Wednesday, July 28, 2010

Key Technical Points

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If this market wants to head higher several key technical points need to be met. As I type the Beige Book confirmed a sluggish economy. Next inline this Friday's  government report on GDP. The S&P 500 needs to close above the 100-ma, the Ten-year Treasury Note above the 50-ma, gold as per GLD under it's 200ma & the $VIX needs 2 days under it's 200ma of 23.38.

Tuesday, July 27, 2010

Global Demand For Energy Has Not Gone Away

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We Produce More Energy from Coal than Any Other Energy Source >>LINK

Annual Energy Outlook 2010 with Projections to 2035 >>LINK

Need we forget that prior to BP's Gulf spill the Obama Administration had proposed more drilling?? >>LINK
The negative impact of a moratorium on deep water drilling in the Gulf of Mexico is apparent to almost everyone but President Obama and his team of radicals at the Interior Department. A recent Bloomberg poll showed that 73 percent of Americans opposed the moratorium and the opposition in Louisiana is even stronger. Last week, over 20,000 fired-up Louisiana residents staged a massive rally in Lafayette protesting the idiotic moratorium. >>MORE Ban’s U.S. effects slim, analysts say >>LINK

Itz Pix Portfolio energy stocks include PDE, RIG, PWE, PGH, SU, UCO, VLO & WLT

FBR Capital Mkts Bullish On Coal Stocks

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FBR Capital Markets
WHILE WE ARE BULLISH ON the coal space and investors should be net long, we want to continually re-evaluate alpha generation.

The steam-coal thesis is clearly intact, but we must take notice of the impact from the met slowdown. We are also seeing a spread between high-quality met and crossover tons widen, and that is the reason we are Outperform-rated on Walter Energy (WLT). >>READ MORE

Silver Wheaton SLW

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Silver could continue its bullish momentum this week on technical indicators and a weaker dollar.
 Economic data releases this week could indicate improving new-home sales, declining consumer confidence and rising durable goods orders. The eurozone is scheduled to release unemployment numbers, confidence measures, and retail sales data. These data releases could be mixed to positive for the dollar, while the eurozone macroeconomic factors are showing an upturn. Markets may be weighed down by the dollar, which has been deteriorating during the past seven weeks. Overall, a weaker dollar may push silver prices higher. >>READ MORE

As I type gold is trading down $1159 -$25 & silver $17.60 -$0.56 Silver Wheaton SLW $18.06 -$0.78. Again suggesting SLW a BUY under $18.

Is The Rally Over?

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December 2008..the last time we had 3-days in a row of triple digit gains in the DJIA. Today's Consumer Confidence numbers wasn't good and took some wind out of the sails from this rally. The group's index of consumer attitudes fell to 50.4 in July from an upwardly revised 54.3 in June, below the median forecast of 51 in a Reuters poll. >>READ MORE
Itz Stock Chartz, believes this move has more to go...the earnings are about half-way through now, just look at DuPonts numbers reported today?! However, the next catalyst will be this Friday's GDP report.

The Association of American Railroads has extrapolated their rail-car loadings report to forecast that if “the 88% correlation (between their numbers and the GDP) that held from Q1 2000 to Q1 2010 held for another quarter, Q2 2010 GDP would be 5.0% higher than Q2 2009 GDP, which translates to 9.3% higher than Q1 2010 GDP.” (Rail Time Indicators, July 2010, page 17). Most other opinions have reflected more modest growth, ranging from 3% to 4%, with the full year ultimately growing at about a 3% rate. In general, most economists have viewed the halving of economic growth from Q4 2009′s 5.7% to Q1 2010′s 2.7% as a return to the mean after a couple of quarters of heated recovery.

If the BEA was accurately reflecting actual consumer demand, they would report a contracting 2nd quarter.
We don’t know what the BEA will report on July 30th. Maybe stimulus spending will push the number up. Maybe factories continued to build up inventories in anticipation of a strengthening recovery — and if that happens, watch for factories to over-correct the other way during the third quarter (with numbers that will be released 4 days before the U.S. mid-term election). Or maybe the BEA will accurately reflect what has actually happened to consumer demand. In any event, it should be interesting.

Saturday, July 24, 2010

Hersh Cohen~ Blue Chip Dividends

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“Great Investor” Hersh Cohen, Chief Investment Officer of ClearBridge Advisors and Forbes Honor Roll fund member eight times discusses the “greatest investment opportunity” he has seen in decades, with Consuelo Mack of Wealth Track.

Thursday, July 22, 2010

Doug Kass

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The Dow is up over 200 points. Doug Kass points out that the shorts are caught.

"...the forward P/E for the S&P 500 (on a realistic corporate profits estimate) is now under 12x vs. an average over the past three decades of 15.5x and about 17x when inflation and interest rates are quiescent (as they are now). Yes, the upside to stocks is capped -- I am using only 13x to get to my 1,150-1,160 S&P target -- by the ambiguity of the current soft economic patch and by the emergence of several nontraditional headwinds (higher marginal tax rates, costly regulation, and federal, state and local imbalances). But the wide gap between historic multiples and today's valuation seems to argue that the concerns are known and discounted.

The downside to stocks will be supported -- I am using 11x, which takes the S&P to the 1,025 level -- by the low probability of a double-dip and by growing evidence of a modest and shallow domestic economic expansion that is capable of sustaining itself."

Wednesday, July 21, 2010

James Cramer XLF Observation

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James Cramer of CNBC's Mad Money made an interesting observation on JPM, BAC & the XLF etf Tuesday evening. Worth a listen.  Now Jim Cramer in the video looked at 2 specific time periods, Now...the returns can vary greatly, all depending on several possible key time frames. In the charts below we have a March 2009 low ~to date; as well as a 3 year period. If one goes back to the March 2003 low ~ to date period; the returns are as follows~~ JPM +75%, S&P +25%, XLF -30% & BAC -55%. The weighting of XLF JPM = 11.49% & BAC 10.47%.
Below are JPM, BAC, XLF & $SPX from the March '09 bottom & 3 years ago to present....interesting. *Itz Pix portfolio suggested bank stocks are JPM, C, & LNC.

Tuesday, July 20, 2010

President Jeffrey M. Lacker Economic Outlook, July 2010

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As I type, Apple's earnings are being reported and they beat on both the top and bottom lines...again they sandbagged. Who says the consumer is dead?
The news of late has been that companies are reporting good earnings ..BUT revenues are missing. However, Fed Reserve President Lacker, recently made this commentary on 'pent up demand'.

"The brighter picture is not limited to consumers. Business investment in equipment and software usually displays large swings in recessions and recoveries, and the latest experience fits that pattern very well. After falling at nearly a 15 percent average annual rate during the recession, this investment category grew slowly in the third quarter last year and then rose at a 15.2 percent annual rate in the next two quarters. Again, prudent firms often defer capital spending in recessions, which creates a pent-up demand that boosts spending early in recoveries. And while sales may have fallen in many industries, technology continues to advance, and as a result there's an array of opportunities to deploy new capital to improve business processes. Major upgrades for IT and communications equipment are underway at many firms. So along with most analysts I expect to see robust increases in spending for business equipment and software this year – and beyond."

"Despite these serious policy challenges, however, I remain fundamentally optimistic about the capacity of the American economy to generate sustained improvements in standards of living. Our country has repeatedly demonstrated an unsurpassed ability to generate technological and organizational innovations and deploy them to deliver improved products and services for consumers and businesses. While we have struggled from time to time with economic policy, and no doubt will continue to struggle in the years ahead, that should not distract us from our signal achievements, nor should it dim our hope for the future."

President Jeffrey M. Lacker Federal Reserve Bank of Richmond Economic Outlook, July 2010 >>LINK

The 'New" Normal

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In this past Itz Weekend Market Review, I posted the following observation on recent earnings releases; "Earnings expectations are good but the guidance and top line revenue numbers from those that reported last week are not exciting."

Pimco's Mohamed El-Erian told CNBC reiterated that same view this morning on CNBC. "Investors are dissatisfied with earnings because companies are showing strong bottom lines but not enough growth in revenue."
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Monday, July 19, 2010

Two Interesting Views

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Preparing for a possibility of hyperinflation, with Victor Sperandeo, Trader, Trader Vic.

Extreme unhappiness by investors can be an opportunity, according to Brian Belski, chief investment strategist at Oppenheimer & Co.

Sunday, July 18, 2010

Itz Weekend Market Review

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One word describes Friday's trading...'UGLY'! Granted it was option expiration and the market had put in a string of up days since the Doug Kass bottom call. Sellers were looking for an excuse to take profits and it came from the bearish University of Michigan Consumer Sentiment number.
The 66.5 headline number was the lowest level for sentiment since last August and it is only 10 points above the 28 year low set in November 2008.
June 29th the Consumer Confidence headline number also dropped a whopping -10.4 to 52.9 and the Dow lost -266 points on the news. Friday's sentiment report was a confirmation of the confidence number decline.**Note below the similarities from the early '80s and now.

Same similarities as Itz has noted in the past, for the Wilshire 5000 a broad index. As in 2003 bottom and sharp run up followed by a sideways trending 2004, same is occurring now. 2003/2004 chart current chart

Earnings continue to be key, as Itz pointed out last the banks. Bank of America (BAC) shares took a -9% hit wiping out more than $10 billion in market cap after reporting earnings that disappointed the street. Earnings rose +15% to $2.78 billion. Loan loss reserves fell -17% from Q1 levels and credit quality was rapidly improving. Citigroup (C) said it earned $2.7 billion last quarter which works out to 9-cents per share but revenue fell -37%. Investment banking revenue fell -36% from the prior quarter. Wall Street was expecting 5-cents per share. Loan loss reserves dropped slightly to $46.2 billion or 6.8% of outstanding loans. The Bank Index dropped -5.7% on Friday because of the earnings disappointments from Citi and BAC. Even the blowout earnings from JPMorgan on Thursday failed to save it from a 4% loss on Friday. The banks are all warning that life under the new FinReg rules 'could be' costly and unpredictable. JPM warned of "unintended consequences" from the 262 new rules that have yet to be turned into laws. Banks will see fees cut, trading restricted and opportunities narrowed.

Q2 earnings will see a good chunk of S&P companies reporting this coming week. Twelve Dow stocks report along with 122 S&P companies. There are 73 companies reporting that are seen as key bellwether stocks. Some of those would be IBM, MSFT, MMM, EBAY, AMZN, AAPL, UTX, CAT, etc. Earnings expectations are good but the guidance and top line revenue numbers from those that reported last week are not exciting.

 Market continues to grapple with uncertainty and indecision along with concerns  companies reporting disappointing revenue outlooks. Bias looks to the downside, will the Doug Kass call that the yearly low has been put in--hold? latest from Doug Kass