FRI. NOV. 21- Stock Prices Can Actually Be Rational

$233,000 to $3,612. Do those numbers mean anything to anyone? Again, $233,000 to $3,612. Ready? This is the BCI rate (CAPE index). In English, this is the rate which one has to pay to use a dry bulk ship per day. This data is taken directly from the website of Dryships, a leading dry bulk shipper (DRYS):
http://www.dryships.com/index.cfm?get=report

So, really, think about this: let’s say you had a bunch of electronics from China you had to ship in dry bulk crates. You can now lease a vessel for $3,667 per day, down from $233,000 a mere five months ago. There are two major points to be taken. First, this incredibly low rate of rental cannot last for a sustained period of time. It is cheaper to simply let the sailors have a good vacation than to operate the ship. Furthermore, if this is the type of commercial activity that is occurring, it could portend horrible things for the world’s populations. Entities must be able to ship goods efficiently or how else will stores stock their goods? The second point is related to day trading: many many people think that things are overdone. And maybe they are in the immediate-term. However, when someone looks at DRYS and sees its stock price down 97% from its high with the average analyst still estimating almost $13/share in earnings for next year, they question the valuation. But, lookit, the rate they are garnering per day per ship is down 98% from five months ago so why shouldn’t the stock be down 97%? So, when one sees these prices and doubts any possibility of things getting worse much less acting incredulous at the computer monitor, they shouldn’t. Not that it will or won’t get worse…we are just saying it is possible. Thus, for day traders, don’t think…just act. Prices are what prices are what prices are and stocks will do what stocks will do what stocks will do. So, just be prepared for anything at anytime and do not overthink anything…particularly on what promises to be a wild wild day.

Markets in Asia stage a reversal overnight; after trading down 2%-3%, most Asian exchanges closed up 3%. The trend extended into Europe as well with prices a bit higher. Futures are stronger in the U.S. too. With it being an options expiration day today, the trend tends to assert itself early in particular. Look for some immediate selling into the rally this morning (S&P’s up 30 should come in at least 10 by some point within the open). However, if the selling isn’t overly intense, it is likely going to be a rather extraordinary A-B-A2 upside day. If the selling is intense, it will be massive with the Dow 7000 level in danger.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-


Good-

DELL – beat earnings

CRM- beat earnings

GPS- good earnings

HLX- closed near low; after close yesterday, company claimed there are no corporate developments

GS, AMZN, BIDU- all tried to rally yesterday, but failed late…yet they showed strength so they may be among the first to bounce in any market strength

HNZ- good earnings

CLNE, KMP – on “Mad Money” last night

CI- reaffirmed guidance

Bad-

ADSK- terrible warning

FL- bad earnings

PFG- closed near low; looking to short thru 9.25

CENX- closed near low; looking to short thru 4.35

STP- closed on absolute low

POT- closed near low

FWLT- closed near low

MEE, JRCC- closed near low

HIG, CI- closed on brand new low

RIMM- closed near low

XOM, NOV, HES, CAM, SUN, PDE- oils/drillers closed near lows

LBTYK- closed on low

SBAC- broke to another low

LINE- among the small energy LLC’s that were belted yesterday

SCHN, STLD, NUE, X- among other steels which sank to new lows

NOC- among the defense names closing at lows

DD- stunning. Was in a narrow range for literally years and has now fallen 50% in weeks. When/if market bounces, should be among first to bounce

EL- among clothing retailers closing near their lows

CE- closed near a multi-year low and warned after hours
CSIQ- atrocious earnings

JPM- filed mixed securities shelf




Earnings:

FRI NOV 21 BEFORE

ANN CSIQ HNZ

SJM




Good luck today.

THURS. NOV. 20- The Rich Are Getting Poorer Too

According to an article on the Bloomberg news wire on Saturday, the average wealth of an Indian billionaire has declined by 62% this year. While most of us would love to be worth a mere $380 million, it is a bit harder to know you lost $620 billion in less than 11 months. State-side, scions of wealth such as Warren Buffett and partners of once-storied names as the Blackstone Group have taken huge hits to their wallets as well. The old maxim that the rich get richer does not apply in 2008. And that is yet one more problem for the stock market. Huge hedge funds with many former wealthy individuals continue to dump vast amounts of stocks and commodities onto the open market as they simply try to save what they have. Don’t get us wrong; unfortunately, the poor are getting poorer as well albeit less on relative terms, but this breathtaking decline has hurt countless people. Back on point, very wealthy people tend to be in two camps right now: there are those who are doing what they can to save what they have and here are those who are doing nothing out of either shock or fear. Either way, nobody is eager quite yet to plunge back in to equities. This helps explain the seemingly non-relenting pressure in every rally to shove prices back down as occurred on Tuesday despite awesome earnings from Hewlett Packard. For day traders, as we seek to ask ‘why the volatility,’ this is but one more reason for the action. More importantly, it is a concept that will come more and more into focus as the year winds down as the upper middle class all the way to the uberwealthy implement their year-end strategies to not only position themselves for an Obama presidency, but to also see to it that they can play this game this time next year.

Markets plunged throughout the world overnight with Asian markets down 5% across the board and Europe 3%. Oil is down again and bonds up again. The markets will likely test their lows as the low October 7882 Dow number acts as a magnet (S&P500 and NASDAQ have already broken through). The market seems to want to hold this morning, but it is sheer folly to say that with any confidence so we’ll give you two scenarios. If the market does hold this morning, there will likely be a mammoth short covering rally this afternoon. If the selling pauses, but resumes vigorously by mid-morning, the market will likely fall several more percent in rapid fashion.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

INTU- decent earnings

GYMB- decent earnings

PETM- good earnings

CYBX- good earnings

HUM – reiterated guidance

ABK, MBI- ABK somehow paid $1 billion for $3.5 billion of bad CDO’s now off of books…may stabilize the company

C- Prince Alwaleed boosted stake back to 5%

Bad-

STP- horrible earnings warning for next quarter

WGOV- poor earnings

XCO- closed near a low; looking to short thru 4.35

LNC- terrible performing bank; looking to short somewhere around 6.90-7

FCE/A- looking to short thru 4 as it was weak yesterday

ROC- closed near low; if it opens lower, looking to short thru 5.85

AMB- bad REIT…looking to short thru 11

MEE- terrible performance yesterday- looking to short below 11.80 if it opens higher else A-B-A2 to upside

HIG- life insurer continues to plunge; looking to short thru 6.80ish if it opens higher particularly

PRU, MET- among bigger insurers which got horribly hit; looking to short thru yesterday’s lows (16.85/18.67 respectively)

WCG- closed near low; looking to short thru 8

JOYG- stunningly (or maybe not), at another new low…has huge buyback in price…company may be stepping away from its commitment

BEAV, GD – among others, defense entities were among the worst sectors yesterday

MAR, HOT- likely shorts into strength as they plummeted yesterday as well
JEF- once-staid company seems to be facing a capital crunch; likely a short into strength

PFG_ another financial in trouble…looking for A-B-A2 off of open as a short if market weak

LUK- closed near a low

HPT- closed on a low

DRE- another REIT which may follow in PLD’s footsteps lower today


Earnings:

THURS NOV 20 BEFORE

BKE BKS DKS

EJ GME HP

LTD NWY PDCO

PLCE SBH SSI

STP


THURS NOV 20 AFTER

ADSK CRM DELL

FL GPS HIBB

NVTL ZUMZ



Good luck today.

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WED. NOV. 19- Delving Into The Headlines

One of the major characteristics of a good trade at Protrading Network is to make sense of the news. Yeah, we know. Just like the rest of Wall Street. The difference is that we have our own unique take on the news. There are two main steps which sound self-evident, but they are not. The first is to learn of the news, but rather than rely on a headline, our most successful traders tend to really study a story. A “Washington Post” headline on November 10 blared “China Unveils $586 Billion Stimulus Plan.” The sub-headline was “Amid Unrest, Package Would Address Social, Political, and Economic Concerns.” It is a plan that many economists compared to the New Deal, according to the article. However, the Chinese central government clarified upon questioning that they’d provide less than 1/3 of that amount with the rest of the money to come from localities. The main course of action would be an increase in exports to boost growth. Furthermore, the government made no indication it’d set aside money for an international bailout fund. Now, one would not really know or understand any of this until doing a mere 3-5 minutes extra homework. Which leads to step II. The market opened up sharply that morning yet sold off rapidly…and few people understood. But those that did their homework knew that the Chinese plan was not what everyone thought it was. So, several traders had a terrific morning as others sat around wondering why the market was breaking. In this time of turmoil, one absolutely not only must keep up with what is going on in the world, but one must understand in detail what is going on in the world.

Overnight, stocks throughout the world failed to move up after Wall Street’s rally yesterday with most indeces down just under 1% in Asia and 2% in Europe. It is a worrisome set-up state-side today, simply put. Futures are down albeit not huge. But the bond market is very strong, oil is down again, and the financials are indicated lower across the board. Yesterday’s rally was weak; there were more than twice as many stocks down as up on the NYSE. So, all the signs point to what could be a pretty bad day. The corollary here is extraneous news flow plus if the expected selling doesn’t come in by mid-day, things could turn up very quickly because, again, it is a pretty dangerous set-up this morning.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

LDK- outstanding earnings- beat and raised guidance

BJ- great numbers; they also beat and raised guidance

PVH- good earnings, but did warn

RIMM- put on Conviction Buy list at Goldman; if market weakens, RIMM likely a short thru unch as it has had a nice run-up this week

WYE- very strong; if it opens down, looking to buy thru 35.50 high of yesterday else A-B-A2 to downside

Bad-

APP- closed near a low; look to short thru yesterday’s 2.60 low

FWLT- closed near a low in failing to rally yesterday afternoon; likely a short thru 18.10

ANR- down heavily on the failed merger; look to short thru 19.20 when/if

DRYS- very weak; looking to short thru 7.80 low if market particularly weak
LFG- it appears merger with FNF in danger of failure; looking to short thru yesterday’s low around 3.70

AAWW- one of last major airlines out there; stock fell on downgrade and liquidity concerns yesterday…looking to short thru yesterday’s 10.40 low

M- wretchedly weak…and just in time for T-giving…if it opens higher, would love to short thru 6

DFS- credit crunch affecting Discover…looking to short thru yesterday’s 7.90 low

BBY- debt ratings cut to near junk by S&P

Earnings:

WED NOV 19 BEFORE

BJ LDK ROST

TWB


WED NOV 19 AFTER

APWR CYBX DBRN

GYMB INTU MENT

MW PETM SMTC

TSL WGOV






Good luck today.

TUES. NOV. 18- The Bad Word

On Saturday, George W. Bush said arguably one of the most amazing statements ever uttered by a standing president in modern history. When asked why he supported a bailout of the U.S. financial markets much less entities, Bush said he was “a free-market person, until you’re told that if you don’t take decisive measures then it’s conceivable that our country could go into a depression greater than the Depression.” No matter why one thinks Bush would say such a thing, it is absolutely stunning to hear the leader of the free world note that he is not a free-market capitalist through and through. Furthermore, he did not use the “r” word a.k.a. ‘recession’ to describe the perilous state of the economy; he used the much scarier “depression.” While the volume of the markets have dried up in recent weeks as there is an increasing dearth of big-time participants, it is statements such as the aforementioned quotation by the president which absolutely does not inspire any confidence whatsoever to the Wall Street community much less the factory workers at the car facilities in Detroit. For day traders, it is but one more example of how any statement at any time – particularly by a leader can deflate things when and if made during market hours. That particular press conference was held on a Saturday, but words of the world’s leaders can move markets extraordinarily rapidly these days. Thus, day traders must be attuned to comments noted by people such as Henry Paulson made on Friday because the Dow literally moves in 100 plus point increments on any words by any major world figure at this point.

Feels like “Groundhog Day” for this segment of the blog- stocks throughout the world fell about 2% across the board overnight albeit on low volume. Commodities and the currencies are generally stable. Stocks are weak new state-side; however, the ‘feel’ is a little different this morning because of HPQ. Look for a little more pile-on selling shortly after the open, but if the pressure evaporates, there will likely be a violent short covering rally. This rally needs to take place fairly early (maybe even pre-open) else it will likely get dicey later as another rest of the trend lows is made.


Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

HPQ- raised guidance

CLF- merger agreement off with ANR; they are acquirer

TARG- up yesterday on positive drug news

YHOO- CEO Yang resigned; company may be perceived as more willing to do a deal now

TMTA- received a cash buyout bid around 20 yet stock did not react after-hours yesterday; will likely do nothing but should trend toward 20

GTE- closed near a high

CHIP- signed a major contract yesterday; could be A-B-A2 thru 1

HD- beat earnings, but said sales growth would be slightly worse than expected

Bad-

ANR- merger agreement off with CLF; ANR was target

WFR- warned on its outlook

DIVX- bad earnings

MET, PRU, HIG- major insurers closed near their lows yesterday

ANF- this clothing retailer continued its descent

GS, MS, MER- brokers continue to portend trouble for broader market

MIC- closed weak again

STSA- small bank closed at new trend low

CENX- producer of aluminum closed on a low; will likely move with metals today

CTRP- bad earnings

MHK- the carpet producer closed at a low

ADS- down in sympathy with COF yesterday; should bounce today if market bounces

DIVX- warned

SOL-terrible earnings

Earnings:

TUES NOV 18 BEFORE

ARM HD MDT

SKS SOL

TUES NOV 18 AFTER

JBX PSUN PVH





Good luck today.

MON. NOV. 17 -Who Gets What Anyway?

Let’s say you’re one of those diligent souls who toll away many hours a week at your job. You have a mortgage that you’ll be paying off for two decades to come. You have three kids, no significant debt other than your mortgage, and ostensibly do everything you’re supposed to do. Your neighbor, who happens to work with you, also has three kids yet he has two new cars, the best 42-inch TV screen on the planet, and the most extensive wine collection you’ve ever witnessed. Because your neighbor has a tremendous amount of debt on his credit card and he took out a 2nd mortgage, he now misses a mortgage payment. Or four. Guess which one of you is going to be bailed out in terms of renegotiated loan terms and amount? Guess which one of you gets to pump your arms in a ‘touchdown’ motion using excessive braggadocio while gloating to the other how you got $100,000 written off on the mortgage? Hint: not you. And therein lies the rub with the change in tone of these bailouts: where is the line in this ‘moral dilemma’ drawn and how much will it cost the responsible taxpayers of the world? In line with yesterday’s commentary, this issue pads the amount of uncertainty out there; this is absolute poison for equity prices. For day traders, it also adds to the muck of intra-day trading as equity prices attempt to position themselves based on the news of the moment. So, the conclusion to this one is the same as so many other pieces recently: you have to be prepared and up-to-date on all of the macro newsflow in addition to the micro. Know how to react based on Congressional testimony regarding an auto bailout or rumors of an airline bailout. By simply spending but a few minutes a day in intense study or thought after doing some homework, it can be the difference between consistently profitable and consistently losing at this point in day trading history.

Japan officially announced it was in a recession overnight yet the market held resilient there, up 0.7%. The other Asian markets were flat. However, European bourses are down 2%-3% across the board and futures are sharply lower state-following Friday’s last minute sell-off. Oil is down yet again but the currency and bond markets are relatively stable. Look for a bit of a bounce from opening levels, but the balance of the day will be thin and volatile. There is not a lot of good news around, but the bad news isn’t coming in torrents so the swings today will likely be sharp both up and down. Be careful.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

AMLN- Carl Icahn boosted his stake

COP, ETN- Warren Buffett sharply increased stakes in these two companies

HIG- announced agreement in TARP program Friday; if it opens higher and goes negative, short thru unch

FONR- $5/share buyout bid on table; stock spiked intra-day Friday yet closed way off of high…anything can happen anytime here

ALO- strong strong rally into close

ETN,AMD- on “Mad Money” on Friday night

GNW- applied for TARP money and S&L status

Bad-

UTHR- one of its leading drugs under studies right now failed to reach a primary endpoint in its trial…if you can short it above 70, particularly before 8AM ET, it is trade of week in all likelihood

TGT- bad earnings; suspended repurchase program

HPT- closed near a low

CUZ- closed on a low

AAPL, AMZN, RIMM- closed near a low

PLD- closed near a low; likely a short thru 5

ANF- closed near a low on bad earnings

MAR- leading hotelier particularly weak on Friday; looking to short thru Friday’s low if it gets there

SHLD, BIG- among other retailers closing at or near new trend lows Friday

EQR- leading office real estate entity closed at its low

DRE- very weak REIT Friday

HOG- The motorcycle entity keeps falling…at a new trend low

MAC- closed near low

CTB- cash crunch facing company; yet another company closing at a new trend low

COF- announced higher than expected charge-off rate

LOW- beat on quarter, but warned on year





Earnings:

MON NOV 17 BEFORE

COV LOW TGT


MON NOV 17 AFTER

CTRP







Good luck today.