Bill Cara’s Blog for Jan 19, 2012

CTA Trading Desk Morning Report

[8:32am ET] Good morning, Geoff here.

Yesterday, the S&P 500 broke out to new 3 month highs. I mentioned that if that happened, that we would begin removing the hedge that we had started to put on. We had hedged 12% of the portfolio and took off half yesterday in the last hour when it was clear that the close was going to be strong. If this break-out fails, we will look at new hedges or taking some gains.

I wrote in yesterday morning’s blog chat to watch FCX for a breakout. Bill had mentioned the stock in the Week in Review as being a long candidate. We were already long the stock and added to it shortly after posting the chat note at $43.35. Subsequently, the stock rallied roughly to the 200 dma, found resisitance and closed at $44.47. We shall see how it trades around that natural resistance/support, but it looks to be a pretty good trade right now.

CPI, Housing Starts, Building Permits and Jobless Claims were just released and S&P futures are flat to up a little. Let’s see how the market trades by mid-morning on those numbers. I will be checking in later.

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 1,969.00 3:58AM EST Up 20.00 (1.03%) Components, Chart, More
^BFX BEL-20 2,170.02 6:59AM EST Up 14.32 (0.66%) Components, Chart, More
^FCHI CAC 40 3,291.75 6:59AM EST Up 26.82 (0.82%) Components, Chart, More
^GDAXI DAX 6,369.40 6:44AM EST Up 14.83 (0.23%) Components, Chart, More
^AEX AEX General 317.25 6:44AM EST Up 1.73 (0.55%) Components, Chart, More
^OSEAX OSE All Share 451.14 6:44AM EST Up 0.03 (0.01%) Components, Chart, More
^OMXSPI Stockholm General 323.82 7:00AM EST Up 1.68 (0.52%) Components, Chart, More
^SSMI Swiss Market 6,149.73 6:45AM EST Up 33.50 (0.55%) Components, Chart, More
^FTSE FTSE 100 5,719.12 6:44AM EST Up 16.75 (0.29%) Components, Chart, More
FPXAA.PR PX Index 914.20 6:59AM EST Up 11.80 (1.31%) Chart, More
ESI500000000.MA IGBM 850.86 6:45AM EST Up 8.65 (1.03%) Components, Chart, More
MICEXINDEXCF.ME MICEX Index 1,498.04 7:45AM EST Up 1.69 (0.11%) Chart, More
GD.AT Athex Composite Share Price Index 686.23 6:45AM EST Up 16.20 (2.42%) 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. 8:30 AM ET Consumer Price Index 8:30 AM ET Housing... [#103824]
    By: davefairtex (5215 comments) Go to top ↑
    • 8:30 AM ET Consumer Price Index
    • 8:30 AM ET Housing Starts
    • 8:30 AM ET Jobless Claims
    • 9:45 AM ET Bloomberg Consumer Comfort Index
    • 10:00 AM ET Philadelphia Fed Survey
    • 10:30 AM ET EIA Natural Gas Report
    • 11:00 AM ET EIA Petroleum Status Report
    • 1:00 PM ET 10-Yr TIPS Auction
    • 4:30 PM ET Fed Balance Sheet
    • 4:30 PM ET Money Supply
  2. 5 in Distribution Zone Accumulation Zone: Monthly 4... [#103825]
    By: davefairtex (5215 comments) Go to top ↑
    • 5 in Distribution Zone

    Accumulation Zone: Monthly 4, Weekly 2, Daily 4
    Distribution Zone: Monthly 11, Weekly 10, Daily 46

  3. ... [#103826]
    By: Mark H (1363 comments) Go to top ↑
  4. ... [#103830]
    By: Bill Cara (4105 comments) Go to top ↑
    • Thanks Bill for the highly educational write up. I'm hoping... [#103841]
      By: 14them34me (295 comments) Go to top ↑

      Thanks Bill for the highly educational write up. I’m hoping for another chance to get back in. Since I sold, the stock ran up another 10-20% (although my profit was not bad) !

  5. Good morning. 08:30 Initial Claims 08:30 CPI 08:30... [#103828]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    08:30 Initial Claims
    08:30 CPI
    08:30 Housing Starts
    10:00 Philadelphia Fed
    11:00 Crude Inventories

    ——

    BBD – Banco Bradesco downgraded to Neutral from Outperform at Credit Suisse.

    KSS – estimates, target cut at Credit Suisse. Shares are now seen reaching $50. Estimates also reduced, as the company is using more promotional activity, Credit Suisse added. Neutral rating.

    NE – was added to the Top Picks List at FBR Capital Markets. Company has exposure to an improving jackup market, FBR said. $45 price target.

    PAYX – Credit Suisse Initiates with an Outperform.

    WAG – Walgreen downgraded to Neutral from Buy at Goldman based on valuation and believes a deal with Express Scripts (ESRX) is unlikely. Price target lowered to $35 from $38.

    ——

    “Moses dragged us for 40 years through the desert to bring us to the one place in the Middle East where there was no oil.” ~ Golda Meir

  6. Great write up Bill! This is a great day for me personally... [#103832]
    By: papadynamite (446 comments) Go to top ↑

    Great write up Bill! This is a great day for me personally. I own UXG in several accounts and my cost is well below the current price. I believe the next target price is $6.50 this year at a minimum. This should take away the embarassment of offering insiders the $6.50 price and then taking a 50% haircut.
    There is a lot to do for UXG, i.e. MUX. I believe that ultimately, Rob will sell the Los Azules property for a hefty sum. Development costs to produce a copper mine will be overwhelming for such a small company. It reminds me of Exeter that has a similar enormous reserve in Chile where the CEO informed me that he thought it would take at least 3-4 billion to develop a mine and therefore they look to sell the property. Hochschild Mining (Harold Hochschild was my old boss at American Metal Climax) owns 51% of the San Jose Mine and probably wish they owned the whole thing. This is a great cash flow for UXG. The property near Cerro Negro could be a tremendous asset once full drilling takes place. Developing a mine or selling at a great profit to Barrick, etc. is a wonderful dilemna for Rob M.
    I always thought that Rubicon could be a great acquisition and a steal for Rob at $5. I don’t know how he would finance such an acquisition without causing a significant share dilution. So maybe that is out. The talk of taking over Lexam has been mentioned. I believe Rob owns 22% of that miner and it may be too soon to dilute more UXG for that takeover. That is something I would ask him privately.
    I expect to see all UXG officials later this year. I wish I could be there in Toronto today but hope that you can relate the Q & A on this site. Good luck!!

  7. The $CPC and $VIX are a bit too low and stopped falling... [#103831]
    By: jack black (2306 comments) Go to top ↑

    The $CPC and $VIX are a bit too low and stopped falling. The shooting star on PTM also spooked me.

    All in cash for a time being.

    Edit: I guess I need to explain that I’m long term bullish, but only short term bearish. I could be easily wrong, but there is nothing wrong with taking some profits.

    • jack, curious why you're short term bearish. Too much good... [#103835]
      By: mike (6 comments) Go to top ↑

      jack,

      curious why you’re short term bearish. Too much good news, improving sentiment, profit taking?

      Mike

      • It's a number of things. Some explained in my previous... [#103837]
        By: jack black (2306 comments) Go to top ↑

        It’s a number of things. Some explained in my previous posts. It boils down to frothy sentiments at the moment. The new year move was largely caused by short covering and people chasing the markets that are running away. There are limits to those moves. I expect there will be a shakeout to lose weak hands that bought on the recent strength. No guaranties and I could be easily wrong.

        Longer term I’m bullish as bonds will sell off and the money have to go somewhere else.

        One more thing. I don’t like how both dollars and gold go down and i consider dollars overbought.

  8. How many think it will disappoint? I think it will due to... [#103833]
    By: jack black (2306 comments) Go to top ↑

    How many think it will disappoint?
    I think it will due to the hard drive shortage.
    Besides, Intel announcements typically coincide with market tops (not sure why).

    • I sold Intel 2 days ago. I was very glad I sold Johnson... [#103838]
      By: rosevillebill (150 comments) Go to top ↑

      I sold Intel 2 days ago. I was very glad I sold Johnson Controls 2 days ago. They really got smacked down when they reported today. Over the past 2 days I’ve sold about 15 different stocks such as INTC, MSFT, DOW, JCI and other such companys. Put a little cash to work in Kinross and Weyerhauser and went from a 95% risk on to about a 40%. The market is not being kind to anyone who misses on the numbers this quarter.

  9. anyone know anything about this divergence? I cannot seem... [#103834]
    By: jack black (2306 comments) Go to top ↑

    anyone know anything about this divergence?

    I cannot seem to find similar examples in the past.

    Edit: Never mind, sounds like KGC is pulling GDX down.

  10. Eventually there should be some good buys in this industry... [#103836]
    By: ulvy (70 comments) Go to top ↑

    Eventually there should be some good buys in this industry once the nat gas price stabalizes. Because of the big drop in the stock price the dividend yields for these stocks come in at 7% and 9%. Of course they may have to reduce the dividends.

    http://bigcharts.marketwatch.com/kaavio.Webhost/ch

    http://bigcharts.marketwatch.com/kaavio.Webhost/ch

    • At the back of my mind I have a concern about US trusts... [#103856]
      By: ChrisM (279 comments) Go to top ↑

      At the back of my mind I have a concern about US trusts such as HGT, such that they can be wound up if their revenue streams fall below some threshold. Sorry I can’t remember the details, but you may want to research this before putting any hard earned cash into them. Should you find something interesting, please publish it here.

  11. There will be no video or audio of the meeting per... [#103839]
    By: papadynamite (446 comments) Go to top ↑

    There will be no video or audio of the meeting per Investor’s Relations. I hope somebody can report on this site after the meeting on Q & A.

  12. Kinross and its management are coming under a lot of... [#103840]
    By: soulek1 (40 comments) Go to top ↑

    Kinross and its management are coming under a lot of pressure right now for the stock performance over the past 2 years and righly so (stock hitting new multi year lows today around $10 per share).

    I think there may be an opportunity here as a value investment. Back up from the stock for a minute and focus on the actual business. Company is producing 2.6-2.8 million ounce of gold annually. Market cap of the company is only $11Billion and company has $0 debt. Production at the company has actually INCREASED each year significantly over the past five years. They own some great undeveloped properties in South America and Africa.

    Part of what is going on has to do with expectations. Costs are increasing meaning margins are not as high as expected, and the projections regarding production increases keep getting pushed out so you have a company that will not get to 4 million ounces of production for longer than anticipated. Probably 5 more years instead of 3 more years.

    The dumping of the stock here is revulsion from investors fed up by being mislead by management over last several years and overpaying for acquisitions. Keep in mind however that all of these different mines were purchased with STOCK NOT DEBT, so other shareholders loss could eventually be our gain. For $11B here you get a company that is producing 2.6 million ounces of gold TODAY and in 5 years could be at the 4 million ounce mark and still owns some trophy properties today.

    Compare these numbers to some of the other large miners. Newmont is a $30B company, Goldcorp is a $45B company (producing similar amount as Kinross today but has much better margins). Name your price $10,9,8,7,6 but I don’t see any insolvency risk here due to ZERO debt and the stock becomes a compelling value and potential takeout target. I plan on playing this by buying the 2014 warrants on TSX exchange and /or LEAPS here in USA buying in the money call options that will give me a little leverage without too much cost.

  13. Not a first time I see this view of Chinese economy by... [#103843]
    By: Vadym Graifer (4341 comments) Go to top ↑

    Not a first time I see this view of Chinese economy by ex-USSR commentators (this article refers to one of them).

    http://pointsandfigures.com/2012/01/19/china-the-s

  14. i suspect a gap tomorrow. can go either way i guess once... [#103844]
    By: NYUGrad (4750 comments) Go to top ↑

    i suspect a gap tomorrow. can go either way i guess once the news is digested.

  15. IBM MSFT AND INTC being bought after hours. cross currents... [#103845]
    By: NYUGrad (4750 comments) Go to top ↑

    IBM MSFT AND INTC being bought after hours. cross currents a plenty.

    • INTC initially went up on hopes but later crashed on... [#103848]
      By: jack black (2306 comments) Go to top ↑

      INTC initially went up on hopes but later crashed on reality (all afterhours). No good news is bad news?

      The MSFT move is impressive (almost 3% afterhours). But how come QQQ is down afterhours?

  16. Great work, again, Bill This stock goes back for me a few... [#103846]
    By: mikede (121 comments) Go to top ↑

    Great work, again, Bill
    This stock goes back for me a few years , when you graciously set up a meeting at PDAC in Toronto with Rob McKwen and any of us from the Cara Community that was there. He is an exceptional man to have at the helm of a company. I rode the stock successfully then and have jumped back on in anticipation of the next move.
    PS. any here that can hook up with Bill at the PDAC or his conferences I can assure you it is well worth the price of admission. At PDAC is time is free, but info gained there will easily pay for your conference.

  17. Banks in Europe rallied today, I know not why; even lowly... [#103847]
    By: goldbug58 (370 comments) Go to top ↑

    Banks in Europe rallied today, I know not why; even lowly Commerzbank (which I do hold, but is not one of my key holdings) was up around 12%, first time I’ve seen the shares over $2 in several months.

  18. Sinclair says global QE3 can only be accomplished by the NY... [#103849]
    By: Dr. Strangelove (2004 comments) Go to top ↑

    Sinclair says global QE3 can only be accomplished by the NY Fed capacity to print and will result in europeans redeeming gold from the Manhattan vault as suggested by the current MSM in europe. Tight market gets tighter.

    http://kingworldnews.com/kingworldnews/KWN_DailyWe

    • Hi Dr. S - Nice article .. who knows about the timing... [#103850]
      By: Luggie (639 comments) Go to top ↑

      Hi Dr. S – Nice article .. who knows about the timing. Thanks to Bill and others I am finally into KGC. Anyone have thoughts about Torex. Might be time to take my Bakken/Niobrara gains, but always looking for long haul when entering. Happy Trading

  19. Rob McEwen held a successful meeting this afternoon with... [#103851]
    By: Bill Cara (4105 comments) Go to top ↑

    Rob McEwen held a successful meeting this afternoon with overwhelming support for the merger. While they could not do a real-time presentation of the meeting, the tape will be uploaded to the company website Friday or over the weekend. Full speed ahead.

    • Thanks Bill for the update. I'm ridin' my UXG like Donnie... [#103852]
      By: Dr. Strangelove (2004 comments) Go to top ↑

      Thanks Bill for the update. I’m ridin’ my UXG like Donnie Gay on Bodacious. (That’s a rodeo reference for you non-cowboys out there)

      • Hey Doc S. Donnie Gay and Bodacious were regulars at the... [#103855]
        By: Ilya (572 comments) Go to top ↑

        Hey Doc S.
        Donnie Gay and Bodacious were regulars at the Mesquite rodeo eons back. My son was in the group that bought the Mesquite rodeo from Tom Hicks when he was on the ropes a few years ago.

        If you’re ridin’ UXG like Bodacious, know that Bodacious was known as ‘the face killer.’ Any cowboy that drew him usually had piss stained jeans even before he was let out the gate… Not that I know anything about UXG but if you follow the bull too closely you’re liable at best to soil your boots…

  20. GE Reports... [#103853]
    By: NYUGrad (4750 comments) Go to top ↑
  21. Just to note, QQQ is at a 10 yr high and it's only Jan... [#103854]
    By: NYUGrad (4750 comments) Go to top ↑

    Just to note, QQQ is at a 10 yr high and it’s only Jan 19.

    http://bit.ly/zYiNvL

  22. Since the dean of covert advertising lost at 'beat the... [#103857]
    By: Ilya (572 comments) Go to top ↑

    Since the dean of covert advertising lost at ‘beat the number’, would this not imply that coupled with reported and seriously skanky Xmas retail sales that all is not so well in WHO-ville?

    Only the leading indicators know for sure and we won’t know ‘fer sure’ til we see them blinking recession in our rear view mirrors.

    Speaking of the injustice of our financial system, pressing down its crown of thorns on savers and the elderly, my 92 year old Mother in Law almost stroked when she was informed that rolling over her 5 year 5% yielding CD’s now only fetched a meager 1.5%. NOW THAT’s DEFLATION…

  23. ... [#103858]
    By: Les (7233 comments) Go to top ↑
  24. If $NDX total breadth in the McClellan oscillator is at... [#103859]
    By: Les (7233 comments) Go to top ↑

    If $NDX total breadth in the McClellan oscillator is at bearish divergence with the index highs then I know to watch my back. Looks like an evening star printed by the NASDAQ yesterday.

    http://stockcharts.com/school/doku.php?id=chart_sc

    We shall see.

    Robert Sinn pointed out the golden crosses soon to arrive on the S&P and NASDAQ and the likelihood that these bullish signs could mark an intermediate high before the market tests support. That’s market logic I can understand.

    http://www.robertsinn.com/2012/01/18/get-excited-g

    Although Sinn rightly points out that $DJIA made its golden cross and not looked back, I’ll hazard a guess that it will soon enough, as this ascending narrowing wedge reverses at some point. Watching the tests of support in various indexes will be key to hopping back on board.

    TLT has not sold off decisively and remains within this zone of consolidation. That tells me something.

    And the dollar tests 8MA support in the weekly time frame. It shows signs of topping out, but without an MACD crossover I don’t see signs of trend change yet. Note in the daily how RSI remains in the upper, bullish zone of 50+.

    Overbought becomes overboughter as Vad would say, until it doesn’t.

  25. http://marcfaberblog.blogspot.com/2012/01/world-wa... I'm... [#103861]
    By: Les (7233 comments) Go to top ↑

    http://marcfaberblog.blogspot.com/2012/01/world-wa

    I’m not used to hearing hyperbole from Faber, so I took a moment to think through the implications of the following passage:

    That means the Middle East will blow up. New regimes there will be less Western-friendly. The West has also figured out it can’t contain China, which is rising rapidly and will have more military and naval power in Southeast Asia. The only way for the West to contain China is to control the oil tap in the Middle East…

    Note that this interview was given to an Israeli audience – it is a targeted message that may implicate a much greater swath of territory than just the Middle East. We can only speculate on such.

    What did strike me is the present Iranian situation and how its regime is at odds with Israel, the US and to a lesser extent the OECD community. More importantly, the dependence that a number of OECD economies have on Iranian oil – Greece and Italy I think I saw quoted in the news.

    We know now that embargoes and economic blockades don’t work. In fact its often business as usual, if you have the right connections. Israeli media recently reported on how Israeli business regularly attempts to circumvent a long standing blockade against Iran:

    http://english.themarker.com/the-badly-kept-secret

    So what does the US et al. expect to achieve by an oil embargo, which several governments have asked to delay the enactment of so that alternative imports may be organised (you can’t make this stuff up). So what will happen, Iran will just turn the spigots off and leave the oil in the ground for their children? Or is China already negotiating behind the scenes to take that excess supply and reroute it to their own economy? Remember, it’s only the EU that has agreed to halt Iranian purchases, not the UN.

    So anticipating this move by the Chinese, what are the Americans going to do about it? Things start getting interesting at that point.

  26. UNEMPLOYMENT RATE S.A. Australia for Dec Actual: 5.2%... [#103862]
    By: Les (7233 comments) Go to top ↑

    UNEMPLOYMENT RATE S.A. Australia for Dec
    Actual: 5.2% Cons.: 5.3% Previous: 5.2% Revised from 5.3%

    Housing is one of the main proponents of household wealth in Oz. The day that market crashes, unemployment will increase considerably. Yet as the above figures show, the Australian economy remains on even keel at this time.

    ———————-

    ECB MONTHLY REPORT
    http://www.ecb.int/pub/pdf/mobu/mb201201en.pdf

    http://www.fx360.com/calendar/

  27. CONSUMER PRICE INDEX (YOY) Dec Actual: 3.0% Cons.: 3.1%... [#103863]
    By: Les (7233 comments) Go to top ↑

    CONSUMER PRICE INDEX (YOY) Dec
    Actual: 3.0% Cons.: 3.1% Previous: 3.4%

    CONSUMER PRICE INDEX EX FOOD & ENERGY (YOY)
    Actual: 2.2% Cons.: 2.2% Previous: 2.2% Dec

    INITIAL JOBLESS CLAIMS for Jan 14
    Actual: 352K Cons.: 392K Previous: 402K Revised from 399K

    CONTINUING JOBLESS CLAIMS for Jan 7
    Actual: 3.432M Cons.: 3.590M Previous: 3.647M Revised from 3.647M

    http://www.fx360.com/calendar/

  28. ... [#103864]
    By: Les (7233 comments) Go to top ↑
  29. ... [#103865]
    By: Les (7233 comments) Go to top ↑