Friday, April 30, 2010

Itz Week End Review

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As Itz highlighted last week, Greece, earnings, FOMC were key events to watch in the went past. Debt issues with Euro along with no movement or wording change from the Fed rallied gold. Oil suprisingly rallied in part to the BP rig explosion in the Gulf. However, Itz Stock Chartz has been suggesting one hedge their portfolios, via options or ProShares etf's or even taking some money off the table. This coming week's big event will be the Jobs Report on Friday. Expectation are for a bullish number...the markets may sell off the news good or bad.
As the old stock market adage states, “Sell in May and go away,” emphasizing that the worst part of the year for stock performance is the months between May and November. To be sure, a $10,000 investment in the Dow Jones purchased in November and sold in April grows to $480,000, while the same strategy employed between May through October shows a loss of $328 (study: between 1950 – 2003) . . . thus, “sell in May and go away.” Itz is not suggesting to sell, however one must take this into consideration and hedge accordingly.

Itz has been posting several overbought index metrics over the last few weeks...LINK..LINK The CBOE equity put/call ratio is at 0.32, for its heaviest “call volume” relative to “put volume” since August of 2000, stocks are the most overbought since the rally began in March 2009. April 16th, was the first 90% Downside Day since February. The Volatility Index ($VIX) is at very complacent levels. In another method of measuring investor sentiment, on April 15th poll of its members by the American Association of Individual Investors, showed bullishness has jumped to 48.5%. The AAII poll is usually considered to be giving a warning when it reaches 50% to 55% bullish. It reached 54.6% bullish in October, 2007, at the exact top of the 2003-2007 bull market. And it reached 52.8% bullish on May 8, 2008, which was one week before the market began its serious 2008 bear market plunge. However, it only reached 47.5% bullish on June 4, 2009, and a correction began a week later. And it only reached 47.4% bullish on January 14 of this year, and the January-February correction began a week later. The reading this week was 41.36% Bullish link

Itz Stock Chartz suggested readers to enter ProShares UltraShort CrudeOil @ $12, it is down 6%. Oil rallied this week mostly on the news from the RIG/BP oil rig explosion and subsequent oil spill. The EIA weekly report on Wednesday showed a build in crude supplies of 1.9M barrels & distillates build of 2.9M. EIA LINK Yet, oil rallied and is approaching the recent $87 highs. Itz is keeping an eye on the Australian dollar $XAD, it has over the past few years peaked as oil has peaked. The Australian dollar on Friday @ 4pm was US$0.9209, the concensus is that the RBA will raise rates next week. The $XAD is hitting resistance & should be monitored carfully this week a breakout there and oil could follow.

Airtime: Fri. Apr. 30 2010 | 2:00 PM ET
Discussing whether the market momentum can continue with this uncertainty, with Jeffrey Hirsch, Stock Trader's Almanac and CNBC's David Faber.

Thursday, April 29, 2010

Gold, Crude Oil & Canadian Dollar

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The Greek bailout may cause a domino effect in other European nations. This bailout could be akin to opening Pandora's Box, especially given that this bailout is funded by other euro-zone members with debt problems of their own, which is likely to make the problem worse if contagion spreads.

This past weekend, The Wall Street Journal reported that Greece is not alone. Italy is forecasted to have a higher debt-to-GDP ratio than Greece, and several other euro-zone nations will reach 80% ratios by 2014:
Forecast of 2014 debt-to-GDP ratio*

*Source: Ernst & Young

At Friday's G20 meeting of finance ministers and central bank governors in Washington DC, concerns about Greece were paramount, but everyone seemed to ignore the other euro-zone debtors and the U.S. The U.S. debt-to-GDP ratio is forecasted to reach the same range as France, Ireland and Spain (80% to 100%) by 2014, but the U.S. has the advantage of borrowing at super-low interest rates, at least for now.

Despite the incredible amount of news about Greece's sovereign debt problems last week, The Financial Times warned that "America's disastrous debt is Obama's biggest test." >>READ STORY The resulting rise in U.S. interest rates could result in the world's biggest credit crisis and potentially the collapse of the U.S. dollar.

Dennis Gartman of "The Gartman Letter" weighs in on the Canadian Dollar & gold.

Tuesday, April 27, 2010

Market Update

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          In this past Weekend Review, Itz again and repeatedly echoed the view that 'this' market had reached an overbought level and indicators reflected that. A pullback was long overdue and would actually be a healthy event. Equities fell 213 points today as investors are again worried that debt problems in Greece and Portugal could threaten the global economic recovery. Standard & Poor's downgraded the debt of the two European countries, all the major market indexes were down about 2%.

The ratings downgrades also sent the dollar up more than 1.1% against the euro, hitting its highest level in about a year. At the same time, gold and Treasury prices rose as investors sought safer investments. The three often do not trade in the same direction. The news about Greece and Portugal also drew some of the market's attention away from testimony by Goldman Sachs CEO Lloyd Blankfein and other top executives from the bank on Capitol Hill. The executives testified about the company's dealings in mortgage-backed securities during the credit crisis. The SEC has charged Goldman with civil fraud, accusing it of misleading investors about investments tied to subprime mortgages. Matter of fact as I type this, I'm listening to CNBC and the hearing.

The Chicago Board Options Exchange's Volatility Index, the $VIX known as the market's fear gauge, surged 30.6%!! It often jumps when investors become rattled. Still, at about 22, it is far below the 89 that it reached in October 2008, at the height of the financial crisis.

Tomorrow the market will be focused on the Federal Reserve, which will end a two-day, rate-setting meeting. The Fed has said it plans to keep rates at historic lows for an 'extended time' to help the recovery. However, eventually rates will need to climb to fight inflation as the economic rebound continues. Will the Fed will hold off on raising rates for some time? Bottom line the Fed, FinReg, Goldman sachs & next week's Jobs Report all market movers. The markets are transition phase~~ from a 'hopeful' recession mind-set dealing with monetary stimulus and low interest rates~~ into a 'recovery' market dealing with improving earnings and economy, higher interest rates and being able to manage inflation.

Itz has suggested using options or ETF such as ProShares UltraSort Crude Oil (SCO) to hedge the Itz Pix Portfolio and/or to take some money off the table.

Tighten your seat belts!

Monday, April 26, 2010

Research In Motion (RIMM) : UPDATE

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A few hours after Itz previous Research In Motion blog post the news came out as follows;
RIM’s Mike Lazaridis has today offered some teasing information on the upcoming BlackBerry OS 6.0. He has promised that the OS will work better with touchscreen devices while maintaining support for trackpad devices. The WebKit-based browser will obviously be an important feature on the next-generation OS as web browsing is becoming increasingly important. Current BlackBerry devices have a chance of being upgraded to OS 6.0, though obviously not all of them will get the update. The updated OS should be released this summer, but t hasn’t been confirmed if there will be a new phone released in conjunction with BlackBerry OS 6.0.
The long awaited new operating system, described by Mr Lazaridis as one of the biggest overhauls in years, is a clear attempt by RIM to address the concerns of some BlackBerry users and position RIM to compete more effectively against rival smartphone manufacturers including Apple, HTC and Motorola. >>READ MORE

As to new functionality, he said RIM set out to “fix the things that people wanted to see fixed,” he said, quashing rumors of an entirely new look and feel. The new OS will be “very familiar to anyone who’s used the BlackBerry,” he added.

But there will be some significant, and overdue, updates. They include a real Internet browser that can show Web pages as they would look on a computer, a customizable home screen with a digital clock a la HTC Android, tile shortcuts to music, the Web and e-mail like the iPhone and a broader focus on BlackBerry App World widgets that can be downloaded over the air and are either billed to the carrier or paid via credit card. An overhauled music player will take a page from the iPhone too, and will display album art.

In short, BlackBerry is adding table-stakes smartphone functionality that consumers have come to expect out of their iPhones and Android devices. new phones

From RIM: BlackBerry Pearl 3G, Bold 9650..What About New OS?

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Research In Motion has been in an upward trading channel since early November of 2009. Sure the leader has been Apple which has always been on the leading edge of innovation. Still depending on how you approach your trading, if one had purchased and held AAPL from November, it would have over a 40% return, versus RIMM's 22%. Now if one traded both stocks Apple would have returned 67% while RIMM about 60%.

Today's News: Research In Motion Ltd. saw its shares dip Monday morning following comments by the company's co-chief executive officer at an analyst meeting. Read  RIMM says it still has a few more things to unveil this week. “We will have more announcements, so I am not going to comment on further announcements,” Balsillie told Reuters. “[co-CEO Mike] Lazaridis will be doing a keynote … So I would tune into his keynote and see what he has to say.” more news

Is RIMM a BUY on this dip?

Crude Oil Outlook

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            OPEC violating production quotas at the same time as demand from industrialized nations stagnates is spurring bets in the oil market that the 13-month rally in crude is coming to an end. >>READ STORY
“Oil at $87 a barrel seems pretty unreasonable given the fundamentals of the market,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut- based procurement adviser. “Forget China and India for a minute. The U.S. remains the biggest consumer, and U.S. demand hasn’t recovered.”
U.S. demand will drop 9.4% to average 18.84 million barrels a day this year, from a record 20.8 million in 2005, the Energy Department said on April 6. The U.S. uses more than twice as much crude as China, the second-biggest consumer. India is fourth. Consumption in the 30 industrialized countries that belong to the Organization for Economic Cooperation and Development will average 45.4 million barrels a day this year, down 8.3% from 2006, according to the International Energy Agency, which coordinates energy policy of 28 developed nations.

The Commitment of Traders (COT) report shows Commercials adding to their large net short position. On April 16th Commerical traders came in at -146,127 contracts net short, while this Friday, April 23rd, -148,126 contracts net short or an increase of 2,099 short contracts. Commercial Traders are early & usually correct in their timing, since they have a position in the underlying commodity. COT Link

Saturday, April 24, 2010

Itz Weekend Review

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The rally that keeps giving! Nothing seems to be able to knock this bull down, last week the Goldman news was shrugged off the following Monday. Apple led the way with a one-week gain of has surpassed Microsoft's market cap. Hard to imagine that just over a year ago everyone was calling for the end of the financial markets and a depression. Today most analysts are touting stocks and saying that you should buy Apple at $270??? But some how seeing all this "giddiness" reminds me of 1999/2000. One should have been buying back in February 2009, some 83% ago. When I hear that the 'Retail' investor is now coming into the market...that is a sure sign of caution and to start reducing my risk.

This week and next are going to be full of data and news. Just this coming week there will be over 2,300 companies reporting earnings like XOM, CAT, MMM & F. On top of that there's a FOMC meeting and most believe that this time around they 'will' change their "extended period" statement.
There appears to be far fewer analysts that continue to believe the Fed is going to remain on hold for the rest of the year. This is going to be a major stumbling block for the markets if the Fed changes the statement dramatically.

The S&P500 is closing in on the ITZ 1,230 target, many other indicators are in 'EXTREME' Overbought levels (I know sounding like a broken record)...but like I said, the next few weeks maybe the pivot point for a correction that's long over due. Earnings will be coming to an end, the FOMC meeting and then the big one, May 7th...JOBS REPORT. My view is that we'll see a meltup rally and the classic 'Sell in May'.
Bottom line, stay hedged and consider taking some money off the table.

Wednesday, April 21, 2010

Itz Pix Portfolio Update: SCO

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Itz Pix portfolio suggests adding the ProShares UltraShort Crude Oil ETF (SCO) @ $12 as posted yesterday. Oil prices declined Wednesday after U.S. government data showed an unexpected increase in crude inventories and fuel stocks. Crude oil inventories in the United States, the world’s largest oil consumer, rose 1.9 million barrels last week, against the forecast for a slight drop, the Energy Information Administration (EIA) oil inventory data showed.

The Canadian dollar is in the news this week as Canada is set to a possible rate hike >>READ. Events this week will move the Loonie.
Below is a daily chart of both the Canadia Dollar and crude oil, very similar in charts. Should the Canadian dollar rally, it may send crude to $90, resistance $87. Itz opinion is that oil is set to decline to the mid $70's and has suggested hedging the energy positions in the Itz Pix portfolio (RIG, PDE, SU, PWE & PGH) via the ProShares ETF. Note this is a trade and a hedge to current long energy positions.

Tuesday, April 20, 2010

Profit From Lower Oil

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The API report Tuesday afternoon, said crude stocks last week declined 741,000 barrels, gasoline inventories fell 1.7 million barrels and distillate stockpiles dropped 3.1 million barrels.
An expanded Reuters poll on Tuesday forecast that domestic crude stockpiles fell 300,000 barrels last week. Distillate stocks rose 800,000 barrels and gasoline stockpiles rose. In futures trading Crude Oil is trading up around $84, the API numbers seem a little hard to understand as they are showing that crude imports are up while refinery runs are just up a little bit 400,000 barrels, the poll showed. Lets wait for the  U.S. Energy Information Administration's ~ EIA report tomorrow morning (10:30am) to see if these numbers stick. Prices are up from the recent drop on several factors...prices rose as traders covered short positions ahead of expiration of the front-month May contract; volcanoe grounded  flights in Europe are resuming and the Goldman Sachs/SEC fraud news is diminishing somewhat.

Looking at the charts does raise some cautious 'yellow' warning flags and Itz has been forewarning that a near term decline in crude is highly probable.

 Itz Stock Chartz has been repeatedly suggesting hedging energy via ProShares inverse ETFs. >>READ  If the EIA weekly report  does show a build in crude oil ~~ Itz Pix will then suggest adding the ProShares UltraShort Crude Oil ETF (SCO) to its portfolio. Note this is a hedge against Itz Pix energy holdings, RIG, PDE, SU, PWE & PGH. Along that thought this would be a trade and a short term holding.

Another Indicator Signals 'SELL'

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The market [S&P500] remains extremely overbought, depending what indicators one follows. Itz has presented several over the last few weeks, some are short term in nature some are lagging...BUT they all point to a very exteneded market.
Below is an $SPX chart using the Parabolic SAR, which is now giving a short term SELL. The $CPCE 50ema remains very over sold, as is the 200-ema. Although it hasn't reversed trend, the low levels should be noted and heeded. Again as with the energy sector hedge, look at covered calls, buying put options or using Inverse ETF's such as Proshares SDS.
Itz $SPX nearterm upside target is 1,230 as highlighted April 14th post. link

Monday, April 19, 2010

Why Oil Is Heading Lower

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Itz Chartz has been suggesting energy traders/investors hedge their positions using the ProShares Ultrashort Crude Oil ETF (SCO) or hedging the drillers such as Transocean or Pride Int'l using the ETF (DUG). Below are several charts using the Continuous Contracts Crude Oil as well as the Futures Price. Today the Gold:Oil Ratio (GOR) hit 14 via Futures pricing. Again this is a hedge, Itz believes that crude oil will trend lower nearterm, however longterm should trend higher as global demand rises.