Bill Cara’s Blog for Mar 22, 2013

CTA Trading Desk Morning Report

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

The Cyprus situation continues to cause consternation among traders, but the IMF gave Cyprus until Monday to decide if they will meet their demands, so hopefully transparency will improve. The fly on the wall is going profit coming out of this. Unfortunately, I don’t know that fly but I expect volatility to increase due to rumors and news.

The most likely outcome of this situation is increased liquidity, imo.

We need to watch how the last 45 minutes trades today. Is there a bid, or are traders unwilling to take positions home over the weekend? Unless we hear some positive news/rumors that places a bid under risk assets, I vote for the latter because traders will take gains with uncertainty in the air.

As I said yesterday, traders with a lower risk profile should be lowering portfolio exposure. Professional traders have the trading range to watch, but if you are not at your workstation all day, taking gains is a good idea until Monday.

Gold is slightly lower this morning as it struggles to move above the $1620 level. An upside break of that level should cause short covering and a profitable pop for the longs (FD: we are long gold and gold shares).

Numerous shorts are exiting their mining stock positions which kicked in a buy signal in the Bullish Percent Index:

ggimage01_032213.png

You can see that it has finally up-ticked from extremely oversold levels.

The GDX trade study is all in now with the final third triggered yesterday:

ggimage02_032213.png

I have noted two levels that I would consider placing stops. The lowest level would probably have a worst case loss of six or seven percent. We are not long GDX, although we are long CEF and individual gold mining stocks, so in essence, we are long this trade.

Have a great trading day and weekend!


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 2,431.27 6:44AM EDT Up 21.27 (0.88%) Components, Chart, More
^BFX BEL-20 2,615.40 Mar 21 Up 0.90 (0.03%) Components, Chart, More
^FCHI CAC 40 3,763.92 6:59AM EDT Down 10.93 (0.29%) Components, Chart, More
^GDAXI DAX 7,923.20 6:45AM EDT Down 9.31 (0.12%) Components, Chart, More
AEX.AS AEX General 349.60 6:45AM EDT Down 2.81 (0.80%) Components, Chart, More
^OSEAX OSE All Share 521.40 6:44AM EDT Up 0.56 (0.11%) Components, Chart, More
^OMXSPI Stockholm General 370.05 6:59AM EDT Down 3.61 (0.97%) Components, Chart, More
^SSMI Swiss Market 7,725.67 6:44AM EDT Down 36.63 (0.47%) Components, Chart, More
^FTSE FTSE 100 6,387.73 6:45AM EDT Down 0.82 (0.01%) Components, Chart, More
FPXAA.PR PX Index 981.26 6:59AM EDT Down 1.84 (0.19%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,459.22 7:45AM EDT 0.00 (0.00%) Chart, More
GD.AT Athex Composite Share Price Index 915.15 6:43AM EDT Down 9.71 (1.05%) 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

Apple (AAPL)

Mar21: 2:44 PM Production of a cheaper iPhone will likely start in June, says Jefferies’ Peter Misek in an afternoon note that’s helping Apple (AAPL +0.7%) outperform. Foxconn and Jabil (JBL) are expected to provide plastic cases. Misek and other sell-side analysts have already predicted a less costly iPhone will arrive this year, though some claim its case will use a composite rather than plastic. Meanwhile, Apple received top marks in J.D. Power’s U.S. smartphone satisfaction study for the 9th straight time – its score of 855 is slightly above a prior 849, and well above an average of 796.


Cnooc’s (CEO)

Mar22: 8:06 AM Cnooc (CEO) says its 2012 profit fell 9.3% due to higher costs for exploration and operating in Canada’s oil sands. Revenue rose 2.8% to 247.6B yuan from 240.9B on higher oil and gas sales. Cnooc’s largest domestic offshore field, Penglai 19-3, was shut because of a spill, hindering production growth. Says it will increase expense on drilling new wells and exploring for resources by 52% Y/Y.


Dow Chemical (DOW)

Mar21: 5:13 PM Dow Chemical’s (DOW) effort to limit U.S. natural gas exports would effectively create a price cap for the commodity, an Exxon (XOM) executive says. Dow begs to differ, of course, but it has concerns about “a tipping point at which LNG exports turn from a net positive for this nation to a net negative… Once you hit that point, it’s too late to go back.”


Intel (INTC)

Mar21: 8:42 PM Though Intel’s (INTC) superb credit rating has allowed it to issue dirt-cheap debt to finance buybacks, “leverage works best when a company is growing,” cautions Bernstein’s Stacy Rasgon. The chip giant’s aggressive cash-return strategy has already led net cash to fall below $5B, its lowest level since ’95. Now, with weak PC demand pressuring sales, capex about to surge, and a 4.2% dividend soaking up over half of free cash flow, Intel probably has little choice but to either slow its buyback activity or further weaken its net cash balance.


Novartis (NVS)

Mar21: 12:34 PM Novartis (NVS -0.9%) says that new data presented at the 65th annual meeting of the American Academy of Neurology analysis shows Gilenya, a treatment for relapsing forms of multiple sclerosis, significantly reduced rate of brain volume loss across three large Phase III studies


Silver Wheaton (SLW)

Mar22: 6:15 AM Silver Wheaton Corp. (SLW) declares $0.14/share quarterly dividend. Forward yield 1.80%. For shareholders of record Apr. 02. Payable Apr. 12. Ex-div date Mar. 28. 6:03 AM Silver Wheaton (SLW): Q4 EPS of $0.50 beats by $0.01. Revenue of $287.2M beats by $27.8M.


Toyota Motors (TM)

Mar22: 8:40 AM Another electric vehicle bombshell: A new report from McKinsey indicates a third of all electric vehicle owners in Japan say they won’t buy another with the nation’s infrastructure not yet ready to support a network of charging stations. Sluggish sales and the looming threat of federal subsidies getting pulled away seems to have more major automakers subtly shifting their focus toward hybrid production instead of pure EVs.


Vad’s Catch of the Day


Kaimu’s Sound Money


Harp’s Roadmap



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kaimu
March 25, 2013 10:53 am
davefairtex
davefairtex
March 25, 2013 8:46 am

http://www.reuters.com//article/2013/03/25/us-cypr… Diplomats said the president [of Cyprus] had fought hard to preserve the country’s business model as an offshore financial centre drawing huge sums from wealthy Russians and Britons but had lost. The tottering banks held 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros – enormous sums for an island of 1.1 million people that could never sustain such a big financial system on its own. ——- Translation: The President of Cyprus labored long and hard to throw the ordinary depositors at every bank in Cyprus under the bus so there would be… Read more »

kaimu
Reply to  davefairtex
March 25, 2013 9:06 am

ALOHA!! including 38 billion in accounts of more than 100,000 euros Do we really know how much is Russian and whether it is all mob money? Or is Cyprus the Swiss equivalent for Russians? That is way more than $38BIL worth of large depositors that will never return to Cyprus or their banks. I am guessing a lot of investment capital will be leaving Cyprus never to return. Lets hope the Cyprus government has well funded EBT and long term unemployment benefits. Plus lets hope the ECB does not need “cheap” Russian oil and gas next winter. There will be… Read more »

davefairtex
davefairtex
Reply to  kaimu
March 25, 2013 9:53 am

Kaimu – “There will be some sort of reparations extracted one way or another.”

I think Cyprus had no way out. Once Greece defaulted, unless the eurozone (or some other sucker) came up with the money to repair the massive holes in the balance sheet, those two Cyprus banks were just dead men walking.

Problem: too many Greek bonds.

kaimu
March 25, 2013 8:18 am
davefairtex
davefairtex
March 25, 2013 4:20 am

Seems to me like the right thing is happening. Rather than making every saver in Cyprus take losses regardless of which bank they were in, the insured depositors are (gasp) being protected from loss, and the rest (including bondholders, uninsured depositors, and shareholders) are taking losses that would seem entirely to depend on the losses at the bank where they had deposits. http://www.reuters.com//article/2013/03/25/us-euro… 1. Laiki will be resolved immediately – with full contribution of equity shareholders, bond holders and uninsured depositors – based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework. 2.… Read more »

kaimu
Reply to  davefairtex
March 25, 2013 8:47 am

ALOHA!! Seems to me like the right thing is happening. Rather than making every saver in Cyprus take losses regardless of which bank they were in, the insured depositors are (gasp) being protected from loss, and the rest (including bondholders, uninsured depositors, and shareholders) are taking losses that would seem entirely to depend on the losses at the bank where they had deposits. You have made the classic mistake that the ECB and the US FED bankers were hoping for! You have lumped “depositors” in with “shareholders” and “bondholders”, the speculators. When I deposit funds into a bank I never… Read more »

davefairtex
davefairtex
Reply to  kaimu
March 25, 2013 9:01 am

Kaimu – “When I deposit funds into a bank I never sign or agree to a piece of paper saying I am a shareholder or a bondholder. I assume I am putting capital in the bank for “safe keeping” for a future date. I assume it is not Las Vegas.” Your assumptions, hopes and dreams aside, once you deposit funds in a bank, you instantly become a creditor to that bank. Bank has title over “your deposits.” Where you are in the list of creditors depends on the laws of that nation. In the US, we have “depositor preference” which… Read more »

kaimu
Reply to  davefairtex
March 25, 2013 10:12 am
Vadym Graifer
March 25, 2013 2:24 am

Pyrrhic victory.

Bill Cara
Admin
March 24, 2013 11:46 pm

FT reports:
Humble blogs escape press controls
Low-profile blogs and not-for-profit publishers are set to be exempted from Britain’s new press controls as the three main political parties seek to iron out what some have described as draconian curbs on freedom of speech.

bsi87
bsi87
March 24, 2013 7:46 pm

what the Russians will do when the Cypriots try to apply a haircut?

Napoleon001
Napoleon001
Reply to  bsi87
March 24, 2013 10:55 pm

I wouldn’t want to find out. They have shown that they can be quite creative in the past…I’m sure this is just a coincidence on this historic weekend…but were it not a coincidence it would have made for a timely reminder that they can reach out and touch someone.

http://www.reuters.com/article/2013/03/24/us-brita

Vadym Graifer
Reply to  Napoleon001
March 25, 2013 5:40 am

– (EU) Former Kremlin advisor Nekrassov: Russia may retaliate against EU if it imposes a 20% levy on Cyprus account holdings; May potentially consider freezing or taxing assets of German businesses operating in Russia – financial press

Vadym Graifer
March 24, 2013 7:34 pm

For those who follow our over-the-weekend summaries, we have put them together in a single weekly e-mail. It’s a sure way not to miss any of them that can get lost in the shuffle of the blog posts. You can see a sample and sign up for it at http://www.realitytrader.com/sundaylinks.html.

bsi87
bsi87
March 24, 2013 6:39 pm

that kills u, it’s what u don’t see

bsi87
bsi87
Reply to  bsi87
March 25, 2013 1:20 am
kaimu
Reply to  bsi87
March 25, 2013 2:35 am
Bill Cara
Admin
March 24, 2013 5:04 pm

FYI, on Monday the main server may be down from 6-10 PM Eastern (or some subset thereof). Sounds like the facility has to move some servers around, and that is the time they have scheduled it to be done.

If there’s any more news, I’ll let you know, but for right now just assume any outage during that window is normal.

Bill Cara
Admin
March 24, 2013 4:41 pm

… is up.

Juniorgoldminerseeker
Juniorgoldminerseeker
March 24, 2013 3:32 pm

I found these two articles interesting in presenting the opposite cases for the dollar, though with a bias to gold in both instances. Clearly our “normal expectation” would be much weaker gold if the dollar continued to strengthen but perhaps if driven by definite weakness in other currencies rather than the positives in the dollar we might see a different result.

For a stronger dollar, breaking the 12 year downtrend
http://www.321gold.com/editorials/groenewegen/groe

For a resumption of the downtrend in the dollar
http://goldscents.blogspot.co.uk/2013/03/the-dolla

BOB 47
BOB 47
March 24, 2013 1:59 pm

The bank is Bank United , but the heart of it all is John Kanas . Mr. Kanas joined his last bank at 26 as a teller after quitting as a teacher . North Fork bank in eastern L . I . He went on to become chairman . When in charge he expanded across Long Island into N . Y . City and up into Connecticut . Building branches and buying other banks . At the end North Fork had 350 branches , this was sold to Capital One for for 13.2 billion in 2006 . After separating from… Read more »

BOB 47
BOB 47
March 24, 2013 12:33 pm

Trade of the Trick or Trick or Treat ! How subtle things like sunny days or letters ” C ” OR ” K ” might inflence a trade ! http://tinyurl.com/czqmpt3

Napoleon001
Napoleon001
Reply to  BOB 47
March 24, 2013 3:18 pm
Vadym Graifer
March 24, 2013 12:21 am

… and from the Land of Lunacy

http://goo.gl/PjJ2W

kaimu
March 23, 2013 11:47 pm

ALOHA!! I have a bank savings account with Bank of Hawaii. Look at these basic savings rate options I have to chose from … MMA 0.49% 0.49% $10K MMA 0.51% 0.51% MMA jumbo 0.62% 0.63% Interest checking 0.51% 0.52% This is the “Greenake Put”! It has “put” many a fixed income retiree into the poor house eating cat food! You could call it “fixed deflation”! Just like London Gold was fixed, the FFR still is! One of the many Federal Reserve Act monetary powers bestowed on private bankers. If the Federal Reserve allowed the markets to determine US interest rates… Read more »

goldbug58
goldbug58
Reply to  kaimu
March 24, 2013 10:43 am

Yes, it sucks. Money Market funds are just as horrible, on a $100K balance the interest worked out to about $1.04 per month. That might get me a stick of gum. People tell me I am insane to keep money in LT bond funds (and maybe I am), but I see no sign of interest rates increasing in a ballistic way (yet). Since I’m ahead on the share prices I hold on to my original returns of 3.4% (govt) and 4.3% (corporate). If I have to sell the shares in a hurry I simply log in and point and click… Read more »

Grym
Grym
Reply to  goldbug58
March 24, 2013 12:49 pm
kaimu
March 23, 2013 8:33 pm

ALOHA!! To boldly go where no other federal employee has gone! Here we see IRS employees engaged in a video production parody of the famous TV show STAR TREK. In their version(v1040) the Capt is black and Uhura is white as they visit the planet “Notax”! This video production cost $60,000USD. It would have cost more if they had to sign up Brad Pitt to play Kirk, but I am sure Obama could have played Spock for a lot less! It looks like they are using a IRS TAX CODE book as the Starship Enterprise. While video production was $60,000… Read more »

c3wands
c3wands
March 23, 2013 5:54 pm

I have noted fewer posters of late.

This sector has taken its toll on us in the past year or so.

Many years ago in Japan the brokers had ambulance stocks to
rescue investors.

I hope we can find some soon or I’ll be with Cheapy.

kaimu
Reply to  c3wands
March 23, 2013 10:50 pm

ALOHA!! This sector has taken its toll on us in the past year or so. Unless you bought at the top and never sold or had no stops then this sector has taken its toll. I practice selling at highs to at the very least recoup my basis. There has definitely been a disconnect between actual assets and share prices in this sector. Some juniors have cash on hand to finance their drill activities for many years yet they are selling at multiples whereby you would think they were filing BK tomorrow. Certainly this sector is nowhere beat up fundamentally… Read more »

Vadym Graifer
Reply to  c3wands
March 23, 2013 6:30 pm

“This sector has taken its toll on us in the past year or so.” If this is indeed what happened, I can’t help but notice that this occurred while the market overall displayed historically strong rally. While the tape was screaming “buy” for the most sectors and whispering “meh” for PMs and miners, only going with one’s opinion while ignoring price action can explain the underperformance during such rally. Detached observer would indeed have noticed this tendency from numerous posts everywhere you look, shaped along the lines “everything is falling apart any day now, so short general equities and/or buy… Read more »

Grym
Grym
Reply to  c3wands
March 23, 2013 6:30 pm

c3wands, Sometimes doing nothing is the best approach. I guess it depends on whether you are an active trader or more comfortable with waiting for a genuine LT trend. (I’m the later.) My view is that both equities and bonds are in bubble territory. Bernanke’s free candy is pumping and distorting both, IMO. Even gold may be threatened if confiscation is enacted once again. Kaimu’s C-Word* is at low ebb in so many areas. (*Condidence) Several are now predicting sooner, rather than later big trouble. From Paul Farrell http://www.marketwatch.com/story/new-critical-warn… New Critical Warning as 2013 shocker looms Commentary: We are at… Read more »

Vadym Graifer
Reply to  Grym
March 23, 2013 6:36 pm

“Several are now predicting sooner, rather than later big trouble.” Here is the problem: more than “several” did just that for the last 3-4 years. Those who listened to them and acted on their predictions got ruined. Remember multiple “I am shorting this market right here right now” we saw in 2009… 2010… 2011…? At the same time, what have we heard from Bill and Geoff all this time? They acknowledged that things are broken but they also forecast Fed’s measures and they observed price action; thus they told us many time to ignore doom-and-gloomers and go long. Until and… Read more »

kaimu
March 23, 2013 3:34 pm

ALOHA!! A week or two ago I commented on Prof Steve Keen’s Kickstarter campaign for a Minsky based economic model. The intended goal was to raise $50,000. This crowd funding tool raised over $78,000, more than meeting his goal. MINSKY LINK: http://www.kickstarter.com/projects/2123355930/min… I like guys like this who are not afraid to step outside of the “Harvard Box”, question authority and create a brave new world. Aloha! Accounting for the disorder of all things human. “Failure to acknowledge the motion of pieces means that society must be at all times in the highest degree of disorder.” Adam Smith (1759). Government… Read more »

goldbug58
goldbug58
March 23, 2013 6:32 am

A few shipping stocks have had breakouts lately: DSX, EGLE, NAT. All are now above their respective 200-day MA on what looks like decent volume. This is a difficult industry group to predict recovery for, even for the shippers themselves, although Stacy Margaronis of Diana Shipping does a fairly honest job of explaining things (at least from my perspective) in their 14 March Earnings Call: http://seekingalpha.com/article/1274661-diana-ship… I’ve been scaling into DSX as I think a recovery will eventually happen; it’s a contrarian play in a sector that’s been out of favor for a while, and DSX seems (to me) conservative… Read more »

Bull Hunter
Bull Hunter
Reply to  goldbug58
March 23, 2013 11:57 am

Hi goldbug58,

I’ve been in and out of DSX many times over the years. I like their management and believe that if you want to invest in this industry, you’ve got the right stock.

Regards,
BH

bsi87
bsi87
March 22, 2013 7:38 pm

Geoff and Maria – last hour of the day is the most important. Big boys can see see every stop and limit order set prior to open and gun them. Last hour big boys have to decide whether to take the trade home.

GDXJ not trading well today but only pennies at this point and lower volume than average. problem is declining MA’s and descending trendlines will be coming into play shortly. My guess is the recent low will be retested…after a ST top.

fd:long gdxj

BillySundance
BillySundance
March 22, 2013 7:17 pm

ANV (Allied Nevada) broke down after releasing an operational update showing they are having some challenges with ore grades but overall, really nothing new for those that have followed Allied Nevada recently. The udpate kind of just reinforced what they communicated in recent earnings call.

The stock broke down about 7% today on the news and took out the previous low 16.89 from a few weeks ago. Hit 16.86 before bouncing above and firming above $17.

I’m definetly not calling a bottom but looks like it may be a good setup for a long w/ a tight stop.

Vadym Graifer
March 22, 2013 6:15 pm

This one is the best illustration of practical implementation of the principle discussed at Cara Conference. Remember that sequence of buyers getting all in, and then the expected news coming, and everything is hunky-dory – but there is no more buyers? Think of today’s BBRY USA launch in these terms, and you will see how this trade came together:

http://tradinglog.realitytrader.com/2013/03/march-