TRADING EFFECT

S & P and financials - not so bad

2011-10-31T20:44:00.000-03:00

We were waiting for the pullback, may be it was more agressive than the one we could desire (especially with the VIX blowing up). Key supports are holding.

SPY & QQQ: hope this time is different

2011-10-12T22:42:00.000-03:00

Sell signal in the 60 and 10 simple moving average system. Should be different this time?

PBR: near 2008

2011-10-11T22:53:00.001-03:00

And near the bottom?

Back in time

2011-10-07T22:15:00.000-03:00

In VIX / out SPY

2011-10-07T21:49:00.000-03:00

May be...

This chart talks

2011-08-14T18:12:00.001-03:00

History repeats?

Euro / US Dollar -

2011-03-27T21:18:00.000-03:00

I am trying to figure out the elliot wave count on this pattern. The news around this pattern today:

Germany May Pay 35 Billion Euros for Euro Rescue, Die Welt Says

Euro Weakens for Second Day After Merkel's Party Defeated; Dollar Advances

Euro Extends Slide Against Dollar, Yen as Leaders Divided on Bailout Fund

S & P 500: technical patterns

2011-03-22T21:23:00.001-03:00

Just some EW counts that I am following.

Warren Buffet: annual letter to share holders

2011-02-27T12:38:00.000-03:00

Available at http://www.berkshirehathaway.com/letters/2010ltr.pdf

Some interesting paragraphs:

"Partially offsetting our anchor of size are several important advantages we have. First, we possess a
cadre of truly skilled managers who have an unusual commitment to their own operations and to Berkshire.
Many of our CEOs are independently wealthy and work only because they love what they do. They are
volunteers, not mercenaries. Because no one can offer them a job they would enjoy more, they can’t be lured
away.
At Berkshire, managers can focus on running their businesses: They are not subjected to meetings at
headquarters nor financing worries nor Wall Street harassment."

"...the directors who represent you think and act like owners. They receive token compensation: no options, no restricted stock and, for that matter, virtually no cash. We do not provide them directors and officers liability insurance, a given at almost every other large public company. If they mess up with your money, they will lose their money as well. Leaving my holdings aside, directors and their families own Berkshire shares worth more than $3 billion. Our directors, therefore, monitor Berkshire’s actions and results with keen interest and an owner’s eye. You and I are lucky to have them as stewards."

PBR - Petrobras Brazil

2011-02-26T21:26:00.005-03:00

Rio de Janeiro-based Petroleo Brasileiro S.A. (Petrobras; PBR) is a mixed joint stock corporation controlled by Brazil's federal government. PBR is one of the largest oil and gas companies in the world, and operates in five business segments: Exploration and Production (E&P; 24% of 2009 revenues, 55% of 2009 operating income), Supply (47%, 37%), Distribution (18%, 4%), Gas & Energy (4%,3%), and International (7%, 1%).
Each ADS represents two common shares.
The chart looks tempting. But, I will keep my stop loss at 37,87...there are a lot of problems around the world, and who knows what could happen in the Middle East and how the development of the unrests could affect the energy sector.

Technically speaking, I think PBR is beginging a wave 3. But, be careful and maintain your stops.

C - Citigroup

2011-02-26T20:39:00.002-03:00

Regarding citigroup, I think it is time to follow this stock. The US banks looks atractive again, and in citigroup I have noticed some interesting things. In this blog I do not make any fundamental analysis (I reserve it to me), but I can tell you some. For example, it has returned to profitability in 2010, with net income of $10.6 billion, versus a loss of $1.6 billion in 2009. Also, it hasmade good progress in improving credit quality. The U.S. government canceled $1.8 billion of its perpetual preferred shares in conjunction with the end of the loss-sharing agreement, but still holds $5.3 billion of preferred shares, which it is selling off gradually. The EPS is at 0,35 per share, not bad. I think that as a result of capital raising activities in the last two years, this company is better prepared than before to withstand further write-downs of their loan and securities portfolios.
Although all this, it has been downgraded to "neutral" from "buy" by Goldman Sachs.
The charts: in the weekly chart, I am following the 55 weekly exponential moving average. Key support.
It is going to break this pattern. I would bet that upward, but who knows?

JPM - (John Pierpont Morgan) Bank

2011-01-07T13:07:00.000-03:00

Time to sell....and wait for a break up.

XLF target: 16,5

2010-11-21T11:23:00.001-03:00

If it breaks 15.

Muni bond market

2010-11-21T00:27:00.003-03:00

Something is wrong in the municipal bond market. Interesting opinions on this topic:

Warren Buffet: Muni Bond Market May Be Next Phase of Financial Crisis

How to Play the New Muni Market:

Municipal bonds are backed by local or state governments or other public entities. Investors like them because their interest payments are generally exempt from federal income tax, though states often levy taxes on out-of-state bonds.

A freakish confluence of events sparked the selloff. Treasury yields rose, which led to losses on all types of bonds as investors sold older bonds to make room for newer ones. A massive amount of muni-bond supply hit the market—about $34 billion through Nov. 19, the average issuance for an entire month in 2010. And the Republicans' retaking of the House of Representatives on Nov. 2 made it more likely that the Bush-era tax rates will be extended for all taxpayers, reducing the urgency for upper-income earners to hold tax-free munis, and threw into question the future of the Build America Bonds program, in which the federal government subsidizes municipalities that issue taxable bonds.

The problems started when bond insurers, with massive exposures to subprime mortgage debt, fell on hard times. Now they are exiting the muni market in droves. Whereas about half of all newly issued bonds in 2006 carried insurance, that number has fallen to about 7% in 2010.

The financial crisis also drained the muni market of liquidity. Bear Stearns and Lehman Brothers were two major muni-bond dealers before they blew up. Other banks and brokers have been less willing to hold large amounts of muni bonds on their books, while some hedge funds that used "arbitrage" strategies in the municipal-bond market pulled back or disappeared.

The market's fragmentation makes it difficult for investors to gauge whether munis are cheap or expensive.

Back when more of the muni market was insured, the direction of interest rates was the primary driver of yields. Treasurys and municipal bonds typically moved in the same direction, with a fairly predictable ratio between their yields.

The historical average was around 82% for 10-year bonds, because that was the ratio that produced a yield roughly equal to a Treasury once taxes were factored in (the "taxable equivalent yield"). When the ratio moved higher or lower than that, it signaled a buying or selling opportunity to some investors.

Now the direction of interest rates is just one of many drivers of muni yields, and the relationship between Treasurys and munis has weakened, say traders and analysts. The correlation between the two since 2008 is just 1%, versus an historical average of 91%. (A correlation of 100% means two assets move in lock step; a correlation of -100% means they move in complete opposition.) So while the taxable-equivalent yield ratio is now 103%, it doesn't mean munis are cheap.

The recent trading in ETFs and closed-end funds shows how tricky it can be for investors to value a muni portfolio. Muni-bond ETFs, which trade on exchanges like stocks, are generally more liquid than the bonds they hold, so there can be big differences between the two during periods of volatility.

For example, the iShares ETF and the SPDR Nuveen Barclays Capital Municipal Bond ETF on Tuesday traded about 2% below the value of their underlying holdings, according to investment-research firm Morningstar Inc. Before November, both ETFs had generally been trading within 0.5% of their net asset values this year.

Investors should focus on national muni funds rather than their single-state competitors, analysts say. And they shouldn't be too tempted by the higher yields now available—there still is more pain to come, say advisers. "There will be a general decline in credit quality," says Warren Pierson, comanager of the Baird Intermediate Municipal Bond Fund. "I think you'll see more downgrades than upgrades," which would hurt muni-bond prices.

Instead, investors should focus on high-quality short- and intermediate-term funds. Bond prices fall as interest rates rise, and longer-term holdings are more sensitive to these shifts. That is especially important given the uncertainty about the Build America Bond program. If it is allowed to expire at the end of the year, there could be a fresh flood of long-term municipal issues, which could cause long-term muni prices to drop.

Time to cover shorts in the euro

2010-11-18T14:21:00.000-03:00

TLT: volatility is coming for some days..

2010-11-10T20:22:00.000-03:00

200 daily moving average is the key.

TBT & the 20 year us treasury yield

2010-11-07T12:53:00.000-03:00

Buy signal in the 20 year US treasury yield. First resistance: 3,95.

DIA & SPY

2010-11-06T19:46:00.001-03:00

Buy signal in the DIA ETF, not confirmed in the SPY.

Alcoa - AA

2010-10-24T12:39:00.001-03:00

12.71 critical support. Still above the 200 Moving average. Uptrending.

High frequency trading

2010-10-23T18:50:00.001-03:00

An interesting article on HFT. There are new participants in the market and we should understand them very well.

Here I extract the most important paragraphs. To read the complete version, click here. (CBSNEWS.COM)

Just four years ago, high frequency traders accounted for 30 percent of the stock trades in the U.S. Today, estimates range as high as 70 percent. And institutional traders, like Joe Saluzzi of Themis Trading LLC, have come to believe that the game is rigged.

Today it is still the public façade of Wall Street, and a television backdrop for reporters relaying financial news. But less than 30 percent of the trading is conducted there now, and the specialists and the noise of the floor is being replaced by the speed and quiet efficiency of computers, and the action has moved elsewhere.
There are now more than 80 alternative trading systems around the country, plus two brand new electronic stock exchanges which most of you have probably never heard of: BATS and Direct Edge.
They're owned by the big banks and by high frequency trading firms, and neither of them would give "60 Minutes" an interview or let us inside to film their operations, but they trade more than a billion shares a day at blinding speed, and most of those bets are being made by machines.
The players range from firms like Goldman Sachs, Barclays, Credit-Suisse and Morgan Stanley to hedge funds and smaller operations like Tradeworx, which is the only high frequency trading firm that would talk to us or let us in.
It's run by Manoj Narang and a small group of mathematicians and scientists called "quants," which is short for quantitative analysts. Their high speed computers trade 40 million shares every day.

Actually, high frequency traders are getting the same market information that Saluzzi gets. They are just getting it a little bit sooner - it's only a few fractions of a second sooner, but if you are running supercomputers, Saluzzi says, it can be an eternity.
"What you're saying is the people with the fastest computers have an advantage? They get the best deals?" Kroft asked.
"Every time. Absolutely. There's no doubt about it. I mean, if they're spending that kind of money, and they're using that type of infrastructure, they're doing it for a reason. And it is to get a speed advantage, in that respect," Saluzzi replied.
It's not just the speed of the super computers that's important - it's also their physical location. The closer they are to the stock exchange's server the quicker they will be able to get critical market information.

"Do these high-frequency trades have anything to do with market fundamentals?" Kroft asked.
"Valuation is irrelevant. It's all about just moving the price up and down the ladder all day long. Each day is new. Each day starts fresh. So, you have to question the true valuation of the markets now," Saluzzi said.

BA: wave 5 to 107?

2010-10-21T22:33:00.000-03:00

US dollar: long?

2010-10-21T15:50:00.002-03:00

Wall Street Journal: Why Letting the Dollar Fall Could Be a Good Thing

2010-10-20T20:24:00.002-03:00

In this video, the economics editor of the WSJ explain the reasons why the falling of the US dollar affects the equilibrium in the international trade, particularly with the developing world and why Bernanke did not make this strategy public.

Another strange move in NYSE

2010-10-18T23:56:00.001-03:00

Take a look at this explanation in Bloomberg on what happened today in the SPY. Some important paragraphs:

"Data published by the electronic venue at 4:15 p.m. New York time showed the SPDR S&P 500 ETF Trust at $106.46 compared with its opening price of $117.74. The apparent plunge in price involved 7.2 million shares in the closing auction on NYSE Arca, according to data compiled by Bloomberg at 4:30 p.m."

"The 104-page study released Oct. 1 said trading software known as an algorithm linked the rate at which it traded the E- Mini contract to overall market volume. The initial sales spurred a flurry of buying and selling among high-frequency traders, which in turn led the algorithm to sell faster."

Another proof of the weak controls in this market.

May be today we have a new millionaire...

Nyse breaks trades of S&P 500 ETF showing 9,6% plunge

Krugman and the bond bubble

2010-10-16T23:29:00.000-03:00

In this post, Krugman explains why the bond bubble have it roots in the low CPI and the high unemployment rate. Enjoy.

"The Taylor rule and the 'bond bubble'. Wonkish"

SPY: updating elliot wave count

2010-10-16T19:02:00.002-03:00

Updating my EW count from September 1st, this could be the road-map. If the market is following this pattern, we are now in the wave 5, wich should take us to 140 SPY. But without the help of the financial sector (the XLF, and specially the big banks, are underperforming the indexes) the risk is high.

DIS: Walt Disney Co

2010-10-11T21:51:00.000-03:00

Some keys of Disney (source: yahoo)

GE: opportunity to get in or get out

2010-10-11T15:24:00.001-03:00

Look at the doji, the long red candlestick and the bear divergence in stocastics. But the target of this pattern (the inverse head and shoulders) is 19,25. And then? Long or short?. We should wait until the close of the market to make a decision. May be is a buy with SL @ 16.50

PBR:

2010-10-11T02:07:00.001-03:00

A break above 37 is a buy.

SPY: elliot wave bear count

2010-09-26T12:36:00.003-03:00

In opposition to this bull count, I am following this bear count. May be we are seeing the final stage of the wave 2, and we should have a big drop next week if this EW count is the right scenario. I am following two alternative scenarios. This is the bear:

The big picture. If we use some imagination, don't you think that this chart looks like a big inverted Head & Shoulders pattern, in which the white line is the neckline?

Fibonacci's retracements:

GOOG: intraday alert

2010-09-21T12:18:00.000-03:00

It has broken the 38.2% fibonacci´s resistance. In addition, accum/dist buy signal and the neck of the inverse Head & Shoulders.

XLV: update

2010-09-15T22:33:00.003-03:00

XLV has broken the 38.2% fibonacci´s resistance and the channel in the Accumulation/Distribution indicator. Bullish divergence in the MACD indicator. I recommend the stop loss @ 29.70. Notice the low volume. It could be a bull-trap.

XLV

2010-09-13T19:26:00.001-03:00

Top 10 Holdings (60.32% Of Total Assets)

Abbott Laboratories ABT 5.44
Amgen Inc. AMGN 4.48
Bristol-Myers Squibb Company Co BMY 3.83
Eli Lilly And Company LLY 3.02
Gilead Sciences, Inc. GILD 2.71
Johnson & Johnson JNJ 14.47
Medtronic Inc. MDT 3.57
Merck & Company, Inc. MRK 9.69
Pfizer, Inc. PFE 10.22
UnitedHealth Group Incorporated UNH 2.89

Source: yahoo

PFE: update

2010-09-12T17:56:00.000-03:00

S&P500 in EURO

2010-09-04T22:26:00.000-03:00

If this hypothesis is right, we will have a rally on the S&P.

FTSE in USD

2010-09-04T20:28:00.001-03:00

This EW count is in line with the counts in the other indexes.

TLT is showing some keys

2010-09-04T16:28:00.001-03:00

In the big picture, TLT looks like it is developing wave 4, until 96.72 (we know what this means for the S & P the US treasury bonds downtrending, at least in the short term). This is supported also by the reversal pattern (hammer followed by a red candlestick). The target is 96.72. In addition, the last news are showing a change in the mood of the market (jobs report, FED speech, etc.). We can add to this, the behavior of the VIX during the last week (weak and without a clear trend in the weekly chart). I am thinking on possible objectives for wave 5. Still I do not know the target of that wave.

TLT daily chart:

IYZ, in the edge

2010-09-02T21:36:00.000-03:00

IYZ Ishares (telecom services) has outperformed the SP500 in the last 2 months. If it breaks 21 consistently, 23.5 is the next step.

Updating my EW count on the S & P 500

2010-09-01T21:22:00.002-03:00

I think we had a complex correction pattern: a triple sideway pattern. I am checking proportions, but the basic rules are accomplished. If it breaks 1010, this count is ruled out.

GOOG: andrew's pitchfork tool

2010-08-30T23:42:00.000-03:00

DOW JONES: Andrew's Pitchfork tool

2010-08-30T23:30:00.000-03:00

China: covering shorts on US treasury bonds?

2010-08-30T21:05:00.001-03:00

China: Rumors of the Central Bank Chief's Defection | STRATFOR

I just read this news and is worth to notice that, even if this is not true, it is perfect to explain the last rally in US treasury bonds. Last months we were trying to find something that explains why the yields tanked again. I did not saw panic in the market (only in the fat finger day). In addition, I think this last movement on yields does not looks like a "flight to quality" and the yields were relatively low (compared to other investments) to justify a big buy on them. The last explanation to this big buy is china covering big shorts....I am still in research on this matter.

Updating some indexes

2010-08-28T16:17:00.004-03:00

Some possibles count for the wave 4:

This are some possible long term EW counts for the most important indexes.

DOW JONES INDUSTRIAL:

LONDON FINANCIAL TIMES STOCK EXCHANGE:

DOW JONES TRANSPORTS:

DOW JONES US FINANCIAL INDEX:

PFE: too good to be true ?

2010-08-17T22:39:00.001-03:00

Continuation pattern: flag.

SPY / S & P 500: Intraday situation

2010-08-17T17:09:00.000-03:00

GOOG: Update

2010-08-16T17:36:00.001-03:00

DIA

2010-08-15T21:14:00.001-03:00

PFE: EW count

2010-08-12T19:27:00.002-03:00

I have very limited knowledge in EW counts, but what do you think about this one?

PFE: Cup with handle

2010-08-10T20:00:00.001-03:00

The Cup with Handle is a bullish continuation pattern. Target: 16.88. Huge volume in the break-up. More information about this pattern: stockcharts.com.

SPY - DIA: History repeats...

2010-08-09T20:30:00.001-03:00

Look at this interesting patterns. Notice that one chart is daily, and the next is weekly. One is from 2010, the next is from 2008 / 2009. Notice the same volume pattern, the same wedge, the same MACD pattern and the same H & S. Looks easy, doesn't it?

PFE: 18

2010-08-08T18:06:00.000-03:00

GOOG: Head & shoulders

2010-08-08T00:12:00.000-03:00

Brazil... la ra la la ra la...

2010-08-02T22:49:00.002-03:00

If it breaks this resistance, first target 90. In the weekly chart, 200 EMA (yellow) up-trending. 50 EMA (green) above the 200 EMA. 22 EMA (red) above the 50 EMA. EWZ is up-trending.

The economy, or the market?

2010-07-27T00:45:00.003-03:00

I just read this, which makes me think about all the time spent reading and and trying to predict the future of the economy...may be is better to use our time and brain to study and analyse business and companies instead of the economy...because in the market, we are the ones that takes the decisions (we decide in which side of the trade stay). On the other hand, In the economy, the decisions are taken by everybody, except us.

"Forecasting stock prices based on a forecast of the economy has almost always led to disappointment.
Rather, the stock market should be seen generally as a good predictor of the economy—although not always."

CRB: waiting for definitions

2010-07-26T23:45:00.000-03:00

XLF

2010-07-26T19:30:00.000-03:00

Chile: New Highs

2010-07-25T12:44:00.000-03:00

Daily chart:

Weekly Chart:

Dow Jones Transports: long term view

2010-07-24T16:33:00.000-03:00

Dow Jones Transports: buy signal

2010-07-24T15:48:00.002-03:00

We should wait one more day above the trend-line:

Notice that the index is above the 200 EMA.

Logarithmic or arithmetic charts?

2010-07-15T20:47:00.000-03:00

If we use the logarithmic scale, the SPX is under the trend-line. If we use arithmetic scale, it is above the trend line. So?

I compared this situation with the one that happened in 2009. Let's see:

Now, in 2010:

KO

2010-07-11T23:39:00.000-03:00

Road map

2010-07-10T21:14:00.002-03:00

This is the pattern that I am following. Until it is broken, I will be waiting for a definition.

Analysts following this pattern: Charlie and analista tecnico.

Wait & See

2010-07-07T21:05:00.001-03:00

Today's action was really strong. But the trend continues down (Using weekly EMA's) and we have some resistances. I am waiting for a signal to go short.

S & P 500:

Dow Trasnports

XLF:

There is no reason to go long

2010-07-04T12:58:00.001-03:00

S & P 500 in EURO:

S & P 500:

DAX in USD:

The edge

2010-07-01T21:34:00.000-03:00

S & P500:

SPY:

DOW TRANSPORTS:

Russel 1000 Financial index:

MRK

2010-06-17T23:21:00.001-03:00

Daily:

Weekly:

SPY: Daily & weekly view

2010-06-16T20:53:00.000-03:00

SPY weekly chart:

SPY daily chart:

Following 1929

2010-06-13T18:08:00.003-03:00

Keep following the development of this pattern.

Notice that the time of the development is different, but the pattern is the same.

If you are not impressed, look this. Currently, the next support in the channel in which the DOW JONES is moving is at 4.000 points.

Get ready for a bounce

2010-06-12T23:58:00.000-03:00

The indexes in Europe look very bullish. Bullish engulfing in DOW JONES

DOW JONES Financial:

DOW JONES Transports:

IBEX in USD:

FTSE in USD:

CAC in USD:

DAX in USD (from all the charts, this one looks the most bullish)

Euro: back in time

2010-06-06T17:55:00.000-03:00

When in 1987, Britain became a member of the European Exchange Rate Mechanism (ERM), investors believed that sterling, then linked to the Deutsche Mark, was as good as the mark.

Citing Mark Tier in the book "The winning investment habits of Warren Buffet and George Soros":

"As British interest rates were higher, money poured into sterling. In a reflexive, self-full-filling prophecy, this increase in demand for sterling helped keep it stable against the mark...and set the scene for its subsequent fall.

Then the Berlin Wall was torn down, the Soviet Union collapsed, Germany was reunified, and the system, said Soros, 'was thrown into a state of dynamic disequilibrum.'"

I think that history tends to repeat, so let's see what happened thereafter.

The chancellor Helmut Kohl, and the Bundesbank, started a discussion over the rate at which East Germany's currency (the Ostmark), should be exchanged for Deutsche Marks. Kohl wanted a higher rate, looking for his party's popularity in the coming election. But, on the other hand, the Bundesbank stated that a high rate of exchange was very negative for the anemic european economy. A higher rate would become very difficult to persuade private investors to make businesses there, it would cause a massive increase in government deficit, high unemployment and inflation. Finally, the Ostmarks were exchanged at .... 1:1 rate for the first 4.000, and 2:1 rate the rest.

According to Soros ("Soros on Soros: staying ahead of the curve", 1995), that set the scene for the collapse of the ERM:

"There was a latent flaw in the ERM as well, but it became blatant only as a consequence of reunification. The flaw was that the Bundesbank played a dual role in the system: It was both the anchor of the ERM and the constitutional protector of the stability of the German currency. During the near-equilibrum period, the Bundesbank could fill both roles without problems, but with the reunification of Gemany, which caused the exchange of the East German currency for the Deutschemark at a very high, excessive rate, created a conflict between the two roles of the Bundesbank: its constitutional role and its role as an anchor of the ERM....

The tremendous injection of capital from West Germany into East Germany set up strong inflationary pressures within the German economy."

At that time, by constitution, the Bundesbank should push up interest rates in order to control inflation pressures. But this was inappropriate for Europe and in particular Britain, since they were in recession. In Soros words: "That throw the ERM, which had been operating near-equilibrium, into dynamic disequilibrium". To avoid this kind of conflict of interest in the Bundesbank, Kohl proposed to Mitterrand (French president) a reform in the european institutions. This (adding other things) was the initial impulse to create the Euro and the European Central Bank.

So, in conclusion, the Bundesbank was advocating a different monetary policy than the one that chancellor Kohl needed and Germany was adopting a monetary policy (tight) inappropriate for the rest of Europe. This tension would not last too much. Sterling collapsed on Black Wednesday, September 16, 1992. And other weak European currencies depreciate too.

Nowadays, we have some similarities with that scenario. First, Germany, given it's productivity and fiscal situation, would need a different monetary policy than the rest of Europe, since it has the best qualities to beat the recession . Notice that both Germany and France are between the most efficient countries (Source: OECDE.org, statistics at 2007):

With this undervalued euro and productivity, (good combination for growth) a tight monetary policy would be appropriate in case the first shoots of inflation appears in Germany. But this is no the case in the rest of the countries. Second, there is a tension between the monetary policy of the BCE and the fiscal and economic situation in countries like Greece, Italy, Spain, Hungary and Portugal (among other countries). The BCE advocates for tight policies (I mean tight in relationship with the ideal suitable policies for recession) in this countries, something difficult to manage in countries with negative growth. If they were not members of the euro, they would depreciate their currencies and there would not be such tension. But this tension could not last for ever. Something should happen.

Here the comparisons between these economies, estimates at 2009 (data source: CIA world factbook):

GDP (purchase power parity, in millions)

Inflation:

Unemployment:

Current account balance as % of GDP:

Real GDP growth:

Notice that Germany is a country which would need a different monetary policy than the rest, if it had not had a negative real GDP growth. Then, with a depreciated euro, if the Germany machine starts rolling, the tension between the different economies will growth and the weakest countries would find very difficult to stimulate their economies, adding pressure to their membership of the common European currency.

WMT

2010-05-24T19:23:00.000-03:00

WMT is reaching an area in which could be worth to take a look. The stock market is very oversold, and may be WMT is a good opportunity to play the rebound if this one finally arrives. Notice how the 38.2% fibonacci retracement from the September 2008 highs coincides with the 50% fibonacci retracement from the March 2010 highs.

But WMT it is not interesting solely based on it charts. The fundamentals are good too.

Some:

- The sales of this giant had been increasing since 2008, the subprime crisis does not push them into negative zone. They have increased 7.8% between 2008 and 2010 (3.9% annual growth). In this same term, the EPS is up 9%.
- The current divindend yield after taxes is 1.4%, with an average divindend growth in the last 3 years of 5.9%. This give us a discounted cash flow of 37 USD (one of the highest in the DOW JONES) with an 8% risk rate and 6.42% using CAPM (0.25 beta and 3.73% risk free rate)

Weekly chart:

Daily chart:

Answers

2010-05-08T21:38:00.001-03:00

Two weeks later, the market clear all the doubts and apparent contradictions in the gold, treasury and stock market. This are the answers:

France index in USD (weekly chart & fibonacci's):

FTSE in USD (weekly chart & fibonacci's):

IBEX 35 in USD (weekly chart & fibonacci's):

EUR/USD

2010-05-08T20:55:00.000-03:00

Finally, the euro break the up-trend long term channel. Massive liquidation. 1.25 & 1.233 next supports.

EUR/USD Daily chart:

EUR/USD Monthly chart: channel

Some projections: I am not trying to predict the future, I am only considering some probables scenarios since the break of the channel.

European and american indexes

2010-05-05T23:41:00.000-03:00

Continuing with the previous posts on the european markets, lets see some interesting coincidences and patterns.

The S & P 500 in euro: 61.8% reached, and uptrending. Look the RSI.

The DAX in US Dollar. Same fibonacci retracement reached... but downtrending.

Finally, look the weak recovery in the Athens market, in which it only reached the 38.2% fibonacci retracement:

We should wait for the week to finish, but the we can reach preliminary conclusions.
First, the american index is uptrending, and we can see a "flight to american securities", not only treasuries. The american stock market is resisting the european crisis.... but will it make it?

The Greece market is in free-falling, (obvious), and we can expect to reach the March 2009 lows. Then, a 10% correction in ATG and 7/8% in the DAX is likely to occur in the next weeks.

Finally, the DAX and the S & P had the same resistances in different currencies (the 61.8% fibo). Quite interesting.

NII holdings (NIHD:NASDAQ)

2010-05-02T20:38:00.000-03:00

This company provides provides wireless communication services to businesses and individuals primarily in Mexico, Brazil, Argentina, Peru, and Chile. Its services include mobile telephone services comprising various calling features, such as speakerphone, conference calling, voice-mail, call forwarding, and additional line service; and Nextel Direct Connect service, which allows subscribers anywhere on its network to talk to each other on a push-to-talk basis, private one-to-one call, or on a group call. The company also offers International Direct Connect service, which allows subscribers to communicate with its subscribers in Mexico, Brazil, Argentina, Peru, Chile, the United States, and Canada. In addition, it provides various services, such as text messaging; mobile Internet; e-mail services; location-based services, which include the use of global positioning system technologies, digital media services, and Java enabled business applications; and international roaming services. Further, the company offers two-way radio service. NII Holdings, Inc. provides its products and services under the Nextel brand name. The company sells its products and services through direct sales representatives, indirect sales agents, telesales, Nextel retail stores, shopping center kiosks, and Web site. It was formerly known as Nextel International, Inc. and changed its name to NII Holdings, Inc. in December 2001. The company was founded in 1995 and is based in Reston, Virginia.

During the first quarter of 2010, the Company added 377,000 net subscribers to its network, bringing its ending subscriber base to over 7.7 million, a 20% increase in the ending subscriber base compared to the end of the first quarter of 2009. Financial results for the quarter included consolidated operating revenues of $1.28 billion, a 33% increase compared to the first quarter of 2009, and consolidated OIBDA of $341 million for the quarter, a 39% increase compared to the same period last year.

The Company continued to invest in the expansion of the coverage and capacity of its networks reporting consolidated first quarter 2010 capital expenditures of $134 million, of which $85 million was invested in Brazil.

The Company ended the quarter with approximately $3.52 billion in total long-term debt and $2.7 billion in consolidated cash and short term investments, resulting in net debt at the end of the quarter of $841 million.

In 2005, the EPS was 1.06 and the stock price 46. Today, with an EPS of 2.26, it is at 42.47.

Price / Book value = 2.5 /// Average 2002 - 2009 = 4.56

Price / Cash Flow = 8.6 /// Average 2002 - 2009 = 13.56

I would wait a pullback to go long.

Sources:

Yahoo Finance

NII holdings Web page

NII Holding Press Release

Greece debt problems.... and USA?

2010-04-26T23:38:00.001-03:00

Today I read an interesting article, in which Nouriel Roubini was giving his opinion on the Greece crisis. He compare this crisis with the crisis of Argentina 2001, explaining that given the Greece numbers (worse than the Argentina figures previous to the default), we need a miracle in Greece. The figures in the chart are the ones described by Roubini for Greece and Argentina. I calculated the figures for U.S.A and compare them with Greece and Argentina.

The output is staggering:

Preparing for this week

2010-04-25T23:59:00.001-03:00

I will post periodically some doubts and apparent incoherences in the market.

The S & P 500 has reached the maximum levels since September 2008, before Lehman's collapse. The Nasdaq is at the May 2008 levels.
Like always happen, we have opposite signals. Regarding the bond market, the situation has not change since it is anticipating no inflation, as we can see in the spread between the TIPS and treasury. I have read something interesting in bloomberg:

Demand for U.S. government bonds is increasing. On average, the Treasury received $3.21 in bids for each dollar sold at 10- year auctions this year, compared with $2.63 in 2009 and $2.41 from 2004 through 2008, according to data compiled by Bloomberg.

But, when I look at the gold market (considered like a hedge against inflation), we see that the cost of this hedge goes up.

Why investors are buying treasurys and why they are buying Gold at the same time? Why this apparent contradiction?. I think we are talking about different investors. I have read that Soros is buying GLD. Is he buying treasurys too? I do not know, but I do not think so. The Greece debt crisis could be the reason, as investor are hedging against money emission in the Greece bail-out and also making a little fly to quality? I have to make more research on this matter.

The TNX is moving within a channel and the trend is moderately UP, although the astronomic numbers of the debt in relationship to GDP (looking at the debt clock, you can see the debt growing 1.000.000 while in the same term the GDP grows only 85.000). Despite this situation (how long can the government keep this level of debt growth?), I would go long at the current levels.

Regarding economic information of this week, these are the most important announcements:

- Tuesday: Consumer confidence
- Wednesday: FOMC interest rate announcement
- Friday: GDP / University of Michigan concumer sentiment

One sector to keep an eye on is the energy sector (XLE), which have made new maxs. Sector rotation could choose this sector to keep the bull rally in the market, since this one of the sector lagging the market (the other is healthcare) and the balance sheets of the most important companies (XOM, CVX) are better than most of the other sectors.

Finally, most important earnings announcements:

Tuesday: MMM, F
Wednesday: DOW, V
Thursday: BMY, XOM

NASDAQ Composite: long term resistance break out!

2010-04-25T20:48:00.000-03:00

Amazing bull market. The Nasdaq has broken the long term resistance from the maximum level of March 2000.

Monthly chart:

Weekly Chart:

More on the euro: following the Greece market?

2010-04-23T00:53:00.000-03:00

The Greece market has broken critical supports. The euro is following the same pattern. Technically, we should see new lows in the euro. The up-trending channel is at risk. I am thinking in 1.25 the first target if it breaks 1.3222. In addition, take a look at the relationship between the Euro, the 10 year treasury bond yield, the Greece market and the S & P 500. The treasury bonds keep their soft down trend while the Greece debt is going down. The fly to quality is absent, the question is: how long?. The S & P is almost reaching its target at 1,228 points. I am wondering which could be the effect in the markets if a debt crisis begin in Europe.

ATG daily chart: notice the positive divergence in the MACD. May be we could see a double bottom. 1.790 points is the critical pivot point.

ATG weekly chart:

Relationships between the different markets: notice how during the second semester of 2009 the negative correlation between the TNX (10-year treasury note index) and the ATG. In addition, the euro has become irrelevant with respect the SPX. It seems that there is no correlation between them.

Euro/Usd monthly: important support.

Euro/Usd weekly:

TNX daily chart:

Market Update

2010-04-13T00:32:00.000-03:00

Something in which I am thinking constantly is on the 10-year treasury notes yield. The ascent in the yield, is anticipating inflation, or economic rebound? I think that it is anticipating economic rebound. If you look at the gap between yields on the index-linked and conventional bonds, you will see that this narrow gap is not anticipating inflation.
In addition, sector rotation is holding the indexes. The past week it was energy stocks...before, financials. Let's see what happen with the earnings comings this week.

I think a correction is possible (or necessary) from this levels, but the rule have not changed: "buy the deeps" will be alive until the bears stops shorting all the corrections.
The VIX is something to worry for the bulls. It is making new lows, and looks like it is ready for a rebound. We know what happen when the VIX wakes-up in bad mood.

But, on the other hand, the Dow Jones Transports has confirmed the new highs in the rest of the indexes:

The euro looks like it is ready for a rebound. Look at the EURO/USD monthly chart:

FXE daily chart:

PFE: 16.8

2010-04-03T20:16:00.000-03:00

Notice the cross between the 200 EMA, the 200 SMA and the 38.2% fibonacci retracement.

PFE: update

2010-03-28T23:53:00.000-03:00

Price/(book value): 2.08

Annual EPS growth (last 3 years): 7 % / DEC/2009 (quarter) vs June/2009 (quarter): -13%

Revenue growth Dec/2009 vs Sep/2009: -51%

Dividend yield: 4.2%

GE - General Electric

2010-03-28T23:04:00.000-03:00

It has one of the lowest Price/book value of the DOW's companies.

The annual rate of growth in the EPS in the last 3 years is negative, -18%. (and it has decreased 53% from dec/2007 to dec/2009).

Total Debt to equity: 4.35. One of the highest of the DOW JONES.

Annual revenue growth (dec/2008 vs dec/2009): -14%. But from March/2009 to Dec/2009, revenue increased 8%.

Dividend yield: 2.5%.

Weekly chart:

Daily charts:

GOLD

2010-03-26T00:37:00.000-03:00

This is one of the elliot wave counts and patterns that I am following in Gold. May be this is a good risk-reward opportunity to go long on gold, considering that the US Dollar is at very high levels and (in my humble opinion) finishing the last impulse (wave 5).

Weekly chart:

Daily Chart:

C: Target reached

2010-03-25T19:19:00.000-03:00

Today C reached the objective of 4.34 (EMA 200). I have this tentative elliot structure in the intraday chart...

In the daily chart, this is the structure. Notice the divergences in the RSI. This divergence at least tell us that we should not go long here... but the EMA's tell that we should not go short too. The 200 daily EMA is the next resistance (4.34) . In addition huge volume today.

3 days frequency chart: notice the resistance in the 23.6 % fibonacci retracement (4.40)

Euro-Usd

2010-03-16T23:45:00.000-03:00

Yes, the signal it is not clear enough, but may be the next coming days we will understand. This could be more fuel to the market rally, (if it breaks the channel).

EURO-USD weekly chart - Fibo's:

EURO-USD daily chart - Fibo's:

Let's see what's happening in the FXE:

PFE: watch-list

2010-03-16T00:11:00.000-03:00

IWM: Bull

2010-03-15T00:20:00.000-03:00

Notice how the Russell 2000 broke the key resistance.... but we can expect a pullback this week. The target is 74.55. Amazing the rally of this index.

XOM: Update

2010-03-14T20:43:00.000-03:00

We had a buy signal some days ago. Look the interesting pattern that is developing. I am not sure but looking at the volume decreasing during the formation of the triangle and the break with relative high volume (a little high), I would guess that we have a change in the trend, at least in the short term. The target could be 71.5, where it is the 61.8% fibonacci retracement and where it fills the gap.
In addition I suggest to look in the previous post about XOM where there is a long term perspective for the stock.

Critical levels

2010-03-14T18:43:00.000-03:00

To continue with the previous post in which we measure the SPX in euro, we notice the critical resistance reached.

In the previous post on the S & P 500, we highlighted a down trend-line that was acting as a resistance. But this red down trend-line have been broken. Then, I think 1222 in S & P are possible, but respecting the trend-line from 1962 (green dotted line). The green trend line cross 1222 in October 2010.

Quarterly chart S & P 500:

DOW JONES: Fundamental Analysis

2010-03-14T01:14:00.000-03:00

During February and March, we have received the last balance sheets of the DOW JONES components. Using the statistics of Yahoo Finance and the information available in my broker, I made some relationships and comparisons between them. In addition, I compare the situation now and some periods ago.

First, lets take a look to the Current Price / Book value relationship. I am wondering why BA is so high, and the implications. AA, BAC, CVX, GE, DIS, JPM, KFT, T and TRV have good ratios.

Now, here we compare the beta of each stock. Notice that sectors like energy (XOM & CVX), consumer goods (KO, KFT, PG), Services (MCD & WMT), telecomunications (VZ & T) and drugs manufactures (PFE, MRK & JNJ) have the lowest. This are the "defensives" companies.

Now that we have some idea about how this companies could react to the crisis, let's take a look on how they reacted until now.

First, the revenues and the E.P.S.: MRK, T, PFE, MCD, PG, T, VZ and WMT were little affected.

The E.P.S. growth vs. dividend growth (annual rate, from January 2007 to December 2009). It is interesting to notice the growth in the EPS of MRK, but this growth is not in relationship with the growth in dividend. Then, I would consider that an increase of dividends in MRK is something possible. MCD, PG, PFE and KFT are some companies in the same situation as MRK.

Revenue year over year (2009 vs 2008) and quarter over quarter (DEC/2009 vs SEP/2009). Notice that revenues from BA, HPQ, JNJ,, MCD, MRK, TRV, PFE, T and VZ were not affected.

Average annual revenue, income and E.P.S. (2007 = 100%). I add up the revenue, income and E.P.S. of the 30 companies and divided by 30, to obtain an idea of this key numbers and their evolution during 2008 and 2009:

Average quarter revenue, income and E.P.S. (June 2009 = 100%):

DOW JONES: The bear case

2010-02-27T01:03:00.000-03:00

This rising wedge is something that is worrying me. The 200 daily exponential moving average is the key support (resistance in May 2009) and is the key point in which I definitely will wear the bear suit. Meanwhile, a trading range between 10.600 and 9.840. In addition, the US dollar in an uptrend is something that give power to the bears.

S & P 500: 1222 possible?

2010-02-21T13:20:00.001-03:00

This is one of the "road-maps" that I am following. It is possible?. Looking the previous posts, I think is something to be aware. I am not going short. The uptrend looks steady.

I think we can not go against the trend despite the apparent fallacy of the bull market.

I have been reading and listening a lot of reasons for the market to crash since Abril 2009. But the market does not listen to them. Then, I think them should listen to the market.

The fiscal tightening of China could be interpreted like something positive for the market, because it means that the economy is growing more than expected (!!!)

The systemic risk and the possibility of radical and political changes is something that were present in 2009 (and the market went UP UP UP).

Then, from the fundamentals, I think there is room for growth.

DAX in US Dollar

2010-02-20T23:40:00.000-03:00

Notice the down trend-line (white line) and the candlestick pattern (short term reversal, yellow circle). In addition, the index is below its 21 EMA (white line) for the first time since March 2009.

S & P 500 in euro: the soft bearish side

2010-02-20T21:18:00.000-03:00

Some people ask me why to look the S & P in euro. I think looking S&P in euro you can eliminate the effect in the charts caused by the depreciation/appreciation of the currency. I am from Argentina, and when Argentina depreciated its currency (the 'peso") in 2002, the financial markets went up because of the depreciation effect. Then, in USA, the depreciation/appreciation of the US dollar is something that have a big impact in the SP500. Looking the SP500 in euro you change the US dollar fluctuation by the euro fluctuation, and then you have another valid and original view of the index. You can find for example which % of the ups and downs (or broken resistances / supports too) are caused by the currency fluctuation, additional targets, etc.

This chart does not looks bearish, but the target of the inverted head and shoulders have been reached.

Watchlist: Citigroup, Gold & XOM

2010-02-17T09:44:00.000-03:00

These are some securities that I am following. The bull US dollar is something to worry (it is not good going against the US dollar now, buying stocks), but I think that the bull US dollar is a sign of weakness on the euro, rather than weakness in commodities and stocks.

Citigroup: wating for the breakup of the down trendline (with volume)

C daily:

GLD: a good buy could be 107 USD

$GOLD daily:

GLD hourly:

XOM: down trendline broken. Refer to older post in order to look up for other timeframes charts.

XOM hourly:

S & P 500 in US euros: bullish signs

2010-02-13T01:18:00.000-03:00

Notice the bullish divergence in the slow stochastics. In addition, the EMA's are still pointing up and the trendline is intact. I am not bearish.

XOM

2010-02-09T22:53:00.000-03:00

It is difficult to imagine the market making new lows after this pattern in XOM.... but the trend is your friend. And mine.

S & P 500 in US dollars: supports and MA's

2010-02-08T00:36:00.000-03:00

SLV: distribution with Head and shoulders?

2010-02-06T02:12:00.000-03:00

Volume: As the Head and Shoulders pattern unfolds, volume plays an important role in confirmation. Volume can be measured as an indicator (OBV, Chaikin Money Flow) or simply by analyzing volume levels. Ideally, but not always, volume during the advance of the left shoulder should be higher than during the advance of the head. This decrease in volume and the new high of the head, together, serve as a warning sign. The next warning sign comes when volume increases on the decline from the peak of the head. Final confirmation comes when volume further increases during the decline of the right shoulder.

To learn more on this pattern, click here