Spot and Trade Institutional Money Moves

Algorithmic Trading with Human Interaction for:

Day Traders, Swing Traders, Long-Term Investors

Tuesday, September 28, 2010

Stock Market Growth Despite of Weak Consumer Confidence

The economy is more solid and progressing than the media is telling us.

Tuesday September 28, 2010.

This morning, the consumer confidence index was reported at 48.5 in September from a downwardly revised 53.2 in August. Economists had expected the index to edge down to 53.0 from the 53.5 originally reported for the previous month. But over the course of the day the markets quickly recovered and finished positive. Why is that?

Consumer confidence is no more an issue the economy take serious. Corporations make solid earnings while unemployment is in the mind of the consumer, even so they have a job. The cash that is generated by US corporations is used for M&A activities that happen either outside the United States or lead to consolidation, where more jobs get eliminated than produced. (Please see our market report form yesterday). If you check out prior reports we often stated that Europe is already used to a good economy that is not producing jobs since 30 years.

Before the start of trading, Standard & Poor's released a separate report showing that its S&P/Case-Shiller 20-City Composite Home Price Index increased at an annual rate of 3.2 percent in July compared to a 4.2 percent increase in June. The index had been expected to increase at an annual rate of about 3.3 percent. Meanwhile, S&P said that the 20-City Composite Home Price Index rose 0.6 percent on a monthly basis in July, reflecting month-over-month increases in twelve out of the twenty metropolitan areas. Surely we know that the real estate market is by far not anywhere where it was, but it is up to last year and we are progressing. The media sure tell you different, but if you like just check companies performance of key builders like HOV, PHM or building machine producers CAT and you might see the difference to what the media is telling you.

To fuel the idea of solid corporate earnings: Walgreen (WAG), posted a strong gain after reporting fourth quarter earnings of $0.49 per share on revenues of $16.9 billion. Analysts had expected the company to earn $0.44 per share on revenues of $16.84 billion.

Skeptical people always come up with bad news like: did you see Research in Motion (RIMM) who are currently down by 3.6 Percent. We answer yes, but did you see the AAPL share progressing by 50% with the launch of iPhones and the iPad. In respect to that, a 3.6% revenue drop of a key competitor is nothing and RIMM even has a copy of the iPad to be launched, which will help to develop the small tablet PC market to the next stage.

A weaker Dollar and a potential buy back of bonds by the Fed will lead to a higher amount of floating dollars which we assume that we continue to see rising stock markets, commodities and bonds/notes.

Why do bonds and notes increase in value, do they not usually go down when the stock markets go up? Usually they do, but not in a case where there is an artificial demand by the Fed which will keep prices higher for a while.

Monday, September 27, 2010

Is the Economy Good or Bad

Based on corporate earnings we report that the economy is better than the news tell us.
Corporate profits are high and we are coming into the next season of sustainable high profits that will rain down on the market. When we go back to a P/E ratio evaluation, many companies are relatively cheap and in that case easy to acquire. This is what triggers M&A activities of key companies in the world. The most recent news are:

Wal-Mart (WMT) revealed a bid to acquire South African Massmart Holdings Ltd. for roughly $4.25 billion or $21.13 per share. Massmart is a leading African retailer of general merchandise, home improvement equipment and supplies.

Southwest Airlines Co. (LUV) also announced that it entered an agreement to acquire AirTran Holdings Inc. (AAI) for approximately $1.4 billion, including debt.

Unilever PLC (UL) announced a definitive deal to acquire U.S.-based Alberto-Culver Co. (ACV) for $3.7 billion in cash. Unilever expects the acquisition to be accretive to earnings in the first full year, excluding restructuring costs.

Some more good earnings reports:

Cal-Maine Foods Inc.'s (CALM) reported first-quarter net income of $4.76 million or $0.20 per share compared with a loss of $3.83 million or $0.16 per share in the same period last year. On average, analysts expected loss per share of $0.07 for the quarter. Net sales for the quarter came in at $190.4 million, just above expectations for $190.08 million.

Hence, the economy is not bad but does not produce the jobs expected. Many of the key US companies report profits ahead of many of the prior 5 years but were not able to top their best year ever when the economy was labeled: good.

So what do we expect for the market: Nervous continued rallies up with downslides at jobless claim reports. Let us watch out for Thursday this week: 8:30 a.m. – and we recommend not to be to heavy in the market at that day.

Stock and Financial Market News Events for the Week of Sept. 27, 2010

This week we will test if key economic data backup the recent market rally:

Wednesday, September 15, 2010

Stock Market: Are We Breaking To The Upside?

There are not many days to experience the stock market going up, together with Bonds and Notes – and on top of it: Gold makes a new all time high.

What triggered this event?

Yesterday, rumors swirled that the Federal Reserve is considering buying as much as $1 trillion in U.S. bonds to support the economy.

That’s an over dimensional sum of money and such a purchase would have drastic effects on the economy and the overall markets. By making paper holders cash holders, this measure would bring a huge amount of money in the market that afterwards has to get invested somewhere. So where is it gone go and what will happen, let us use easy supply and demand rules:

• the stock market will surge by more money floating that will be put to work,

• the dollar will get weaker, because we have more dollars floating,

• commodities will rise because the dollar is getting weak and we purchase those in USD.

In the last two days, we had a hug increase in Volume of Stock market Indexes and their referring puts and calls, while more calls got issued. Overnight, the bank of Japan intervened to stop the continues rising of the Yen, which makes their exports less attractive. But why does the Yen rise? Because the dollar is on a fall.

Everybody who was waiting for the stock markets t the fall of the cliff better changes position now. From our perspective we will see rising indexes first.

If you are shaking your head in disagreement after reading the last sentence, you are probably someone who believes we are going to see a double dip in the stock market. Your prediction could be right in the long run, but there is no way in the short term such a large bond purchase wouldn’t have these 3 results. The Fed would do this to stimulate the economy and there is no way a trillion dollars wouldn’t succeed, at least temporarily.

Just take a look at what yesterday’s, September 14, 2010 rumors did :

• The dollar traded to lows not seen against the Japanese yen since 1995

• The dollar dropped to parity with the Swiss Franc

• The dollar dropped 1% against the Euro

• Gold hit an all time high of $1,276.50

• Bonds went up in anticipation of a move.

• Japan intervened on the Yen.

Good trading !

Sunday, September 12, 2010

Stock Markets: News Events for the Week of September 13, 2010

The week to come will be a key week to determine if the stock markets can stay on their current uptrend or get challenged for a potential retracement.

So far we have not seen a big money flow into stocks and by that the reached levels of the market indexes seem to be a bit fragile. Tuesday, Wednesday and Thursday prior to market opening we will see if the current direction gets confirmed or reverted.

Our suggestion, stay out of the market at the red highlighted times.

Monday, September 6, 2010

Weekly Options Explained

Just recently, weekly options got introduced and we received multiple questions from our students and members. Let us give you a brief explanation.

• They offer a short term trading opportunity with less premium to pay.

• Weekly options are only available for selected securities (we list them for you).

• Weekly options are issued on a Thursday and expire the following Friday.

• They are not yet as liquid as Monthly options.

• In the week of Options Expiration, no weekly options will be posted.

• For option traders they offer additional opportunities for calendar spreads.

Here is the current list of weekly options available:

Not all of the listed Options fulfill the NeverLossTrading criteria’s.

News Events for the Week of September 6, 2010

Last week we saw the following picture:
  • Strong finish of the stock markets,
  • Strong finish of key commodities
  • Retracement in Bonds and Notes.
This week, Wednesday and Thursday will be the focal days to validate last week’s positive interpretaions of the overall economy.