Bill Cara’s Blog for Aug 3, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
The big news this week is the collapse of market-maker giant Knight Capital Group (KGC). Volume in the stock has zoomed from 1.76 million shares traded on July 31 to 63.93 million August 1 to 158.30 million August 2. Valuation has plunged -75.0% in the past two days. The stock is down a lot more in the pre-open. Clearly, if a bridge loan cannot be found today, this company will likely file bankruptcy over the weekend. As I see it, a buyer will be found this weekend and the almost 800 broker-dealer clients’ accounts will be protected.
The US capital market is in a sickly state and with the recent collapses of other trading firms, MF Global and Peregrine Financial, the bankruptcy of Knight Capital is a bitter pill for Wall Street to swallow.
Many in the media are pointing to the ills of automation; but, I hardly think that is the problem. The issue is also not with greedy managers or bad management practices, and it’s not with lack of regulatory oversight. When all is said and done, the issue is one of lack of confidence in a financial system riddled with conflict of interest, the very ones put in place by a bought-and-paid for Congress. Isn’t it about time that Congress owns up to the problems they have created by not representing the interests of the people who elected them, but siding with those who financially support them?
In the bigger picture, the European banks today are receiving the love they crave from the monetary authorities that will bail them out in times of crisis. I don’t think more Intervention is appropriate, but it is what it is.
A stock that has done rather well since I selected it as my pick for top Growth candidate in the Healthcare sector at the Cara Community Whistler Conference through October 2, 2011 is Gilead Sciences (GILD).
GILD, a stock we hold in both the Growth and All-Weather portfolios, is up +51.52% from $27.71 (Oct 3) to $57.29 today.
Barchart.com, a service I am trying out (no decision yet), featured GILD today:
The “Chart of the Day” is Gilead Sciences (GILD), which showed up on Thursday’s Barchart “All-Time High” list. Gilead gapped higher on Thursday, posted an all-time high of $58.84 and closed up +6.82%. TrendSpotter has been long Gilead since June 27 at $51.25. Gilead surged Thursday after rival drugmaker Bristol-Myers suspended a study of one of its hepatitis C drug candidates after at least one patient suffered heart failure. Bristol-Myers has been in a race with Gilead to develop the next generation of hepatitis C treatments, according to Bernstein analyst Dr. Tim Anderson. Gilead bought hepatitis C drug developer Pharmasset in January for $11.1 billion. The deal gave it several experimental hepatitis treatments, including one labeled GS-7977 that many analysts see as promising. Credit Suisse analyst Catherine Arnold said that because Gilead’s GS-7977 isn’t associated with major safety issues, investors will view the company’s hepatitis C program more positively. Gilead Sciences with a market cap of $41.1 billion, is an independent biopharmaceutical company that seeks to provide accelerated solutions for patients and the people who care for them. They have a broad-based focus on developing and marketing drugs to treat patients with infectious diseases, including viral infections, fungal infections and bacterial infections, and a specialized focus on cancer.
The TrendSpotter service of Barchart.com is based on new-high break-outs, which is often effective, but not an approach I have favored in the past. However, I do think we have to examine the reasons for success and, in some cases, adapt. That’s why I am studying the data.
Have a good day.
Good morning, Geoff here.
163,000 jobs were added to the labor force which exceeded expectations. It is also above the important number of 150,000.
The market had already rallied overnight and continued in that direction following the data release but we need to see the full day and close.
The dollar needs a trend.
Let’s see how the trade plays out today.
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|
||52.47 (2.70%)||Components, Chart, More|
||43.70 (1.91%)||Components, Chart, More|
||76.08 (2.35%)||Components, Chart, More|
||126.62 (1.92%)||Components, Chart, More|
||3.14 (0.97%)||Components, Chart, More|
|^OSEAX||OSE All Share||473.00
||4.97 (1.06%)||Components, Chart, More|
||3.63 (1.11%)||Components, Chart, More|
||42.50 (0.66%)||Components, Chart, More|
||71.97 (1.27%)||Components, Chart, More|
||7.80 (0.88%)||Chart, More|
||13.50 (0.97%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||592.89
||0.15 (0.03%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from brokers
Raymond James report Aug 3, 2012:
Silvercorp Releases F1Q13 (C2Q12) Results – Negative
A First Look at Silvercorp’s F1Q13 financial and operating results (C2Q12).
Analysis: Even Silvercorp, with its historically low cost operations, combined with significant by-product metal production, is not completely insulated from the global cost pressures gripping the industry. On a year-over-year basis, cost per tonne have increased on the back of higher input costs such as labour, however quarter-over-quarter cost per tonne did improve slightly. The first ever positive cash cost (on a per ounce basis) reported in this quarter was largely due to much lower grades. According to management, grades are expected to improve over the remainder of the fiscal year as the key operations get back in
line with its development plan.
Financials – Silvercorp reported adj. EPS of $0.05 vs. our and consensus estimates of $0.07.
Operations – (On a 100% basis) Silvercorp production totaled 1.2Moz in the quarter, below our estimate of 1.5Moz due to lower than expected grades. Lead and zinc production levels were also down (~35% and ~47% respectively vs. our estimates) from the Ying District.
Although on a per tonne basis QoQ costs actually declined modestly, the slide in grades led to higher cash costs per ounce with total cash costs coming in at positive $0.16/oz vs. our estimate of negative $3.60/oz.
Development Projects – Silvercorp also provided an update on the GC project which was hampered by a power supply restriction and the introduction of a new tailings design regulations. The company advised that this additional step is likely to delay the project 3 months to F4Q13 (C1Q13) – in line with our current estimate.
F2013 Guidance Revision – Although lower grades early in F2013 were expected, actual grades in the quarter came in below our, and we suspect, management’s expectations. As a result the company is providing new guidance for the Ying District of 5.3Moz of silver and 78Mlbs of lead and zinc down from the previous guidance of 5.9Moz and 87Mlbs. We currently estimate 5.7Moz of silver and 93Mlbs of lead and zinc.
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
On a pop in volume yesterday, the SPDR S&P Metals and Mining ETF ($XME) formed a bearish “reversal candle” when it rallied to test resistance of its two-day high, but weakened dramatically to close near its intraday lows. As such, a drop below yesterday’s low of $38.55 could now provide a potential short sale entry trigger for this ETF. We have placed XME on our swing trading watchlist, where our exact entry and exit criteria are listed for regular subscribers. For those of you trading qualified accounts, which are non-marginable and therefore non-shortable, the inversely correlated Direxion Daily Gold Miners 3x Bear ETF ($DUST) might serve as a reasonable, though not precise, proxy to XME. The chart below illustrates the technical setup in XME:
The Powershares DB US Dollar Bull ETF ($UUP), a commodity ETF, has been in an uptrend for several months and is now consolidating to form a base of support near its 20-day and 50-day moving averages. If UUP pulls back from its current level, it would provide a low-risk buying opportunity, especially if it briefly “undercuts” its 50-day MA (the teal line). On the chart below, we have annotated the ideal price action we would like to see in order to buy UUP as a swing trade. We will continue to monitor this ETF for a potential long entry:
Our open short position in Oil Service HOLDR ($OIH) fell to move in our favor as much as 2.7% yesterday after, but recovered to close well off its low of the day. Turnover was also heavy in OIH. Although we would have preferred to see weaker price action into the close, OIH should continue to push lower, especially if the broad market remains weak or in a trading range. Remember that most stocks and ETFs rarely break out above long-term resistance of their 200-day MAs on the first attempt.
The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of our top technical ETF and stock picks, access to our market timing, and more. To get started today, sign up for your 30-day risk-free subscription at MorpheusTrading.com or visit our trading blog to learn more about our short-term trading strategy.
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report