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Opinion (155)

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Enjoy The Holiday Season

U.S. markets will close early tomorrow, Christmas Eve and remain closed on Christmas day.  Regular trading will return on Friday although who's really going to be around?  Not me.  Even though it's a holiday week though, I will still be charting in the background (mental health time) so check back when you find spare moments and checkout our "Charts" section for new setups. See you back here full time next Monday.

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Admin

The Big Market Squeeze

Volatility definitely increased leading up to this weeks quadruple witching and the S&P (400, 500 and 600) index re-balancing taking place tonight after the close.  Selling the last two weeks resulted in oversold conditions in the near term charts and massive short covering at the market as every fund and investment bank bought new shares (as they rebalanced ahead of the indexes), resulted in two astounding days of back to back two percent gains.  Bulls were partying in the streets but is it warranted?   Has anything truly changed? 

Yes, the Fed has reassured…

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After hearing one analyst commenting that lower prices at the pump would translate into increased oil demand, I had to open up the commentary notepad.  (click on charts to enlarge)

The first thing that immediately came to mind was the rising costs elsewhere in Americans pocketbooks that would take up the slack of lower gasoline prices, such as rent.  Social Security recipients for example will see an increase of 1.9% in 2015 however this is no where on pace with the increases in average rents which continue to climb.  In fact, how about a rent increase of 6.9% in November according to Trulia?  Ouch!

Indeed incomes, when adjusted for inflation, have definitely not kept pace since 2000. (chart…

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Admin

Gotta Love It - Ted Cruz Edition

Once is a great while you come across a blogger who takes a subject in the limelight, such as Ted Cruz's ridiculous tweet today on Net Neutrality, and he proceeds to absolutely NAIL it explaining why he's wrong in such a way, that even a 5th grader can understand it. 

It's gone viral on Facebook and the comments continue to fly in.  Nice effort on Cruz's part to get the 'uninformed' and 'Obama haters' to turn against Net Neutrality without even knowing why..........because Cruz says so!  He has, after all, recently issed a comic book entitled "Ted Cruz Saves America".  *LOL*  This is classic.  Read on.…

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Admin

Are Profit Margins Sustainable: RBC

Stock markets have enjoyed a banner half-decade, forcefully reclaiming the ground lost to the financial crisis, and then some. This vigorous performance has occurred thanks, above all else, to two key enablers: surging earnings and recovering valuations. On the surface, there is nothing especially questionable about either. Earnings naturally rise as economies grow, and valuations recover as risk aversion fades.

However, a closer examination reveals a significant vulnerability within this cozy equation. Corporate earnings growth has been, in a sense, too good – persistently outpacing both revenues and the economy. This has driven profit margins to multi-decade highs.

Worryingly, profit margins have long been assumed to be mean-reverting, arguing that these juicy gains may…

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Admin

Is It A Correction Or Bear Market?

“Is the S&P in a correction or Bear market Mom?” is the question I received from my daughter last night. She’s been learning the stock market slowly over the last five or so years and I cringe at times with the questions she poses however no question is a bad question. I’d rather she come to me than blindly follow some pundit or supposed guru to $99/month subscription. After all, if he/she is so smart – why do they even need to charge for anything?  Just sit back and enjoy the wealth.

While the big boys and their algorithms have their calculated strategy, this is how I explained it to her in my simple, 'laywomans' terms.  In my mind big money typically buys at major supports during a correction. They sit back and salivate at an opportunity to, not buy the dip, buy buy on the cheap and define their risk.

For me, I consider the monthly 20 SMA as you can see from my prior post on the subject…

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Admin

Roasted NFLX

You mean when you raise prices, it affects subscriber levels?  No one told Reed Hastings and nor did he forewarn the market of the drop which was coming.  NFLX already has streaming competition from HBO (TWC) and talk is being bandied about that CBS will be joining that pool along side AMZN and others and well, it all equals = more competition.  NFLX is no longer 'unique'.  Yes I am short this pos based off the technical divergences on the daily chart.  Burnt popcorn anyone?…

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Admin

Headlines And Risk Appetite

Very quickly some morning headlines.  While a few of the geopolitical risk headlines may be behind us (Brazil election, Russian border, etc) I believe markets are waiting for this quarters earnings (and guidance) to set the stage.  Multi-nationals with exposure overseas may struggle going forward if one believes the headlines below:

  • IMF revises and raises growth for the US BUT lowers prospects for the world (4.0 to 3.0%)
  • IMF says some valuations are "frothy"
  • SODA warns of miss and citing lower US demand (stick a fork in it)
  • Women's apparel mfgr CBK warns of lower sales; blames low mall traffic.
  • Hong Kong retailers experience sharp sales decline (blames protests of course because happy people would be spending)
  • AGCO cuts forecast, shares down 6% premarket
  • Taiwan's exports growth…

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Admin

Looking Back At The Market

The ECB left its key lending rates at record low levels, and the four-week moving average for initial claims is at an eight-year low.  That sounds like a pretty good setup for a stock market that worries about earnings prospects tied to a stronger dollar, loves the thought of central bank policy rates holding near the zero bound, and is anxious to see evidence the U.S. economy is gaining momentum.

Despite the setup, it has been a swing and a miss so far for the stock market, which has once again been greeted with steady, and broad-based, selling pressure.

ECB President Mario Draghi is getting a lot of blame for the disappointing price action based on reports that his presentation regarding the ECB's asset-backed securities purchase program was lacking and the…

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Admin

Open Mouth - Insert Size Nine

The odds of any weather forecast predicting rain in the Dallas-Fort Worth area of Texas are heavily skewed in favor of the naysayers any given time of year.   

We live with 0-20% humidity daily; a far cry from the Chicago of which I was accustomed for 50 years.  Down here arthritis pain, or I should say inflation due to humidity or cold, is a distant memory (thank goodness).

So one becomes the Rodney Dangerfield heckler in the crowd when the weatherman, or weather[dot]com for that matter, forecasts rain.  You plow ahead and plan that birthday BBQ or soccer game anyway.  You wash the car and exterior windows of the house in full anticipation that once again, the rain will evaporate before ever hitting the ground once more.  Rain is seldom, welcomed and evaporates quickly.  Welcome to DFW.

Yesterday was such a day as I monitored weather[dot]com’s radar map and posted to my old Chicago friends on Facebook “it looks as though…

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Admin

Putting The Hong Kong Protests In Context

Pro-democracy protesters in Hong Kong have set a Wednesday deadline for a response from the government to meet their demands for reforms, threatening wider actions if Hong Kong's top leader does not meet with them.  Reports are that the protestors were considering various options, including widening the protests, pushing for a labor strike and possibly occupying a government building if the deadline is not met.

The protesters want a reversal of a decision by China's government in August that a pro-Beijing panel will screen all candidates in the territory's first direct elections, scheduled for 2017 — a move they view as reneging on a promise that the chief executive will be chosen through "universal suffrage."

The Economist…

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Admin

Talk Of Softbank-4-Dreamworks

Having recommended DWA long earlier this month, I was thrilled to see this headline today.  Now we're beginning to see what Softbank will do with a portion of their profits from the Alibaba ($BABA) investment after their IPO last week.

According to Hollywood Reporter, Japanese conglomerate SoftBank is in talks to acquire DreamWorks Animation in a deal that would value the company at $3.4 billion, according to a source with knowledge of the situation. 

SoftBank has been in the news lately because of its $20 million investment…

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Admin

The Bulls Push Back

Just when the (last few remaining) bears were enjoying some market wide liquidation, China apparently launched some stealth QE of their own reversing AUD/JPY and sending markets plowing over weak bears.  From Bloomberg:

  • CHINA’S PBOC STARTS 500B YUAN SLF TODAY, SINA.COM SAYS
  • PBOC PROVIDES 500B YUAN LIQUIDITY TO CHINA’S TOP 5 BANKS: SINA
  • PBOC PROVIDES 100B YUAN TO EACH BANK TODAY, TOMORROW WITH DURATION OF 3 MONTHS: SINA

According to Government Sachs

"This amount is roughly the same as a 50 bps cut to RRR for the whole banking system on a static basis.  Still, such an easing would be consistent with our expectation that…

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Admin

If The Scots Divorce, It Could Easily Bode For More

Polls released this week showed for the first time that a majority – an extremely small majority, but a majority nonetheless – of Scots favor independence, although other polls suggest the no camp remains in the lead. A poll is not the election, which will be held Sept. 18, but it is still a warning that something extraordinary might happen very soon. The political union between Scotland and England might be abolished after 300 years. The implications of this are enormous and generally ignored.

Obviously, this raises a host of question about how such a divorce might take place, whether the expected time frame – divorce by 2016 – will be adhered to, and how state property might be divided. It also raises the question of Scottish foreign policy. Will Scotland remain in NATO? Will it have membership…

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Admin

Down Days Happen

On down days such as this, one could easily assume some profits are being taken ahead of the Alibaba IPO the third week of September.  Some will look for signs of a market top (as they nervously do each day).  We could also sit and ponder if the dollar strength is weighing or over seas tensions are bothering the market but in truth, it doesn't matter.

Best thing to do is to check your stops, adjust as necessary and take note of just "who" is holding up amongst the selling.  I'm not referring sectors per se or to laggards or beaten up names, but what one could consider leaders with more "room to run" and not being sold first by finds. Funds, after all, know more than we do.

Better to explain it, those who may be seeing selling BUT are stil holding up (green) as eager…

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