Jobless claims came in a little light and this, it seems, is enough of an excuse to open market higher.

Bill - FYI, you labeled today's report "Cara's Wednesday Report". Just letting you know.

If the U.S. stock market is to re-test the mid-August lows, then it should begin to move down again in the next few days. Why? Because the move down after a post-correction rally peak is usually fast (about 2 weeks). And the post-correction rally peaked back on 9/4.

So while the market can open up solidly today due to GM upgrade by Citi, if it shakes off that strength and closes down on the day, expect more weakness tomorrow and into next week.

http://www.2globalmarkets.com

The Costs of war: $2 trillion

http://www.lewrockwell.com/woods/woods81.html

CFC- squeeze time...

CFC- in for a trade at 17.95...

HOV- adding at 10.16...

Anyone buying the yarn that pinching the UAW is going to help GM?

I'm not.

2nd, I hope you're wearing protective garments when making those trades. ;)

2nd,,,I joined you in HOV at 10.12

HOV - Sep 10 Calls (currently .65 bid/.70 ask) a limited risk way to play Tuesday's Fed action.

HOV - Sep 10 Calls (.65 bid/.70 ask) a limited risk way to play Tued Fed action.

CFC- funny how the price gravitated to BAC's conversion option...

2nd ave,,,I set a trade to trigger a stop at 9.90,,,,gonna stay close on this one.

Dab

Bill -
You are on vacation, so I certainly can't blame you for that sentiment! Thanks for keeping things running here while you are trying to take a break!

2nd - CFC looking good so far.
IB Users - Is there a way to see Market indexes like DOW, NASD and S&P on TWS trading page?

JogyP - Yes. Just put picker (INDU/SPX/NDX/RUT/etc.) in "Underlying" column, then select "Index" as security type.

ticker, not picker.....

n2son: the shorts don't appear to be fazed here...another sign of just how bad things are in the housing sector...i was reading yesterday about bill miller buying the sector in late 2005/2006 for his value fund-it's hard to tell when the builders become a "value..."

n2son- was also reading a post of yours last night:

Speaking of mindless analysts, BoA upgraded Cara 100 Hovnanian (HOV) yesterday to a buy. The stock shot up 6% in response.

I don't like HOV right now. And I like the BAC analyst, author of the infamous "foot traffic" meme, even less.

Posted by: number2son at February 2, 2007 8:03 AM

nice call..

only protective garments i need are sunglasses...

KSS (Cara100) +2.6% @ 54.71

dab- since you're in, reposting bill's take on HOV from august 12:

"Since I have been asked why Hovnanian remains a Cara 100 company, I suppose it’s because the company was always well managed and produced exceptional results. It’s also because of their diversification across the US and the fact they build quality homes.

This past year has been exceptionally hard on the industry and of course on this company, but their long-term track record is exceptional. I believe they are financially strong enough to weather this storm.

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, Chairman, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian Homes, Matzel & Mumford, Forecast Homes, Parkside Homes, Brighton Homes, Parkwood Builders, Windward Homes, Cambridge Homes, Town & Country Homes, Oster Homes, First Home Builders of Florida and CraftBuilt Homes. As the developer of K. Hovnanian's Four Seasons communities, the Company is also one of the nation's largest builders of active adult homes. Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company's 2006 annual report, can be accessed through the "Investor Relations" section of Hovnanian Enterprises' website at http://www.khov.com.
Quarterly results for the Q ending July 31 will be reported Sept 7. Those results are expected to be poor, as they have been. But a quality company in a cyclical industry such as home-building goes through ups and downs. It was May through July 2005 when I argued traders ought to be selling the home-builders. They were all in the Distribution Zone (which I'll explain later), amid wild hype by Financial Entertainment Media. HOV at the time was well above 60 on its way to a peak in the low 70’s. Using my system, you could easily have been out at say 65. It’s now 14.70, and hit a low of 10.83 on Aug. 1. Two weeks ago, you would have been back in (or closed shorts) in the 11’s.

As an aside, I’ll have to set up a page of Cara sayings and definitions to make things easier for new readers. You’ll see that it’s pretty simple stuff, but when you don’t know it at all, then it looks quite complex.

Presently, for HOV, the RSI-7 for Monthly, Weekly and Daily is 23.3/35.6/54.7. When a Buy Alert was issued earlier in the month, a +30 pct gain could have been earned in just a few days. But, when offered, traders need to take profits of that magnitude.

My advice is that if when entering a new position you can get a gain of +26 pct or more in a year, you ought to consider that is a Warren Buffet number, and if you can ever do as well as Warren, you will be a top 2 pct trader. So, a +30 pct gain in a week is basically found money in a turbulent trading environment, and in this case the gain was in a stock in an industry that is in horrid shape.

But this is an industry made worse by the public’s attention on foreclosures and the huge losses being taken in the sub-prime market. In situations like that, you have to think that much of that flash gain in HOV was from a short squeeze. So, you should have had your finger on the Sell button every day in any case.

My point is you are managing a portfolio. You never have to hit the top or the bottom price (in fact you can’t); it’s the percentage gains (and percentage losses avoided) that count.

By focusing that portfolio on a watchlist of say 100 stocks, you will get to know them, like family. You will see that each stock is traded within its own community. Many of the traders are professional, and much of the trading is via programmed trading. So you need to focus. That means reading all the news. Reading the Value Line or other Wall Street research reports. Watching price and volume closely whenever the stock gets into the Accumulation Zone or the Distribution Zone, which is decision time."

OldGoat, Thanks for the tip.
So far my experience with IB is good, and looking at the commissions I could have save thousands if I had switched earlier.

DUG - bought some expecting a pull back in overheated energy sector.

The KGC 12.50 calls are up from $0.25 to $1.50 or so. Still holding some of the profits till the last minute and bought some free puts too. Next week will be wild.

KSS daily, weekly, monthly were all below 30. Daily nudged above 30 recently. Another proof in concept for Bill.

HAL- took a position earlier this week after the "dissing" and "cussing" (why does that remind me of leisa) about the move to Dubai...as "discuss...ting" as it was to craig, the bottom line is avoiding taxes makes sense for shareholders...

LEH up another 3.4% so far today. My calls are very happy.

2nd ave. I checked the recent prices on hov and see a low of 9.93, although it made a low of 9.91 todayso far.

My stop is at 9.90 so it may get hit.

LOL, the last run down this morning went to 9.91 and turned so im hoping it'll do better after this monings 10 a.m. swoon.

If I get stopped it's not a big loss.

Dab

I am interested in knowing who thinks the fed will cut next week, and if so, how much?

I think it's better not counting on a cut, 'cause obviously the market's already factoring in a 50 cut. Either way, it sounds like a setup to disappointment.

Anyone here familiar with the Canadian Oils sands stocks want to provide an opinion on them? I follow a basket of them and have noticed that after a brief rally they quickly retreated back to the recent lows when the markets retreated. The basket I follow is down around 20% since the tax change was announced in 2006 and haven't recovered. I would like to think there is some value here considering and taking into account a nice dividend. There hasn't been any talk about them in here in months.

Okay, what am I missing?

XAU up above 157 yet my pm's and miners are treading water. Where's the buying that's driving XAU?

There is a rumor on minyanville that there is a steady bid in the stock index futures every day which is propping the market up. If this is true, more evidence that our markets are not 'free' and someone wants to prevent a decline here.

OG,
"HOV - Sep 10 Calls (.65 bid/.70 ask) a limited risk way to play Tued Fed action"

Those calls look very risky and expensive to me. You will incur a 7% loss if HOV doesnt move up more than 7% (break even at 10.70) in the next 5 trading days. October 7.50's (3.10) have a smaller premium (0.60) and you have 37 days for it to work out...

TimG

ETFC - Long @ 14.04
BC - Long @ 22.13
LEH - Exited calls (+46.8% in 2 days)

shark,

59% of people here think the Fed will cut 0.25%
26% think they will keep rates as is
12% think they will cut by 0.50%
1% think they will raise rates

If you haven't voted, please do vote, there is one day left:

http://stats2008.googlepages.com/poll

Shark, as I have posted before, the FED has already cut .25, they just have not announced it. You can see the FED data here:
http://www.ny.frb.org/markets/omo/dmm/fedfundsdata.cfm
They have been below the 5.25 target rate since August 10. It is possible that we get a full 1/2 pt cut, but I think the 1/4 is a lock.

geckojb,
A heads up for all Alberta Oil Sands investors.
This friday after the market closes the government of alberta will be announcing whether or not there will be royalities added to the oil sand company.
In addition, China has pulled out of a pipe line project that was suppose to transport oil to B.C. from the oil sands. They mentioned that the government process to build the pipe line will be filled with delays.

moab, could you please provide a link to that story?

2nd ave. I have a line drawn in connecting tops on HOV for the hourly chart. If it gets above 10.15 it oughta be a good shrt term trade.

I belive for a longer term trade it really needs to base awhile.

Im looking for it to start forming a base when we go into recession, whenever that is.

At that point I think most of the homebuilders and mortgage co.s will start to move as well. IMHO.

Dab

Dear Bill,

Lovely photos of the new digs. It sure looks like paradise to me. Mrs. Cara looks as happy as you do, and I'm sure this winter (the absence thereof) will do both of you good.

I just voted in the Cara poll, and did want to mention to moab, that it does make perfect sense to prop up markets here. The "cover" they talk about on tv, (reasons that justify a cut) isn't the cover that Ben is looking for, in my opinion. I do acknowledge that a quarter point cut is the most palatable and meaningless option available to 'ol Ben. I just think that Ben came into this thing with a plan, and wants to see it through. I also see economic pain either way.

It's an end-of-cycle boom gone bust, and there's ways to slow down the destruction, there are ways to lessen the destruction, but none of those are truly desirable. It's at times like this that one wants to see a real Malthusian, Ricardoan bloodletting, which would be the truest and quickest market-resolution to this housing BS. Let the prices swing, let the stupid suffer, let the wiley profit, it's the life we live and the credo we venerate here in the world of trading.

It is from the paid part of the site. If they post it on the free section later today I will provide the link.

2nd Ave, dabonenose - HOV

HOV's chart shows THREE shots at fast profits:

+18% over 3 July trading days
+42% over 3 August trading days
+20% over 4 trading days just before Labour day.

BUT, you'd have to be a VERY fast trader to capitalize before HOV fell back down. I've mailed the chart to Bill.

Who knows, perhaps after the quarter's disappointment, perhaps another yet bigger trading opportunity!

Oil Sands:
Being discussed on Bloomberg radio now..

TimG - All in how you look at things.
.60 x 10 contracts = $600 at risk
3.10 x 10 contracts = $3,100 at risk

If HOV pops on Fed announcement (doesn't have to go all the way to 10.70 for calls to go up in value prior to expiry; no need to hold to expiry), the short-term contract will move more rapidly and give a much higher yield on $ at risk. This is not to say that the Oct 7.50's aren't worth considering for those with a farther out horizon, in which case deep calls should be roughly equivalent to being long the stock. But, if Fed doesn't cut and HOV drops to $8, how will the Oct 7.50's bought today at $3.10 look in comparison to the Sep 10's @ .60? On the other hand, if Fed cuts and HOV jumps to $15, everybody's happy. But the guy with the Sep 10's is a bit happier.

WMT - calls exited +23.5%
BBBY - calls exited +28.0%

"I never buy at the bottom and I always sell too soon." -- Baron Rothschild (as quoted by Jesse L)

I have the second half of Rothschild's approach down pat; it's the first half I need to work on.

OldGoat -

I concur with TimG on the steep price for options that expire in six-and-a-half trading days. Maybe in relation with HOV recent volatility you get a fair deal, but you must be a very nibble trader to handle those. Definitely not my forte...

On the market in general, I am getting the feeling that a sense of otherworldliness is slowly seeping back into the market. Momentum leaders are back at 52-week highs (or higher), narrow big stock leadership is pulling the markets higher and headline a mucky looking show (see RUT & a bunch of waterfall charts for a few small/mid caps (-40 to 50% in Q3 so far)). FETV is back touting the indestructible emerging market explosion and the newest darlings, technology & biotech (since Labor day).

I still haven't seen any floating body of some dimension emerge after the Aug. shake-up. Wave 1 of the correction looks like a paper cut that has most operators crying to Mommy their hearts out. I hear disingeneous speeches about the danger moral hazard when it comes to individual borrowers (see Art Hogan this morning on CNBC), but strong-arm tactics to force the Fed to cut rates and help the big boys. Bernanke will set a very important precedent for his tenure on Tuesday; I still have a hunch that he doesn't like being bullied (after all academic tenure is comfortable in that way). What if he doesn't cut or cut Fed Funds rate 25 bps once-and-done AND slashes discount rate below 5% and/or open the collateral pool wider?

In short, this market is not complacent like earlier in the Summer, it is blind and deaf to the signals that don't fit the spin narrative ($80 oil, dollar slide, China's bubble, near-recession economic conditions).

JML

ALOHA !!

Another junior miner is hit with "country risk" ... Down another 22% today ...

GABRIEL RESOURCES (T.GBU, C$3.56, 255M SO, 266M FD, C$907.8M MCap, www.gabrielresources.com)

CLOSING POSITION— GBU has just been hit with a frivolous lawsuit, albeit a well-financed one (one of the NGO bringing the case is funded by George Soros). We believe the company will prevail, because the issue really does appear to be non-material, but the mining ministry in Romania has suspended the review process on GBU's EIA. That means that at the very least, the project goes off schedule. It also does not suggest that the ministry is very supportive of the project--they could have ignored the suit until the courts ordered whatever they will order. This was always a long shot, and this sort of thing is exactly why, and why we highlighted the company as being a greater risk in the current edition of the International Speculator. So, we're closing our position -- but that's primarily because the time frame no longer meets our mandate. The weight-challenged lady hasn't actually sung yet on this one, so we'll probably hold on to some shares, just to see it through. But for now, we're writing it off our portfolio. END

Would be interesting to know the "real" reasons George Soros is behind this. Has he got some real estate near the mine or does he want to pick up some cheap shares on the down low?

I own no shares in GBU ...

KSS got to 57.00, up 7%, before falling back a bit.

CCJ is on the move in the last few days after announcing a large buyback and seems to be breaking out from its recent range of $38-42 (currently 43.80s). Other uranium producers are following as well. I am long Paladin (PDN.to) and opened a small position in Uranium One (UUU.to) yesterday afternoon.

BC:
Taking a small bet. Bought 2 Oct 20 calls for 2.5

UNG- glad i stayed out...but back on the watchlist...this thing has more action in september than gold...

JWibbs

Your statement about the market retesting the lows normally happening with-in two weeks (I would say a month) of the previous lows are right...

I am beginning to think of all the posibilities of how this might play out; and one of the options is that we have see all the down side we are going to see and the market will continue to rise from here.

The market pullback has been strong enough, and long enough, that it could have been enough in length and strength to satisfy the powers that be. That is actually what I think is doing to happen.

As I was expecting a pullback in the market and it had not happened to the degree I expected and we are taking out key indicators in time and price on the DJIA I now have a bias towards the market continuing forward from here with no further downside.

GSS about to have a clearance sale?

looks like some vol coming into hov now

I have next R on hov at 10.32, then move to 10.75

MPEL .. 14.94

What's impressed upon me is that this latest recovery rally in the industrials, spanning the past month or so, has come at the expense of an almost 3.5% decline in the US dollar (in a month!). Meanwhile the index is up, what, maybe 5% if you look at the closing low? During the same period, in $US terms, crude is up 10% and gold is up 9%. The question becomes, can gains continue if/when the currency strengthens?

The US$ has lost 15% against the Canadian dollar in six months. As a Canadian, I'm hesitant to allocate any of my medium to long-term positions to US securities. Thank goodness most of the miners and resource stocks I'm interested in are Canadian listed. When does the tipping point come when foreigners en-masse decide they've had it with the US$, or has that already started?

20 wooden nickels indeed.

peter- thanks for your update...

CFC- squeeze is on > 18.95...

n2son- making lemonade out of CFC ;)

There is absolutely no volume on today's rally in the E-mini.

I follow 1 hour and 3 hour bars, normalized for their time frame, and they are 30-60% of normal volume time frame volume for the past 2 weeks.

I'm suspect unless volume picks up greatly.

Can anyone explain how we get this movement on such light volume?

AlaBill -

Because of light volume, you are getting this move. BTW, we are closely grinding toward some important resistances. Question: do we probe them prior to Fed meeting & jump them @ 11:16a next Tuesday?

JML

Hovnanian holding a fire sale this weekend in 19 states. Discounts of six figures in some cases!

http://www.nj.com/starledger/stories/index.ssf?/base/news-12/1189658360216280.xml&coll=1

Talk about deflation!

Re weak dollar-

throwing in a "primer" about the dollar from todd harrison's site...

Re weak dollar-

throwing in a "primer" about the dollar from todd harrison's site..

http://tinyurl.com/yv9wlw

Looks like countrywide is following in the same foot steps as Enron.
Only difference is the "have's" will keep pumping money into their coffin to cover up the dirty SCAM. 'Least they can't shut off peoples electricity.

http://www.msnbc.msn.com/id/20764036/

Quentusrex and Hoosier,
Thank you for the RSI spreadsheet. I've entered my 100 watchlist and it works brilliantly. I made one small revision and formatted the RSI cells with conditional formatting to turn green when the RSI is less than 30 and turn red when the RSI is greater than 70. That way the AZ and DZ cells jump out at me at a glance.

bigward,
I read the countrywide article, but don't understand the comparison to Enron.

I am long CFC for the following reasons

1)I believe Fed will do everything to avoid a CFC bankruptcy.

2) BAC will not sink 2 billion into CFC without a reason

3) "The company yesterday said that it expected to benefit in the long-term from the mortgage market correction because reduced competition would allow it to raise prices."

The funny thing is, a company like CFC sold all it's bad paper. I don't think it faces a particularly bright future, but it didn't leave itself holding the flaming doo doo bag either. Maybe it can get into the reverse-mortgage business, which will become a big business before we're through.

I am starting to think that if the market holds up (propped up?) well into next week, Ben may just hang tough, more or less, on rates. I also think a 1/4 point is a meaningless gesture and it is therefore Ben's most likely choice among unpalatable choices. It will appease the largest number of participants without changing anything materially.

It will, as a side note, be interesting to see if Ben will EVER be able to tame the Washington Inflation Monster during his tenure, or is will it prove to be the case that once the horse is out of the barn...

Fred, please send me your modification and I'll add it into the next release. I'll even add in a phase that turns orange when it's above 55 but below 70 and a light green when it's 30-45 with yellow from 45-55.

Anyone have thoughts on the color coded RSI's? Votes A) No color.
B) Only Red and Green
C) Full RSI Spectrum: Green-Light Green-Yellow-Orange-Red

Quentusrex,
In Excel you just:
1. highlight the three rows of RSI cells,
2. click Format
3. click Conditional Formatting
4. In the Conditional Formatting screen, use the pull-down menues and enter whatever number you want to use in the box
For Condition 1: I used Cell value is less than 30 and chose green.

5. Click Format
6. Click Patterns
7. Select your Colour.
8. Click OK

You'll be back in the Conditional Formatting screen. Click Add and format Condition 2 the same as you just did.

For Condition 2: I used Cell value is greater than 70 and chose red.

Save the file and all the conditional formatting will be saves.

It's a lot easier than my instructions suggest. takes about 30 seconds to do.

That should have read "highlight the three columns of RSI cells". My Excel only allows three Conditional Formatting selections.

ALOHA !!

Peter ... I don't believe the markets are free of a credit crunch yet. The deflation of the housing market is not over. I don't see anyone diving into 5 year car loans much less 30 year home loans ... Instead I see defaults and lowered house prices continuing.

I disagree I see more downside especially after companies start reporting 3rd quarter financials in October and November. I find it curious that so far we have gotten a smattering of mining companies reporting exposure to ABCP but no reporting from 90% of Large/Mid Caps listed on the NYSE and globals. I mean where is ABB or MSFT or GOOG short term cash? Also what of the corporate debt sector? Surely there will be fallout from the big derivative banks who also packaged low quality corporate debt. I find it hard to believe these investment banks stopped at using just retail consumer credit when conspiring to write and package bad debt under AAA ratings. To them a fee is a fee whether based on retail crap or corporate crap! The biggest corporation in the World the USA has a AAA credit rating ... so where's the credability in rating corporate debt within the fee denominated rating agencies?

I have not even touched on the adverse domino effect of a falling US Dollar in terms of US Dollar denominated assets which includes the US stock markets and US debt. I believe the foreigners have gotten it that a US Dollar is just "PR packaged" debt with no future pay off. Problem is when will Americans figure it out?

The "confidence" crisis wave is on the horizon and rolling towards our shores at a tsunami pace. If you watch the tide prior to a tsunami you will be alerted to the impending danger. In this case the receeding tide is the receeding foreign investors in US stock and debt markets tied to the US Dollar. The Japanese surely must be on to this since they already went down this street in the late 80's! Hummmmmm ... MASSIVE BAD DEBT + 0% INTEREST = 10 years of financial hell! Only diff is the Japanese public actually had savings to fall back on in tough times. Americans don't ... How does an American save? He signs up for another teaser rate credit card good for six months! Live by the DEBT sword ... die by the DEBT sword! And ... GOVERNMENT IS ONLY AS HONEST AS ITS MONEY! IF OUR MONEY IS CORRUPT THEN IT FOLLOWS ALL ELSE FINANCIAL IS ...