Bill Cara’s Blog for Oct 19, 2011
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
Top of the morning to you. A bit of green. And some good news from the maker of Guinness. Volume growth as well as pricing power!
Have a good day.
(7:15am ET) Good morning, Geoff here.
Yesterday, following an initial sell off based on bad economic news from China, news that France and Germany had agreed to increase the bank bail out fund pulled the market higher. The rally probably sucked a number of traders into the long side right at the top of the trading range. We shall see if that higher risk trade works out for them.
As long as the recent lows in the dollar hold, getting long equities has heightened risk at these levels, imo. The market may move higher, into new highs for the S&P 500, but the higher probability trade is to sell into this strength. Traders can always buy a future breakout, missing a few percent of the rally. Of course, that trade is made much easier if the trader bought the weakness and fear found at the October lows as we did.
There are a number of indicators pointing towards overbought conditions. Have you ever used the McClellan oscillator? It is definitely overbought –
In other news:
Moody’s downgrades Spain citing continuing issues with the Euroland debt.
Shocker – Apple released earnings after the close, missing on both earnings and revenue.
Cara 100 stock Intel shipped more chips than ever before and enjoyed record earnings as a result of high laptop sales. Demand for chips in Brazil and China was high – maybe we need to look a little deeper into those two countries right now.
Abbot Labs shares have jumped on slightly better than expected earnings and the news that the company will split into two publicly traded companies. One will focus on pharma and biotech, the other on medical devices, diagnostics and generic medicines.
Morgan Stanley (not in the Cara 100) posted a $2.15 billion profit as core revenue in trading, banking and wealth management operations fell. The stock broke out of a nice technical pattern yesterday but we are not buying it – the stock or the number. The profit was not due to expanding business activity, it was helped by a large accounting gain. It is difficult to get on board these financials when so much of their business is accounting trickery. Until the banks value all of their holdings on a mark to market basis, this will continue. We applaud their accounting firm…MS, not so much.
We are at a significant juncture right now. It is time for the bulls to put up or shut up. Focus on earnings and news out of Europe. Or, you can simply focus on the US Dollar which may be the only thing we need to watch. We have a long candidate list of about 15 stocks with strong earning estimates that we may be purchasing should the market find continued strength.
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|
||73.10 (3.61%)||Components, Chart, More|
||18.62 (0.87%)||Components, Chart, More|
||37.44 (1.19%)||Components, Chart, More|
||81.82 (1.39%)||Components, Chart, More|
||4.88 (1.63%)||Components, Chart, More|
|^OSEAX||OSE All Share||422.59
||2.04 (0.49%)||Components, Chart, More|
||0.64 (0.22%)||Components, Chart, More|
||37.83 (0.67%)||Components, Chart, More|
||60.67 (1.12%)||Components, Chart, More|
||12.90 (1.39%)||Chart, More|
||7.32 (0.83%)||Components, Chart, More|
||3.49 (0.24%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||751.60
||13.52 (1.83%)||Chart, More|
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
Jeff Borsato’s Hidden Truth
Look out gang, markets moved one way yesterday on news that something happened after moving another way amidst something global and largely attributed to large groups such as “traders”, “economists” or “speculators”.
The big indexes are at support levels but could fall below them, or rise above them, so plan your trade and trade your plan. The dollar, the SPY, the DJIU and gold are all at key levels that could mean something or not depending on the outcome of a bill by congress that is to be discussed for the next 6 months and will appear in and out of the news whenever justification is needed for a move in the market.
People are awaiting what the speechwriters for the President have decided he will say in order to calm or excite markets depending on how editors demand economists cover the story in newspapers that will feature clips of bankers saying things like:
we foresee a possible scenario unfolding in which a contracting of relative growth year over year takes place towards the end of the quarter, offset by gains in sectors that lagged in Q1 due to concerns over a decline in growth and real GDP fluctuations that loomed large over businesses
News reports will go on to present the opposite point of view to show how balanced they are in the hopes that they will convince readers they will be informed by reading their publication:
In spite of the strong warning, such and such economist felt there is reason for optimism in the not too distant future, just far enough in time to revise their forecast if it proves wrong, but close enough to take credit for being able to predict the future if things go even remotely close to their prediction. As quoted from a large respected banker who’s title is drawn out to give the air of respectability such as: Senior Allocation Strategist and Econimist with The Bank of Such and Such’s Global Wealth Management Trust and Research Division.
All in all its shaping up to be a great session ahead, one which will test the mettle of bulls, bears, birds and bees….
Good luck, its a crazy market out there…..