Bill Cara’s Blog for Mar 21, 2013

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

Hello from the Harvard Faculty Club.

blog13_mar21.1.gif


Good morning, Geoff here.

Recent weeks have seen newsletter writers become extremely bullish while the public has jumped into mutual funds with ferver.

While retail bullishness is running rampant, we have seen signs of the “smart” commercial traders becoming very leery of the rally continuing much higher.

Those conditions should warrant concern for stock longs. However, as I mentioned the other day, the market seems to have a destiny with the all-time highs which are only a few percent higher.

In “normal” times, I would expect a test of those highs with a probable throw-over (marginal new highs) as the public throws more money into the market as they listen to talking heads rave about market returns. Then, the market would leave them holding the bag as the “smart” money are the ones selling them the stock and we witness a subsequent decline. I would expect something similar to the following example chart of a topping process:

ggimage02_032113.png

However, these are not “normal” times.

There are two market sayings that currently ring very true:

“The trend is your friend”.

“Don’t fight the Fed”.

Although we have noted cracks in the dike, there is not enough water breaking through to worry us about a complete breakdown in the market. Liquidity is running at $1 Trillion plus annually and continues to prop up the market, possibly driving it to much higher highs than the “throw-over” mentioned above.

The market continues to buy any dips (if there are any to buy) and until the trend turns from up to down, this will continue. This is why I think there is a good chance that we just witnessed a half-cycle low in the S&P 500 and new highs should be bought:

ggimage01_032113.png

Of course, we need to be watching those cracks in the dike in case they begin to get larger. Once the public has exhausted their buying there will be no one left to buy so we should expect a correction coming up, but not just yet.

In a nutshell: the market looks like it wants to test the highs, but risk is rising so caution is warranted. People with less risk tolerance that are not watching the tape all day should be thinking of reducing risk.

Traders should watch the following levels:

– If the market exceeds 1564, a test of the highs are likely.

– If the market breaks below 1538, remove risk.

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 2,454.09 6:44AM EDT Up 28.09 (1.16%) Components, Chart, More
^BFX BEL-20 2,614.50 Mar 20 Up 9.80 (0.38%) Components, Chart, More
^FCHI CAC 40 3,788.50 6:59AM EDT Down 41.06 (1.07%) Components, Chart, More
^GDAXI DAX 7,931.28 6:45AM EDT Down 70.69 (0.88%) Components, Chart, More
AEX.AS AEX General 351.65 6:45AM EDT Down 2.72 (0.77%) Components, Chart, More
^OSEAX OSE All Share 521.23 6:45AM EDT Down 0.86 (0.16%) Components, Chart, More
^OMXSPI Stockholm General 372.51 6:44AM EDT Down 2.50 (0.67%) Components, Chart, More
^SSMI Swiss Market 7,783.08 6:45AM EDT Down 64.62 (0.82%) Components, Chart, More
^FTSE FTSE 100 6,387.10 6:45AM EDT Down 45.60 (0.71%) Components, Chart, More
FPXAA.PR PX Index 988.52 6:59AM EDT Up 6.41 (0.65%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,459.03 8:00AM EDT 0.00 (0.00%) Chart, More
GD.AT Athex Composite Share Price Index 931.81 6:45AM EDT Up 1.08 (0.12%) 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

Cameron International Corp (CAM)

Mar21: 8:53 AM Cameron (CAM), which manufactured the blowout preventer that was connected to the Deepwater Horizon rig when it exploded in 2010, won’t face punitive damages from the disaster, a federal judge ruled yesterday. CAM had paid BP $250M to settle most of the legal claims arising from the spill, but the agreement didn’t cover fines, penalties or punitive damages.


Carnival (CCL)

Mar20: 11:49 AM As Carnival (CCL +1%) works on repairs on a pair of cruise liners which experienced dramatic engines problems mid-cruise, cancellations on future cruises are starting to pile up. The company says it will cancel 10 planned trips for Triumph and two European sojourns for Sunshine. Analysts continue to warn that the misadventures on the high seas may force the company to discount cruise prices in order to boost sales.


Caterpillar (CAT)

Mar20: 9:35 AM Caterpillar’s (CAT -1.5%) retail sales of machines -13% Y/Y in three months to February vs -12% in three months to January, with AsiaPacific -26% in Dec-Feb, North America -12%, EMEA -9%, Latin America +3%. Power Systems sales -7% in February period, as in January period; electric power -8%, industrial -25%, transport +15%, petroleum -8%.


Cisco Systems (CSCO)

Mar21: 8:17 AM Cisco (CSCO) is downgraded to Sell at FBR Capital, which says the company will find it difficult to offset weakening router and switching demand. Negative tech trends “could significantly blur the lines between routers, switches, AND servers.” FBR throws in a downgrade of Juniper Networks (JNPR) as well. Both are down more than 1% premarket.


Coca-Cola (KO)

Mar21: 8:06 AM Coca-Cola (KO) says it will cut 750 jobs in the U.S. The bulk of the positions being eliminated are in the Atlanta area.


25 McDonald’s (MCD)

Mar21: 8:33 AM McDonald’s (MCD) plans to make chicken McWraps a permanent part of its menu after offering the item in other parts of the world to success. The menu at McDonald’s continues to be shifted with a nod to the fresh/healthy mix at Panera and Chipotle as well as the increased menu pressure from Wendy’s and Burger King. National advertising for McWraps begins April 1.


Novartis (NVS)

Mar21: 8:59 AM Novartis’ (NVS -1.1%) approved Gilenya treatment cut brain volume loss in multiple sclerosis patients by a third vs a comparator and a placebo and in three large Phase III trials. Brain volume loss is an important indicator of disease progression; data also shows that Gilenya consistently reduces relapse rates across disease activity.


Oracle (ORCL)

Mar20: 5:19 PM Oracle (ORCL) guides on its FQ3 call (webcast) for -1% to +4% Y/Y revenue growth in FQ4, and EPS of $0.85-$0.91. The former is below a consensus for 5.2% growth, while the latter is in-line with an $0.88 consensus. New software license/cloud subscription growth is expected to be in a range of 1%-11%, and hardware product sales are expected to fall 13%-23%. Oracle blames its FQ3 miss in part on deal push-outs and sales execution issues related to new hires. Oracle insists its win rate remains strong, and that the macro situation is unchanged. Shares -7% AH. 4:24 PM More on Oracle: New software license/cloud subscription sales fell 2% Y/Y, down sharply from FQ2’s +17% and below guidance of +3%-13% (is cloud competition a factor?). Hardware product sales -23%, same as FQ2 and worse than guidance of flat to -10% (plunging UNIX server demand). License update/product support sales +7% (same as FQ2). Cloud software sales (boosted by acquisitions) grew “well over 100%.” $2.1B in buybacks propped up EPS. Opex -2% Y/Y. ORCL -6.6% AH. CC at 5PM ET (webcast), guidance should be provided.


Ross Stores (ROST)

Mar21: 8:40 AM More on Ross Stores’ (ROST) Q4: The retailer says comparable store sales rose 5% during the period and profit improved on higher merchandise gross margin. Store count up to 1,199. ROST +0.8% premarket. 8:35 AM Ross Stores (ROST): Q4 EPS of $1.07 in-line. Revenue of $2.76B (+15% Y/Y) beats by $0.01B.


Vad’s Catch of the Day


Kaimu’s Sound Money


Harp’s Roadmap


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kaimu
March 22, 2013 11:55 am

ALOHA!! US bank depositors insured under FDIC have been saved from 582 bank collapses since 2007. You may thank US taxpayers and the US Congress for that. The US Treasury still pays out those FDIC costs under the Deposit Insurance Fund(DIF) line item. Here is the full list … LINK: http://www.fdic.gov/bank/individual/failed/banklis… Anyone old enough to remember this list of bank deposit insurance programs? Can anyone tell me which one of these programs still exist? -FSLIC -SAIF -RTC -FHLB -BIF -DIF Now the DIF is still effective only you don’t see much of it on bank windows because it is a… Read more »

kaimu
March 22, 2013 10:46 am

ALOHA!! Move along folks … nothing to see … just billions,not trillions … nothing more! Move along! All the “usual suspects”!! Freddie Mac Sues 15 Banks over LIBOR Scheme Mar 20 2013, 9:45AM Freddie Mac has filed a complaint in federal court in Alexandria, Virginia alleging that 15 banks, including Bank of America, JP Morgan Chase, UBS, and Citigroup manipulated the London interbank offered rate (LIBOR). This manipulation, Freddie Mac alleges, caused it to suffer substantial losses. The complaint by Freddie Mac charges that the defendants, by using false and dishonest USD LIBOR submissions to “bolster their respective reputations, artificially… Read more »

Bill Cara
Admin
March 22, 2013 2:25 am

while standing at the piano in the Harvard Faculty Club.

Note the wintry day outside. Had my coat on but didn’t want to leave.

George
George
March 21, 2013 10:25 pm

http://www.bloomberg.com/quote/HAG:CN

No answer at their toll free number either:
1-866-641-5739

Bill Cara
Admin
March 21, 2013 10:08 pm

One of you asked:

“Bill, it looks like the Gartman ETF from Horizon isn’t trading any longer. TMX is indicating it’s delisted. Oh well.”

Did not know. I’ll ask.

Bill Cara
Admin
March 21, 2013 10:00 pm

I received this letter today and did watch the movie. Highly recommended.

——————————–

Bill,

Here are the links for movie that I mentioned.

Its about the early life of “Che Guevara” the Cuban Legend, who
happens to be a Doctor by education, a simple person with a steadfast
mind aimed at the goal and caring heart rebelling at injustice.

https://www.rottentomatoes.com/m/motorcycle_diaries/

http://www.imdb.com/title/tt0318462/

http://movies.netflix.com/WiMovie/The_Motorcycle_D

Ilya
Ilya
Reply to  Bill Cara
March 22, 2013 5:11 am

And who will ever forget Marlon Brando in the ‘Wild Bunch’ riding his cycle across India, meeting Mother Teresa and then dedicating his life to stamping out the caste system and leprosy!

Better yet, Brando as Emeliano Zapata, fighting against the bankster interests in Mexico in the name of the peasants who needed better zapatas!

Gotta love Hollywood.

Che was a romantic but, well, two bit prick.

Bull Hunter
Bull Hunter
March 21, 2013 9:52 pm

Jim discusses Fed Policy, Uncle Ben and Cyprus. BTW, he likes mining shares!

Earlier today on Bubble Vision (10 minute video):

http://tinyurl.com/cr8m23t

Grym
Grym
Reply to  Bull Hunter
March 22, 2013 12:39 pm

BH,

Thanks for the link. It is reassuring to listen to someone who says what many of us here believe about gold mining shares.

Perhaps it also helps to hear Grant decry the Fed actions and to admit that he, like we, doesn’t know “when” this will end, but the market will eventually win.

We all know the ending will be traumatic.

Grym

bigwad1
bigwad1
March 21, 2013 9:31 pm
Sync
Sync
March 21, 2013 9:08 pm

Still holding BBRY (actually BB.TO). I see no reason to sell until perhaps on the 28th.

I bought some of RGX at 1.19 today. Hard to resist at such a price. TA does not look amazing, but I still felt intuition to buy.

Napoleon001
Napoleon001
Reply to  Sync
March 21, 2013 10:02 pm

Regarding RGX, I’ve been buying the dips for about a year and a half with good results. I’m expecting that we might see even more volatility in the share price as we get closer to the release of the bankable feasibility study next QTR. Thanks to Bill for putting this one on my radar.

JimG
JimG
March 21, 2013 8:48 pm

via World Gold Council

Answer: Central Banks

http://i.imgur.com/OasY52D.jpg

Central Banks Seen Buying More Gold, Yen, Renminbi to Diversify

http://tinyurl.com/d3qkw9w

szoya
szoya
March 21, 2013 7:31 pm
szoya
szoya
March 21, 2013 6:26 pm
Napoleon001
Napoleon001
Reply to  szoya
March 21, 2013 7:05 pm

I’m still not convinced that the gold would be out of the reach of the government if/when government finances continue to deteriorate and they become increasingly desperate to maintain control, or at least some semblance of control. Do you think they might seize this low hanging fruit which is conveniently stored in one location and do something like issue debt in it’s place?

kaimu
Reply to  szoya
March 21, 2013 6:43 pm

ALOHA!!

In other words this is the Texas version of the PERTH MINT … only 105 years later!

bigwad1
bigwad1
March 21, 2013 5:59 pm

Morgan Housel from Fool.com, interviews former Chairman and CEO of AIG, Hank Greenberg. His new book, The AIG Story, chronicles the rise and growth of AIG, including the fall and bailout in 2008.

http://www.fool.com/investing/general/2013/03/14/a

JimG
JimG
March 21, 2013 2:26 pm

Who would have thought…

March 20 volume was 110,684,700

http://tinyurl.com/d2qqgaa

jimddavis
jimddavis
Reply to  JimG
March 21, 2013 3:02 pm

Yep, but down about 35% now. Those who play with fire sometimes get burned.

JimG
JimG
March 21, 2013 2:10 pm

February 2013
Employed 143,942 million
Employment population ratio 58.6%

http://www.bls.gov/news.release/empsit.t01.htm

February 2008
Employed 145,993 million
Employment population ratio 62.7%

http://www.bls.gov/news.release/archives/empsit_03

BOB 47
BOB 47
Reply to  JimG
March 21, 2013 3:51 pm

Jim G , That is interesting .

Grym
Grym
Reply to  BOB 47
March 21, 2013 6:05 pm
Ynot
Ynot
Reply to  Grym
March 21, 2013 6:43 pm

And lets not forget that these are ‘Seasonally Adjusted’ numbers. If you look at the non-adjusted numbers, the unemployment rate is 8.1% and the employment to population ratio is 58.1%. One has to believe that these numbers are collated by the bureau’s IT department, aren’t they? If I’m right, then you can say that these numbers originate from BLS IT DEPT. Say that quickly three times in a row…

davefairtex
davefairtex
Reply to  Ynot
March 21, 2013 7:25 pm

My favorite employment indicator is one I came up with myself – the FTE / POP ratio. The standard employment-population chart (EMRATIO) compares “civilian employment 16+” / “civilian population 16+” which leaves room for some funny business in stating who is actually employed. If you even work 1 hour, bang, you’re employed according to BLS. Likewise, I have a minor bone to pick with “civilian non-institutionalized population” too. Anyhow, the FTE-POP ratio shows that full time work went from a bit over 40% of the population in 2008 to 36.7% today. Let’s say roughly 10% of FTEs lost their jobs,… Read more »

Grym
Grym
Reply to  davefairtex
March 21, 2013 8:49 pm

Ynot, Dave,

One of the most used governmental financial tools is the rubber ruler along with the Etch-A-Sketch rule book.

When is an unemployed person countable?

When I was little, the adults would tell us to go upstairs and tell riddles. The criteria games remind me of a riddle which makes as much sense as these data definitions.

Q: “When is a door not a door?”
A: “When it’s ajar.”

Ynot
Ynot
Reply to  Grym
March 21, 2013 9:20 pm

Grym, Dave

“One of the most used governmental financial tools is the rubber ruler along with the Etch-A-Sketch rule book.”

ROFLMAO

“There are three kinds of lies: lies, damned lies, and statistics.”

Popularized by Mark Twain, who graciously attributed the phrase to British PM Benjamin Disraeli

Bull Hunter
Bull Hunter
March 21, 2013 1:38 pm

INTC – Intel estimates cut thru 2014 @ Citi. New PT = $23

ORCL – Oracle estimates cut thru 2014 @ Citi. PT = $38

WAG – Walgreen Upgraded to Outperform from Neutral @ Macquarie.

Bull Hunter
Bull Hunter
March 21, 2013 1:24 pm

I’d just like to add that sooner or later, economic reality and the Market are going to meet.

Economic bellweathers, Fed Ex and Caterpillar were trying to tell us something yesterday….and it wasn’t pleasant.

Thanks for your always insightful comments.

Regards,
BH

ea32da32
ea32da32
Reply to  Bull Hunter
March 21, 2013 6:33 pm

Hi Bull; agree about the economic reality and will add it’s really about the earnings… I was reading some comments by James Saft this morning when it hit me like a ton of bricks; these are not fines on the TBTF institutions, these are simply this governments cut of the action… Earl By James Saft of Reuters Lawmakers have expressed surprise that no corporate or personal criminal prosecutions emerged from the HSBC Holdings Plc case, in which the bank was fined $1.9 billion over money laundering, including money from Mexican and Colombian drug cartels. Justice Department officials also cited economic… Read more »

skyler
skyler
March 21, 2013 1:07 pm

great chart, illuminating distribution and breakdown, etc. thankyou Geoff.

Bull Hunter
Bull Hunter
March 21, 2013 12:44 pm

Good morning. 08:30 Jobless Claims (336,000) Full gubmint malarky here: http://tinyurl.com/49nuu 09:00 FHFA Housing Price Index 10:00 Existing Home Sales 10:00 Philadelphia Fed 10:00 Leading Indicators 10:30 Natural Gas Inventories —— CAT – Caterpillar Reiterated with a Neutral @ Bank of America. CHA – China Telecom Downgraded to Neutral from Overweight at JP Morgan. CSCO – Cisco Systems Downgraded to Underperform from Market Perform @ FBR. PT Lowered from $22 to $17 HD – Home Depot PT Lifted from $54 to $61 @ Canaccord. Hold JNPR – Juniper Networks Downgraded to Underperform from Market Perform @ FBR. PT Lowered from… Read more »

wpeyton
wpeyton
March 21, 2013 12:07 pm

You look good in that, Bill.

Bill Cara
Admin
Reply to  wpeyton
March 21, 2013 12:18 pm

wpeyton,

Thank you. News to come.

Sync
Sync
Reply to  Bill Cara
March 21, 2013 9:07 pm

You should come to Schulich sometime.

Bill Cara
Admin
Reply to  Sync
March 21, 2013 10:06 pm

Sync,

I have indeed personally met Seymour Schulich. Amazing human being.

http://en.wikipedia.org/wiki/Seymour_Schulich

And I have been to York University on many occasions, but not as a student. For that I did University of Toronto, Laurier (when it Waterloo Lutheran), and McMaster. Canadians are blessed to have such fine institutions, affordable to so many.

basketguy
basketguy
Reply to  Bill Cara
March 21, 2013 12:50 pm

Bill,

Glad to see you representing the 99% of us at Harvard. Hopefully you can talk some sense into the future Billionaire Graduates from Harvard…..

goldbug58
goldbug58
March 21, 2013 11:37 am

Just wanted to say thanks to all who responded on my GORO question yesterday.

davefairtex
davefairtex
March 21, 2013 11:05 am
  • 4 in Buy alert
  • 7 in Distribution Zone
  • 15 in Sell alert
  • Accumulation Zone (8%): Monthly 4, Weekly 12, Daily 10
    Distribution Zone (21%): Monthly 23, Weekly 26, Daily 16

    davefairtex
    davefairtex
    March 21, 2013 11:04 am
  • 8:30 AM ET Jobless Claims
  • 8:58 AM ET PMI Manufacturing Index Flash
  • 9:00 AM ET FHFA House Price Index
  • 9:45 AM ET Bloomberg Consumer Comfort Index
  • 10:00 AM ET Existing Home Sales
  • 10:00 AM ET Philadelphia Fed Survey
  • 10:00 AM ET Leading Indicators
  • 10:30 AM ET EIA Natural Gas Report
  • 1:00 PM ET 10-Yr TIPS Auction
  • 4:30 PM ET Fed Balance Sheet
  • 4:30 PM ET Money Supply