Bill Cara’s Blog for Mar 19, 2012

CTA Trading Desk Morning Report

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

As Bill noted in the Week in Review, the big story last week was the bond sell-off with money moving to equities. The market reacted positively to the bank stress-test and bank stocks were bought. Having confidence that banks are not going to implode could continue to lift stocks, but I continue to wonder how long stocks can rally with the dollar.

The dollar has lifted for a couple of weeks but now is short term toppy. As the dollar approaches the 81 – 82 level that has served as prior resistance, we shall see the true strength in the rally.

We like energy and are watching the dollar closely. Should the greenback turn lower here, we have a few energy, material and industrial names that we will add to or initiate positions in should their prices turn higher in response.

Regarding the Strategic Petroleum Reserve, I understand that the administration doesn’t want the price at the pump to slow the economy and hurt the reelection campaign but these types of efforts many times lead to higher prices, not lower.

Like I said, we like a few energy names that are down significantly over the last few weeks. Keep your eye on that sector.

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 2,233.38 6:44AM EDT Down 5.48 (0.24%) Components, Chart, More
^BFX BEL-20 2,366.42 7:00AM EDT Up 0.31 (0.01%) Components, Chart, More
^FCHI CAC 40 3,569.08 7:00AM EDT Down 25.75 (0.72%) Components, Chart, More
^GDAXI DAX 7,108.87 6:45AM EDT Down 48.95 (0.68%) Components, Chart, More
^AEX AEX General 333.45 6:44AM EDT Down 2.72 (0.81%) Components, Chart, More
^OSEAX OSE All Share 492.49 6:45AM EDT Up 0.68 (0.14%) Components, Chart, More
^OMXSPI Stockholm General 349.76 6:44AM EDT Down 1.76 (0.50%) Components, Chart, More
^SSMI Swiss Market 6,318.98 6:45AM EDT Down 22.35 (0.35%) Components, Chart, More
^FTSE FTSE 100 5,938.07 6:45AM EDT Down 27.51 (0.46%) Components, Chart, More
FPXAA.PR PX Index 994.20 Mar 16 Up 1.10 (0.11%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,585.61 7:45AM EDT Down 30.84 (1.91%) Chart, More
GD.AT Athex Composite Share Price Index 770.53 6:45AM EDT Up 5.73 (0.75%) 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 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. 10:00 AM ET Housing Market Index 11:30 AM ET 3-Month... [#106491]
    By: davefairtex (5215 comments) Go to top ↑
    • 10:00 AM ET Housing Market Index
    • 11:30 AM ET 3-Month Bill Auction
    • 11:30 AM ET 6-Month Bill Auction
  2. 2 in Buy alert 12 in Distribution Zone 5 in Sell... [#106492]
    By: davefairtex (5215 comments) Go to top ↑
    • 2 in Buy alert
    • 12 in Distribution Zone
    • 5 in Sell alert

    Accumulation Zone: Monthly 4, Weekly 1, Daily 7
    Distribution Zone: Monthly 19, Weekly 34, Daily 23

  3. So I see Bill wants to keep Greenfield private. Fair... [#106493]
    By: Les (7233 comments) Go to top ↑

    So I see Bill wants to keep Greenfield private. Fair enough. I like the idea of listing 100 juniors – I don’t have the time to even keep up with MUX so happy to have a portal I can access at some point in the future, as day trading slowly comes together.

    Bill said: “The charts of the Monthly, Weekly and Daily price data are very bullish, but the risks are also very high at this point. Unless the commodity producers in XLE and XLB follow through and pick up the pace that has been set by the Tech and Financial sectors, the broad market is likely to come off now. Profit-takers will try to protect their portfolios.”

    Thanks for those thoughts Bill. It’s a bit schizoid watching some sectors on the sidelines while others keep running. Sinn introduced me to the Citigroup Economic Surprise Index for the US this weekend:

    http://www.bloomberg.com/quote/CESIUSD:IND/chart

    The topping action is clear and if you pull out to a 5 year time frame, one can see that this chart does have some correlation with market moves – I could not calculate the accuracy however. But it is another warning signal.

    Bill said:“At the end of the day it behooves all of us to keep records of our decision-making process. In time, you will see where the most mistakes are made and you can correct them. Trading is an intellectual exercise for students-of-the-market. Every day we participate we should be learning something.

    One difference in my short term decision making process, now that I’m back at the coal face in Vad’s room, is that my intellectual exercises posted here are no longer influencing my intraday trading decisions. I’m aware the market likely needs to rest here, but I’m not doggedly pursuing every pullback and profit-taking dip as THE market top, which makes a heck of a difference to my batting average. More on that shortly.

  4. ... [#106494]
    By: Bull Hunter (3552 comments) Go to top ↑
  5. In dialogue with Vad having returned to the room and seeing... [#106496]
    By: Les (7233 comments) Go to top ↑

    In dialogue with Vad having returned to the room and seeing that my trading is moving closer to target, I’d thought I’d share my experiences as an ongoing learner.

    As I remarked on in the previous post my musings here are no longer directly feeding into my trading strategy. That is a big difference with my day trading in 2012, as opposed to 2010. Being aware of, but able to separate a bigger picture from short-term trading decisions is an exercise in intellectual flexibility, but permits me to align with the immediate flow of energy in the market place while keeping an eye on what may be transpiring.

    One can see an example on Friday. I’d already packed up for the day to welcome the boss home for the weekend (we’d done quite well given that it was a quadruple witching day) but after dinner a quick glance at the screen told me that I wanted to be back in, so I put TNA up in front of me, as attached. As it was I sat there too long contemplating risk/reward, and TNA left without me as I’d anticipated in the setup, but in 2010 I would use every dip in the market as a shorting opportunity, AND WOULD ALWAYS SHORT THE BOTTOM. That is no longer the case.

    I decided to treat trading as a business and invested in a new computer (built the beast meself) with three screens. I asked Nemo for his well annotated IWM/SPY 3/15 min. charts and watch them like a hawk during the session, to help me seek out reversal points – swing trading in a minute time frame:

    http://tradinglog.realitytrader.com/2012/03/nemos-

    Vad helped me navigate a profitable trade I could see setting up on CAT on Friday. My STRATEGY – and strategy is an important element I was lacking in 2010 – is to seek out multi time frame MACD setups, be they showing bullish or bearish divergences, or otherwise indicating likelihood of trend continuation. But here I was trying to crack a nut at strong support – CAT’s opening price at .45. Vad waits for that support to be lost, to hit CAT below .40. And it worked well. See attached.

    So surround yourself with smart traders if you wanna smarten up. Get yourself a mentor if possible. Bill has served as a mentor for me for the last 5 years and I was lucky to come to his site just as I took an interest in trading – linking economic fundamentals with market behaviour has been a vital understanding for me.

    Vad has been a mentor on a more personal basis, when I’ve chose to listen to him :) . That’s actually an important point, as I have a high esteem of myself and have thought I could do well doing my own thing. So I’ve made money with Vad and then given it back trying out my own stuff.

    So in 2012 I am trading Vad’s calls with increasingly larger volume and keeping my own trade ideas, and those of others in Vad’s trading room (the quality of the calls are really good) to strictly 50 shares a trade. It’s nothing I know, but I’m learning from Aikido that the practise of Aikido is exactly that – in doing.

    Same as in trading. Just taking the setup time and time again, filtering which trades of mine are good and which are garbage and working on improving that. I don’t get angry anymore, don’t revenge trade and I don’t get excited anymore, like I’m at the races. All those emotions cost me dearly in 2010.

    Much is coming from Aikido as well, which is not easily related here. Shihan Sensei Robert Nadeau has the word on relating to the world around me, including the market. The first min. is enough to get the gist:

    http://www.youtube.com/watch?v=qZKIPrRVm58&feature

    market opening in 10. back to the coal face.

  6. AAPL - estimates, target boosted at Wedbush. Shares of AAPL... [#106497]
    By: Bull Hunter (3552 comments) Go to top ↑

    AAPL – estimates, target boosted at Wedbush. Shares of AAPL now seen reaching $750, according to Wedbush. Estimates also upped, as new iPad and iPhone should continue to drive growth. Outperform rating. The company announced a buyback and quarterly dividend of $2.65 per share Monday before the open.

    BBBY – Downgraded to Neutral @ Longbow.

    INFY – estimates lowered at Oppenheimer though 2013, Oppenheimer said. Financial services vertical remains pressure. Perform rating.

    NKE – estimates, target raised at Auriga. Shares of NKE now seen reaching $128, according to Auriga USA. Estimates also increased, as new products should continue to drive growth. Buy rating.

    NUE – estimates, target upped at Morgan Stanley. NUE estimates were boosted through 2013, Morgan Stanley said. Industry demand should outstrip new supply. Overweight rating and new $56 price target.

  7. watching to see if ' wfr ' turns back to $ 3.80's.. Japan... [#106498]
    By: baz22 (2875 comments) Go to top ↑

    watching to see if ‘ wfr ‘ turns back to $ 3.80′s.. Japan is very interested in solar from full/provider/installation servicer … possible 1 GW plans if ( IF ) financing goes through..

  8. Noticing two of my hard-asset stocks have started to take... [#106499]
    By: Dr. Strangelove (2004 comments) Go to top ↑

    Noticing two of my hard-asset stocks have started to take off with one-day moves in excess of 7% late last week (CSX) and over 11% today (CRESY). We appear to have sector rotation into railroads last week and now ag today? May have to buy some POT. Capital always concentrates especially when a sovereign bond market like that of Greece technically defaults.

    • Yeah, Doc... POT and MOS have about a 60% correlation to... [#106503]
      By: baz22 (2875 comments) Go to top ↑

      Yeah, Doc… POT and MOS have about a 60% correlation to the $ Euro, but nitro use will increase.

  9. ... when you fix all your problems and get bored? Fed's... [#106501]
    By: Vadym Graifer (4341 comments) Go to top ↑

    … when you fix all your problems and get bored?

    Fed’s Bernanke to testify on European debt crisis before House panel on Wednesday, 3/21 at 09:30ET

  10. During the Vietnam era we use to smoke it! Now we sell... [#106500]
    By: papadynamite (446 comments) Go to top ↑

    During the Vietnam era we use to smoke it! Now we sell it!!

  11. AKS chart has looked bullish over the past 4 sessions... [#106502]
    By: goldbug58 (370 comments) Go to top ↑

    AKS chart has looked bullish over the past 4 sessions, price and volume. Might get back to $10 a share, now at $8.60 from below $7 a week ago. Just sayin’.

  12. took small position in CHK, strong money flow, MACD turning... [#106504]
    By: tradylady (205 comments) Go to top ↑

    took small position in CHK, strong money flow, MACD turning up…

  13. Obama signed this Executive Order on Friday. Was this just... [#106505]
    By: bluesky (98 comments) Go to top ↑

    Obama signed this Executive Order on Friday. Was this just done only because Obama wanted to crack open the Strategic Petroleum Reserve, or is something else of enough concern to warrant this?

    http://www.whitehouse.gov/the-press-office/2012/03

  14. There are 4 prominent world suppliers of Lithium and TLH is... [#106507]
    By: bobbor (33 comments) Go to top ↑

    There are 4 prominent world suppliers of Lithium and TLH is the largest by a small margin.
    TLH were planning to complete their mine expasion ( by 100%) this coming quarter which is the April,May June time frame.No word yet, but I imagine news is not that far away.
    TLH have bee saying both the demand and prices of Lithium are rising.

    I am not a day trader but am long TLH. Please do your own due diligence.

    Best Regards

    • Nice to see someone talk about a specific stock here again... [#106511]
      By: gregdickie (26 comments) Go to top ↑

      Nice to see someone talk about a specific stock here again !!
      I am watching Canadian Lithium CLQ.TO out of Quebec. The new mine is suppose to go into operation the end of this year, management says everything is on track with no cost overuns. Not like Thompson Creek Metals TCM.TO who’s new gold mine in British Columbia cost overruns came in shockingly high last month and they sank quicker than the Titanic. All my little mines were bought up last year and I have to look for new to replace, Grande Cache Coal, Western Canadian Coal, Consolidate Thompson, Breakwater Resources, and a few others.

    • bobber - I like Chile's SQM because the country is very... [#106509]
      By: Dr. Strangelove (2004 comments) Go to top ↑

      bobber -

      I like Chile’s SQM because the country is very stable and pro-business unlike most in South and Central America. POT has a huge stake in SQM. SQM produces fertilizer nitrates, the purest lithium on the planet, and iodine with a global distribution, a $15.66 billion market cap, low debt ratios, fat margins, MASSIVE reserves, and trades on the NYSE. What’s not to like about that diversity?

      If you want lithium production, this one’s hard to beat. I’m sure POT would love own more of it. Since lithium is abundant, why not go for the purity edge produced by SQM?

  15. ... [#106508]
    By: ea32da32 (2362 comments) Go to top ↑
    • Good step... do think Gemany will use national companies ... [#106510]
      By: baz22 (2875 comments) Go to top ↑

      Good step… do think Gemany will use national companies ( although noticed SPWR in there ).. same reason I am warming up to ‘ wfr ‘ as they design, make , install and service. Some pretty smart guys in industrial HVAC in Charlotte realized the value of the ‘ service ‘ end of the work years ago, and are still around, doing well… Take care, Earl. Will write, as started some new Bio’s… baz

  16. Smith & Wesson. 3 yr base, and a recent bull flag from... [#106512]
    By: NYUGrad (4750 comments) Go to top ↑

    Smith & Wesson. 3 yr base, and a recent bull flag from March 19.

    Using long strangle options strategy.

    • If you're going to own a gun manufacturer, RGR is the one... [#106513]
      By: Dr. Strangelove (2004 comments) Go to top ↑

      If you’re going to own a gun manufacturer, RGR is the one for me. My gun retailer play is CAB. Performance speaks for itself with these two …

    • Did you make your purchase decision before or after the... [#106515]
      By: Bill Cara (4105 comments) Go to top ↑

      Did you make your purchase decision before or after the stock popped?

      I’m always nervous to follow a move like that before the profit takers come in.

      • I dont own any shares outright. After the bull flag formed... [#106518]
        By: NYUGrad (4750 comments) Go to top ↑

        I dont own any shares outright. After the bull flag formed i began to purchase $7 calls and $6 puts.

        I too am wary of profit taking, thus am happy with playing both sides from where the stock is currently trading.

        If i had to own shares, i would put the stop no lower than $6.15 -6.30

        • I wanted to also point out the recent pop was same time as... [#106522]
          By: NYUGrad (4750 comments) Go to top ↑

          I wanted to also point out the recent pop was same time as the co announcing that they went from loss to profit, beat estimates, raised full yr guidance on March 8. They also announced that on April 12, at the NRA convention they will reveal a new concealed carry hand gun model, which already is in production and will be ready to ship on april 12 to dealers.

          For those who are not familiar with fire arms, concealed carry is the fastest consumer segment for firearms and many woman are now “packing”.

          http://yhoo.it/GzZddD

          The reason i chose an options strategy (straddle/strangle) is i do not know which way the price will go. whether up or down i dont care. I just want volatility. if the stock moves up violently the puts expire worthless. vice versa.

          I am explaining this for those who are not familiar with options. By no means am i trying to explain options to Bill Cara. that would be embarrassingly foolish of me.

  17. I'm having trouble pulling this chart up on ADVFN. Any help... [#106516]
    By: parkmca (38 comments) Go to top ↑

    I’m having trouble pulling this chart up on ADVFN. Any help is appreciated.
    TIA

    • parkmca, The chart is labeled the way the fx trade is... [#106517]
      By: Bill Cara (4105 comments) Go to top ↑

      parkmca,

      The chart is labeled the way the fx trade is made: FX:USDINR

      You are confused because once I get the chart, I switch the code so that when I talk about a Rupee on the upswing, the chart I show is pointing north (not south). (smiley goes here)

  18. Interesting... [#106519]
    By: Bill Cara (4105 comments) Go to top ↑

    Interesting chart.

  19. I'm always reading good things about this material. Here's... [#106521]
    By: rosevillebill (150 comments) Go to top ↑

    I’m always reading good things about this material. Here’s a new discovery for capacitors and possiblly batteries. They make it using a LG DVD burner.
    .
    http://www.extremetech.com/extreme/122763-graphene

    I’ve read where it also can be used to make very efficient water filters.

  20. Luxuarily priced Germanic car companys are discounting... [#106524]
    By: Ilya (572 comments) Go to top ↑

    Luxuarily priced Germanic car companys are discounting their wares up to 25% off list for the waning Chinese comsumers.

    So much for the transition from an export led to a domestic consumption economy. They are totally lacking in the fundemental art of double entry book-keeping at the national level and at the local level….they just lie. A Greek/Worldcom/Enron fantasy comes to my mind.

    It’s one thing to tell 400,000 chinese that they must move because high speed rail is going to bisect their town. That’s good ole commie top down forced demand economics which has worked well since 1979. How does a government ‘force’ domestic consumption without using bayonettes to herd their rich into Mercedes showrooms? They cannot.

    They are in the classic chinese finger puzzle.

    • And then there's the other side of the trade. I'm on my... [#106525]
      By: rosevillebill (150 comments) Go to top ↑

      And then there’s the other side of the trade.

      I’m on my 2nd BMW and can confidently state it will be my last. Their cuteness with technology has exceeded the practical use of “it’s a car” and it even depreciates as much if not more that other automobile choices. I have found a great mechanic and he saves me about 50% over what the dealer would be charging me for upkeep, but even losing his services can’t keep me an”Ultimate Driving Machine” buyer. Full disclosure “Never Say Never”.

  21. Sinn's link to Citigroup's Economic Surprise Index for the... [#106526]
    By: Les (7233 comments) Go to top ↑

    Sinn’s link to Citigroup’s Economic Surprise Index for the US:

    http://www.bloomberg.com/quote/CESIUSD:IND/chart

    …led me to look at option’s activity again, so as to look for useful indications. The daily is just making noise, it’s usefulness passed when market broke its range bound trading and returned to trend – JMO.

    The weekly has something to say. Note in the weekly chart the slide to complacency that ultimately led to topping action in the first half of 2011. That same slide has occurred since the August bottom rally until now.

    Note that there is only 1 ‘false’ signal given by $CPCE in the duration of this chart, from which the market consolidated in a broadening wedge before breaking out again.

    Spikes down below .50 lead to a pullback in most cases. What is very interesting is the topping action in 2011 is accompanied by a surge in put options activity, just before the market drops away.

    So Citi’s economic index is dropping away again, bonds have been cracked, which as Bill remarked should see money move into equities, one Fed member is cautious on the sustainability of this US recovery…

    While these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods. To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade as we got into the second and third quarters of those years.1 Moreover, the United States has experienced unusually mild weather over the past few months, with the number of heating degree days in January and February about 17 percent below the average of the preceding five years. While this reduces the amount that households and businesses must spend for heating, I suspect that it temporarily boosts economic activity overall. For example, the mild weather is certainly conducive to higher than normal levels of construction activity, and we did see a surge in hours worked in that sector over the past few months.

    http://www.newyorkfed.org/newsevents/speeches/2012

    … I wonder if HB&B will be selling in May. The complacency in market participants is apparent, so is the profit taking on mark up days like yesterday.

    I’m still waiting for my pullback.