Bill Cara’s Blog for Mar 19, 2013

CTA Trading Desk Morning Report

[7:00am ET] Good morning, Geoff here.

From yesterday morning:

“The Cyprus situation is extremely interesting. According to just about every news agency, old Russian money is deposited in the Cyprus banks and the KGB will be out for revenge should their money be “taxed” alongside the Cypriots deposits. We shall see if this outright confiscation of private capital will come to pass without repercussions, but I have to ask; how can this possibly go over well with the public? If it happens in Cyprus, it can happen anywhere, and I do mean anywhere.

This event has the makings of a catalyst worthy of squeezing the massive gold short position taken by hedge funds. At the very least, the CEF and GDX long trades posted here in the last few weeks continue to work and may have marked the lows.”

The US markets ended up shrugging off the Cyprus situation, but clearly this is a big deal. It is clear that this was the first attempt at confiscation – they chose a small country to see what happened. The Russian KGB deposits were probably a miscalculation that has turned this event into a bigger mess than they anticipated.

What should worry everyone is a bank run that starts small but grows to large proportions. As deposits are removed, the fractional reserve banking system comes into question. Thankfully, we have not seen panic but public perception can turn on a dime.

Here in the United States, Ben Bernanke has repeatedly stated that they have an exit plan from QE programs, but I see that as difficult at best. Could taking money from the public be part of that plan? I don’t want to sound like a conspiracy nut but I wouldn’t put it past them. Leaders in Washington have been discussing retirement saving reform that may include mandatory US Treasury purchases by participants in said programs. The US can’t buy its own treasury issuance in perpetuity, so why not force the public to place a portion of their savings in Treasuries as part of the reform? I can see that happening and people accepting it because; “it isn’t as bad as having money being confiscated like they did in Cyprus”. We shall see how this all plays out, but Social Security reform is coming and don’t be surprised if you are buying bonds against your will.

The people of the world should be paying attention to the fate of the Cypriots. Not only because the same fate may befall them, but because confiscation is wrong! Those citizens do not deserve to pay for the sins of the bankers who made themselves rich, yet have not gone to jail from their fraud. Those bankers knew what they were doing when they tranched bad mortgage paper, slapped a high credit rating on it and sold it to the world as high quality securities. The bottom line is that the people of a small country such as Cyprus should not be paying for the banker’s Long Island estates.

As I mentioned yesterday, this is bullish for gold and if I was one of those hedge funds short the yellow metal, I would be worried about the size of the exit door when price begins to rise.

The S&P 500 is starting to show signs of weakening, but since the all-time highs are only a few percent higher, I expect a test of that area before a sustained decline can begin in earnest, if at all.

Here are the indicators that pointed to last October’s decline:

ggimage01_031813.png

You can see that cracks are starting to form in the S&P 500 as new highs were not confirmed in the majority of the indicators. The trend is UP but if you are risk averse, you might want to review your portfolio at this time. We continue to be long but very wary of the rally.

You can see that the public’s appetite for leveraged long positions spiked recently:

ggimage02_031813.gif

(chart courtesy of sentimentrader.com)

I guess they got tired of missing out on the rally.

Will the public be left holding the bag once again as they buy all-time highs?

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 2,455.67 6:44AM EDT Down 15.15 (0.61%) Components, Chart, More
^BFX BEL-20 2,621.00 4:02AM EDT Up 13.00 (0.50%) Components, Chart, More
^FCHI CAC 40 3,791.36 6:59AM EDT Down 34.11 (0.89%) Components, Chart, More
^GDAXI DAX 7,968.35 6:45AM EDT Down 42.35 (0.53%) Components, Chart, More
AEX.AS AEX General 350.90 6:45AM EDT Down 2.11 (0.60%) Components, Chart, More
^OSEAX OSE All Share 524.87 6:44AM EDT Up 0.25 (0.05%) Components, Chart, More
^OMXSPI Stockholm General 376.24 6:44AM EDT Down 1.29 (0.34%) Components, Chart, More
^SSMI Swiss Market 7,797.30 6:45AM EDT Down 33.07 (0.42%) Components, Chart, More
^FTSE FTSE 100 6,435.94 6:45AM EDT Down 21.98 (0.34%) Components, Chart, More
FPXAA.PR PX Index 987.42 7:00AM EDT Down 0.62 (0.06%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,462.82 7:45AM EDT 0.00 (0.00%) Chart, More
GD.AT Athex Composite Share Price Index 935.85 6:44AM EDT Down 24.57 (2.56%) 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 Seeking Alpha

Boeing (BA)

Mar19: 5:55 AM Boeing (BA) has won an order for 175 737-800 jets from Dublin-based Ryanair (RYAAY) in a deal worth $15.6B at list prices. The booking makes up for some of Boeing’s hurt for losing out on a $24B order from Indonesia’s Lion Air. 3:14 AM Boeing’s (BA) technical engineers have overwhelmingly approved a new four-year labor agreement, thereby averting a possible strike at a critical time for the company as it works to solve the 787’s battery problems. The authorization comes after the technical works rejected the same offer last month while Boeing’s engineers accepted it. The agreement will lower the firm’s pension costs, as it eliminates pensions for new recruits.


Coca-Cola (KO)

Mar18: 4:49 PM Coca-Cola (KO) looks to capture more ground between bottled-water and its sugary mainstay with the April 1 launch of “Fruitwater,” a line of fruit-flavored seltzer waters. The product will be housed in the company’s Glaceau unit which also produces fast-sellers Vitaminwater and Smartwater.


Juniper (JNPR)

Mar18: 7:02 PM Juniper (JNPR) has jumped on board the 100G optical bandwagon: a line card containing two 100G links has been introduced for Juniper’s PTX switches, which combine optical and data networking capabilities in the same box. Among the systems the line card works with is the new PTX3000, which delivers twice the density of the older PTX5000. In the wake of the announcement, Light Reading thinks Juniper, still best-known in the carrier realm for its routers, has a “very strong claim on being an optical company.”


McDonald’s (MCD)

Mar19: 7:17 AM McDonald’s (MCD) plans to shift its strategy in Russia to initiate franchising with Yum Brands, Burger King, and Subway all making a splash in the nation. Last year, the company saw revenue fall off in Russia.


Schwab (SCHW)

Mar18: 11:24 AM Schwab (SCHW) files for a lineup of “fundamental indexing” ETFs, with 5 of the offerings copycats of already-available mutual funds. Jokingly called by its creator Rob Arnott “active management in drag,” fundamental indexing looks at earnings, cash flow, dividends, and book value, and tends to favor smaller-cap stocks. The most popular current RAFI ETF is PowerShares’ (PRF) which has outperformed the SPY.


Starbucks (SBUX)

Mar19: 7:20 AM Starbucks (SBUX) buys its first coffee farm with the purchase of a 600-acre property in Costa Rica. The company plans to test new coffee varieties and do research at the location.


Vale (VALE)

Mar18: 5:05 PM Vale (VALE) has almost doubled its estimated cost of its potash project in Argentina to $11B, as exchange rate controls amid rampant inflation caused the Rio Colorado mine to become commercially unviable, CEO Murilo Ferreira says. Argentina’s government blasted Vale’s claims, but Barrick Gold (ABX), developing the Pascua-Lama mine, had to boost its cost estimate by ~70% within a matter of months.


Vad’s Catch of the Day


Kaimu’s Sound Money


Deron’s Daily ETF Analysis


Point and Figure on Canada


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



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loannetter
March 20, 2013 6:12 am
J D Wingert
J D Wingert
Reply to  loannetter
March 20, 2013 9:30 am

“Although the British and French started World War II by declaring war on Germany,..”

I seem to recall something about Poland being invaded just before the French/British declared war on Germany – or am I wrong? Also, isn’t that around the same time that a guy named Hitler was in power in Germany? You simply can’t believe that Germany is the wornged party can you? Are you really that ignorant?

Grym
Grym
Reply to  J D Wingert
March 20, 2013 12:46 pm
loannetter
Reply to  Grym
March 21, 2013 6:07 am

Those unaware of the lessons of the past (I count myself among them) will be doomed to relive the mistakes we could have avoided.

3D Wingnut – my post was a reprinted article I found relevant on our erosion of liberties, which exist at every level of governance and enterprise. No one asked me to vote on going to war with Iraq and Afghanistan and paying all their cronies to kill and torture in my name.

J D Wingert
J D Wingert
Reply to  loannetter
March 20, 2013 9:30 am

“Although the British and French started World War II by declaring war on Germany,..”

I seem to recall something about Poland being invaded just before the French/British declared war on Germany – or am I wrong? Also, isn’t that around the same time that a guy named Hitler was in power in Germany? You simply can’t believe that Germany is the wornged party can you? Are you really that ignorant?

J D Wingert
J D Wingert
Reply to  loannetter
March 20, 2013 9:30 am

“Although the British and French started World War II by declaring war on Germany,..”

I seem to recall something about Poland being invaded just before the French/British declared war on Germany – or am I wrong? Also, isn’t that around the same time that a guy named Hitler was in power in Germany? You simply can’t believe that Germany is the wornged party can you? Are you really that ignorant?

kaimu
Reply to  loannetter
March 20, 2013 7:05 am
baz22
baz22
March 20, 2013 1:58 am

” will the public be left holding the bag…… “. Well, as Fleck wrote today, ‘ Never show up late to the end of the party ‘…!!!

Napoleon001
Napoleon001
March 20, 2013 12:47 am

GIX.TO announced results of positive prefeasibility study today…so far greeted by a yawn…tough being a junior these days!

http://finance.yahoo.com/news/geologix-exploration

Vadym Graifer
March 19, 2013 8:51 pm

(CY) Cyprus and ECB said to be working on a capital control plan as a contingency plan against bank runs ahead of bank reopening (previously expected Thurs); Banks may stay closed until Tues 26th – financial press

– Eurogroup to issue a statement later tonight.
– To introduce border checks for cash over certain amount.
– ECB may fly euro notes from other countries to feed Cyprus ATMs.
– Contingency plan said to include daily limits on transactions.
– Control plans said to be in place for weeks.

davefairtex
davefairtex
Reply to  Vadym Graifer
March 20, 2013 5:32 am

I think its safe to say that the whole “savings levy” concept has gone over poorly. Its one thing for this to happen in some banana republic – its almost expected – but quite another for it to happen in The Eurozone. It make it all too easy for other peripheral nation eurozone citizens to envision this happening to them. “Will Brussels one day order my government to turn off my ATM and then steal my money too?” Each day of “controls” reduces the common man’s faith in the banking system. I’d love to be tracking daily cash withdrawls across… Read more »

Ynot
Ynot
Reply to  Vadym Graifer
March 19, 2013 9:53 pm

Here’s some more lunacy, Vad.

‘Helicopter’ Ben? How about the UK’s Chancellor of the Exchequer ‘Hercules’ George Osborne, of Her Majesty’s Treasury, to the rescue!

http://www.zerohedge.com/news/2013-03-19/uk-sends-

Vadym Graifer
March 19, 2013 6:20 pm

(CY) Cyprus bank levy bill rejected by parliament as expected – financial press

Vadym Graifer
Reply to  Vadym Graifer
March 19, 2013 7:16 pm

ECB caved when their bluff was called:

15:14(CY) ECB to provide liquidity to Cyprus within existing rules

pjcowboy
pjcowboy
March 19, 2013 6:12 pm

So I mainly read the blog and comments daily but still do not truly understand all of the technical signals but would someone take a look at AMT and tell me if I am correct in saying that it is over sold and based on the RSI would be at a good range to add to existing positions? Or has it formed a top and on its way back some more. Their is nothing fundamentally that has changed in the last few weeks though it has had a huge run. Thanks in advance for your insightful guidance.

Vadym Graifer
March 19, 2013 5:33 pm

… of a theory advanced couple weeks ago, that PMs are seen as hedge against EU collapse: when troubles are brewing again over there, they moved up together with USD.

http://caracommunity.com/content/bill-caras-blog-m

So far, confirmed beautifully.

Ynot
Ynot
March 19, 2013 4:48 pm

The US dollar, Gold and US T-bonds are all rallying in tandem while the major stock indices go the other way, and the VIX has rallied up through its 50 dma. Certainly smells like risk off mode to me.

Vadym Graifer
March 19, 2013 4:12 pm

Short into bounce near upper line of the descending channel. Nice and easy 1:3

http://goo.gl/BiCfk

bsi87
bsi87
March 19, 2013 3:03 pm

IMO the American people have had their net worth reduced thru inflation. And I don’t mean the official rate. All you have to do is look at the grocery.

Grym
Grym
Reply to  bsi87
March 19, 2013 7:04 pm

bsi87,

Grocery is definitely up, but can be effected by other factors such as weather and climate changes. What I have noticed is my new water heater cost $945 and the 8-year-old one it replaced was only $600.

It is things we can’t put off which have pricing power. My barber and dentist are experiencing delays in haircuts checkups. My taxes are on a steady uptrend_including real estate tax on a far lower pricing structure. they simply changed the assessment value yardstick.

bsi87
bsi87
Reply to  Grym
March 20, 2013 1:21 am

I suggest a grocery cart for valid comparison. There are too many govt subsidies/price support programs to accurately gauge individual items like milk and sugar. so much for the Federal Reserve’s mandates to maintain price stability and full employment

Grym
Grym
Reply to  bsi87
March 20, 2013 12:26 pm
BillySundance
BillySundance
Reply to  Grym
March 19, 2013 7:32 pm

Electric water heaters on Home Depot’s site are priced about the same as when I bought one 3-4 years ago – got a 50 gallon GE tank for about $300 plus $200-300 more to install and dispose of the old one. NatGas ones are about $150 more. My understanding is that the difference in “years” on the water is just the warranty that comes with it. I go for the lowest one since chances are good I won’t be collecting on the warranty on a 7-year old water heater. I’ve had great luck using the electric water heater and running… Read more »

baz22
baz22
Reply to  BillySundance
March 20, 2013 1:12 am

Hi Billy…. In the Spring of 2007, a 25 lb. box of ‘ deck screws ‘cost $ 65.00 at Home Depot…… Spring, 2013, same Home Depot store, same manager… 25 lb. box of ‘ deck screws ‘…. $ 95.00.

baz22
baz22
Reply to  baz22
March 20, 2013 1:25 am

Also ( same store, same years )… 2×4 x 96 in. stud > $ 2.10 in 2007… $ 2.95 now, and the lumber is crappy white pine…. use to be decent yellow pine..

Grym
Grym
Reply to  BillySundance
March 19, 2013 8:18 pm
Bull Hunter
Bull Hunter
Reply to  bsi87
March 19, 2013 3:16 pm

Rick Santelli just made the point that Americans have had their savings confiscated thru Fed policy keeping interest rates artificially low. Sound anything like Cyprus?

davefairtex
davefairtex
Reply to  Bull Hunter
March 19, 2013 3:28 pm

No – Cyprus and Fed activity are nothing alike, as far as impact on the common person goes. Confiscation through inflation is very difficult for the common person to quantify, while confiscation of INSURED DEPOSITS in a FAILED BANK using a SAVINGS TAX is dreadfully easy to quantify. “My account dropped by 10,000 euros over the weekend!!!” Furthermore, the blame is easily assessed, and so the anger can be directed at the source of the problem. Given that a promise was made – “your savings are safe up to 100,000 euros” – and its now being explicitly broken, well I… Read more »

Grym
Grym
March 19, 2013 2:24 pm

This Is Housing Bubble 2.0: David Stockman

“Serial bubbles is what the Fed is doing.”

http://finance.yahoo.com/blogs/daily-ticker/housin

Bull Hunter
Bull Hunter
Reply to  Grym
March 19, 2013 2:35 pm

Thanks, Grym.

This video only adds to my suspicion that the “economic recovery” is just a bunch of manipulated BS.

I’m a small businessman out in this economy on a daily basis and see no evidence of any “economic recovery”. I believe what I see and experience rather than the stats that the gubmint cooks up.

Regards,
BH

Grym
Grym
Reply to  Bull Hunter
March 19, 2013 6:57 pm

Bull Hunter, Interesting to hear from someone who can report from the front lines of the US economy. What sort of business are you in? Do you work with consumers, businesses, other ? I gradually came to realize that much is distortion by not supplying the whole picture and far less obvious than outright lies. For example, I just read that the recent jobs report of 236,000 new jobs is based on only 145,000 companies surveyed. Alos, the actual number will not be available for a year. http://trimtabs.com/blog/2013/03/12/u-s-economy-no… My local view of housing is bleak and comes from my neighbor… Read more »

Bull Hunter
Bull Hunter
March 19, 2013 2:04 pm

ORCL – PT Lifted from $37 to $39 @ RBC. Outperform rating.

JimG
JimG
March 19, 2013 1:21 pm

Takes time to wrap your head around this absurd situation…there is a glut of ethanol…refiners are required to use the ethanol but there is only so much that can be blended in a gallon of gasoline…hence, they are forced to buy ethanol credits from other refiners…high demand for ethanol credits…higher prices The NYT tries to explain… A glut of ethanol in the gasoline supply is threatening to push up prices at the pump and may have exacerbated the growing cost gap between regular gasoline and premium, some oil experts say. Refiners have been trading so-called ethanol credits furiously in an… Read more »

johnuk
johnuk
March 19, 2013 12:38 pm
Bull Hunter
Bull Hunter
March 19, 2013 1:10 pm

Good morning. 08:30 Housing Starts/Building Permits (917K/946K) —— AAPL – Topeka Reiterates Buy Rating on Apple and maintains $888 PT. AMZN – Amazon Initiated with a Market Perform at JMP Securities. BHP – BHP Downgraded to Neutral from Buy at Goldman Sachs. CCL – Upgraded to Add @ Numis Securities. PT Lowered from $48.34 to $41.54 GOOG – Google Initiated with an Outperform at JMP Securities. Target = $955 JNPR – Juniper Downgraded to Sell from Neutral at Goldman Sachs. PT Lowered from $20 to $17. TEF – Upgraded to Overweight from Equal Weight @ Morgan Stanley. —— Miners: AUY… Read more »

Ynot
Ynot
March 19, 2013 12:19 pm

If copper is the bellwether for global economic growth, then this may not end well…

http://www.investing.com/analysis/copper-breaking-

davefairtex
davefairtex
March 19, 2013 11:05 am
  • 2 in Accumulation Zone
  • 4 in Buy alert
  • 3 in Distribution Zone
  • 19 in Sell alert
  • Accumulation Zone (9%): Monthly 6, Weekly 10, Daily 12
    Distribution Zone (17%): Monthly 24, Weekly 20, Daily 7

    davefairtex
    davefairtex
    March 19, 2013 11:04 am
  • [No set time] FOMC Meeting Begins
  • 7:45 AM ET ICSC-Goldman Store Sales
  • 8:30 AM ET Housing Starts
  • 8:55 AM ET Redbook
  • 11:30 AM ET 4-Week Bill Auction