing from them.
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    Helene Meisler @hmeisler · Oct 6
    I lived in China during SARS. It was amazing the way folks went from 'bothersome' to 'outright fear' so fast.A matter of a few days.

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    1. I think it's a bit silly to compare ebola with SARS.

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  11. Adam Parker pumping on CNBC right now. Talk about regularly being on the wrong side of the table

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    1. I'm probably beeing too harsh on him but this is the guy that was essentially a perma bear for several years until now right?

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  12. Odds the DJIA tests February lows at some point?

    How about today?

    Headlines are pretty bad right now so wouldn't shock me to see a down 4-7% day.

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  13. But I'm told by professionals it's perfectly safe and the chances of an ebola outbreak are 1:1Billion served, so enjoy these blankets I brought here today to keep you warm. :)

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  14. GOOG - Doesn't seem prudent to be tossing this one away like this.

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  15. http://time.com/3490415/ebola-sars-mers-marburg/

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    1. I hope you're right man. I'd rather catch SARS than ebola that's for sure. I think the public is going to panic, causing airlines to crash.

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    2. Because it is so hard to catch, and now people are understanding better and getting very serious about it, I think it can be stopped fairly quickly. If it does start getting spread more, I can see airport screening stepping up in a major way and travel falling off, like happened with SARS. Consumers will avoid this and help stop the spread.

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    3. I hope I never catch that one again!

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  16. Getting sick of this grinding down market - going to Costco for some free samples and to buy some groceries.

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  17. Now we're beginning to have some fun, for sure.

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  18. Wonder what would happen to crude oil prices if the US military was to be involved in fewer wars and military exercises over the next couple decades?

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  19. BXE - Okay, Christmas and thanksgiving are coming and I'm becoming impatient so raised my bid to $4.45 for another bite off this turkey. If they fill the bid today then fine, else I'll wait and see what's in the oven tomorrow expecting another $0.30 off today's price.

    Coulda avoided this draw down that was clear as they get from the low $8's....

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  20. INTC - Coulda had some in the $20's, I suspect this company is preparing internally for a series of impressive new products.

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  21. ETP - Anything better than $58.28 would be a sweet close.

    Bring out your dead. But, he;s not dead. He will be soon, he's very ill. No, I'm getting better. No you're not, you'll be stone dead in a moment. Well, I can't take him like that, it's against regulations.

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  22. Perfect frog boiling action, apply power and adjust controls for maximum smoke.

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  23. ETP vs BXE - Which one looks like the real thing today?

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  24. I had an extremely busy day today. Too many trades to post. I ended up buying a bunch of VSR in the $5.3 range and sold 1/2 into the close. I also loaded up on SPXS earlier and sold into the swoosh lower and just rebought a smaller position before the close at around $28.9 avg. I also sold LAKE at $24.8 and APT at $8.6. I may buy those back...

    I'm still keeping a lot in cash at each close, though. I have had one of the best runs I've ever had over the past few weeks and really don't want to give much back. I don't think we have seen the bottom yet for stocks. I think Ebola will hurt the sentiment of consumers for a while.

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    1. Thanks man. We've been through this rodeo before. A huge giveback is the norm after a big run which made me skittish after a huge run. Definitely left a lot on the table but still alive

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    2. Really nice when you can make money in a declining market - tough to do.

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  25. Replies
    1. I shot a text to my friend and he asked if it was because of HBO Streaming news> Obviously its earnings related but what's up with the HBO streaming news?

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    2. aha he said "HBO announced today they will allow anyone to purchase HBO via Internet...moving away from cable only subscription model to compete against Netflix" I think people would still need a Netflix account.

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  26. Sold the SPXS after hours.

    Wondering when CNBC will be doing their markets in turmoil coverage. Should be good for a sizable bounce.

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  27. The market will usually frustrate the majority. That was certainly the case today. The stand-out examples:

    (a) ATACX (which is currently 'all in' the long bond) showed an almost unprecedented +5% paper gain (using TLT as a proxy) within the first ten minutes of today's session. Had I been sitting across from Mike and Charlie I would have pounded the table to sell it all! They could have repaired the entire damage sustained by their fund this year with a single keystroke. Most fund managers don't bother watching prices during the first hour of trading, which is generally not characterized by 'smart money' flows. They were probably having coffee with Ed- after all, they only execute trades on Fridays. Bottom line? Both TLT and ATACX closed the day +0.7%. Expensive coffee.
    (b) Mutual fund traders were locked out of any low-risk entries, even using Rydex funds that trade twice daily. Any long positions in Rydex funds opened at the 1030 window would have subjected traders to a gut-wrenching 3 hour plunge into the abyss before finally closing with a small gain. Any short positions opened at the 1030 window would have delivered an euphoric high for 3 hours before the obligatory crash in the final hour.
    (c) Surely Hussman kicked butt-> HSGFX +0.53%? HDGE? -0.88%!

    It's my opinion that price movements in the closing hour were driven by shorts.

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    1. Note also the strong open/weak close pattern in miners.

      We probably witnessed short-term capitulation in many asset classes this morning. Hoping for retest later this week- should we see one, I would treat that as a buying opp.

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  28. NFLX- Think about this...Take away their original content and what do you have? AMZN prime without the free 2 day shipping.

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  29. "David, hussman has the absolute worst 1 year record of all mutual funds out there. Don't waste your time listening to him."

    BB, if Hussman were stating his *opinion* this time, then we could ignore it. But he wasn't. He was stating historical facts, and as such, it doesn't really matter who stated them. Facts are facts.

    "There is one particular syndrome of conditions after which stocks have reliably suffered major, generally abrupt losses, without any historical counter-examples. This syndrome features a combination of overvalued, overbought, overbullish conditions in an environment of upward pressure on yields or risk spreads."

    I haven't been in the markets during many crashes/bear markets, but I do remember that the 2007 bear market started precisely with this syndrome -- stocks have been in a multi-year bull market and then junk bond yields started shooting up. So I could have just as well been the messenger of these words (instead of Hussman) -- when junk bond yields start shooting up, it is time to stop buying dips and to start protecting your portfolio.

    Here is another observation that was made repeatedly about bull market tops by many keen observers:

    “One of the best indications of the speculative willingness of investors is the ‘uniformity’ of positive market action across a broad range of internals… I've noted over the years that substantial market declines are often preceded by a combination of internal dispersion, where the market simultaneously registers a relatively large number of new highs and new lows among individual stocks, and a leadership reversal, where the statistics shift from a majority of new highs to a majority of new lows within a small number of trading sessions.

    “This is much like what happens when a substance goes through a ‘phase transition,’ for example, from a gas to a liquid or vice versa. Portions of the material begin to act distinctly, as if the particles are choosing between the two phases, and as the transition approaches its ‘critical point,’ you start to observe larger clusters as one phase takes precedence and the particles that have ‘made a choice’ affect their neighbors. You also observe fast oscillations between order and disorder in the remaining particles. So a phase transition features internal dispersion followed by leadership reversal."

    Now consider the fact that Russel 2000 stopped making new highs in February 2014, after steadily outperforming S&P for several years. What could be a more clear sign of a "phase change" and leadership reversal?

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    1. David - there are a lot of issues with so much of what Hussman is saying here. It seems just off the top of my head that he isn't backtesting his comments or putting the recent moves in any sort of context. Look at HYG for example. It has moved from $95 to $90. That's a whopping 5% move. It does appear to be rolling over a bit but that kind of move is nothing in the context of how it has traded over the past 5 years since the bull market began. I can eye up 6 or 7 times when HYG made a similar down move.

      The Russell 2000 diverging has been an issue all year but it has happened before and not marked some major top.

      "I've noted over the years that substantial market declines are often preceded by a combination of internal dispersion, where the market simultaneously registers a relatively large number of new highs and new lows among individual stocks"

      This has been shown to be skewed substantially over the past 5 years as the majority of the new lows showing up on screens were inverse ETFs/ETNs. Thus the large number of "Hindenburg Omens".

      I think the market could potentially be in for a little more rough sledding but I don't think it's because of what Hussman is saying or has been saying for the past 90% up.

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    2. David,

      Go back through Hussman's writings for the past 5 years. He has included that "severely overvalued, overbought, overbullish" in almost every weekly write-up (I copied the one here from Feb 17, 2014) and had some justification for it.

      He may be right this time, everyone is sometimes, but no way he is providing any value in the timing of this.

      What he does, like all of us do, is figure out what he thinks the market will do (based on facts, research, etc), and then cherrypick stats to support his theory.

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  30. It's official...a bottom is very near:
    http://www.cnbc.com/id/102092358

    Gartman says we're going into a Bear Market and on the bottom left of the screen on CNBC it says "Markets in Turmoil".

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  31. Past corrections for reference

    http://seekingalpha.com/article/2565355-could-the-s-and-p-500-fall-to-1625

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  32. Replies
    1. $RUT target is 942, do you see it?

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    2. CP just looked at RUT' went to Cara yesterday first time in months and Geoff had a post on key reversal where it seems he would view as confirmation and be a buyer. The current bar set-up in RUT is a match if it holds to eod. check it out

      http://www.billcara.com/cara-community/the-four-pillars-trading-solution-morning-note-october-15-2014/

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    3. However today's bar is not an outside day curently and do not know how this would change his interpretation.

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  33. BXE There's the $4.4x, not bad for a dummy. Let's see if we can get a little bit more, just a guess.

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  34. Icahn sold a bunch of NFLX while his son and his son's partner held on. I bet he's giving him a lesson on risk management right now...

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  35. JONE - Nibbled a chunk @ $11.88, hoping this sector is done being clobbered.

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  36. Opened small positions in Emerging Markets and the SPX at the 1030 window. Small b/c the steep decline at the open (which presented a lower-risk entry) had already blown by (ie, I'm playing with the typical handicap faced by all mutual fund traders).

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    1. I've been watching EEM closely as well. Showing a positive divergence so far over the past week or so.

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  37. OIBR - Bought a token amount of this one too, as a long shot, LOL

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  38. OIBR - Is that dividend really 85%? BACML has a buy assigned with $1.20 price objective. Not sure why this one is so beat up, must be they're bankrupt somehow?

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    1. "Oi (OIBR)
      We arrive at our 12-month price objective of $1.20/ADR using a FCFE valuation
      method, with a cost of equity of 15% and a terminal FCF growth rate of 3%.
      Currently trading at 5.0x EV/EBITDA 2014, OIBR would trade at 5.7x EV/EBITDA
      2014 at our price objective. We prefer to look at FCF yield for telcos, given the
      capital intensity of the industry. However, in our view it does not make the better
      sense in Oi's case right now given its still negative free cash flow. We have the
      same view with respect to looking at P/E ratio. As a result, we recommend
      investors look at Oi on an EV/EBITDA or DCF basis.
      Downside risks to our PO are: (1) no/low single-digit growth rates for the Brazilian
      telco sector, (2) the Portuguese economy, even though improving, remains
      sluggish, (3) capital intensity is high for the industry globally and with risk of
      increasing further, and (4) Oi continues to have high debt leverage (4x net
      debt/EBITDA), even after the conclusion of the R$8.25bn cash injection."

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  39. OUTR - Was under $55, that's always been the entry for some time now, right?

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  40. JONE - Although I don't own quite as much of JONE as BXE, I paid a whole lot less for it.

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  41. I was looking back at my notes from April when I was getting all beared up and this is a link I saved:
    http://1.bp.blogspot.com/_wmz32xeNKtU/THr3y0SZIeI/AAAAAAAACdA/J76-77Bo3Cc/s1600/DJIA+1946+bear+market.PNG

    Shit it sure looks like we're right around that late August on this link huh? ie 1/2 of the way through this selloff.

    I hopped back into SPXS recently in the low $29's. Keeping a tight leash on it of course but this move up feels fake to me.

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    1. My line in the sand on the S&P is about 1% higher from here. That would get me out of this trade.

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    2. I'm thinking if the S&P goes up another 20 points I would sell but if we keep cascading lower then we could drop another 200 if this plays out like I think it has a slight chance to. That would bring the total decline to about 18 to 20%. Only a handful of people actually think the market will drop like it did in 2011 which I believe was after the end of QE as well. A lot of people probably have said it will but I think very few have acted on it.

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  42. Strictly from a trading perspective, I think there’s a growing chance we head another 10% lower. we need a rally soon to alleviate the bearishness. I still think this feels a lot like the May 2010 period before the flash crash. Not saying we get that but any up moves are just completely smothered every day.

    The positive sign for sure is some of the energy stuff. Check out HCLP EMES SLCA

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    1. HCLP EMES SLCA are 3 stocks I'm watching really closely for some signs of positive divergences just like the momo stocks back in May, setting up another really awesome trade. My only issue with the same type of trade setting up is the fundamentals are much stronger with these than with YELP etc.

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    2. Energy and N Gas stocks are mostly rallying here the last few days, just do not know if its short covering or value players moving in.

      Wish I had the balls for PBR, the volatility in EWZ the last few weeks is unreal.

      I just got our internet to our Catalina Mountain house above Tucson and we moved in a week ago. Finally I do not feel like a gypsy on the move, still waiting for our furniture which is crossing the Pacific Ocean.

      I would watch the 80 level on WTI if we break this pressure could again develop in the oils,

      Good luck mates

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    3. BTW, I also think we are going to get a 17-21% SP drop before end of NOV, but it is always anyone's guess.

      Have read some of past post's and you guys have been making some awesome trades.

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  43. Added to SPXS at $28.7

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    1. I'll probably be out by EOD. I'm pressing a bet that the market continues to fade. Risk-reward is pretty good at this point in my opinion.

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  44. I bought some INO today earlier. My thinking is after the protective gear plays wear off the vaccine plays will make a move higher. I also am still holding VSR which is a momo play on ebola protective gear.

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  45. Picked up some GOOGL as well today. THey have earnings after the close so I was thinking it would run into that given how far it has fallen. Not sure if I will hold thru earnings.

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    1. GOOGL is set to report after hours today, and this is a name that is widely held by many funds.
      GOOGL is expected to earn 6.53 on 6.58 billion, and they need to do better then that to move this stock. This name has been trending down and it is becoming a value play at these levels, but that seems not to matter. Before we even think about buying this stock we need to hear the call and what GOOGL is seeing with the economy and advertising in the quarters to come. This stock usually moves around 5% to 10% after earnings. Below are the most important metrics a fundamental investor will want to watch closely for Google. Paid Click and Cost Per Click + growth = greater PE. We are big fans of this company for its competitive dominance, as Yahoo and Microsoft’s search business is really a joke.

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    2. Above is per chartlabpro, from a trading perspective, they buy late more of a trend following system.

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    3. Love the GOOG idea, was contemplating that myself b/c it looks, feels and tastes like a knockout. But decided to wait and see if maybe it tanks then get in. I bet it gaps and runs, though.

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  46. I've got a lot of Canadian stocks up over 5% today (not a big deal, because many are down more than 30%), but it is the best bounce I've seen in this downturn, but who knows.

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  47. Sold half my position in Canadian investment company ELF.TO. Has held in well through this downturn and the value is not as high as it used to be, so basically raised cash to buy other stocks.

    I am trying to buy a couple of US small regional banks, but they are very thinly traded, so only partial fills so far. I think there are good opportunities in these small banks as the US economy improves and the banking industry consolidates. This will use about half the cash I raised. Haven't decided whether to do more purchases today or wait a bit and see how the market goes.

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  48. That was quick. I sold SPXS at $28.4

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    1. Put it back on at $28.7 just in case it works...

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  49. Okay, so yesterday's bottom marked the release of the Beige Book so I have to think (incorrectly of course) the market liked the verbage. Didn't find that out till after close y-day.

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  50. Telestar is back! Was hoping for that, Yeah! :)

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  51. Going into the final stretch folks, it's "Snail Trail" in the lead by a length. What a hands-down upset for the unanimously favored "Hoof Hearted"!

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  52. I ended up selling GOOGL before the close for a small loss. Closed SPXS before the close too dammit. Still holding VSR which hurts and closed INO today for a decent gain.

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  53. DD - If you like the ebola protective bunny suit theme then you must know the material used for those paper-like type suits is often "Tyvek" made by DD, perhaps similar or identical to Tyvek is available under other names.

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  54. I ended up going golfing this afternoon and left my bank orders open and got 2 very partial fills. I hope I can top these up over the next few days or else they aren't going to be worth holding.

    The 2 I am buying are BOCH (Redding California) and FUNC (Maryland).

    BKJ actually looks pretty reasonable with the knock being that New Jersey is supposedly one of the most over-banked and competitive states for banking. Do you know anymore about it?

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    1. No, I don't know much about it. It's on a list written a while back for some reason theme long forgotten how it wound up there. IBKC is written next to it.

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    2. BB- Redding? How many clients do they have. 6?

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    3. ...including cows of course...

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    4. Isn't that the Cartwrights place, The Ponderosa Ranch? Ben, Hoss, Adam and that other guy?

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    5. Haha. You know in Canada, it's pretty simple, we have 6 banks, so its pretty easy to pick one. Down there, you've got like 7,000 of them. There should be consolidation due to increased oversight costs and regulation, so I'm want to buy a few that are solid businesses and hopefully will get taken out and, if not, grow above market rates. I've got a couple of guys I read who are big into these small banks, so I've been reading through some of their stuff and BOCH seems like a pretty good one, but I'm leaning towards taking a portfolio approach with these and buying 3-5. BOCH made money every year for the last 10 at least, even through the financial crisis and their numbers look good.

      Maybe you could take a trip up there ask for a construction loan and report back - looks like a pretty town!

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  55. Anybody wondering about oil tanker stocks?

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  56. MEOH - Big volume these past couple days.

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