Bill Cara’s Blog for Jul 18, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

Fed chairman Bernanke’s testimony to the Senate Banking Committee yesterday was summarized by Econoday as follows:
http://fidweek.econoday.com/byshoweventfull.asp?fid=454365&cust=mam&year…

At 10:00am ET today, Bernanke will address the House Financial Services Committee, and Econoday will later summarize it here:
http://fidweek.econoday.com/byshoweventfull.asp?fid=454298&cust=mam&year…

Confirmed release date for Lessons from the Trader Wizard (2012) is Friday July 27! Announcements to follow.

Have a good day.


Good morning, Geoff here.

We are looking for a catalyst to kick gold and silver out of their trading ranges.

Public opinion on gold has been very negative as many bulls have thrown in the towel.

Public opinion on silver is as negative as it has been in 5 years.

The Hulbert Newsletter Sentiment Index – you would have to go back to 1991 to find a more negative 4 month average reading of Gold newsletter writers.

Clearly, opinion on gold couldn’t get much worse.

However, the latest COT data shows an extremely low Net Long Position as a % of Open Interest in both futures and options for commercial traders. This is a bullish reading for the metals.

The Simpleton trader says that when the little guys are bearish and the big guys are bullish prices will rise.

The price of gold is down as I write this. Apparently, lack of QE mention has some traders exiting positions today. I guess the move will occur when the big guys are all fully positioned for it and that could happen following one last flush or gold could simply move up out of its triangle – we shall see.

Here are some basic charts showing how prices have been coiling. The longer this action goes on, the larger the move out of the triangle usually is.

ggimage01_071812.png

ggimage02_071812.png

ggimage03_071812.png

ggimage04_071812.png

I have been a gold bull for a decade due to fundamentals. Those fundamentals have slowly showed themselves to the public but not all. Look at the Libor Manipulation scandal. Central Bankers knew of this issue but stayed quiet for years and it is only coming to the attention of the public now. This is just a fraction of what we will learn in the next few years and gold will rise because of fiat scams.

The price of gold will end in a parabolic price pattern much higher than here. When bank assets are priced as marked to market securities, gold will be at a top but we are no where near that point.

The big boys are getting positioned, are you?

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 1,970.66 6:44AM EDT Up 8.66 (0.44%) Components, Chart, More
^BFX BEL-20 2,243.40 6:37AM EDT Up 18.40 (0.83%) Components, Chart, More
^FCHI CAC 40 3,196.51 7:00AM EDT Up 19.54 (0.62%) Components, Chart, More
^GDAXI DAX 6,590.95 6:45AM EDT Up 13.31 (0.20%) Components, Chart, More
AEX.AS AEX General 316.34 6:45AM EDT Up 1.04 (0.33%) Components, Chart, More
^OSEAX OSE All Share 470.78 6:44AM EDT Up 1.40 (0.30%) Components, Chart, More
^OMXSPI Stockholm General 316.51 6:44AM EDT Down 1.78 (0.56%) Components, Chart, More
^SSMI Swiss Market 6,223.64 6:44AM EDT Up 21.30 (0.34%) Components, Chart, More
^FTSE FTSE 100 5,634.94 6:45AM EDT Up 5.85 (0.10%) Components, Chart, More
FPXAA.PR PX Index 899.30 6:59AM EDT Down 8.50 (0.94%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,428.89 6:45AM EDT Down 3.70 (0.26%) Chart, More
GD.AT Athex Composite Share Price Index 623.07 6:44AM EDT Up 10.69 (1.75%) 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 100 Company research notes from brokers

July 18, 2012
Credit Suisse report:

Intel Corp. (INTC) OUTPERFORM J. Pitzer
CP: US$ 25.38 TP: US$ 35 CAP: US$ 126.5b
Macro Chips Fall Where They May But INTC Continues to Execute; Lowering 2012 Estimates

Bottom Line: INTC’s C2Q report/C3Q guide was better than/in-line with investor expectations. While macro headwinds persist and are forcing INTC to lower 2012 rev guidance from +7-9% y/y to +3-5%, management continues to demonstrate significant flexibility around the operating model – lowering 2012 opex by $100m, maintaining full year GM of 64%, controlling capex/depreciation in-line/below the low end of the range – resulting in 2012 EPS declining by only 3 cents to $2.45. Macro risks still persist, but no more so for INTC than the rest of Semis/the stock market. Sub-seasonal guide for C3Q, only seasonal for C4Q – despite lean inventory and Win8 – might actually mean INTC stock is less exposed, especially relative to continued negative investor sentiment. We disagree with but at least understand the structural bear call on INTC. The tactical call of disappointing revenue coupled with uncontrollable spending driving major EPS revisions is losing steam. Our view: Tactically a levered play on reaccelerating Emerging Market GDP, structurally one-of-one chip companies able to continue to leverage Moore’s Law with tangible economic benefit. While we acknowledge NT volatility, we maintain our LT OP rating and PT of $35.

C2Q In-Line to Better than Feared. INTC reported rev of $13.5bn (+4.6%), roughly in- line with Credit Suisse/Street ests $13.6bn (+5.4%)/$13.6bn (+5.1%) and EPS of $0.54 better than Credit Suisse/Street at $0.52. The modest revenue miss in C2Q was 100% related to NAND pricing; PCCG (+3% q/q) and DCG (+14%) and other IA (+3%) all performed as expected. PCCG units +3% q/q with ASPs -2% and DCG units +11% and ASPs +3% q/q. ASP declines in PCCG appear to be more mix related than like-for-like – despite the high level of Ivy Bridge (25% of mix) shipments in the quarter – inventory depletion/share gains at the low end drove ASPs lower. GM of 63.4% was better than our model of 62.0% helping to drive two cents of upside to EPS estimates. Inventory increased $415m q/q to 90 days but more than 100% of the inventory increase was Ivy Bridge related. Inventory dollars are expected to be flat q/q in C3Q with days down sequentially. CFO of $4.7bn was offset by $1.1bn in Dividends, $1.1bn in buybacks and $2.6bn in Capex.

Modestly Lower 2012 Estimates, Maintain PT. We lower our 2012 rev/EPS estimates of $56.9bn/$2.48 to $56.1bn/$2.45 on continued softness in the developed PC market and decelerating emerging market growth — Street is at $56.5bn/$2.43. For 2013, we lower our rev est. to $60.9bn from $61.5bn but maintain our EPS est. of $2.70 on tighter OpEx control. INTC trades at 9.4x CY13 EPS (8.9x ex-cash) vs. 5-year average of 12.9x (range is 8x-18x) and the SPX at 11.6x. FCF Yield (CY13) is 8.3% and Div Yield of 3.3%. Maintain our PT of $35 which represents 12.9x CY13 EPS (12.4x ex-Cash), in-line with the 5-year avg. multiple.

Data Deposition – Intel capex tracking to lower end, but within range

Summary: Capex tracking to lower end. Intel kicked off earnings season reporting C2Q12 (Jun) results after the close – company noted that its CY12 capex will likely track to the lower end of its range at $12.1-$12.9bb (up 12-19% y/y) by weaker macro, it will take some of its 32nm capacity offline and reuse this for leading edge such that total capex is likely to track to the lower end of the prior guidance range. Given weak macro and concerns on PCs, to us this change in capex appears better than feared. We continue to expect our 2012 WFE capex estimates will be lowered by ~5% (now at down 4% y/y, but expect to be closer to down 10% post earnings) as we will likely need to revise our NAND and Tier 2 foundry capex. Companies with high relative exposure to Intel’s capex are KLAC & ASML.

Revising estimates prior to earnings. We are also taking the opportunity to update our earnings models for AMAT, LRCX, KLAC ahead of earnings. We continue to maintain a positive relative view on KLAC given valuation and the inspection adoption theme.

Other details from Intel. (i) Weak macro, but not terrible – Intel noted generally weaker consumer in developed markets and slower growth in emerging markets; enterprise remains solid (15% yoy growth in data center); (ii) Intel remains optimistic on Win 8 and Ultrabooks with < $700 price points for Ultraboooks in 2H;(iii) NAND has been soft – company expects other companies to also be cautious on NAND – we had noted the dramatic decline in new orders for NAND at Tokyo Electron (Y2bb in June vs Y19bb in Mar – NAND has virtually stopped expanding for now – implying bit supply growth will decelerate sharply in 2013); (iv) An interesting tidbit of Intel’s pricing power was that Intel has seen its strongest quarter for distributor sales – not because of traditional desktop/whitebox/emerging market – but more because of enterprise server strength perhaps coming at the expense of some brand OEMs.
22nm ramp ahead of plan. Intel noted 22nm Ivy Bridge launch is tracking ahead of plan – with over 25% of PC now on Ivy Bridge – this should ice concerns on 22nm yield “issues” some investors have worried in the past for Intel. Also, Intel believes Ivy Bridge will be > 50% of PC mix by 3Q12.


Vad’s Catch of the Day


Kaimu’s Sound Money


Deron’s Daily ETF Analysis

On two occasions in the past three days, the Market Vectors Retail ETF (RTH) has tested and held support of its 20-day EMA. Yesterday, on an uptick in volume, RTH formed a bullish reversal candle, as it recovered from an undercut of its 20-day EMA. A volume assisted move above the three day high of $42.52 could provide a buy entry trigger for RTH.

EUO

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 the top ETF and stock picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily stock newsletter or visit our trading blog to learn more about our proven technical trading strategy.


OptionOracle


Harp’s Roadmap


Cara on the Metalminers


Cara on the International Markets


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


  1. 7:00 AM ET MBA Purchase Applications 8:30 AM ET Housing... [#111230]
    By: davefairtex (5216 comments) Go to top ↑
    • 7:00 AM ET MBA Purchase Applications
    • 8:30 AM ET Housing Starts
    • 10:30 AM ET EIA Petroleum Status Report
    • 2:00 PM ET Beige Book
  2. 3 in Accumulation Zone 2 in Buy alert 7 in Distribution... [#111231]
    By: davefairtex (5216 comments) Go to top ↑
    • 3 in Accumulation Zone
    • 2 in Buy alert
    • 7 in Distribution Zone
    • 1 in Sell alert

    Accumulation Zone (10%): Monthly 12, Weekly 11, Daily 8
    Distribution Zone (13%): Monthly 14, Weekly 7, Daily 19

  3. Good morning. 07:00 MBA Mortgage Index (+16.9%) 08:30... [#111232]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    07:00 MBA Mortgage Index (+16.9%)
    08:30 Housing Starts (760K)
    10:30 Crude Inventories
    14:00 Fed’s Beige Book

    ——

    CAT – Caterpillar downgraded to Neutral from Buy at Longbow following checks that indicate higher dealer inventory, moderating North American demand, and a weaker outlook.

    CAT – Caterpillar downgraded to Hold from Buy at Jefferies citing international weakness and some moderation in North America. The firm lowered its price target for Caterpillar to $85 from $130.

    GILD – Gilead coverage assumed with an Outperform at Oppenheimer. Target $60

    GILD – Initiated with a Buy and $70 target at Maxim Group, which says it is in the lead for the next second-generation hepatitis C virus daily combination therapy.

    JNJ – PT Lifted from $65 to $71 @ RBC. Sector Perform

    TLM – Talisman Energy downgraded to Sector Perform from Outperform at RBC Capital citing a lack of near-term catalysts. The firm lowered its price target for shares to $14 from $17.

    WFM – Whole Foods downgraded to Hold from Buy at Williams Capital based on valuation. Price target is $88.

    ——

    Other stocks of possible interest:

    AUQ – AuRico Gold downgraded to Hold from Buy at Canaccord following the lower than expected Q2 production results. Price target lowered to $8 from $12.

    ——

    “A censor is a man who knows more than he thinks you ought to.” ~ Granville Hicks

  4. Please note the Credit Suisse commentary... [#111233]
    By: Bill Cara (4105 comments) Go to top ↑

    Please note the Credit Suisse commentary above.

  5. I have asked countless people ( non-traders ) to name a... [#111234]
    By: baz22 (2875 comments) Go to top ↑

    I have asked countless people ( non-traders ) to name a gold company… no one can. I may be crazy, but this seems extremely bullish for gold in the long term. When the general public finally gets hip to viewing ‘ gold ‘ in terms other than coins/bars, the rush will really be on. I certainly am adding to my positions when appropiate for my style. Thank you for so much.

  6. Loaded up some Aug20 calls at $1.40 when it dropped below... [#111235]
    By: ea32da32 (2362 comments) Go to top ↑

    Loaded up some Aug20 calls at $1.40 when it dropped below 15.80

    A VIX below 15 means buy everything! LOL

    Sarcasm off,

    Earl

    • Sold VIX calls $1.60 for $.20 - (use VXX as indication... [#111240]
      By: ea32da32 (2362 comments) Go to top ↑

      Sold VIX calls $1.60 for $.20 – (use VXX as indication because VIX indication does not match option prices),

      INTC – bought Aug 20 puts for $1.15

      • FFIV, AXP, IBM, SYK, CLB, KMI, examples of some rev misses... [#111254]
        By: ea32da32 (2362 comments) Go to top ↑

        FFIV, AXP, IBM, SYK, CLB, KMI, examples of some rev misses or rev cuts,

        Crazy day! Picked up 20 VXX Aug13′s $.92 right before end of day.

        Holdng INTC Aug27 puts from $1.15, lots of short covering today. I’m looking for it to pull back half gains of today, maybe ~ $25.75 tomorrow will make a nice coin provided the market does not take off – 108MM SPY shares traded with 20day avg of 143MM – sure sounds like institutional investors are piling into this… All of this looks like a short cover rally IMHO but it could continue up more. SPY did not break out above my top of trading channel, 137.80

        Earl

  7. live... [#111236]
    By: M R Ducks (84 comments) Go to top ↑
  8. INTC - estimates reduced at BMO through 2013. Company... [#111238]
    By: Bull Hunter (3552 comments) Go to top ↑

    INTC – estimates reduced at BMO through 2013. Company reduced its guidance. Market Perform rating and $24 price target.

    KO – estimates lowered at UBS through 2013. Slowing in Japan, China, Brazil, and Europe. Neutral rating and $77 price target.

    KO – Coca-Cola numbers reduced at Goldman. Shares of KO now seen reaching $81
    . Estimates also cut, as the company is realizing lower margins. Buy rating.

    ——

    STRATEGY CALLS / MARKET CALLS
    S&P 500 (SPX) target lowered at Credit Suisse. SPX now seen reaching 1425. Expect lower earnings, especially out of Europe.

  9. Market breaks out above SPX 1366 and both TLT and VXX are... [#111239]
    By: Ron Sen (975 comments) Go to top ↑

    Market breaks out above SPX 1366 and both TLT and VXX are up a little.

    1) Don’t see a recession call (weekly leading index or not) here
    2) Maybe the Fairy Fedfather plans to do something (doubt it)
    3) False breakout to come?

    • I actually just hedged my call position on BCE buy... [#111244]
      By: SyncMaster152T (166 comments) Go to top ↑

      I actually just hedged my call position on BCE buy purchasing some puts. Delta neutral trading is a powerful tool once mastered.

  10. der Spiegel reports down-beatedly on London Olympic... [#111241]
    By: jock (1011 comments) Go to top ↑

    der Spiegel reports down-beatedly on London Olympic preparations, but sees no irony (they’re german) in message delivery reverting to the orginal olympic (marathon) methods:

    “DHL, for example, plans to shut down part of its London delivery fleet, knowing that traffic will be moving even slower in the downtown area than at the typical snail’s pace of 11 kilometers per hour (7 miles per hour). Instead, DHL plans to have extremely fit jogging couriers making package deliveries during the games.”

    http://www.spiegel.de/international/world/london-a

  11. I know this is off topic, but it's life and death and there... [#111243]
    By: westcoaster (1130 comments) Go to top ↑

    I know this is off topic, but it’s life and death and there are some here who follow biotech and health issues who might help. My good friend who lives an exemplary life in terms of lifestyle, diet, and exercise, has not been spared the intrusion of a cancerous brain tumor that was recently mostly removed.

    He remarked on the phone this morning that a challenge he faces is doing the research for ideas on how he might increase his chances of ridding himself of it so he can live on. The odds are not in his favor.

    If anything comes to mind, please post here or email me directly, any avenues he might pursue. His comment this morning was that each case is very individual, what might work for one, may not for another, but obviously at 67 and looking forward to another 20yrs on the planet, 6 months is not a pleasant thought to contemplate.

    TIA

    He recently wrote:
    Hello Friends, I’m getting set up for radiation and chemo for 6 weeks starting July 23rd, (half an hour a day, five days a week..back home on weekends). Hard to believe this is happening to me..it still has dream like characteristics, all pretty surreal. This is a particularly aggressive cancer and beyond normal treatment there are alternate therapies that are promising and effective. Please send any success stories my way!

    I’ve had almost 2 months to digest and process the diagnosis and for the most part I’ve lived in fear and terror about dying, not for myself but everyone I’d leave behind. But the tide has turned and I have a much more positive outlook on the possibility of recovery. It’s easy to become a victim of the medical system but I’ve chosen to author my own outcome…it will be mine!

  12. Tech is the recipient of a lot of cash inflow today and... [#111249]
    By: nebish (297 comments) Go to top ↑

    Tech is the recipient of a lot of cash inflow today and financials (including REIT’s) are being drained.

    Somebody out there thinks big cap Tech is dirt cheap and overweighting.

    • I think tech is oversold, and a new spend cycle on networks... [#111252]
      By: westcoaster (1130 comments) Go to top ↑

      I think tech is oversold, and a new spend cycle on networks is a couple of quarters off, and new devices are coming.

  13. Nice little 36% up yesterday from Assante. And its still... [#111255]
    By: Ventilation Blues (164 comments) Go to top ↑

    Nice little 36% up yesterday from Assante. And its still under 50% off it public offering. That sounds like a better deal than my depleted MUX shares.

  14. OK, the corn crop is dust, we have $8 wheat and no doubt... [#111256]
    By: Ilya (572 comments) Go to top ↑

    OK, the corn crop is dust, we have $8 wheat and no doubt the ethanol mandate may be waived for a year………..gasoline prices will or could spike as a result.

    More importantly, agriculture in India may be at risk. I would watch the price of rough rice, a people food.

    It’s difficult to reason with a man whose family has empty bellies.