Sunday, July 31, 2016

7/31/16 The First Day in August



DJs dusting off this beautiful Carole King ballad often signals the onset of 'the season of volatility' in the markets.  Investors who choose to board (or continue on) in August and September expect turbulence.  My take can be summarized as follows:

(a) Very short term.  New highs for US indexes.

(b) Short term.  Up to a -5% retracement, which is likely to include at least one 'nose dive' to discourage travelers.

(c) Longer term.  Ascent to new 52-wk highs for most/all global indexes.  

106 comments:

  1. TOF, you may find this article interesting since you are involved with online selling.

    https://www.entrepreneur.com/article/278622

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    1. Thanks T3d. I know this stuff well. We have people doing this to us as well but I'm totally fine with it if it means more sales.

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  2. Eyeing a re-entry in FCX in the low $12s. Hope there's not too much competition getting in at that price.

    Picked up some BABA this morning and plan on holding some thru earnings.

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  3. This Zika could be the thing that takes the market down your 5% 2nd. Looks like another 10 got it in FL:
    http://www.news4jax.com/news/florida/10-more-people-likely-contracted-zika-from-mosquitoes

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    1. Remember APT? They had that big bump the last heath crisis. Might not be a match for this one as they provide face masks, etc., but maybe there are others or often traders don't pay that much attention to details and go back to what worked last time.

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    2. Funny, I was looking at this one earlier today. Reasonable valuation.

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  4. Went golfing for the weekend with my gold bug friends. They are finally starting to talk about their investments again and proudly saying how "none of the true believers sold" and "look at gold in 2016".

    Gold is doing well in CDN $ and they are "only" down 10% or so. Not super cocky like last time, but enough to make me think this gold run is closer to the end than the beginning.

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  5. I was wondering too if the Zika stuff would work it's magic.

    Added to SEDG just under 17 this morning on the whole SCTY/TSLA noise.

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    1. That SEDG is a tough one. Makes me think market knows something...

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  6. I grabbed some TWTR today. I was looking closer at their financials and they're actually making significant free cash flow. Not sure how long it lasts but last two quarters they did $104M and $175M in FCF

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    1. Ha yeah. I got out in the pre market on that and BABA and decided to buy XON too high of course. Travel bans to FL are coming. I'm thinking this is a sympathy play.

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    2. I should say to parts of FL is my guess...the ones with those mosquitos.

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  7. It is amazing to see oil down so much over the past month with HLX being UP! Or with ECA being FLAT! I read somewhere that the recent drop in the oil price is due to unloading of floating inventory, with fundamental supply shortages still looming over the medium term. The traders of oil companies are probably looking "across the valley"...

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    1. FCX coming back down toward $12. I'm eyeing $11.5-$11.7 again.

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  8. I am going with my family today to Pine Mountain Lake, a resort community near the Yosemite NP. We'll stay there in a house for two nights and then might camp in their campground for a night or two if we really like the area. Even though today's jump in oil stocks might be the start of a strong rebound, I still decided to cash in my ECA position at $8.09, which I opened at $7.69 last week, so as to pay for this trip. Now I'll enjoy it a little more. :)

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  9. Small oils and small boitechs sure are vibrating today, keep wondering if PCRX has bottomed.

    Interesting oils AREX CVI RIG, for bio's pick your poison.

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    1. Hit my bid on PCRX near close yesterday, most likely let it go near today's open not sure. Yesterday ETP just keep running all day, pulling back this morning after earnings release.

      Listening to Neil Pasricha now.

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  10. Great podcast I listened to today
    http://mikedillard.com/happiness-equation-revealed/

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    1. Thanks for posting, enjoyed very much.

      My favorite has always been Earl Nightengale, probably the father of self help, check out his Lead The Field program if interested.

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    2. Here of some of his quotes:

      http://www.brainyquote.com/quotes/authors/e/earl_nightingale.html

      took off PCRX

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    3. T3d -- Good stuff. I always listen to your posts. Hope you are doing well.

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    4. Great quotes, T3d! I'll discuss them with my kids!

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  11. It turned out there is WiFi at Pine Mountain Lake. :) So I figured today is much chance to buy GDXJ with a close stop at yesterday's low. So I just bought some. I remember how during the past two gold ascents in 2005 and 2009, many stretches of the ascent were uninterrupted, without any major pullbacks.

    I was waiting on buying GDXJ as I was expecting the market would rise after the February low and people, once again, will not feel the need for gold. But something else has occurred (a hidden major shift), and we may indeed be at the start of a long gold bull market...

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  12. Nice job numbers. Interest rates down some. Still watching closely to see if this finally gets rates back to more normal level.

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  13. You know why GDX crashed today? Because I bought it yesterday! My stop was pretty tight, though, and it was triggered today at 49.90. I forgot that I also placed a buy order for Jan 2018 $40 GDXJ calls, and it was triggered today at 15.30. Will exit them if GDXJ drops below end of July lows at $45.

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    1. Seems like chasing a bit on GDXJ..I've been wanting to short gold/silver actually

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  14. In order to compensate for today's loss on GDXJ, I decided to sell at $8.20 the shares of HLX I purchased a while ago at $7.30.

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  15. Rentered CEF, PCRX

    PACB perking up

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  16. This comment has been removed by the author.

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  17. have you guys seen this Stranger Things show? What a great show.

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  18. After keeping my 401K in some slow-growing money-market fund for a long time and seeing it grow only due to my contributions and 1:1 company matches (nice to see someone just depositing money into your account every 2 weeks, right? :)), I put 1/2 of my 401K into LZEMX at $14.20 and then another 1/4 at $12.40. Then, on the way up, I sold at $14.20 the shares I added at $12.40, and just now I submitted an order to sell (around $16.40) 60% of my remaining LZEMX position, so that the remaining position will be about 1/4 of my total dollar value.

    The run in emerging markets might very well continue, but VIX is already under $12 and the gap from March 2015 in LZEMX has been filled, so a decent pullback to, say, $15 can easily happen now. So I am just reducing my position in proportion to my perception of the reduced "energy" remaining in the LZEMX compressed spring.

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  19. BTE hit my sell limit at $5 today for the shares I purchased at $4.45 two weeks ago. My next sell limits are at $5.50 and $6.00.

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  20. I bought some EBIX today at 53.8. Been following this thing for a long time and have been waiting for a substantial pullback. It dropped on earnings which were better than expected. Cheap company with awesome margins.

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    1. Great long-term chart! It is ripping now, and so I bought some at $55.07 with a stop at today's lows of $52.

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    2. What is your target for this company, Mike? How much more, do you think, it can grow?

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    3. EBIX has a very interesting price-volume pattern over the past 6 months:

      http://finance.yahoo.com/quote/EBIX?p=EBIX

      The price moves up in a staircase fashion, and every step up is made on very large volume...

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    4. David - I'm not really sure. It's trading at 18x EPS assuming the current quarter's run rate is annualized. They're projecting significant EPS / Cash flow growth from the Patriot National acquisition. I'd think 22 to 25x is a reasonable multiple. So let's say they get up to a $3.20 EPS run rate then $70 to $80. Keep in mind that this is a SaaS type business and ones that are growing like this that are profitable are almost non existent. the others are trading at extreme multiples. They're at a $290M revenue run rate so 10x that equates to another 55% upside or so.

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  21. Grabbed some FCX into the bell.

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  22. EEM (emerging markets), EWZ (Brazil) and RSX (Russia) all closed at 52-wk highs today. VT (Vanguard Total World Stock Market) closed within 1% of its 52-wk high. The S&P500 and Nasdaq indexes (again) at new all-time highs.

    What's interesting is the lack of euphoria normally seen at new highs. There is instead a great deal of skepticism. One of many notable examples is the recent call by Goldman Sachs:

    http://www.bloomberg.com/news/articles/2016-08-01/goldman-downgrades-equities-for-the-next-three-months

    That's bullish.

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  23. t3d- Earl Nightingale! I bought the tapes to 'Lead the Field' in the fall of 1990, shortly after moving back to the Bay Area. That was one fantastic series! I used to listen while driving to work (which occasionally would involve extended commutes to remote locations). I still have the tapes.

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  24. Hey Guys! Wow, what a summer. We had trips pretty much every weekend...but now it's back to the grind.

    Traded a bit with SEDG the last few days. Couple thousand shares each time but did well. Buying on the panic again at about 16ish and selling the last few days at 18/19. Bought some back AH today at 17.50. ER was almost exactly what I expected so am happy. Stock will probably get killed but oh well. I still love it LT.

    AAPL is now my largest position by default...ie, it's going up. Still love it. Much more now that I'm up 7% on it.

    I suspect I'll be trading more in the coming weeks as obligations slow down.

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  25. I wouldn't buy any here, but GPRO is up over 50% from the low.

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  26. Based on support only, SPWR is interesting here. I only know they make the best panels, but expensive.

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  27. I just took another stab at GDXJ, with a stop below the recent low at $49.

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  28. Mike, I just finished listening to the podcast you posted, and I too thought it was great! Thanks!

    For a while now I have been reminding my kids to do at least ONE good/kind deed per day (even just something something nice to somebody with the motivation of brightening up the day for that person rather than putting a check mark on your list), since that gives a pleasant feeling of accomplishment at the end of the day. Recently, I also started asking them to *write* in a journal the one good/kind deed they made each day, so that at the end of the month they will see a long list of accomplishments and their own perception of who they are and why they are living here would also be affected by that list. This is very similar to what is suggested in this podcast, so it looks like I stumbled onto the right track! :)

    I also had a suspicion that retiring and becoming a lazy bum is not a good idea, but this podcast really shaped this idea and now it will be well-formed in my mind. The conclusion that I made is that it is really not worthwhile to strive to be rich, since the "good life" associated with riches is akin to retirement, which we now know sucks from the happiness point of view. It is much better to search for a fulfilling and meaningful activity that I can do NOW, and try to do it (or whatever activity will seem appropriate during each period of my life) for as long as I breath. This is a much easier goal to achieve than becoming rich and/or famous.

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  29. Added into the close at 16.71.

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  30. Good stuff David! I like the good deed / journal idea too.

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  31. Got lucky with FCX today. Sold the pop and bought back in around $12.09 avg. I missed the trade on BABA over $85. Such an easy trade to take.

    I can't believe the move in SPWR. Looks like solars were just one big bubble huh?

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    1. People got caught up in projecting endless growth when really most of it was just government subsidy driving the business

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  32. Sold my shares in Canadian Engineering firm IBG.TO. Was a wild ride (and more stressful than usual because my brother decided to follow along and went way too big) but end up doing well.

    Thinking about putting some money into agriculture stocks. Ag is out of favour and crop prices are down, so stocks are pretty beaten up. The thing I'm still questioning is the same as the metals - did the overinvestment in AG bring forward so much business that we have a protracted bear market or will it be more of a standard bear market and stocks should start moving up again soon. Analysts are down on the stocks too, but that can be a good thing.

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  33. SEDG- Sold the block of shares I bought at 16.40 for 17.79. Just keeping sizing in line.

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  34. I ended up taking a position in SPWR today at $10.31. I've regretted not buying into these panic situations before. Not saying this is the same but this was always the best of the solar companies from what I read as far as technology goes so I'm thinking it bounces fairly significantly down here on talk of takeouts or just being oversold.

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    1. I will too if SEDG can pop a little more and switch those shares.

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  35. Record highs printed across the globe.

    (a) Brazil's iBovespa +2.11% to 58,120 (compared to a low near 37,000 in late January!), a new 52-wk high. A tremendous rally amid Rousseff's imminent impeachment trial + Zika.

    (b) EEM (emerging markets) +1.16% to 37.57. A new 52-wk high.

    (c) VT (Vanguard Total World Stock Market) +0.72% to 61.30. A new 52-wk high.

    (d) RSX (Russia) +1.87% to 18.57. A new 52-wk high.

    (e) DJIA (Dow Jones Industrial Average) hit a new all-time of 18,638 on an intraday basis. It remains to be seen whether it sets a new closing high.

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  36. Sold SPWR at $10.63. I'm still conditioned to sell gains quickly which is a thing I'm trying to get over, especially after having watched PBR go from $6 to almost $9 and TWTR go from $15 to almost $20. But I'm up nicely this year and this method is still working as there's plenty of movement from day to day still.

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  37. Sold another block of SEDG at 18.47 that I bought at 17.20ish.

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  38. Some interesting panic is happening now in HLX despite oil being UP! Reloaded just now at 7.67 the shares I sold a couple of days ago at 8.20. Also, reloaded now at 11.86 the shares of FCX I sold during its first pop at 12.50...

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    1. Placed a sell limit at $8.20 for 1/2 of the HLX shares I picked up today at $7.67, and at $12.86 for the shares of FCX I picked up today at $11.86.

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  39. Also, bought some more MTL now at 1.60 and placed a sell limit at 1.75 -- I think a pop is coming soon...

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  40. Nice trades on SEDG, Mark! Can you please briefly describe why you believe in that company? It is now close to the bottom of its 1-year range, so now is a good time to buy, if we think the company will grow in the future....

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  41. I got a nice trade in on NBY today. Bought at $3.3 and sold at $4. It's at $4.55 after hours.
    Lost money on FCX. Bought at $12.05 and sold at $11.90. Bought back in at $11.83.
    Picked up LEJU today at $5.30. Oldie that I traded from 2014. It's the Zillow of China. They have a deal with Zillow as well actually.
    Picked up some ISNS at 3.45. They had blowout earnings last week and its been tanking ever since. I think its due for a bounce.

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  42. I missed the re-entry on SPWR because I was trying out NBY and it moved so fast I got distracted. SPWR ran like crazy the last 90 minutes.

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  43. Placed a buy stop limit order on SEDG at $19/$19.20, just above the recent spike.

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  44. I was hoping that the "mini panic" in HLX (and to some extent in the whole energy sector, when oil was up but many oil stocks were down a lot) was just a fluke, and now it looks like it indeed was a fluke, as HLX has already hit my sell limit today at $8.20 for the shares I purchased on Friday at $7.67.

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  45. Picked up some BHP now at $31.20. It has a nice uptrending chart since the end of June, which looks set to break out to new bull market highs. If it doesn't and instead breaks below the uptrend line, then I'll exit my position.

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  46. This summer, Einhorn and Robertson trimmed their $AAPL stake, Soros liquidated it and Singer went short. Berkshire raised its stake 55%. Barry held firm.

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  47. Bought some MOS now at 27.64 and placed a stop at 27.1, just below the recent low.

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  48. What has just happened? Why such a spike up in GDXJ and other metals?

    In any case, today's pullback in FCX might be suggesting more downside in the near future, and so I just placed a sell stop limit at $11.75/11.70 for the shares I picked up last week at $11.86.

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  49. Also, today we got that pop in MTL that I sensed last week, and since I have a lot of MTL already and my last week's purchase was just a trade, I decided to lower my sell limit to $1.73 so as to try to sell the shares I purchased at $1.60 last week.

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  50. SEDG might be making a higher low now relative to Aug 10. Just for the heck of it, I bought some now at $17.78 and placed a stop limit at $16.75/$16.70.

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  51. If SLX drops below the recent support at $31, more downside might follow. So I raised my sell stop limit to $30.90/30.80, for the shares I purchased at $31.50

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  52. Fidelity is very slow to update the actual cash position in my account (it can take up to 5 days to do that), and so only now did I notice that my yesterday's "buying spree", fueled by the intuition that many commodity stocks are due to rise in the near future, resulted in me borrowing about 10% of my account on margin. Since I now try to avoid margin, I decided to take some profits today, so as to get out of margin debt. So I just sold at $5.62 the portion of BTE that I purchased a couple of weeks ago at $5.18, and this morning a sell limit was triggered at $5.50 for the portion that I purchased at $5, so overall I made about a 10% profit on both share lots. In addition, I just sold at $8.40 the last half of the large HLX position I picked up on Friday at $7.67 during its "mini-panic." That also amounted to about 10%. Even though I imagine much larger potential percentage gains when I enter position, I need to learn to be more realistic and quicker to abandon positions that I don't like.

    To that end, I decided to move up the stop on my large BHP position to my entry point at $31.22. Also, I decided to place a stop under my large ORCL position (that was granted to me in the form or RSUs this summer) at $40.6.

    Now I have stops for all my position, and now, hopefully, I will preserve my gains if the commodity rally comes to an end. :)

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  53. I had a good week until today. I bought back into FCX, fairly large position, yesterday on the thought that it was on the verge of breaking out. I still like it and the chart looks ready but frustrating to see zero follow through on this stock. A move below $11.70 would probably shake me out.

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    1. I also thought that FCX was done going down when I puchased it last Friday, and I have a stop at 11.75...

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    2. Gonna be interesting to watch the close today. I'm waiting on the close to determine what I do since intraday moves are all shenanigans.

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    3. Here's what I'm referring to:
      http://stockcharts.com/h-sc/ui?s=FCX&p=D&b=5&g=0&id=p93287948599

      If you look at the chart with closing prices only there's plenty of support from the tops in May to July in the $11.50 to $11.70 area.

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    4. You would think it would hold here, but 10 is the ultimate support.

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  54. SEDG- Bought back the shares i sold at 18.80ish today for 17.07. I guess I'll keep doing this until...

    A-It breaks out or...
    B-It collapses when support fails!

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  55. Got stopped out of BHP today flat (since I moved my stop up to the entry point) and out of FCX with a minor loss (purchased it at $11.86 and sold at $11.70).

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  56. A classic shakeout yesterday. BHP is gone without me. FCX, however, did not leave the station yet, and I have just reboarded that train at 12.05, with a 4X position size, since the stop is pretty close (11.75) and the maximum loss on this trade is still manageable.

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  57. For perhaps the first time since mid-January, my sixth sense has turned skittish. For what it's worth.

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    1. Good time to ask yourself how you will (or whether you want to) weather a short-term drop.

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    2. Even though I'm mostly long, been feeling lately like the market is getting away from me and have been consciously not chasing. Hopefully will be smart enough to do some timely buying if we do get a pullback.

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  58. From Reformed Broker - I see this as implying that individual stock picking will be better rewarded in the future as less money competes in the stock picking area and more money moves to ETF buying.

    Before we start our discussion proper we should say what we mean by active and passive. It is becoming increasingly hard to tell the difference between active and passive. More than a decade ago things were easier as passive meant market cap weighted indices, although even then the number of indices was growing. The proliferation of indices has been greater since then as smart beta indices increasingly offer exposures that cover part of what was known as active before. We now have the bizarre situation that there are more indices than there are large cap stocks, this is not at all helpful for investors.

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  59. Got stopped out of FCX today at $11.70 (which I entered at $12.05 yesterday). Got stopped out at $30.80 for SLX that I purchased at $31.50.

    Gave back some profits today, but that's "the cost of doing business." That's expected when the uptrend turns into a downtrend -- all stops get hit, if one was lucky enough to place stops right at the top and give back only a little after such a long run.

    Also, just sold at $28.66 the shares of MOS I bought at $27.64 last week. Sold my ORCL shares, since 1-month intraday charts are suggesting a double top recently. Finally, sold most of my MTL just now at $1.83, since it has now almost reached my cost basis of around $1.90

    The commodity charts do start looking suspicious, and I'll try to stay away from buying anything until the charts improve.

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  60. I followed suit, but I'm on vacation and wasn't able to get out at the right price. Sold at $11.30. Bummer.

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  61. Gold stocks taking a big hit today. Talked to my gold bug friend yesterday and tried to convince him to do some partial selling after the big run his stocks have had. Was saying his one account holds gold mutual fund and it went from $120,000 down when he bought to $60,000 and now back to $160,000. He wasn't buying my "nothing goes straight up" or "raising interest rates is bad for gold" and his theory is Yellen talks up rates Friday, which scares people out of stocks and they run to the safety of gold.

    Pretty sure the long term gold bear in not over as he is one of those guys who does everything wrong and he is still very bullish on Gold. When he sells, I will be buying.

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    1. BB, I think the gold bear is over and we are in a new bull market. The recent run in gold is too strong for a bear market rebound...

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    2. A broken clock becomes right at some point, and if your friend is long-term bullish on gold (like T3d, who has been holding it for more than 20 years), then he is bound to become right at some point. Why not now? We will only know in retrospect why the gold bear turned to bull in 2016, even though most people expected gold bear to continue...

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    3. You (and he) may be right David, but when I look at long term charts - eg. http://goldprice.org/gold-price-history.html

      it sure looks like we are just having a reflex rebound after a huge bull, like we did in 1983. That was over a 55% up-move back then, higher than now, and then it turned back down and basically went into a 20 year basing pattern. The pattern this time could (and will likely) be different, but something to think about.

      Not that I think it is bad to have a position in gold, but my friend is way over-invested, past the point of safety, and Gold is actually pretty close to being back to the highs in CDN Dollars, so I'm pushing my friend to do some selling and rebalancing. But his strong belief he is right usually means he is wrong.

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  62. I got stopped out of SEDG today at $16.80 for the shares I purchased at $17.80. As a result, I have accomplished a miracle -- my portfolio is 90% cash now, with small long-term positions in BTE, HLX and GDXJ. I guess I am learning not to be stubborn with my investments. :)

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  63. Going to be an interesting day tomorrow with Yellen speaking. My guess is she doesn't say anything new and just continues to keep her options open.

    No idea how the market reacts to this.

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  64. Gold "bull" is dead IMO. I think this was a dead cat bounce. Doesn't mean miners stay down tho

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  65. Ryan Detrick, CMT ‏@RyanDetrick 35m35 minutes ago
    AAII bears>bulls this week. Only 4 other times since 2000 did this rare event happen closer to S&P 500 all-time highs.

    HULBERT ON MARKETS
    Uh Oh, the Wall of Worry Just Came Tumbling Down
    Whenever market timers have been this bullish in the past, the market was headed for a fall.


    > Easy to find support for whatever position you want sentiment-wise these days.

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