I would like to refer to an article that was pointed out by TBP. I think this article points toward a pretty bleak future, as I understand it. See
http://www.chron.com/business/article/Corporate-profits-aren-t-what-they-seem-3079696.php
They allude to some numbers from another company, without quoting directly the numbers or the method used to derive them, so like anything else, this may be inaccurate when taken out of context. So this may be another example of yellow journalism, but it agrees with what I’ve been looking at and fearing.
Earnings are coming down. It’s hard to explain why job numbers are going up, but earnings are coming down. To paraphrase the article, if AAPL and AIG were removed, the S&P earnings would be about 1.1% higher for the 4th quarter of last year (2011). A rate that is substantially below the first 3 quarters.
I don’t look at earnings, because the books can be easily cooked, making earnings look better (or worse) than they are. Like DMND didn’t pay for their nuts on time. But it is scary to think that without the two big guns, the total increase in the S&P is 1.1% in the quarter. Cooked books or not.
This quarter, around 66% of the reporting companies met or exceeded analysts’ expectations for earnings. But as the article points out, and as we pointed out last December, those estimates were being reduced. Even Bloomie had a vignette on that in January.. But until this article came out, I had no idea it was that drastic.
My indicator is to look at operating cash flow and levered cash flow for a determination of the health of the company. A company like GOOG has a huge 25% of revenue reported as levered free cash flow. (Levered free cash is kind of what’s left over, that you can invest back in your company or put in the bank). If I have time, I would like to see the ratios for the last several quarters, but I can’t find that information compiled and published anywhere, except in the balance sheets of the corporations on Edgar. That’s painful to extract..
The other thing I’d like to point out is that the article said “In cutting profit forecasts for 2012, Procter & Gamble and Pfizer both cited the stronger dollar.” I looked at the dollar curve, did a simple piecewise linear integration of 2010 and 2011, got it that the dollar went down by 12% in 2011, but PFE’s earnings only went up 4% (from the TDAmeritrade “earnings” graph). Doesn’t make sense to me. (But of course, earnings are simply cooked books, but you’d think they’d have to live with their untruths, wouldn’t you?) In any case, it looks like the companies want to say that lowered earnings “ain’t our fault”.
We know fundamentals don’t matter in our market today. But if one day they do, the article’s author’s conclusion might be right.
Friday, February 10, 2012
Monday, February 6, 2012
On Track
Remember Mutt asked if there could be a 2000 point rally in the DIA? My reply was yep, and here’s why.
We’re on track. Extend the green line to where the black line meets the red line. Poof. 2000 points. (Chart courtesy of TDAmeritrade's StrategyDesk)
So where from there? Everyone will be looking for a pullback, so I suspect we will get one going into the election. Who knows what the reasoning will be. It may be unsuspected, like China (remember they just increased liquidity a lot there, could be a sign of the times, and their GDP growth is slowing. Maybe it would slow a lot without that liquidity. Or maybe it’s a war with Syria. We often (without QE(n)) have pullbacks in the slow summer season, so maybe it’s that.
If this is the case, Mr. Obama will lose. The next relatively equidistant timing cycle will extend into the first of next year.
What do I like during the next few months? The herds report tells me to get out of precious metals, but into the metals and mining stocks like CENX X (yes, that will beta along, I guess) and the KOLs. I like many of the retailers like TIF that had a big pullback, and COH that didn’t . Maybe ANF.
I think the future revenue guidences are important in choosing. So I’m looking for white-collar retail stocks (TIF, COH, ANF etc), and B2B corporations like Oracle, IBM, Cisco etc to do well.
Notice the pink vertical line on the DIA chart. It appears as though there was a pullback cycle starting that if allowed to complete, would mean the DOW would fall below the 10000 point. Unthinkable! You remember what happened to turn that around? All the central banks got together and promised TBP (no, this time it means The Big Put), that is, liquidity forever. So with 0% interest rates promised forever, of course, everybody bought, and will continue to buy. Soon you’ll see the funds start getting in big time, then it’s time to ride, boys. Or as Mannwich likes to say, “Rally on, Wayne!”.
At the time of the pink line, I think the boys at the Fed saw the downturn (resulting from sentiment about Eurozone finances and sovereign debt repayment) and didn't want the Ubers value to drop, so the simultaneous announcement was created. I mean what other reason could there be to orchistrate a simultaneous announcement? So the cycle price direction was interrupted.
Could happen again in June/July timeframe. Maybe the US and China will have a simultaneous announcement of plans to save the Eurozone.
We’re on track. Extend the green line to where the black line meets the red line. Poof. 2000 points. (Chart courtesy of TDAmeritrade's StrategyDesk)
So where from there? Everyone will be looking for a pullback, so I suspect we will get one going into the election. Who knows what the reasoning will be. It may be unsuspected, like China (remember they just increased liquidity a lot there, could be a sign of the times, and their GDP growth is slowing. Maybe it would slow a lot without that liquidity. Or maybe it’s a war with Syria. We often (without QE(n)) have pullbacks in the slow summer season, so maybe it’s that.
If this is the case, Mr. Obama will lose. The next relatively equidistant timing cycle will extend into the first of next year.
What do I like during the next few months? The herds report tells me to get out of precious metals, but into the metals and mining stocks like CENX X (yes, that will beta along, I guess) and the KOLs. I like many of the retailers like TIF that had a big pullback, and COH that didn’t . Maybe ANF.
I think the future revenue guidences are important in choosing. So I’m looking for white-collar retail stocks (TIF, COH, ANF etc), and B2B corporations like Oracle, IBM, Cisco etc to do well.
Notice the pink vertical line on the DIA chart. It appears as though there was a pullback cycle starting that if allowed to complete, would mean the DOW would fall below the 10000 point. Unthinkable! You remember what happened to turn that around? All the central banks got together and promised TBP (no, this time it means The Big Put), that is, liquidity forever. So with 0% interest rates promised forever, of course, everybody bought, and will continue to buy. Soon you’ll see the funds start getting in big time, then it’s time to ride, boys. Or as Mannwich likes to say, “Rally on, Wayne!”.
At the time of the pink line, I think the boys at the Fed saw the downturn (resulting from sentiment about Eurozone finances and sovereign debt repayment) and didn't want the Ubers value to drop, so the simultaneous announcement was created. I mean what other reason could there be to orchistrate a simultaneous announcement? So the cycle price direction was interrupted.
Could happen again in June/July timeframe. Maybe the US and China will have a simultaneous announcement of plans to save the Eurozone.
Sunday, February 5, 2012
Unemployment and the Market
We saw the unemployment numbers improve pretty dramatically on Friday. We all know the dramatic improvement was due to a lot of people dropping off the edge of unemployment reports: that is, they are no longer counted, and may not be looking.
As we pointed out earlier, during Mr. Obaba’s reign, the use of food stamps has increased by 33%, or more. Mr Newt said that it was the biggest increase ever under one president, but he was wrong. It was the second biggest (Bush’s was bigger), but when the Jan numbers come out, Mr. Newt may be right. In any case, for leaders of our country to let this happen is inexcusable.
I have heard many many talking heads on Bloomberg say that we won’t improve the economy until we let the housing sector recover. Many say just let the bottom fall out and recover naturally, some say support it to keep our spirits up and confidence high to support spending.
You can’t spend what you don’t have. And aren’t making. And we all talk about the discrepancy between the haves, and have-nots, and it’s getting bigger, and worse. Even to the point where billionaires say “I volunteer to pay more taxes” which is of course meaningless in the long term, without spending cuts. “you can’t spend what you don’t have” should apply to the US Government, but as we see, it doesn’t.
So what is all this ramble about? It’s about housing, and the recovery as applied to improvements in the housing market.
Prices have come down, but as the blue collar workers lose ground, they still can’t afford to buy houses. Many white collar workers have houses, maybe underwater, but do possess them. As Mannwich’s article pointed out, many feel caught at higher interest rates since banks won’t let them refinance. We all know banks are mostly all insolvent if the government decided to make them mark their assets to market value. So the banks need this high interest rate revenue. The question is, what do banks do with the foreclosures, which are a drain on their revenues from their securities?
The answer was given to us Thursday. There are some private equity firms negotiating with Fannie and Freddie to take the troubled properties off their hands and fix them up and offer them as rental properties (since rentals are on the rise).
This will be a disaster for the housing market. Here’s why: I have looked at a bunch of repos here in the bay area, They are all dumps, where anyone with 600K-1KK price range would not want to live. And even after dumping 100K in upgrades into the property, you still end up with a hacked-up layout, a fixed-up camp. A dump. How will this hurt the housing market?
Fannie and Freddie will sell the securitized properties to the private equity firms for substantially less than their value. You and I can’t invest in this, because we can’t buy an entire security, we could only buy one or two of the components. So we won’t be allowed to participate. Anyway, we can’t afford to buy the property paying 4.25% mortgage, + property tax, + lost revenue on the down payment even with a 90% rental rate, because even at that rate, we will not have a positive yield, and it may be years and years before we can get our money out. What will happen when the PE firms buy is that the taxpayer will pay for the Fannie and Freddie losses (either directly or through AIG), and the PE firms will own the dumps.
The dumps aren’t necessarily concentrated. If they are, they will be slightly repaired and offered to the Blue Collar workers (who are dropping out of the jobs market, remember), and will ultimately likely become ghettos. If they are not concentrated, they are scattered throughout YOUR neighborhoods. And the blue collar workders will be moving in. Next door to you.
Unintended consequences could be ghettos (as I said earlier), lower property-tax income for towns, poorer schools, higher crime (I mean, even in my white-collar neighborhood, my Christmas lights were stolen), and an even brighter and more focused spotlight on the have-have not disparity.. Most of the new building permits are for multi-family dwellings, and this effort to provide low-cost rental property will stop those permits for sure.
Bottom line, your property values will go down, and your tax rates will go up. And, of course, we’ll all have to pay for the losses taken by Fannie and Freddie, and we will give all that money to the PE firms.
Sounds like a deal.
This, I think, is your future. Luckily, it is not Rock’s future, but I weep for my children, and for you. I am desperately sorry I helped bring this about.
As we pointed out earlier, during Mr. Obaba’s reign, the use of food stamps has increased by 33%, or more. Mr Newt said that it was the biggest increase ever under one president, but he was wrong. It was the second biggest (Bush’s was bigger), but when the Jan numbers come out, Mr. Newt may be right. In any case, for leaders of our country to let this happen is inexcusable.
I have heard many many talking heads on Bloomberg say that we won’t improve the economy until we let the housing sector recover. Many say just let the bottom fall out and recover naturally, some say support it to keep our spirits up and confidence high to support spending.
You can’t spend what you don’t have. And aren’t making. And we all talk about the discrepancy between the haves, and have-nots, and it’s getting bigger, and worse. Even to the point where billionaires say “I volunteer to pay more taxes” which is of course meaningless in the long term, without spending cuts. “you can’t spend what you don’t have” should apply to the US Government, but as we see, it doesn’t.
So what is all this ramble about? It’s about housing, and the recovery as applied to improvements in the housing market.
Prices have come down, but as the blue collar workers lose ground, they still can’t afford to buy houses. Many white collar workers have houses, maybe underwater, but do possess them. As Mannwich’s article pointed out, many feel caught at higher interest rates since banks won’t let them refinance. We all know banks are mostly all insolvent if the government decided to make them mark their assets to market value. So the banks need this high interest rate revenue. The question is, what do banks do with the foreclosures, which are a drain on their revenues from their securities?
The answer was given to us Thursday. There are some private equity firms negotiating with Fannie and Freddie to take the troubled properties off their hands and fix them up and offer them as rental properties (since rentals are on the rise).
This will be a disaster for the housing market. Here’s why: I have looked at a bunch of repos here in the bay area, They are all dumps, where anyone with 600K-1KK price range would not want to live. And even after dumping 100K in upgrades into the property, you still end up with a hacked-up layout, a fixed-up camp. A dump. How will this hurt the housing market?
Fannie and Freddie will sell the securitized properties to the private equity firms for substantially less than their value. You and I can’t invest in this, because we can’t buy an entire security, we could only buy one or two of the components. So we won’t be allowed to participate. Anyway, we can’t afford to buy the property paying 4.25% mortgage, + property tax, + lost revenue on the down payment even with a 90% rental rate, because even at that rate, we will not have a positive yield, and it may be years and years before we can get our money out. What will happen when the PE firms buy is that the taxpayer will pay for the Fannie and Freddie losses (either directly or through AIG), and the PE firms will own the dumps.
The dumps aren’t necessarily concentrated. If they are, they will be slightly repaired and offered to the Blue Collar workers (who are dropping out of the jobs market, remember), and will ultimately likely become ghettos. If they are not concentrated, they are scattered throughout YOUR neighborhoods. And the blue collar workders will be moving in. Next door to you.
Unintended consequences could be ghettos (as I said earlier), lower property-tax income for towns, poorer schools, higher crime (I mean, even in my white-collar neighborhood, my Christmas lights were stolen), and an even brighter and more focused spotlight on the have-have not disparity.. Most of the new building permits are for multi-family dwellings, and this effort to provide low-cost rental property will stop those permits for sure.
Bottom line, your property values will go down, and your tax rates will go up. And, of course, we’ll all have to pay for the losses taken by Fannie and Freddie, and we will give all that money to the PE firms.
Sounds like a deal.
This, I think, is your future. Luckily, it is not Rock’s future, but I weep for my children, and for you. I am desperately sorry I helped bring this about.
Tuesday, January 31, 2012
Keeping On
So here’s our head and shoulders.
I’m thinking that today’s visit to 1300 was not the pullback from what looks like a H&S pattern, but was rather a bear trap. I saw a report on Bloomie where they talked about their interview with Tom DeMark, who called a top this week, but now he’s delaying the call. I think (not sure, didn’t write it down) was that the top would be around 1340 or so. Anyway, that same call was made for last Christmas: see
http://www.bloomberg.com/news/2011-12-05/demark-s-p-500-at-1-330-by-christmas.html
Which was wrong.
So, in light of that, here’s this week’s sooth:
http://www.bloomberg.com/news/2012-01-20/demark-says-s-p-500-may-reach-1-342-by-next-week-before-falling.html
I know, I know, he gets paid a lot more than I do for his sooth saying.
There used to be a sage XYL that commented here but she’s gone now, who had wise advice about calling tops or bottoms. As I recall, she used to say that you don’t know a top’s in until after the top is made, and sometimes that takes months.
I personally don’t think we’re going to see a top for awhile. I am hoping for a pullback, because we need one to advance with strength. I was hoping the pullback would come when the earnings were down, but was not to be. I was hoping the pullback would come when Greece failed, but news coverage has beat that to death, and everybody is expecting that to happen. I was hoping the pullback would happen when the S&P announced they would downgrade everybody’s sovereign debt, but when that happened, that too went out with a whimper. I was hoping for the pullback when Iran said they were gonna block the canal, but they backed down from that, so once again, a mild breeze.
Maybe we need a black swan for a pullback. There’s so much support from lenders of last resorts and bank’s earnings faking success from the rubble of mark-to-non-market, that without a black swan, well, how can we get a pullback? I don’t want this trading in a range crap. It’s very hard and takes complete concentration to make money. At my age, I shouldn’t have to work so hard.
So for now, I’ll just keep on keeping on. Buy the dips, and sell the blips. It makes me kinda sad that I wasn’t involved in the market before this systemic manipulation came to be. It must have been an exciting place. Mannwich commented about the moving average intersection, but things are so cooked these days I’m in the camp of believing that nothing historical matters. What will be, will be.
I still can’t short SHLD. So what will be will be, as long as it’s what’s permitted.
I’m thinking that today’s visit to 1300 was not the pullback from what looks like a H&S pattern, but was rather a bear trap. I saw a report on Bloomie where they talked about their interview with Tom DeMark, who called a top this week, but now he’s delaying the call. I think (not sure, didn’t write it down) was that the top would be around 1340 or so. Anyway, that same call was made for last Christmas: see
http://www.bloomberg.com/news/2011-12-05/demark-s-p-500-at-1-330-by-christmas.html
Which was wrong.
So, in light of that, here’s this week’s sooth:
http://www.bloomberg.com/news/2012-01-20/demark-says-s-p-500-may-reach-1-342-by-next-week-before-falling.html
I know, I know, he gets paid a lot more than I do for his sooth saying.
There used to be a sage XYL that commented here but she’s gone now, who had wise advice about calling tops or bottoms. As I recall, she used to say that you don’t know a top’s in until after the top is made, and sometimes that takes months.
I personally don’t think we’re going to see a top for awhile. I am hoping for a pullback, because we need one to advance with strength. I was hoping the pullback would come when the earnings were down, but was not to be. I was hoping the pullback would come when Greece failed, but news coverage has beat that to death, and everybody is expecting that to happen. I was hoping the pullback would happen when the S&P announced they would downgrade everybody’s sovereign debt, but when that happened, that too went out with a whimper. I was hoping for the pullback when Iran said they were gonna block the canal, but they backed down from that, so once again, a mild breeze.
Maybe we need a black swan for a pullback. There’s so much support from lenders of last resorts and bank’s earnings faking success from the rubble of mark-to-non-market, that without a black swan, well, how can we get a pullback? I don’t want this trading in a range crap. It’s very hard and takes complete concentration to make money. At my age, I shouldn’t have to work so hard.
So for now, I’ll just keep on keeping on. Buy the dips, and sell the blips. It makes me kinda sad that I wasn’t involved in the market before this systemic manipulation came to be. It must have been an exciting place. Mannwich commented about the moving average intersection, but things are so cooked these days I’m in the camp of believing that nothing historical matters. What will be, will be.
I still can’t short SHLD. So what will be will be, as long as it’s what’s permitted.
Monday, January 23, 2012
Failed to Track our Rally
I have run some scans, and have some conclusions.
I think the way is up. Still. The Dollar is destined to go down, as the Euro goes up. Why is the Euro going in the up direction? Because people are starting to face the facts. Face it, ladies and gents, the ubra-riche will not let the economy disintegrate, because their fortunes would disintegrate along with the economy. True, they’d still have their real property, and their gold, but you can’t eat marble pillars.
We’ve had a 20-day up-channel in the SPY. Looking at the daily chart, it seems we see a nice W formation with the right side higher, a very bullish formation. Now to continue on with strength, we need to see a pullback. The problem is I don’t see a reason for the pullback, so I’m guessing it will be done by the traders on a technical basis. The psychologicals are up, people are bullish, Greek debt is under control to fail, and we all see the ECB and the Fed stepping in to save the banks. Again. No surprise.
The fundamentals are up. Meeting or beating expectations, whatever that means. I guess it means fundies are up (they are not but the use of “expectations” gives poetic license for me to say the fundies are up)
Structurals are up. Any doubt about capital liquidity flowing into Eurozone and the LIBOR improving?
Technicals are, well, a function of low volume and trader’s sentiment. I can only see in the short term a sentiment change, when everybody says “Overbought!! Overbought!!” and the charts start to turn south.
I ran several screeners and developed a list of stocks that haven’t tracked our rally (yet). I’ve mentioned a few of my favorites that are in my investment account, but these are the ones that may (or may not) have the least to retreat when there is a pullback, and the most to gain. The one piece missing from this chart, which is most important, is the future revenue guidance. For example, TIF is on the chart, but their future revenue guidance is down like 20% from last year. If you take this information, add to it the revenue guidance, I think you’ll have some possibilities.
You can’t use P/E, because as we all know, the E can be adjusted by the accountants, so P/E is almost worthless, it’s included here because some people believe it’s not.
I had to do this with pictures, because I couldn’t get the colums to line up and look like it was meaningful. Sorry. Blame my ignorance, or blame blogger, one of the two is the culprit for sure.
I think the way is up. Still. The Dollar is destined to go down, as the Euro goes up. Why is the Euro going in the up direction? Because people are starting to face the facts. Face it, ladies and gents, the ubra-riche will not let the economy disintegrate, because their fortunes would disintegrate along with the economy. True, they’d still have their real property, and their gold, but you can’t eat marble pillars.
We’ve had a 20-day up-channel in the SPY. Looking at the daily chart, it seems we see a nice W formation with the right side higher, a very bullish formation. Now to continue on with strength, we need to see a pullback. The problem is I don’t see a reason for the pullback, so I’m guessing it will be done by the traders on a technical basis. The psychologicals are up, people are bullish, Greek debt is under control to fail, and we all see the ECB and the Fed stepping in to save the banks. Again. No surprise.
The fundamentals are up. Meeting or beating expectations, whatever that means. I guess it means fundies are up (they are not but the use of “expectations” gives poetic license for me to say the fundies are up)
Structurals are up. Any doubt about capital liquidity flowing into Eurozone and the LIBOR improving?
Technicals are, well, a function of low volume and trader’s sentiment. I can only see in the short term a sentiment change, when everybody says “Overbought!! Overbought!!” and the charts start to turn south.
I ran several screeners and developed a list of stocks that haven’t tracked our rally (yet). I’ve mentioned a few of my favorites that are in my investment account, but these are the ones that may (or may not) have the least to retreat when there is a pullback, and the most to gain. The one piece missing from this chart, which is most important, is the future revenue guidance. For example, TIF is on the chart, but their future revenue guidance is down like 20% from last year. If you take this information, add to it the revenue guidance, I think you’ll have some possibilities.
You can’t use P/E, because as we all know, the E can be adjusted by the accountants, so P/E is almost worthless, it’s included here because some people believe it’s not.
I had to do this with pictures, because I couldn’t get the colums to line up and look like it was meaningful. Sorry. Blame my ignorance, or blame blogger, one of the two is the culprit for sure.
Tuesday, January 17, 2012
Looking up, my son
There’s a great class on divergences at one of our links:
http://blog.afraidtotrade.com/
Walking by the Priest, the boy asked “how’re things, Father?” to which the Priest replied “Looking up, my son”.
So here we are, today, looking at the SPY. Remember I drew the pennant, and said the breakout buy/sell points would be 128 and 122? Well, we hit and passed the 128, and are currently trading around 129. So we broke through. However, we see some caveats:
1. Low volume (little new money coming in so no commitment, and remember a significant percentage of the volume comes from the HVTs and HFT’s)
2. We got here way earlier than we were supposed to, in order to complete the pennant
Here’s the SPY now:
I had to go back to July, 2009 to get a similar pattern. And this pattern, we all know, resolved into Up Up and away for months.
Which brings me to the importance of the other 3 aspects of the market: the psychologicals, the fundamentals, and the structurals. As you recall, in July, 2009, we were beginning QE2 and the Fed was pumping in liquidity like mad. And, corporate profits on earnings were going up, as the corporations became leaner and meaner. And the psychologicals were down in the dumps, as were the bank balance statements and fundamental insolvency.
Isn’t that exactly where we are today? Billions being loaned/given to the ECB, Eurobanks balance sheets suck, and everybody says “oh woe is the Eurozone and therefore by contagion, oh woe is me”. And in earnings season, doesn’t it look like we’re beating expectations (again).
Looks to me like a repeat of July, 2009. Up Up and away.
Now, we may see a minor correction to bring us back into the pennant, as you can see from the “Oversold” and “Turning Down” comments on the chart above,. And here’s my favorite indicator, the SPXA50 from StockCharts.com
Which indicates we are at or near the top of the cycle range. Indicating a turndown may be in store for us. But after that, should it happen, I think things are Looking Up.
http://blog.afraidtotrade.com/
Walking by the Priest, the boy asked “how’re things, Father?” to which the Priest replied “Looking up, my son”.
So here we are, today, looking at the SPY. Remember I drew the pennant, and said the breakout buy/sell points would be 128 and 122? Well, we hit and passed the 128, and are currently trading around 129. So we broke through. However, we see some caveats:
1. Low volume (little new money coming in so no commitment, and remember a significant percentage of the volume comes from the HVTs and HFT’s)
2. We got here way earlier than we were supposed to, in order to complete the pennant
Here’s the SPY now:
I had to go back to July, 2009 to get a similar pattern. And this pattern, we all know, resolved into Up Up and away for months.
Which brings me to the importance of the other 3 aspects of the market: the psychologicals, the fundamentals, and the structurals. As you recall, in July, 2009, we were beginning QE2 and the Fed was pumping in liquidity like mad. And, corporate profits on earnings were going up, as the corporations became leaner and meaner. And the psychologicals were down in the dumps, as were the bank balance statements and fundamental insolvency.
Isn’t that exactly where we are today? Billions being loaned/given to the ECB, Eurobanks balance sheets suck, and everybody says “oh woe is the Eurozone and therefore by contagion, oh woe is me”. And in earnings season, doesn’t it look like we’re beating expectations (again).
Looks to me like a repeat of July, 2009. Up Up and away.
Now, we may see a minor correction to bring us back into the pennant, as you can see from the “Oversold” and “Turning Down” comments on the chart above,. And here’s my favorite indicator, the SPXA50 from StockCharts.com
Which indicates we are at or near the top of the cycle range. Indicating a turndown may be in store for us. But after that, should it happen, I think things are Looking Up.
Wednesday, January 4, 2012
Watchlist
Better late than never.
Rock’s Watch List
Here are a few of my watchlist picks and why they are on the watchlist.
First, we are significantly affected by headlines, so temper your trades accordingly. Second, I’m sorry if any of them offend your political, moral, or religious bents. Third, I look at the indicators I see and they all point up, so these are on my watchlist as the market goes positive. Fourth, I will not trade the banks because of their lying balance sheets, and at any moment, they could become insolvent. If Congress gets any balls, which may be unlikely, but possible.
1. VMW. They have a great product and have expanded into the APPL zone. As we get more and more HTML3 and straming movies, there will be more server farms deployed and VMW is the choice for these installations. Their chart is on the bottom, stochs for the 3, 15, and 60 minute is <20. Their money flow is the same and is tipping up, so I’m thinking this is the time. On the financials, they have been profitable at around 18%, and their levered free cash flow (what they have left over to invest in their business) is a whopping 1/3 of their revenues (3.5B).
2. POT I like the smell. I grew up working summers on a farm, and it smells good. Food and water are going to be important going forward, unless the dictators in Africa are successful in killing off the locusts. It’s forming W’s with the right side higher. Their profit is around 40% (huge) but their free cash flow is is only around 12% of their revenue. Since their operating cash flow is about 40% of revenue, that says they’re reinvesting heavily in their company. Good long term strategy while the prices are low, as we get inflation, and companies that don’t invest now will not grow quickly as the economy cycle progresses. Their charts are a little high, but I like the W’s.
3. MCD. I don’t enjoy the product too much, when I go there I get a McDouble and side salad. However, their management team is the best. The chart action is not a formation I like to see, so the entry point may have to be risky or delayed. Profit is huge, 25% or so. Levered free cash flow is around 12% of the revenue which is great, and is about 50% of the operating cash flow, so they too are investing in their business. A lot.
4. AAPL. What can I say. I’ve made a lot of money on AAPL, and I believe sex sells, and if they get somebody sexy to replace Steve, this is a winner.
5. MON. Profit is good, around 12%. Cash flow is good as well. They’re reinvesting around 10% of revenues back into the business. On the chart, the weekly shows a W formation with the right side higher.
6. TIF (RL and COH too). Yep, as the economy turns, look for TIF to outperform. Profit is around 16%, but their levered free cash flow is negative. I can’t explain that other than they may need new management. Operating cash flow is around 10% of revenue, so they may be positioning to sell the company. “Will see”. I still like that play and look for it to hit 85 again.
7. I like several of the metals. I am playing XME because of the headline risk. I expect XME to hit the 76 and would gladly take the 50%. You can do some investigation on SLX AA ATI CCJ CENX CLF CMC CMP CRS CU FCX GGB IPI MT TML NUE POT PKX RS SCHN STLD TIE TX VALE WORX.
8. I don’t trade drugs because of the headline risk again, but some of the pharma ETF’s are on my list. I have not entered yet, but as my aches and pains get worse, I’m seriously considering it.
9. GLD The pullback in GLD is probably tradable since it’s so heavy on the psychologicals. I would keep my stops tight, because as the dollar strengthens, I expect GLD to decline. However, it looks like it’s downtrend M’s have been broken. One more day of follow-through with significant volume will probably kick me off to start a position.
I have established positions in AAPL, VMW, XME and POT. I have half-positions in MCD
Rock’s Watch List
Here are a few of my watchlist picks and why they are on the watchlist.
First, we are significantly affected by headlines, so temper your trades accordingly. Second, I’m sorry if any of them offend your political, moral, or religious bents. Third, I look at the indicators I see and they all point up, so these are on my watchlist as the market goes positive. Fourth, I will not trade the banks because of their lying balance sheets, and at any moment, they could become insolvent. If Congress gets any balls, which may be unlikely, but possible.
1. VMW. They have a great product and have expanded into the APPL zone. As we get more and more HTML3 and straming movies, there will be more server farms deployed and VMW is the choice for these installations. Their chart is on the bottom, stochs for the 3, 15, and 60 minute is <20. Their money flow is the same and is tipping up, so I’m thinking this is the time. On the financials, they have been profitable at around 18%, and their levered free cash flow (what they have left over to invest in their business) is a whopping 1/3 of their revenues (3.5B).
2. POT I like the smell. I grew up working summers on a farm, and it smells good. Food and water are going to be important going forward, unless the dictators in Africa are successful in killing off the locusts. It’s forming W’s with the right side higher. Their profit is around 40% (huge) but their free cash flow is is only around 12% of their revenue. Since their operating cash flow is about 40% of revenue, that says they’re reinvesting heavily in their company. Good long term strategy while the prices are low, as we get inflation, and companies that don’t invest now will not grow quickly as the economy cycle progresses. Their charts are a little high, but I like the W’s.
3. MCD. I don’t enjoy the product too much, when I go there I get a McDouble and side salad. However, their management team is the best. The chart action is not a formation I like to see, so the entry point may have to be risky or delayed. Profit is huge, 25% or so. Levered free cash flow is around 12% of the revenue which is great, and is about 50% of the operating cash flow, so they too are investing in their business. A lot.
4. AAPL. What can I say. I’ve made a lot of money on AAPL, and I believe sex sells, and if they get somebody sexy to replace Steve, this is a winner.
5. MON. Profit is good, around 12%. Cash flow is good as well. They’re reinvesting around 10% of revenues back into the business. On the chart, the weekly shows a W formation with the right side higher.
6. TIF (RL and COH too). Yep, as the economy turns, look for TIF to outperform. Profit is around 16%, but their levered free cash flow is negative. I can’t explain that other than they may need new management. Operating cash flow is around 10% of revenue, so they may be positioning to sell the company. “Will see”. I still like that play and look for it to hit 85 again.
7. I like several of the metals. I am playing XME because of the headline risk. I expect XME to hit the 76 and would gladly take the 50%. You can do some investigation on SLX AA ATI CCJ CENX CLF CMC CMP CRS CU FCX GGB IPI MT TML NUE POT PKX RS SCHN STLD TIE TX VALE WORX.
8. I don’t trade drugs because of the headline risk again, but some of the pharma ETF’s are on my list. I have not entered yet, but as my aches and pains get worse, I’m seriously considering it.
9. GLD The pullback in GLD is probably tradable since it’s so heavy on the psychologicals. I would keep my stops tight, because as the dollar strengthens, I expect GLD to decline. However, it looks like it’s downtrend M’s have been broken. One more day of follow-through with significant volume will probably kick me off to start a position.
I have established positions in AAPL, VMW, XME and POT. I have half-positions in MCD
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