Bill Cara’s Blog for Apr 9, 2012

CTA Trading Desk Morning Report

[9:00am ET] Good morning, Geoff here.

From my notes on April 5th:

“The US markets are closed on Friday and Europe has a holiday on Monday. That makes for a VERY long weekend for those who continue to worry about Europe.

I think it was a mistake for the jobs number to be released on Friday when the market is closed.

Many traders, including us, are doing more selling than buying following the Fed announcement. Not because of what they said (we believe that liquidity to infinity is in the cards) but how the market reacted. Various sell signals were generated as traders took gains. The S&P 500 has pretty good support at around the 1370 level which is a few percent lower than here.

As I have been saying for weeks, this rally is long in the tooth and some risk control is warranted. Our actions in the All-Weather and Growth strategies have been to take some gains, buy some hedges and lower the overall volatility by lowering the overall portfolio beta. With the upcoming long weekend, we may continue to take some other risk mitigating actions today.

With regards to gold, the dollar is lower this morning and gold is up a little.

A friend of mine recently said that good positions are built, not taken. With that in mind, building a good position in the metals complex over the next few weeks is important. Determine which securities you want to own at what price, both in the metals and in the miners, and build that position.”

Then on Friday, April 6th;

“Employment data was disappointing this morning as 120,000 jobs were added for the month of March. That is the lowest in 5 months and missed the expectations of 205,000.

This will probably bring new talk of a new QE program on the heels of the Fed suggesting that one is not needed.

Immediately, S&P futures were hit, dropping over 1% in 15 minues. Bonds and gold rallied.

Like I said yesterday, releasing this number on a holiday was the wrong thing to do. Event risk was the reason why risk mitigation was necessary and why we took that route this week.

Hope you are not sitting super long this weekend with no access to the markets.”

Today, it looks like the S&P 500 will be trading around the 1370 level that I mentioned last week. This level is an overlap of the 50 dma and the 2011 highs, not to the penny, but close enough. The question is; last week we took risk off, do we add that risk back to the portfolio at these levels?

One thing that I think is important to watch is AAPL. Until that bubble stock is broken, there will be strength in the market. In today’s RSI App, we see that AAPL is in the distribution zone, but hasn’t triggered a sell signal yet.

I also saw in the Stockcharts Technical Pattern data that Bill posted in the Week In Review that New 52-week highs were at 106 compared to last week’s 234. That number needs to drop some more before the market will top, but it is trending in that direction.

So, there are 2 things that we are watching that haven’t quite triggered a sell signal. What we need to see is how the market reacts today and if the 1370 level holds as support.

Bill noted in the Week in Review that unless traders think that plans are being made for more QE, that market strength will be hard to come by and I agree. Lets face it, expectations of future liquidity is what extended this recent run-up and when those expectations are removed, where will buyers in future weeks come from? With China talking about signs of inflation this morning (which is not new, btw), how will that affect traders views on future QE?

Bonds are rallying today and that is helping All-Weather.

From March 20th:

“Financial TV has made it abundantly clear that, and I quote; “there is no riskier place to be than in the 30 year Treasury Bond”. With all the bond bears around, it sounds to me like we may get a tradable bounce as the long bond approaches the 135 support level.

In the short run, it seems to me that the higher probability trade is to look for a long entry in bonds and an exit in stocks.”

The long bond ETF, TLT, is up over 4% since the talking heads were screaming for you to sell. We faded those shills and achieved a nice return for clients in just a few weeks in a security that many don’t trade at all.

As far as gold is concerned, don’t forget that the window for a higher probability buy is the last 2 weeks of April. If the stock market pulls the yellow metal down until then, look for that buying opportunity should it arise.

Overall, the recent portfolio changes are looking great in All-Weather and Growth and we hope you are not worried about selling stocks today. Watch how traders react to prices at these key levels.

Have a great trading day!


Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,028.00 Apr 5 Down 19.00 (0.93%) Components, Chart, More
^BFX BEL-20 2,247.00 Apr 5 Down 19.00 (0.84%) Components, Chart, More
^FCHI CAC 40 3,319.81 Apr 5 Up 6.34 (0.19%) Chart, More
^GDAXI DAX 6,775.26 Apr 5 Down 8.80 (0.13%) Components, Chart, More
^AEX AEX General 312.25 Apr 5 Down 1.62 (0.52%) Chart, More
^OSEAX OSE All Share 476.62 Apr 4 Down 5.16 (1.07%) Components, Chart, More
^OMXSPI Stockholm General 328.19 Apr 5 0.00 (0.00%) Components, Chart, More
^SSMI Swiss Market 6,163.49 Apr 5 Down 3.30 (0.05%) Components, Chart, More
^FTSE FTSE 100 5,723.67 Apr 5 Up 19.90 (0.35%) Components, Chart, More
FPXAA.PR PX Index 927.50 Apr 6 Down 7.60 (0.81%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,487.54 7:00AM EDT Down 11.51 (0.77%) Chart, More
GD.AT Athex Composite Share Price Index 707.60 Apr 5 Up 3.66 (0.52%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.


Cara on Trends & Cycles


Vad’s Catch of the Day


Kaimu’s Sound Money


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


  1. ... [#38756]
    By: Mackinaw (812 comments) Go to top ↑
  2. 11:30 AM ET 3-Month Bill Auction 11:30 AM ET 6-Month... [#107260]
    By: davefairtex (5216 comments) Go to top ↑
    • 11:30 AM ET 3-Month Bill Auction
    • 11:30 AM ET 6-Month Bill Auction
  3. 2 in Accumulation Zone 4 in Distribution Zone 9 in Sell... [#107261]
    By: davefairtex (5216 comments) Go to top ↑
    • 2 in Accumulation Zone
    • 4 in Distribution Zone
    • 9 in Sell alert

    Accumulation Zone: Monthly 4, Weekly 5, Daily 18
    Distribution Zone: Monthly 18, Weekly 15, Daily 5

  4. ... [#107262]
    By: Bill Cara (4105 comments) Go to top ↑
  5. Good morning. AAPL - Apple downgraded to Neutral from Buy... [#107263]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    AAPL – Apple downgraded to Neutral from Buy at BTIG citing the changing dynamics in the post-paid wireless industry and margin pressure from iPhone customer upgrade activity. The firm questions the sustainability of the $600 iPhone and the possible need for a price cut along with high investor expectations for a new revolutionary product. (now this call requires some stones)

    DIS – Disney downgraded to Neutral from Buy at Citigroup citing the slowdown in cable advertising and the contraction of network’s total day ratings. The firm lowered its price target for Disney shares to $43 from $44.

    SCHW – Charles Schwab coverage resumed with a Buy at Goldman. Target $16.50

    ——

    Outside the Cara 100 Universe:

    GOLD – Randgold Resources upgraded to Buy from Hold at Stifel Nicolaus citing its attractive growth profile, stable operating margin outlook, and exploration opportunities. Price target is $110.

    ——

    “The greater the number of laws and enactments, the more thieves and robbers there will be.” ~ Lao Tsu

  6. http://bit.ly/Hv234Z The 1st will be 9mm. dealers will... [#107265]
    By: NYUGrad (4750 comments) Go to top ↑

    http://bit.ly/Hv234Z

    The 1st will be 9mm. dealers will have this as early as this week.
    Should sell out quickly.

    Since S&W invented the 40 cal S&W, i am pretty sure that both 40 S&W and 45 cal are in the works.

  7. INFY - The Indian outsourcing giant gets downgraded to... [#107266]
    By: Bull Hunter (3552 comments) Go to top ↑

    INFY – The Indian outsourcing giant gets downgraded to Market Perform from Outperform by brokerage William Blair.

    TGT – Target downgraded to Neutral from Buy at Buckingham.

  8. I suspect the higher price for gold has as much to do with... [#107267]
    By: Bill Cara (4105 comments) Go to top ↑

    I suspect the higher price for gold has as much to do with the North Korea threat as it does with the weak jobs report on Friday.

    http://www.bloomberg.com/news/2012-04-09/north-kor

  9. started small buys at nat. gas producers... $$ cost avg... [#107268]
    By: baz22 (2875 comments) Go to top ↑

    started small buys at nat. gas producers… $$ cost avg… so much like 2008 coal’s… conversion is coming.

  10. It is silver that will show the trend reversal.... Thanks... [#107269]
    By: basketguy (90 comments) Go to top ↑

    It is silver that will show the trend reversal….

    Thanks for that Bill…I agree…Silver has room on the downside to maybe later this month…then we shall look for the lift…

    Here is my simple road map…

    28.50 interesting area….below 26.00 and all bets are off…

  11. Electronic Arts is getting bashed in the media today as the... [#107270]
    By: rosevillebill (150 comments) Go to top ↑

    Electronic Arts is getting bashed in the media today as the worst company in America. They’re getting ranked right with Bank of America. I quit trading their stock almost 2 years ago as I felt there was no value there. A month ago I sold my desktop gaming PC and disposed of my Battlefield 3 DVD. I never intend to buy another product from this company again. The games online servers were always full of hackers and in addition EA saw fit to not be able to turn off the potty mouth language as you could in previous Battlefield games. Hopefully Bill will give them the boot from the Cara 100. Bye bye EA.

  12. "They're getting ranked right with Bank of America." Am I... [#107271]
    By: nebish (297 comments) Go to top ↑

    “They’re getting ranked right with Bank of America.”

    Am I the only one here that happens to think that Brian Moynihan has done an unbelieveable job and is probably one of the best CEO’s in America today?

    Flame away…

    FD: Long BAC JAN 2013 out of the money calls.

    • I can't really comment on how well the CEO has done as I... [#107272]
      By: BillySundance (1355 comments) Go to top ↑

      I can’t really comment on how well the CEO has done as I don’t follow the intricacies of BAC’s balance sheet, but I can say that I have been a retail deposit account holder for a couple decades and have always found the company to have a very attentive and well-trained staff. It was really unfortunate how much crap some of those retail employees had to take for the gaffs caused by senior management’s foray into the mortgage trading fiasco.

      • I'll have to look further into EA. Re BAC, at the time of... [#107273]
        By: Bill Cara (4105 comments) Go to top ↑

        I’ll have to look further into EA.

        Re BAC, at the time of the Countrywide acquisition in 2008, I wrote in this blog that no business person nevertheless banker would go into such a transaction not knowing the extent of the liabilities. I was not wrong. That deal was an unmitigated disaster. And you are correct that the retail employees and shareholders paid for the mistake of that CEO and his Board. The wrongdoers departed with multi-millions.

  13. certainly a risk, but ' high quality ' samples coming from... [#107275]
    By: baz22 (2875 comments) Go to top ↑

    certainly a risk, but ‘ high quality ‘ samples coming from mmr at Davey Jones… still issues with flow…

  14. Really? crazy crazy valuation for a app that allows people... [#107274]
    By: NYUGrad (4750 comments) Go to top ↑

    Really? crazy crazy valuation for a app that allows people to share photos.

    http://lat.ms/IrOIJn

    Are you telling me it would cost FB more than $1B to make their own photo sharing app?

  15. I don't get it either. The best description I heard of... [#107276]
    By: nebish (297 comments) Go to top ↑

    I don’t get it either. The best description I heard of Instagram was that it was Twitter for pics.

    Why wouldn’t FB just buy Twitter?

    What would Twitter have cost Mr. Zuckerberg? $15B?

    Does it really matter given the absurd public valuation associated with FB ($109B at last report)?

    It reminds me of Blackstone and Steve Schwarzman right before that disaster came public in the Summer of 2007. To this day, BX trades at about half its offering price.

    • I am not sure you could buy Twitter for $15B but... [#107278]
      By: BillySundance (1355 comments) Go to top ↑

      I am not sure you could buy Twitter for $15B but nevertheless, Facebook doesn’t actually have $15B in cash so it would have to be a stock deal, making it much more difficult (since they aren’t even public yet). My guess is that they probably tried to buy Twitter a hundred times over but it grew too fast……..

  16. For those of us holding mining stocks: When markets are... [#107277]
    By: Menock (39 comments) Go to top ↑

    For those of us holding mining stocks:

    When markets are somewhere between oversold, oversolder and oversoldest, those not smart enough to have focused only on day trading, but hold positions for long term gain need help at times realizing that this too shall pass. See the following link if you are in need of succor.

    http://tinyurl.com/y9lgsms

    If only our institutions worked this well.

  17. Just perusing the pile of debris formerly known as... [#107281]
    By: BillySundance (1355 comments) Go to top ↑

    Just perusing the pile of debris formerly known as promising junior gold mining companies……looks to me like Keegan Resources has $205m in treasury per their Feb12 presentation. Market Cap at today’s close is appx $235 million. So for the remaining $30m difference you get the 3.64m oz M&I Esaase advanced development project in Ghana (a safe jurisdiction as far as Africa goes). I need to do some more research to determine how fast they are burning through the treasury, but something seems fairly out of whack……

    • After a week away out of whack is certainly how it feels... [#107282]
      By: Juniorgoldminerseeker (228 comments) Go to top ↑

      After a week away out of whack is certainly how it feels across the juniors.
      Not good being early and wrong.
      The $CDNX venture is still just maintaining higher lows but I wonder how long I’ll be able to say that.

      It all seemed to go wrong for Keegan when they published their pre-feasability study in Sept-11, just after gold peaked of course.

      Maybe it was sell the news and the numbers must have disappointed some, 3.6m oz M&I plus 1.5m inferred, 260k oz pa production.
      Showed an NPV range of $171m to $1.037Bn on gold prices ranging from $1,150 to $1,800 so clearly the net market valuation of $30m is discounting extremely low gold prices or is indeed a little out of whack.
      There are government stake / taxation issues to understand more in Ghana, but I would still understand it to be one of the best African jurisdictions.

      More junior explorers, like Kaimu’s Asante (ASE.v) also halved recently, now $6m cap. Others in Ghana with interesting ground 1/4 of highs. Perhaps some degree of general Africa fear after Mali issues (though Randgold bounced today on some apparent resolution) but I think more generally a miners / juniors weakness. As Bill said in the WIR, when it’s bad it’s terrible. As Geoff says positions are built.

      Keegan news / PFS
      http://tmx.quotemedia.com/article.php?newsid=44706

  18. IMO if the dollar closes above 80 this week we may see some... [#107283]
    By: dberryclan (687 comments) Go to top ↑

    IMO if the dollar closes above 80 this week we may see some serious selling.
    Otherwise it looks sripted. Guns loadd and waiting….

    FD TLT my most recent trade…working well but looked like s selling today.

  19. Grab more of the sheeple's time and thus more data ... sell... [#107285]
    By: jock (1011 comments) Go to top ↑

    Grab more of the sheeple’s time and thus more data … sell it to any and all bidders