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January 26, 2008
Daily Report for Sat, Jan 26, 2008
Markets Re-cap
Despite strong quarterly earnings reports from Dow 30 components Microsoft (MSFT), Caterpillar (CAT), and Honeywell (HON), which pumped the US equity market at the open, the rally fizzled.
By the closing bell, the DJIA (-171.44 -1.38 pct to 12207), S&P 500 (-21.46 -1.59 pct to 1330.6), and Nasdaq Composite (-34.72 -1.47 pct to 2326) had been pulled down by weakness in the Financials (XLF -2.62 pct), Cons Discretionary (XLY -2.06 pct), Energy (XLE -1.79 pct) and Healthcare (XLV -1.58 pct). Only Basic Materials (XLB +0.50 pct) lifted among the ten sectors, and barely so.
In the final hour of the week, the DJIA appeared on the verge of a breakdown of technical support at 12200.
Earlier in the day, after the Asia-Pacific equity markets had been red hot, the European bourses closed mostly flat with the UK FTSE -0.10 pct and German DAX -0.06 pct down a bit. On the heels of a shocking -$7.14 billion trading loss in the quarter by French bank Societe Generale, which the management claims, somewhat incredulously, was done with no one’s knowledge by an individual 31 y.o. rogue trader, the CAC 40 dropped -0.70 pct.
On the earnings front, Microsoft reported 2Q profit jumped +81 pct to $4.7 billion vs $2.6 billion a year ago, based on strong sales of its Windows software. Honeywell’s 4Q net income lifted +18 pct to $689 million vs $585 million a year earlier; however, the company warned of a "softer" global environment in 2008. Caterpillar’s 4Q net income lifted +11 pct to $975 million vs $882 million a year earlier, largely due to strong overseas sales.
Crude Oil moved back to the 90’s with a close for the $WTIC of 90.71, up +1.30/bbl on speculation that the US $150 billion stimulus plan will boost fuel demand.
$Gold started the day strong, but gave back some of its early momentum. At the close, $GOLD was up +0.54 pct to 910.70.
The $USD climbed +0.38 pct. The Euro ($XEU) dropped -0.66 pct to 146.66.
US Treasury instruments lifted from flight-to-safety bids. The 30-year long bond ($USB) gained +0.76 pct to 119.88 as the yield ($TYX) dropped -1.63 pct to 4.282. The 10-year yield ($TNX) dropped -1.54 pct to 3.584. And the 2-year ($IRX) yield dropped -3.48 pct to 2.22.
Comments & Outlook
On Friday, Value Line published its quarterly review of Caterpillar, and also United Technologies.
(CAT: Value Line Report Jan. 25: next one is due Apr. 25)
(UTX: Value Line Report Jan. 25: next one is due Apr. 25)
With respect to the earnings bump reported on Friday by Microsoft, Honeywell and Caterpillar, traders are not fooled by results that are boosted as a result of huge share buy-backs.
To show how earnings are increased via financial balance sheet restructuring rather than from operations, look to the number of outstanding shares as reported by Value Line:
MSFT
2005: 10700 mil shs
2006: 10062
2007: 9380
2008: 9000e
HON
2005: 829.48 mil shs
2006: 800.59
2007: 745.00
2008: 745.00e
CAT
2005: 670.87 mil shs
2006: 645.81
2007: 635.00
2008: 615.00e
Despite higher internal rate of return from operations, these corporations were buying back treasury stock in the open market at cycle-high prices. As I see it, these companies seek to boost their per share profit in order to derive higher management bonuses and/or to rationalize extreme compensation.
It’s a case of everybody has to get theirs as soon as they can get it.
To get another insight into the mindset of the people who run these shareholder-owned corporations, look at the insider buying/selling reports as also shown in the top left corner of the Value Line reports.
http://valueline.com/dow30/f5905.pdf
http://valueline.com/dow30/f337.pdf
http://valueline.com/dow30/f1767.pdf
You should not be shocked to see that of these three companies over a period of 12 months, there was a single insider Buy in a single month for one company vs a total of 26 sellers. These insiders, by the way, are the senior officers and directors who are guiding shareholders with confident, optimistic reviews of management performance.
If shareholders, not management, controlled the Boards of these corporations, you would see an immediate change in compensation practices. What you read in college textbooks fails to grasp today’s reality. Shareholders are an after-thought.
Links & Charts
International Economics Review
Here is more bad news – the negative wealth effect of a declining US housing market. As the Econoday economist reported: “Treasury yields and the dollar slipped in immediate reaction to the headline disappointment.”
US Existing Home Sales report for December.
Knobias Cara100 Tables
|
Portfolio GAINERS |
| SYMB | LAST | CHG | %C | VOL |
| IBN | 62.260 | +3.200 | +5.4 | 3.6M |
| TCK | 32.510 | +1.440 | +4.6 | 2.3M |
| ABX | 52.170 | +1.540 | +3 | 13.5M |
| HDB | 118.300 | +2.670 | +2.3 | 458.7K |
| TM | 102.000 | +2.300 | +2.3 | 688.7K |
| PBR | 104.620 | +2.190 | +2.1 | 9.1M |
| BHP | 63.420 | +1.130 | +1.8 | 4.7M |
| YHOO | 21.940 | +0.250 | +1.2 | 28.2M |
| SWK | 46.580 | +0.520 | +1.1 | 1.5M |
| PTR | 147.830 | +1.520 | +1 | 1.3M |
| IMO | 48.850 | +0.450 | +0.9 | 397.7K |
| DOW | 36.310 | +0.300 | +0.8 | 5.6M |
| ADBE | 34.840 | +0.200 | +0.6 | 9.2M |
| NTES | 18.610 | +0.080 | +0.4 | 930.3K |
| CEO | 145.500 | +0.620 | +0.4 | 524.4K |
| TGP | 28.280 | +0.100 | +0.4 | 46.3K |
| UTX | 72.750 | +0.190 | +0.3 | 7.9M |
| WBK | 114.260 | +0.270 | +0.2 | 25.4K |
| CTSH | 26.870 | +0.060 | +0.2 | 3.9M |
| PAYX | 33.140 | +0.050 | +0.2 | 3.2M |
|
|
Portfolio LOSERS |
| SYMB | LAST | CHG | %C | VOL |
| GFI | 15.150 | -1.550 | -9.3 | 13.8M |
| KB | 64.650 | -3.360 | -4.9 | 746.5K |
| DELL | 20.060 | -1.030 | -4.9 | 41.7M |
| UBS | 41.620 | -2.060 | -4.7 | 3.3M |
| ERTS | 47.220 | -2.240 | -4.5 | 4.7M |
| BBBY | 29.360 | -1.360 | -4.4 | 5.6M |
| DB | 111.430 | -5.060 | -4.3 | 1.3M |
| GOL | 18.230 | -0.820 | -4.3 | 482.3K |
| IBKR | 31.450 | -1.410 | -4.3 | 3M |
| GRMN | 64.940 | -2.870 | -4.2 | 4.5M |
| SNDK | 25.620 | -1.130 | -4.2 | 11M |
| RIMM | 91.050 | -3.950 | -4.2 | 26.9M |
| SBUX | 19.660 | -0.790 | -3.9 | 17.7M |
| NOK | 35.080 | -1.400 | -3.8 | 31.3M |
| GS | 191.370 | -7.480 | -3.8 | 14M |
| CSCO | 24.200 | -0.910 | -3.6 | 79.1M |
| STO | 25.770 | -0.930 | -3.5 | 1.6M |
| MICC | 99.330 | -3.540 | -3.4 | 944K |
| TEF | 85.580 | -3.010 | -3.4 | 776.6K |
| INTC | 20.000 | -0.690 | -3.3 | 104.4M |
| CCL | 41.410 | -1.400 | -3.3 | 5.4M |
| WFMI | 37.550 | -1.170 | -3 | 3.6M |
| VIP | 33.180 | -1.030 | -3 | 5.2M |
| AMAT | 17.420 | -0.540 | -3 | 22.5M |
| CHL | 75.570 | -2.280 | -2.9 | 4.7M |
|
|
Portfolio 52-Wk HIGHS |
| SYMB | DAY HIGH | LAST | CHG | %CHG | VOL |
| ABX | 53.380 | 52.170 | +1.540 | +3.04 | 13.45M |
|
|
Portfolio 52-Wk LOWS |
| SYMB | DAY LOW | LAST | CHG | %CHG | VOL |
| GSK | 46.600 | 46.920 | -1.030 | -2.15 | 2.29M |
|
|
Portfolio VOLUME |
| SYMB | LAST | %C | VOL | %ADSV |
| IBKR | 31.450 | -4.3 | 3M | +226 |
| TCK | 32.510 | +4.6 | 2.3M | +80 |
| BDK | 69.980 | -0.4 | 2.4M | +72 |
| GFI | 15.150 | -9.3 | 13.8M | +68 |
| JNJ | 62.460 | -1.7 | 23.7M | +64 |
| NOK | 35.080 | -3.8 | 31.3M | +57 |
| BC | 17.100 | -0.4 | 3M | +57 |
| BMY | 22.970 | -1.6 | 31.1M | +52 |
| DB | 111.430 | -4.3 | 1.3M | +42 |
| CHL | 75.570 | -2.9 | 4.7M | +37 |
| TT | 44.300 | -0.5 | 6.2M | +28 |
| UTX | 72.750 | +0.3 | 7.9M | +26 |
| MBT | 85.210 | -1.6 | 2.1M | +26 |
| VIP | 33.180 | -3 | 5.2M | +22 |
| GS | 191.370 | -3.8 | 14M | +22 |
| ABB | 24.250 | -1.2 | 8.5M | +20 |
| IBN | 62.260 | +5.4 | 3.6M | +20 |
| SU | 89.370 | -0.5 | 3.7M | +19 |
| CSCO | 24.200 | -3.6 | 79.1M | +18 |
| CCJ | 34.670 | -0.8 | 3.2M | +18 |
| DELL | 20.060 | -4.9 | 41.7M | +16 |
| CCL | 41.410 | -3.3 | 5.4M | +13 |
| IMO | 48.850 | +0.9 | 397.7K | +13 |
| ADBE | 34.840 | +0.6 | 9.2M | +13 |
| SNDK | 25.620 | -4.2 | 11M | +12 |
|
Analysts UPGRADES |
| SYMB | ANALYST | OLD | NEW | BEFORE | AFTER | ||
| ABB | HSBC | --- |
|
--- | Neutral |
|
Overweight |
| NOK | Davenport | --- |
|
--- | Neutral |
|
Buy |
| • PREVIOUS SESSION | |||||||
| SLW | Salman Partners | --- |
|
--- | Buy |
|
Top Pick |
| GRMN | Oppenheimer | --- |
|
77.00 | Sector Perform |
|
Outperform |
| STO | Smith Barney | --- |
|
--- | Hold |
|
Buy |
| BMY | Goldman Sachs | --- |
|
--- | Sell |
|
Neutral |
|
|
Analysts DOWNGRADES |
| SYMB | ANALYST | OLD | NEW | BEFORE | AFTER | ||
| NONE FOUND. | |||||||
| • PREVIOUS SESSION | |||||||
| GOOG | Stanford Group | --- |
|
--- | Buy |
|
Hold |
Cara 100 Daily RSI-7 Charts
At least one RSI value >70:
| Ticker | Last | RSI-7M | RSI-7W | RSI-7D | Zone |
|---|---|---|---|---|---|
| ABX | 52.17 | 82.19 | 71.86 | 68.88 | Sell alert (trig. 8 days ago [on 2008-01-15 at $50.25, +3.82% chg], after a 8 day DZ) |
| IBN | 62.26 | 82.05 | 51.74 | 45.06 | Sell alert (trig. 8 days ago [on 2008-01-15 at $66.03, -5.71% chg], after a 3 day DZ) |
| SLW | 16.48 | 76.98 | 54.71 | 51.29 | |
| PBR | 104.62 | 75.48 | 55.28 | 53.88 | |
| GG | 37.86 | 74.10 | 63.00 | 63.01 | Sell alert (trig. 8 days ago [on 2008-01-15 at $36.60, +3.44% chg], after a 1 day DZ) |
| BC | 17.10 | 12.60 | 39.77 | 71.61 | Buy alert (trig. 5 days ago [on 2008-01-18 at $15.09, +13.32% chg], after a 3 day AZ) |
At least one RSI value <30:
| Ticker | Last | RSI-7M | RSI-7W | RSI-7D | Zone |
|---|---|---|---|---|---|
| BC | 17.10 | 12.60 | 39.77 | 71.61 | Buy alert (trig. 5 days ago [on 2008-01-18 at $15.09, +13.32% chg], after a 3 day AZ) |
| KSS | 41.84 | 15.86 | 31.36 | 51.08 | Buy alert (trig. 7 days ago [on 2008-01-16 at $39.57, +5.74% chg], after a 9 day AZ) |
| SBUX | 19.66 | 17.05 | 32.58 | 51.35 | |
| UBS | 41.62 | 19.14 | 23.94 | 41.26 | Buy alert (trig. 4 days ago [on 2008-01-22 at $40.56, +2.61% chg], after a 2 day AZ) |
| BBBY | 29.36 | 20.49 | 46.41 | 57.71 | |
| JCP | 42.48 | 21.89 | 40.82 | 58.82 | |
| DELL | 20.06 | 22.04 | 19.34 | 34.14 | Buy alert (trig. 2 days ago [on 2008-01-24 at $21.09, -4.88% chg], after a 2 day AZ) |
| WAG | 34.28 | 22.61 | 33.79 | 47.10 | Buy alert (trig. 7 days ago [on 2008-01-16 at $33.24, +3.13% chg], after a 2 day AZ) |
| SNDK | 25.62 | 24.34 | 11.33 | 29.02 | Accumulation Zone (for 1 days) |
| HBC | 75.70 | 25.17 | 27.28 | 40.61 | Buy alert (trig. 3 days ago [on 2008-01-23 at $76.62, -1.20% chg], after a 4 day AZ) |
| BMY | 22.97 | 26.24 | 19.49 | 25.68 | Accumulation Zone (for 4 days) |
| TGT | 51.60 | 26.24 | 39.89 | 50.37 | |
| DOW | 36.31 | 26.84 | 33.15 | 49.13 | |
| BDK | 69.98 | 27.98 | 38.38 | 58.21 | Buy alert (trig. 7 days ago [on 2008-01-16 at $65.99, +6.05% chg], after a 9 day AZ) |
| GOL | 18.23 | 29.06 | 23.94 | 22.50 | Accumulation Zone (for 1 days) |
| TM | 102.00 | 29.83 | 36.11 | 53.59 | Buy alert (trig. 3 days ago [on 2008-01-23 at $99.25, +2.77% chg], after a 1 day AZ) |
| PAYX | 33.14 | 30.14 | 18.98 | 43.14 | Buy alert (trig. 3 days ago [on 2008-01-23 at $33.34, -0.60% chg], after a 1 day AZ) |
| LLTC | 27.41 | 30.34 | 22.56 | 36.72 | Buy alert (trig. 3 days ago [on 2008-01-23 at $28.05, -2.28% chg], after a 2 day AZ) |
| DB | 111.43 | 30.56 | 21.42 | 29.18 | |
| DIS | 28.68 | 31.33 | 22.38 | 34.38 | Buy alert (trig. 3 days ago [on 2008-01-23 at $28.52, +0.56% chg], after a 2 day AZ) |
| BA | 77.03 | 31.90 | 20.94 | 32.48 | Buy alert (trig. 2 days ago [on 2008-01-24 at $77.62, -0.76% chg], after a 1 day AZ) |
| GSK | 46.92 | 32.80 | 32.91 | 14.40 | |
| CTSH | 26.87 | 32.99 | 26.30 | 40.30 | Buy alert (trig. 7 days ago [on 2008-01-16 at $26.20, +2.56% chg], after a 1 day AZ) |
| TS | 37.98 | 33.05 | 28.60 | 39.50 | |
| GE | 34.00 | 33.80 | 29.63 | 37.31 | |
| CSCO | 24.20 | 34.95 | 20.56 | 38.31 | |
| ADBE | 34.84 | 35.98 | 20.97 | 24.64 | |
| INTC | 20.00 | 36.57 | 27.29 | 38.62 | |
| ERTS | 47.22 | 39.26 | 25.49 | 24.08 | |
| GRMN | 64.94 | 40.73 | 28.01 | 37.23 | |
| ERJ | 40.98 | 41.81 | 33.20 | 28.33 | |
| DEO | 78.85 | 43.27 | 26.49 | 43.92 | |
| JNJ | 62.46 | 46.35 | 29.60 | 12.30 | |
| PG | 65.31 | 47.75 | 23.55 | 19.33 | |
| NKE | 56.00 | 49.11 | 28.74 | 25.31 | |
| CVX | 81.82 | 49.81 | 31.93 | 29.49 | |
| GOOG | 566.40 | 51.02 | 31.90 | 29.23 | |
| AET | 52.60 | 55.79 | 34.77 | 26.69 | |
| TEF | 85.58 | 62.04 | 36.17 | 27.33 | |
| KO | 58.41 | 64.46 | 38.58 | 27.17 |
International Equity Markets Review
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Here is the latest session data for the Swiss market index.
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Here is the latest chart for the Singapore index .
Here is the latest chart for the Shanghai Composite index .
Here is the latest chart for the Hong Kong Hang Seng index .
Here is the latest chart for the India BSE 30 index .
Here is the latest chart for the Australian All Ordinaries index .
US Equity Markets Review
NASDAQ Composite (interactive) chart
Table: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summaries window at www.billcara2.com and then clicking on the link for Performance.
AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG T UTX VZ WMT XOM
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)
The Americas
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Here is the latest session data for the Toronto Stock Exchange composite index.
Sector ETF Summary for the US equity market
The tables I show in this section are for ten (GICS) Sector Index Funds (ETF's) only, but they cover the full spectrum of the US equity market.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.
For a list of components to any ETF, go to the AMEX.com web site, and click on ETF's.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
International Equity Market USD-denominated ETF Review
Table 13: International equities via the USD-denominated ETF perspective
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Daily data charts:
EWU Daily data:
Canada's equity market
Here is the Canadian (EWC) equity market ETF Daily data charts:
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 2.17 | 2.28 | 2.68 | 3.19 |
| 6 Month | 2.27 | 2.40 | 2.70 | 3.42 |
| 2 Year | 2.18 | 2.31 | 2.32 | 3.29 |
| 3 Year | 2.14 | 2.27 | 2.27 | 3.24 |
| 5 Year | 2.77 | 2.90 | 2.73 | 3.71 |
| 10 Year | 3.56 | 3.71 | 3.62 | 4.28 |
| 30 Year | 4.27 | 4.39 | 4.28 | 4.67 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.19 | 2.29 | 2.63 | 3.08 |
| 2yr AAA | 2.34 | 2.42 | 2.65 | 3.11 |
| 2yr A | 2.70 | 2.53 | 2.77 | 3.59 |
| 5yr AAA | 2.76 | 2.83 | 2.87 | 3.35 |
| 5yr AA | 2.70 | 2.76 | 2.84 | 3.38 |
| 5yr A | 3.04 | 3.11 | 3.15 | 3.55 |
| 10yr AAA | 3.44 | 3.34 | 3.41 | 3.87 |
| 10yr AA | 3.36 | 3.26 | 3.39 | 3.46 |
| 10yr A | 3.67 | 3.57 | 3.64 | 4.10 |
| 20yr AAA | 4.29 | 4.19 | 4.17 | 4.42 |
| 20yr AA | 4.42 | 4.33 | 4.31 | 4.56 |
| 20yr A | 4.43 | 4.51 | 4.12 | 4.65 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.40 | 3.49 | 3.64 | 4.50 |
| 2yr A | 3.52 | 3.69 | 3.80 | 4.74 |
| 5yr AAA | 3.93 | 4.15 | 4.20 | 4.86 |
| 5yr AA | 4.23 | 4.33 | 4.19 | 5.16 |
| 5yr A | 4.16 | 4.29 | 4.24 | 5.22 |
| 10yr AAA | 4.94 | 4.80 | 4.97 | 5.43 |
| 10yr AA | 5.11 | 5.19 | 5.22 | 5.73 |
| 10yr A | 5.28 | 5.48 | 5.17 | 5.95 |
| 20yr AAA | 5.35 | 5.45 | 5.30 | 5.47 |
| 20yr AA | 5.63 | 5.76 | 5.68 | 5.95 |
| 20yr A | 5.94 | 6.06 | 6.03 | 6.46 |
Here is the $USB 30-year Treasury Bond chart.
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
Interactive Chart of Daily CRB Commodities Index:
Interactive Chart of Weekly CRB Commodities Index:
Oil Review
Here is the e-miNY Mar-08 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Gold & Precious Metals Review
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Spot silver chart for the week
Interactive daily data
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Spot platinum chart for the past three days
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
Spot palladium chart for the week
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
NEM ABX AU GFI GG HMY AUY KGC BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Daily U.S. Goldminers Index:
Interactive Chart of Weekly U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Daily data:
GDX Weekly data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD. Yes, just like GDX on the AMEX, you can trade XGD on Toronto.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Daily data:
Interactive Chart of XGD Weekly data:
Forex Review
Here is the chart of the week's trading in the $USD.
Interactive Chart of Daily U.S. Dollar Index:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
Daily British Pound Index:
Daily Japanese Yen Index:
Daily Canadian Dollar Index:
ADDENDUM
All Tables
Table 1: Cara ETF List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 3: Senior metals and steel equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 4: Senior capital goods makers and transportation
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 10: Yahoo Finance U.S. Treasury Debt, Municipal and Corporate Bond Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 2.17 | 2.28 | 2.68 | 3.19 |
| 6 Month | 2.27 | 2.40 | 2.70 | 3.42 |
| 2 Year | 2.18 | 2.31 | 2.32 | 3.29 |
| 3 Year | 2.14 | 2.27 | 2.27 | 3.24 |
| 5 Year | 2.77 | 2.90 | 2.73 | 3.71 |
| 10 Year | 3.56 | 3.71 | 3.62 | 4.28 |
| 30 Year | 4.27 | 4.39 | 4.28 | 4.67 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.19 | 2.29 | 2.63 | 3.08 |
| 2yr AAA | 2.34 | 2.42 | 2.65 | 3.11 |
| 2yr A | 2.70 | 2.53 | 2.77 | 3.59 |
| 5yr AAA | 2.76 | 2.83 | 2.87 | 3.35 |
| 5yr AA | 2.70 | 2.76 | 2.84 | 3.38 |
| 5yr A | 3.04 | 3.11 | 3.15 | 3.55 |
| 10yr AAA | 3.44 | 3.34 | 3.41 | 3.87 |
| 10yr AA | 3.36 | 3.26 | 3.39 | 3.46 |
| 10yr A | 3.67 | 3.57 | 3.64 | 4.10 |
| 20yr AAA | 4.29 | 4.19 | 4.17 | 4.42 |
| 20yr AA | 4.42 | 4.33 | 4.31 | 4.56 |
| 20yr A | 4.43 | 4.51 | 4.12 | 4.65 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.40 | 3.49 | 3.64 | 4.50 |
| 2yr A | 3.52 | 3.69 | 3.80 | 4.74 |
| 5yr AAA | 3.93 | 4.15 | 4.20 | 4.86 |
| 5yr AA | 4.23 | 4.33 | 4.19 | 5.16 |
| 5yr A | 4.16 | 4.29 | 4.24 | 5.22 |
| 10yr AAA | 4.94 | 4.80 | 4.97 | 5.43 |
| 10yr AA | 5.11 | 5.19 | 5.22 | 5.73 |
| 10yr A | 5.28 | 5.48 | 5.17 | 5.95 |
| 20yr AAA | 5.35 | 5.45 | 5.30 | 5.47 |
| 20yr AA | 5.63 | 5.76 | 5.68 | 5.95 |
| 20yr A | 5.94 | 6.06 | 6.03 | 6.46 |
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 13: International equities perspective
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Wrap-up
I will return with the usual Week In Review on Sunday. Have a good weekend. Relax; you might need to rest up for next week.
Posted by Posted by Bill Cara on January 26, 2008 08:10:52 AM | Category: Daily Report
Discourse
Bill,
Great stuff. May I recommend Vitaliy Katsenelson's book (ACTIVE VALUE INVESTING)...which might complement your work...
Have a great weekend. Saturday Morning Coffee is up...including some charts on some 'pans' I made, and why
http://ronsen.blogspot.com/2008/01/saturday-morning-coffee-point-and.html
Ugly bar chart on the indices yesterday...
Posted by: g034 ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
January 26, 2008 10:13 AM [link]
Bill - Your posts and this site certainly encourage learning and self-imposed due diligence. Strong thanks for all that you do.
I find the “Cara 100 Daily RSI-7 Charts” very handy and an excellent setup for quick reference as are also the charts for obtaining Sector RSI (daily) values.
After my third cup of coffee this morning, the thought occurred to me that armed with that RSI data, I should go to StockCharts, or other service, and find the RSI values for the $SPX for comparative purposes. For today, I found the $SPX to have RSI monthly ~30, weekly ~22, and daily (having just bounced from below 30 to a current value of) ~34.
Given that “a rising tide (should) lift all boats (unless they are sinking)” and that the “tide reaches some boats before others” then I conclude that so long as the $SPX daily RSI continues to rise above 30, and even more so should the weekly RSI value soon exceed 30, then perhaps my best bets for Cara 100 stocks are those with weekly RSI values currently less than 30 but daily RSI values are better than that of the $SPX (ie ~34).because for that time period, they appear to be the leaders in “rising with the tide”.
Of course, further due diligence and confirmations are needed before any action, but perhaps it’s a worthy start for decision making? If so, then perhaps it might be helpful to add the $SPX values to the table for comparative purposes, if possible?
The above is certainly open for discussion and target practice. TIA
Posted by: spot at
January 26, 2008 10:33 AM [link]
Thanks Bill, Friday’s action certainly seems to portend testing the lows of last week. However, I'm seeing week ending breadth overall as the strongest in 5+ weeks. That combined with the strong buying volume earlier in the week is making a case for a bit more upside in my humble opinion but it certainly does appear that the lows of last week will need testing first.
In terms of sector breadth I’m seeing the broadest buying in Retail, Real Estate and Automotive sectors last week and the broadest selling in various Utility, Drug and Health Care sectors.
Good Trading,
Ralph
http://successfulonlinetrading.com/blogs/
Speaking of liquidity
From Everbank's Daily Pfennig (Friday' missive):
"Margin debt is a great way to tell how strong the market is... And when margin debt is falling, people are taking money out of stocks... They are running away from "risk"... Well, it was reported yesterday that margin debt, after reaching a high in July of $381 Billion... It has fallen each month since to $322 Billion... This is just a piece of the puzzle folks... But don't be surprised if this indicator hold true to form!"
Posted by: Seamus at
January 26, 2008 10:59 AM [link]
The GFMS base metals index resembles moves in the S&P:
http://www.weblinks247.com/indexes/gfms-5y-Large.gif
Strong divergence between S&P and gold:
Stockcharts.com
Posted by: FranSix at
January 26, 2008 11:05 AM [link]
This is really too much and too hard to comprehend.
"01/24/2008: Don Luskin Named Economic Advisor to the Ron Paul 2008 Presidential Campaign"
http://tinyurl.com/23a5kb
I am sure you have that same grimace on your face as well.
Posted by: geckojb at
January 26, 2008 1:05 PM [link]
The coming Unemployment report will probably not be as exciting as the last one, when the rate climbed to 5%.
It is important to realize that despite positive job creations, deterioration in the Employment rate means deterioration in Real Wages.
You can see this graphically on my site.
See "Unemployment Key Numbers"
Posted by: Will Rahal at
January 26, 2008 1:15 PM [link]
news trickling out of davos:
excerpt:
"Just before Fukuda's speech, International Monetary Fund Managing Director Dominique Strauss-Kahn threatened to steal the show, urging in a panel discussion that emerging economies and other nations with sound fiscal balance sheets should begin running temporary budget deficits in a multilateral effort to pump up domestic demand and offset an expected U.S. consumer spending slowdown.
Central banks aren't equipped to address the financial woes on their own, he said.
"I don't think we could get rid of the crisis just with monetary tools," Strauss-Kahn said.
The IMF chief was applauded by fellow panelist Lawrence Summers, the former U.S. Treasury secretary, who termed the call a "mildly historical event," given the IMF's past tendency to urge fiscal tightening in the midst of economic crises."
despite a pessimistic bent in the early reporting ("Like most economic discussions at Davos this year, the morning panel was a gloomy affair," and "The elite event in the Swiss Alps, which this year attracted around 2,500 corporate chiefs, financiers, politicians and others, began in the shadow of a steep plunge in Asian and European stock markets"), the event should end on a positive note, with participants returning home armed with at least some resolve to act in the interest of presenting a unified response, and with positive sound-bites for the home office (is this not how we all respond to our own annual conventions)...
would therefore expect a positive open in the markets next week, into which i would be selling down long positions...reopening shorts would require more caution, as it's unclear (to me) how violent and sustainable a short squeeze might be->IMO, haven't seen the end of it yet...
Posted by: 2nd_ave at
January 26, 2008 1:30 PM [link]
To all those who posted about the high volume in Microsoft Feb. 35 calls on Thursday, and the few who speculated that this was someone "in the know" buying ahead of a good earnings report, well, nothing could have been further from the truth.
On Friday morning, the IV on those calls dropped from 44% to under 15%, rendering them unprofitable to anyone who bought them the day before. This was not someone "in the know", but rather an experienced professional trader setting up retail investors for the slaughter.
Never, never, never buy options with a high IV -- especially heading into a news event like earnings! Sell them.
Posted by: I_Loser at
January 26, 2008 3:51 PM [link]
Sadleb and cyderman,
Yes you can draw out any principle you put into ROTH IRA's penalty free at any time. But, the earnings have to stay in until 59.5. We don't contribute to our 401K because there's no match. But we try to fund our ROTH's every year. It's great that we can invest the ROTH in anything since the 401K's are so limited. I also think 401K's will be taxed at a higher rate in the future or they'll drop your Social Security based on how much you have in your retirement accounts. I just hope Washington doesn't change the rule on us and tax our earnings eventually.
Rob.
Posted by: Finger Lakes at
January 26, 2008 3:57 PM [link]
Sadleb and cyderman,
Yes, you can withdraw your contributions to your ROTH IRA at any time without penalty. The earnings have to stay there until you're 59.5 though.
We fund our ROTH IRA's and don't even contribute to our 401K. The company doesn't match and the choices are terrible. Also, I can see the government taxing 401K's at a higher rate in the future. I just hope they don't change the rules on ROTH's and make us pay tax on our earnings.
Rob.
Posted by: Finger Lakes at
January 26, 2008 4:28 PM [link]
Sorry for the double post.
Did anyone see Libor? Both the 1 month and 3 month are at 3.31. So, now it looks like only a .25 rate cut Wednesday. I wonder how the market will like that?
Rob.
Posted by: Finger Lakes at
January 26, 2008 4:30 PM [link]
Hi Bill et al., Quite a week in the markets, a real roller coaster for sure. Thanks to Bill and all those who are helping us to understand and find the true situation in these turbulent times.
Found a very interesting and entertaining book at the Library called " New Lessons from Dead CEO'S"
Video interview with the author, Todd G. Buchholz can be viewed here:
Posted by: DancingWithBulls/Bears at
January 26, 2008 4:33 PM [link]
LONDON (Reuters) - U.S. investment bank Goldman Sachs plans to sack about 5 percent of its global workforce in coming months after its annual staff evaluation, a company spokesman said on Friday.
Goldman Sachs employs about 30,500 people worldwide, meaning the cuts would represent about 1,500 employees.
The New York-based bank said those being dismissed will be the worst-performing employees.
Details of who will be affected by the cuts, which are set to take place across the bank's departments, are set to be announced by March, the spokesman told Reuters.
He added that this was the part of a normal employee evaluation process.
"We conduct performance reviews every year and this is part of that process," said the spokesman.
The spokesman added the bank is continuing to hire.
The move came as the credit crunch hits banks' balance sheets and earnings outlooks, causing Goldman's rivals such as Lehman Brothers , Citigroup and Credit Suisse to slash jobs.
In December, Goldman announced its fourth-quarter earnings had risen 2 percent, beating expectations, but the company gave a cautious outlook and said trading and investment banking markets would make earnings growth challenging.
The company had declined to provide details on mortgage-related write-downs but said losses and offsetting gains from hedges were both "modest."
Posted by: bigwad at
January 26, 2008 5:01 PM [link]
bigwad,
I think Goldman Sachs is doing the right thing, particularly if these are 1500 front office people being moved out and replaced by 2000 new ones. That's business. Personally it is tough, perhaps, but for the organization, it's what exec management must do to grow their organizations. Most of those eliminated people would be highly desired by other firms, and rightly so. Goldman has arguably the most respected name in the business.
Posted by: Bill Cara at
January 26, 2008 5:56 PM [link]
"On Friday morning, the IV on those calls dropped from 44% to under 15%..."
Posted by: I_Loser [TypeKey Profile Page] at January 26, 2008 3:51 PM
IL- no participation in the msft discussion last thursday, but did write a few puts on sndk last week, which will report monday afternoon...so would be interested in being directed to underlying formula(s) for imputed values...TIA
Posted by: 2nd_ave at
January 26, 2008 5:57 PM [link]
I_loser: That is an interesting post re. high implied volatility on pre-earnings. Those MSFT 35 Call traded as high as $1.01 on Friday, since the stock jumped in early trading. Those who traded early made a nice profit. The volume was very high, over 88,000 contracts, on Friday too, but I don't know what portion traded in the AM vs the PM. So it may well be that those in-the-know made a lot of money no?
Is there a site where the price of the options cabnbe seen in a historical graph?
Also, recent straddles on AMZN on earnings eves have paid handsomely, but your point is correct in general. I believe in general option writers are the ones who make the profit.
What do you mean that this the work of "an experienced professional trader setting up retail investors for the slaughter". Do you think this "professional" was convincing his clients to buy those calls on purpose so they they would lose money? I am not sure they made money or lost money in this case though. But yes, my impression is that the stock market/rigged casino seems to be controlled by crooks indeed.
Posted by: SiO2 at
January 26, 2008 6:03 PM [link]
That's quite an impressive and informative weekly market summary and recap... nice
First off, activedollars would like to say that he sees many comments on this blog and others - about this being a time in the markets similar to the 1930's...
Are you crazy? There is abundance all around us...
A little too much doom and gloom there I'd say.
Activedollars would now like to make 2 points:
1st off, Gold...
Gold is seriously undervalued relative to stock indices.
Gold is going up on average 20% a year since 2000
The Dow is going up in real terms about 0% per year since 2000.
This should continue to happen up until about 2020, by which time, with Gold having doubled every 5 years, Gold will be about $4000 dollars - with the Dow having gone no where in real terms.
This will restore the Gold/Dow ratio.
Activedollars thinks Silver could do even better.
2nd point... The markets:
They never do what you expect
Activedollars thinks some of the broad markets are going to surprise people - WE WILL SEE NEW HIGHS This year or early next year - yes New highs.
This market can move 100's of points on a dime - short interest is extremely large - trillions of $ afraid in money market funds and bonds - look out bears when all this money comes out of the matresses and bomb shelters.
Prior to this happening - the market is likely to go lower at some point - markets usually don't bottom on Emergency rate cuts - do they?
In the shortterm activedollars will be watching for some kind of reflex selloff or a lack of selling when the Fed does not cut interest rates next week - activedollars will be buying in if the market is shortterm oversold on or right after the FOMC.
Posted by: activedollars at
January 26, 2008 6:15 PM [link]
"implied volatility"->google results now jump from zero to a few million (LOL)...thanks for the clarification...
Posted by: 2nd_ave at
January 26, 2008 6:18 PM [link]
re implied volatility (for anyone else beginning to wade into options without a clue, will try to keep you updated as i update myself):
"Implied volatility as measure of relative value
Often, the implied volatility of an option is a more useful measure of the option's relative value than its price. This is because the price of an option depends most directly on the price of its underlying security. If an option is held as part of a delta neutral portfolio, that is, a portfolio that is hedged against small moves in the underlier's price, then the next most important factor in determining the value of the option will be its implied volatility.
Implied volatility is so important that options are often quoted in terms of volatility rather than price, particularly between professional traders.
Example
A call option is trading at $1.50 with the underlier trading at $42.05. The implied volatility of the option is determined to be 18.0%. A short time later, the option is trading at $2.10 with the underlier at $43.34, yielding an implied volatility of 17.2%. Even though the option's price is higher at the second measurement, it is still considered cheaper on a volatility basis. This is because the underlier needed to hedge the call option can be sold for a higher price."
Posted by: 2nd_ave at
January 26, 2008 6:38 PM [link]
"Those MSFT 35 Call traded as high as $1.01 on Friday, since the stock jumped in early trading."
2nd, actually the high for the day was 95 cents per the CBOE. In any case, the price dropped from that high on the open almost immediately. After the first 10 minutes, it was game, set, match.
The CBOE has some good tools for calculating implied volatility. The tool is available here:
Enter in MSFT for the symbol. You will find that the calls hit their 52 week high on January 24th. The IV did come back a bit during the day, but only after the stock dropped to $33. When it was above $34, the IV was under 20%.
I know, because I checked.
There was probably an early rush to sell all those calls, so the market maker dropped the bid like a stone on Jupiter, and volatility collapsed.
You can also use the CBOE's free option calculator tool to see how volatility can work for or against you. Those 35 calls are now priced at 29 cents, implying a volatility of 30%. If the volatility were still at Thursday's level of 44%, the price would be 64 cents.
Also consider that the option priced dropped 44 cents on Friday, while the underlying stock dropped only 31 cents. That's a delta of over 100% on the downside! Now the delta is 21%.
A perfect example of how the market works in extremes to the detriment of inexperienced traders. And you can bet that the traders on the other side of that volatility shift were toasting yet another fleecing of Joe Sickpack investor.
I wasn't watching, but wasn't CNBC cheerleading the rise in MS ahead of Thursday's close? Hmmm ... someone wasn't buying it. Or rather, they were selling it.
This is how the professionals and the markets work against us, folks.
And yes, I am a Loser.
Posted by: I_Loser at
January 26, 2008 7:02 PM [link]
Hi,
Here is a video interview with the chairman of GATA outlining what they are trying to accomplish with their WSJ campaign.
http://video.google.com/videoplay?docid=1347566773853667480&hl=en-CA
Cheers,
Posted by: maromatics at
January 26, 2008 7:05 PM [link]
Hi again,
Sill Re Gold:
I hve come across a post by Richard J. Greene at an Interne form, which makes an interesing point on gold:
He says:
"I have heard from many investors inquiring if they should sell their gold stocks and just buy the gold and silver ETFs. The first thing they should understand is that doing so would prolong the time they must wait for gold and silver to reach their true market levels which are much higher. The gold and silver ETFs were created by such financial giants as JP Morgan and Barclay's Bank that also serve as custodians and sub-custodians. These are the very firms that have been involved in the process of short selling gold and silver in huge quantities. That they would be involved in creating the ETFs had to be considered as most unlikely unless they had nefarious purposes. What I mean by that is that when the gold and silver ETFs first came out the investment demand for gold and silver was just in the initial phases of taking off. The bullion banks and financial powers that have been involved in suppressing the prices of gold and silver needed an outlet to satisfy this additional demand for gold and silver when there was clearly no actual gold and silver to fulfill this additional demand.
Based on the surrounding circumstances you would have to be naĂŻve if you believe that the gold and silver ETFs were created so that investors would have an easy way to get exposure to gold and silver without the burdens of taking delivery and finding a secure and safe location to store it. The one and only purpose was to fulfill a dire need to satisfy a growing and steady investment demand for gold and silver that has no hope of being fulfilled by the actual production or availability of real gold and silver. That no one can see this charade is truly amazing since it is so easily revealed that a second grader could understand it. I can give an example that should truly make the buyers of GLD or SLV seriously question their investment choices. There is simply no room for any additional demand for gold and silver, particularly investment demand which is already growing rapidly and exponentially. So what to do about this dilemma? If you are one of the big short sellers of gold and silver and see that the jig is up and investment demand has reached a level that will overwhelm your ability to keep it under wraps, how can you find an outlet for this demand? Why not provide a piece of paper that promises ounces of gold and silver since they know they can't produce the real thing? Gold production is in decline. The world's biggest producer, South Africa, reported a 12.7% decline year over year in production enabling China to surpass it as the largest producer.
The following example a second grader should be able to follow. Yesterday GLD traded at a price of $87.05 while gold futures were $882 and spot gold was at $881. I called my best sources and the best quote I could get for purchasing one ounce of physical gold was $897. So here is the question: If you were buying ownership of gold at an effective price of $870.50 for an ounce of gold by buying the gold ETF at $87.05, how does the gold ETF turn around and purchase real physical gold for you when the spot price is $11 higher, the futures price is $12 higher and the physical price is $27 higher? That is a neat trick. I wonder how they do it. YOU SHOULD START WONDERING TOO! Do you really believe the GLD ETF can survive loosing $27.00 for every ounce of gold that they buy for you? Now you know why the custodian and sub-custodian's agreements for these ETFs are so complicated and un-auditable. It would make sense that the GLD would have to trade at least $4-$5 higher than the price of gold if they were actually buying it, insuring it, guarding it, and delivering it. They say there is a sucker born every minute. This should help to prove that point.
If you can understand that the current economic and financial environment screams for protection through ownership of gold and silver, please stop shooting yourself in the foot by thinking that the ETFs will do anything but delay and muffle the rise of gold and silver and leave the ultimate holders with nothing but worthless paper at exactly the moment you will need gold and silver for your financial survival. Nothing compares with having the gold and silver in your own possession and the gold and silver ETFs are way down the list as far as safety goes, and far below even gold and silver stocks."
Posted by: maromatics at
January 26, 2008 7:26 PM [link]
IL- thanks for the link...
would it then be possible for one to stack the odds (in his/her favor) by a) limiting trades to (only) writing calls/puts, and b) opening those positions (only) during periods of high volatility?
Posted by: 2nd_ave at
January 26, 2008 7:33 PM [link]
I remember some people on this site have suggested that the biggest upcoming problem for the world will be food shortages rather than oil shortages. What do you think about the agricultural ETF with ticker DBA? Here is its description:
"The investment seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index - Optimum Yield Agriculture Excess Return. The index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities – corn, wheat, soy beans and sugar. The index is intended to reflect the performance of the agricultural sector."
The general reasoning for investing into the agricultural sector is that the emerging contries are becoming richer, they want to eat better food and more meat, and it takes about 5 pounds of grain (as food) to produce one pound of pork. Besides, with the exponential growth of Earth's population, we will hit the limit of grain production per year at some point, and looking at the DBA chart, we might have hit that point recently. DBA chart also shows that it is more resilient to bear market fears than stocks of agricultural companies, just like Bill noted recently about ETFs USO and GLD vs. shares of gold and oil companies. However, DBA already went up a lot recently, and so I am wondering if anyone here has some specific reasons for not investing into it now (i.e., wrong timing in the economic cycle or recently discovered counter forces that might not be accounted for in the price yet).
I took a small position in DBA at $35 recently, just to diversify my investments from the gold/energy sector...
Thanks...
Posted by: David at
January 26, 2008 7:37 PM [link]
Hi,
One final chart for today:
http://research.stlouisfed.org/fred2/series/BOGNONBR?rid=19&soid=1
Enjoy your weekend. We are getting sunny winter days here in Europe.
Cheers,
Posted by: maromatics at
January 26, 2008 7:49 PM [link]
Here a lucky find, a long term chart of gold prices since 1930:
Posted by: FranSix at
January 26, 2008 8:33 PM [link]
2nd, I wouldn't say it is that cut and dried, but anyone trading options needs to be aware of the implications of volatility.
And remember Bill's good advice about avoiding writing covered call options in a bear market.
That said, I'll bet a lot of people who had bought MSFT in the low 30's were writing calls like crazy on Thursday. Maybe that's what the "in the know" people were actually doing, aided and abetted by the cheer leading from the financial media.
Anyway, there are people on Wall Street whose specialty is exploiting discrepancies in volatility. And it's something which I do not begin to suggest I have any expertise.
But I do think it is wise to avoid buying call or put options when they are at or near their 52 week highs in terms of volatility. It just throws the risk/reward balance way off kilter.
This week, Microsoft provided a textbook example of this.
Posted by: I_Loser at
January 26, 2008 8:35 PM [link]
IL- thanks...although little in life is cut and dried, sometimes just hearing something once ("..avoid buying call or put options when they are at or near their 52 week highs in terms of volatility") can keep your portfolio out of trouble...how many times has a word of friendly advice ("I wouldn't park my car there" or "I wouldn't walk there after dark") been sufficient to avert (other forms of) tragedy?
Posted by: 2nd_ave at
January 26, 2008 9:15 PM [link]
David, in relation to DBA I don't think it's perfect but you could do worse. In regards to their future strategy you may have to deal with backwardation and contango which can be irritating. I will say that DBA does try to minimize these better than a lot of commodity funds I have researched in the past. They just don't roll to the next front month as most do. It does get frustrating watching the underlying spot price move up but your futures based investment moving the other way. I think the risk is less here in that happening but it will happen from time to time.
I am glad that others want to know how these ETF's work. Too many close their eyes and buy and really don't care how the mechanics of the thing work. I own both GLD and DBA but have been reducing GLD as I buy more physical to replace. (thanks Kaimu).
Posted by: geckojb at
January 26, 2008 9:48 PM [link]
David: DBA (agricultural commodities ETF)
I also have been watching for an entry point for this one but have declined so far. Sugar is the only commodity in the fund that has not had a big run-up in the last year. In addition, the "invest in agriculture" theme has been hammered incessantly over the past year, and I am suspicious that there could be some profit taking in the near future. Long term, I think the demand considerations that you cited combined with inflation will make DBA a good performer.
Here's a link to an interesting chart that shows a high correlation between the Baltic Dry Index (BDI) and soybean prices. Look at what the BDI has done recently, and how soybeans so far has lagged. (Off topic, look at the close relationship between the BDI and FXI, the last chart in the series).
http://tinyurl.com/jkkag
A related play is what I call the "MOO COW" trade. MOO is an ag-biz ETF trading in the US; COW.TO is a similar ETF in Canada. I have similar reservations on them short term despite (for instance) POT's outstanding earnings and forward guidance.
I'm not a professional; my thinking is guided by my observations (and many associated trading losses) that markets tend to top on a plethora of good news, and that "sure thing" plays can fail, especially when the mass media are involved in the promotion.
Posted by: Freedom57 at
January 26, 2008 9:58 PM [link]
Re. the GLD ETF and Greene's comment above by maromatics. GLD has an MER, so it's price will not correlate 100% to an ounce of gold, it will deviate daily and cumulatively. I wonder if that explains the $11/$12 discrepancy?
For a gold ETF, what about using GTU-UN.TO instead. They claim they actually hold physical gold? As an added benefit, GTU.UN uses the CAD. Thanks.
Posted by: SiO2 at
January 26, 2008 10:23 PM [link]
re DBA- as an aside, should note the relatively high correlation between DBA and GLD (.94):
Posted by: 2nd_ave at
January 26, 2008 10:28 PM [link]
(0.94)
Posted by: 2nd_ave at
January 26, 2008 10:29 PM [link]
I Loser..
I appreciate your feedback Re: options in MSFT.
Finger Lakes ..Asked what we thought of MSFT going into earnings...I told him that I tought earnings would be good, but would be selling the news if we got a pop...And that is exactly what happened. Your typical buy rumor sell news
I pointed out the 35.00 strike just to make a point because the volume was FLYING the day before earnings...Now you could say that was smart money SELLING the calls, you could say that was smart money BUYING the calls. If the market would have closed up 200 pts on Friday instead of down close to 200 pts We would not even be having this disscussion right now.
You could also argue that the 30.00 strike was a nice buy the day before options as long as you sold on the open.
I have said this before and many know that 99.999999% of the time options expire worthless. IMO they are a good way to hedge a position or build a new position...
Perfect example
I sold the 17.50 Jan Put strikes in BC in early JAN for 1.50 per contract. Of course the stock was put to me, so my break even was 16.00 per share plus expenses...The stock ran up to 18.00+ on Friday. On Thursday I sold the March calls 17.50 strike for .95 c...
One of two outcomes
The stock gets called away from me for 17.50 share and I pocket the premium so my total return is around 2.45 per share or around 15%
Or..The stock continues it's decline and I have lowered my purchase price to around 15.00 per share. Either way I feel I am O.K.
I am comfortable holding the position and with options I can continue to lower my purchase price hopefully to ZERO...
IV yes is a killer, but I feel time decay is even worse...
When I look to buy near month calls in a stock My timeframe is THREE DAYS. Yes three days, if I do not see a return within three days I am out. Why you say, well time decay is a killer and I do not want to be holding calls and watch my premium tick away day after day...
That is why I do not buy many calls, but I love to sell puts. Usually in quality CARA companies I do not mind owning...
2nd and IL,
One way I use volatility in options for gains most of the time is to buy calls or puts(depending on the market) on a stock 1-2 weeks before it reports earnings and then sell just before it reports(unless the stock goes beyond my limit the opposite way and then I sell before to limit losses).
This strategy is great with low volatility stocks that tend to move at least 5% after earnings(as long as you're on the right side of the trend).
Everything with options is more risky than stocks but can be more rewarding as well.
Rob.
Posted by: Finger Lakes at
January 26, 2008 10:36 PM [link]
The $SPX from the low of tuesday morning to the high on wednesday, where it kisssed the rising trendline from 8/04 and fell apart was a move of about 100 points and shy of an 8% rise in 4 days!
When I benchmarked this % rise with my own trading performance this week, I did not even get to 5%. This is after using leveraged ETFs, and margin buying power on one day.
When I look back at the causes of dismal performance, I look back at a short list of cause and effect that I keep in my trading journal. I thought I would share it with those who also had an interesting week.
TREND/DIRECTION
Did I catch the meat of the market's trend each day? Yes, except for wednesday's late day surge when I thought/imagined that the parabolic rise will be stopped at the prior days support/resistance levels. IT didnt, the market kept going. Missed half of the intraday reversal move. On THE day that mattered...went into a trending condition with a trading range mindset!
SECURITY SELECTION:
Did I pick at least 1 of the 3 top or weakest sectors/country ETFs each day to go long or short? Yes.
RISK MANAGEMENT:
Did I have risk and money management protection..yes..except for one day which cost me dearly with AAPL's earnings- was distracted/cavalier, lost concentration. Consistency matters. Used margin only on 1 day to catch up on gains.
HOMEWORK:
Did it help?..No on wednesday, yes on Friday morning when I nailed where the market will turn as a result of the trendline from 8/04.
EMOTIONAL WISDOM/Concentration:
FAILED did not trade in a neutral manner, got caught up in the adrenaline rush of wild market swings.I allowed my emotions to decide - exited both profitable long and short trades too early.
RESILIENCY- Mental & Emotional Recovery:
Nope, traded from memory, totally disgusted with my AAPL gamble, I didnt recover fast enough to short the QQQQ's on wed morning, and missed the ride up with the QQQQs in the afternoon. Self flagellation was an expensive mistake.
TECHNOLOGY:
Yes..it picked up the late day volume and price surge on MSFT and INTC.
PERSONAL DOUBTS & CONSIDERATIONS:
How long before lessons become healthy habits...
Still not happy with trending and oscillating indicators/mindset and reading the market conditions to use each.Have to train myself to see it as it is..not what it was.
Next week's FOCUS ?
Pay more attention to my mental and emotional condition - slow everything down - move to higher timeframe. Look into starting up yoga again. Just trade key inflection points. personal hubris/confidence effects the way I assess risk reward. Journal more on my thoughts and feelings after a trade-flush it out. Trade less/trade neutral. Focus more on mind and execution.
Hope this helps someone else.
Posted by: EEMTRADER at
January 26, 2008 10:37 PM [link]
correction: the high or $SPX was friday morning.
Posted by: EEMTRADER at
January 26, 2008 10:38 PM [link]
Bill,
I've heard people say quite a few times over the past couple of years that earnings were being supported more and more by share buybacks. The even more disturbing part of it is how many companies sold bonds to buy back shares to support earnings. You really have to thoroughly study any company you want to hold long-term shares in these days with all these pseudo-earnings we see.
Basketguy,
That's exactly why I wasn't rushing into Softie calls. I've been on the wrong end of that earnings gamble too many times. That's why my current strategy is what I've listed above. It works great if you're on the right trend and even if you aren't if it's a slow moving stock. I would never attempt it with GOOG or APPL.
Rob.
Posted by: Finger Lakes at
January 26, 2008 10:48 PM [link]
Yesterday someone posted an article about the SoGen mess. Reading beyond the first paragraph shows an insight into what big time money is doing with volatility. Mind boggling - I wonder how many of their customers really understand. Anyway, here's the link again:
http://www.risk.net/public/showPage.html?page=685494
And 40% of a wooden nickel on GLD. I read that article posted by maromatics, and was unhappy with the language. For example, what does "There is simply no room for any additional demand for gold and silver" mean? Demand always meets supply at price. Perhaps the author wasn't around when the Hunt brothers drove up the price of silver (yes, I know they were ----ed by the change in margin requirements), but there was a massive supply of silver out of India in response to the price. Physical silver, not margined paper.
Another point that I thought did not add value was the section on price where the author called around for the best price for an ounce of gold. Well, do you think that might have been a retail price he got - we don't know -too vague.
So does GLD have physical gold or not? As I understand it, its in a vault in London. No, I haven't seen it, but I don't see any reason why GLD should not be used as an investment equivalent of physical gold. Just one conspiracy too many
No, I don't own GLD, but I am long many PM miners. I now await the wrath of Kaimu.
Posted by: cyderman at
January 27, 2008 12:25 AM [link]
Hi,
A full understanging of what GLD really is may be one of the key competitive advantages of a gold trader.
Myself, I have been trying to really understand the product, and as I made some research I have come across with the text I posted above on the Web.
Now, a full detailed breakdown of the GLD product can be found here, in a post written by the same author on a gold forum:
http://goldismoney.info/forums/showthread.php?t=227340
It is clear, detailed, albeit long and sometimes boring to read.
If you are a GLD trader, you may be very intersted in reading this.
Cheers,
Posted by: maromatics at
January 27, 2008 5:15 AM [link]
EEMTRADER...
Good advice. I would not beat yourself up about APPL too much...I have been looking to buy in on the ride all the way up to 200.00...Never caught the train...
Now that it is coming to me, I am happy to start writing some puts. I am waiting for a pullback to the 120.00 level...and will watch to see what happens at that point. The premiums being paid on the put side is almost too much to pass up.
Almost got me there after earnings, but not quite..I am sure there are a lot of people like me loooking for an in, and a lot of people upset that they did not sell above 200.00
Finger...Softie has been getting upgrades from all over the place lately. Holding into earnings was a great call, if you sold. A few days from now we may be back above 35.00. That is why this is so much fun.
Got my dancing shoes on and a few adrenalin shots waiting in the wings...
EEMTRADER...YOGA?? I am thinking some ULTIMATE FIGHTING..YOGA way to calm for you and I and this market...Beating on things will make you feel so much better...
Basketguy: yoga to lure it out.....then depedning on what shows up..Krav Maga or Chocolate ice cream..
Posted by: EEMTRADER at
January 27, 2008 11:04 AM [link]
maromatics,
thanks for the link to a much more cogent article. I found it fascinating. Made me wonder how many people actually buy GLD thinking they're getting a receipt for one ounce of gold, rather than an electronic (not even paper) instrument that tracks the price of gold. If one expects to to continue day to day transactions in the local fiat currency, then GLD is a useful investment tool. For those heading for the hills with sacks of beans and heavy artillery, physical coins are the only thing. For those of us in between, GLD has some usefulness. The article does raise useful warning flags. Caveat emptor.
Posted by: cyderman at
January 27, 2008 11:53 AM [link]
SiO2 at January 26, 2008 6:03 PM
"...Is there a site where the price of the options cabnbe seen in a historical graph?..."
I use Quotemedia.com, link below for the MSFT Feb $35 call, just go to the option chain, get the symbol and select time frame. Now they do have volume but I wish I could find a site that plotted the historical open interest, to me that would be more helpful to see if the volume is opening / closing positions or just swapping existing contracts around.
http://www.quotemedia.com/results.php?qm_symbol=@MSQBG
The IV chart and tools at the CBOE are excellent and I also use the data at Schaeffers
www.schaeffersresearch.com
more stuff for the toolbox
Posted by: Quasi at
January 27, 2008 12:29 PM [link]
what sunday readers are hearing about the rate cut(s) and the rebate program- if the goal is to keep the average investor (who is, after all, well-educated and of above-average intelligence) from reaching for the phone on monday to sell off his funds and instead to think "maybe this will really work," then they're doing a good job...neither article shies away from mentioning recession, but both redirect one's attention to memories or expectations of better times...expect calmer trading on monday, certainly none of the overloaded circuits that charecterized last week...
Posted by: 2nd_ave at
January 27, 2008 12:29 PM [link]
what sunday readers are hearing about the rate cut(s) and the rebate program- if the goal is to keep the average investor (who is, after all, well-educated and of above-average intelligence) from reaching for the phone on monday to sell off his funds and instead to think "maybe this will really work," then they're doing a good job...neither article shies away from mentioning recession, but both redirect one's attention to memories or expectations of better times...expect calmer trading on monday, certainly none of the overloaded circuits that characterized brokerage activity last week...
Posted by: 2nd_ave at
January 27, 2008 12:29 PM [link]
Re: gold
"The past week has been one of the most volatile in recent memory, but after the dust has settled, it seems that gold, silver and precious-metals stocks have shown more resilience than the stock market as a whole. Some of the short-term charts below look healthy, while some longer-term charts are looking overbought. Caution and optimism may both be called for, depending on one's risk tolerance and time horizon."
http://tinyurl.com/yu68v7
Seems to me we're close to a turning point, so the case for caution may be a bit more compelling.
JMHO
Posted by: franklin at
January 27, 2008 1:08 PM [link]
Time Magazine article:
Chinese and Indian consumers spend 1.6 billion in 2007. American Consumers spend 9.5 trillion in 2007.
Posted by: stktrader at
January 27, 2008 1:14 PM [link]
We just made a change in the server clock, which should address some of the issues that many Caraistas were having in getting logged on and with duplicate entries. Hopefully. If not, please complain, and somebody here will see it, and look into it.
Posted by: Bill Cara at
January 27, 2008 1:26 PM [link]
San Francisco sign of recession: SF has insanely high rents just now: studios for $1450 in lousy areas, for example. But the local rental sheet today proclaims: "One month December rent free for all new lease signings." I haven't seen this since the post dot-com bust in this city.
Posted by: bbcmoney at
January 27, 2008 1:32 PM [link]
Posted by: Miadhach at
January 27, 2008 2:13 PM [link]
Posted by: Miadhach at
January 27, 2008 2:14 PM [link]
miadmash, thanks for the link.
The GLD ETF post, keep in mind it seems to be written by goldbugs. Do I trust GLD? No. Do I trust the source of that article? No.
Quotes from reputable sources I can understand and accept and are interesting, that is not the case.
How about GTU-UN.to?
Posted by: SiO2 at
January 27, 2008 5:29 PM [link]
Silver is going into seasonal strength:
http://www.flickr.com/photo_zoom.gne?id=2224485986&size=o
Gold meanwhile, is about go into a light seasonal trough through April:
http://www.flickr.com/photo_zoom.gne?id=2223695897&size=o
From the website:
http://www.timingcharts.com/index.php
The inverted Gold/Silver Ratio with a $US Silver price overlay, a $C dollar price overlay, and an overlay of a Saskatchewan-based gold junior:
http://www.flickr.com/photos/11747277@N07/2221382592/
I feel reasonably confident that if you could somehow configure the parametres of the overlay to show the $C silver price vs. the $C bullion price, you would have a very close portrayal of the junior gold market in Canada.
So if Silver outperforms seasonally against Gold sometime in mid-February, then we see a confirmation of seasonality once more. An exaggerated seasonality has been a feature of precious metals markets for some time, along with other commodities.
The junior gold market is also prepping for an influx of investment to the sector, once the 13-week EMA crosses over the 34-week EMA on the inverted Gold/Silver ratio.
I would say for U.S. investors that a stabilizing dollar into its seasonal low and an advancing Silver price into spring appears to be a lay up for advancing shares leveraged to Silver through March.
There are a couple of wild cards in play, namely how the $US dollar performs, given the fact that the euro zone has not cut rates, and the U.S. FOMC is coming up. The euro zone can cut rates at least 250 basis points, due to the yield on their short term treasuries, so we will get an idea of how much the Fed is inclined to liquifiy money markets by the short term treasury yield of the moment.
Posted by: FranSix at
January 27, 2008 6:04 PM [link]
Bill:
State of the Union address is MONDAY evening, 9PM.
Posted by: ronbon at
January 27, 2008 6:44 PM [link]
EEMTRADER,
Haven't caught up with all the posts yet, but noticed several by you in the past week about the process of trading. Would like to say that I think they were generous and valuable posts.
Thanks.
Posted by: franklin at
January 27, 2008 7:16 PM [link]
Qataris poised to snap up $3bn stake in Credit Suisse
By Mark Kleinman in Davos
Last Updated: 12:57am GMT 27/01/2008
Powerful funds backed by the Qatari government are considering assembling a significant stake in Credit Suisse, one of Europe's largest banks, The Sunday Telegraph has learned.
Investment entities believed to be affiliated to the Qatar Investment Authority, which is closely linked to the emirate's royal family and has tabled unsuccessful bids for J Sainsbury and Thames Water, are understood to be considering building a 5 per cent stake in the Zurich-based bank.
Posted by: moneygenie at
January 27, 2008 8:44 PM [link]
Hedge funds: The new global super powers
By Robert Peston
Last Updated: 9:45am GMT 27/01/2008Page 1 of 3
In our second extract from his provocative new book, Who Runs Britain? Robert Peston asks whether the new Masters of the Universe should be using their talents to save the world rather than making themselves even richer
To find where true power and super-riches lie in modern Britain, go to the thickets of the hedge funds. In January 2007, $261bn of hedge fund money was managed from London by 72 firms that each control more than $1bn. That makes London the second largest hedge fund centre after New York.
Although they are usually described as City businesses, most of them are not based in the Square Mile, London's financial district, or in the towers of Canary Wharf. Their stupendously rewarded managers live and work in Mayfair, Knightsbridge, Belgravia, Covent Garden and Chelsea. The journey from overpriced home to overpriced office to overpriced restaurant is just a short walk.
Habitually tieless and dressed-down casual, they sit at computer screens and construct complicated trading strategies. Many of them stay at their desks without pause or interruption from 7am to 9pm on weekdays and maintain electronic contact with markets at all other times. They are not to be pitied. Some of them are worth hundreds of millions of pounds.
One of the most successful of the younger generation of hedge fund tycoons is Nathaniel "Nat" Rothschild, the son of Lord (Jacob) Rothschild. He is a founder and co-chairman of Atticus Capital, which has $8bn under management. Atticus made a fortune from identifying early that Europe's stock exchanges were ripe to be taken over and merged with each other. According to Alpha magazine, he earned $240m from Atticus in 2006.
Two other members of the City's new elite are Ian Wace and Paul Marshall, who in 1997 set up a hedge fund, Marshall Wace, that is now one of the 10 largest in Europe. It has magnificent open-plan offices on the top floor of the Adelphi building off the Strand in London, with a glorious view of the Thames.
Posted by: moneygenie at
January 27, 2008 8:55 PM [link]
Re: selling puts on UTX and CAT, as described by Bill above - Which expiry would you use here?
It seems the trades are outlined such that the strike selected is a "wouldn't mind it here" price. That would seem to say "Sell a lot of time premium, because UTX at 60 is a great price next month or next year, so sell a year premium."
On the other hand, time decay seems to really kick in pretty good when you start to get to the 30 day mark, so selling the puts a few months or so out puts time really on your side quickly.
I guess the answer is "it depends." Long term trade to provide the multi-year gains Bill is talking about, via large time premium sales and/or acquiring the stock, or shorter term trade, pocketing a few bucks selling hope to gamblers?
I'm curious how others would approach these trades
Posted by: MikeNYC at
January 27, 2008 10:02 PM [link]
Asian markets down sharply.
US futures also down.
Should be another wild ride tomorrow.
See y'all then.
Posted by: Bull Hunter at
January 28, 2008 12:19 AM [link]
Good Morning!
Rough start for European equities...
After spending part of the weekend researching gold, I have decided to start adding long positions.
There is nothing bearish for gold here...
Cheers,
Posted by: maromatics at
January 28, 2008 6:54 AM [link]
I just did an awesome analysis of the entire universe of stocks and which are looking ripe for jumping in, in addition to posting Goldman's industry ranking
http://wallastoninvestments.com/what-stocks-will-make-you-rich-week-of-jan-20-26
Posted by: Rob Wallaston at
January 28, 2008 7:41 AM [link]
Two things.
Thing 1: I was intrigued by the Elder Impulse Model. For metastock users, you can add this indicator to your charts. Go here. http://trader.online.pl/MSZ/e-w-Elders_Impulse.html
I was able to add it easily to my Metastock.
Thing 2: Don Coxe. Worth listening to. http://events.startcast.com/events/199/B0003/# (I've not back blogged, so this may have been given already.)
Found in Bill's WIR -
"Gold & Precious Metals Review
The $GOLD contract rocketed from 881.70 to 914.12 in the four-session week.
That’s what happens when the FOMC declares an emergency -75 bp drop in the Fed Rate, and the Administration was simultaneously explaining its $150 billion econ stimulus package.
The 50-day MA for $GOLD is now 834.69, up from 829.09, and the 200d MA is 733.05, up from 728.68.
As I wrote in this space a week ago, “I think $GOLD is at a crucial point right now. There could be a rally or the price could collapse. A short straddle might be effective.” Wow, how good was that?
I also wrote, “There are indications from the price chart of gold, platinum and palladium (but not for silver) that the price might break downward. Watch the silver for the key.”
As usual, I’m trying hard to please.
The gain for $GOLD on Friday was a remarkable +3.67 pct.
Traders can now leg out of that straddle, I think. Maybe g034 can explain this?"
Bill has two concepts here, a straddle and legging.
A straddle is a "Delta Neutral" options strategy that is bi-directional where the trader can make $ without forecasting the direction of the trade. Here is how it is laid out:
A straddle is placed by the simultaneous purchase of calls and puts at the same strike price and expiration. The risk of this trade is the premium that you pay for both the calls and the puts. You want to use a strike close to the current price of the underlying security. The reward is unlimited.
Example:
XYZ trading at $50.
Buy 50 calls
Buy 50 puts
If at expiration XYZ is trading at exactly $50 (what are the odds of that happening?), you make no money, usually one of the options will be in the money and you hope that XYZ has moved enough to offset the premium that you paid for both positions. So if XYZ rallies to $60, your calls have done really well, your puts will expire worthless. This can be an expensive position to put on, so a good time to use this would be during a period of consolidation - like in our symmetrical triangle example a few weeks ago. As the price movement narrows, the volatility declines as the coil is winding - then the coil is sprung and the price shoots either way for big gains on one side of your trade.
Please note that in general you want to use options from around 45 days to 120 days to expiration as a starting point, definitely don't use long dated options like leaps because they are too expensive. In Bills case, he wanted to use even shorter expirations.
In Bill's strategy, he thought that gold was going to get volatile within a few days, but had no definitive direction in mind, so why not get set up for the big move not caring about direction? His strategy was to put on a straddle which has worked out on the calls side of the trade with the big rally. Now he has a decision to make - how does he get out of the trade? The trade was put on simultaneously, but it doesn't have to come off simultaneously. This is where the term "legging" comes in. Legging is putting the position on (or taking off) in two parts, not as a spread. Bill, why don't you "leg" out of the trade by selling your calls at a profit now and taking your puts off later? You've locked in the gains on your calls, your puts are basically worthless now, but why get rid of the puts? They can act like a lottery ticket - if the price of gold falls from here, your puts could be in the money also. That would be a grand slam and the proper way to manage this position.
Bill talks about managing your portfolio like a business. Here he is giving you a simple tool to add to your toolbox to help your business prosper.
(hope that made sense :-) )
Posted by: g034 at
January 28, 2008 8:56 AM [link]
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The news this week from Ecuador:
UPDATE 2-Ecuador revokes hundreds of mine concessions
Forbes
http://tinyurl.com/24g32o
Futures Chain for Gold:
http://finance.yahoo.com/q/fc?s=GCF08.CMX
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at
January 26, 2008 9:46 AM [link]