Friday, October 21, 2016
Joined Dec 4, 2012
222 Blog Posts

Follow-up On Several Items & Randoms Thoughts :Why A Hillary Presidency Is a Good Not Bad Thing


Every once in a while I like to look back on what I have written over the past couple of months to see how things are playing out. So here is a quick summary and some new thoughts.

1.On September 30th, I noted that I thought Carter Worth’s comments would mark a low in the price of Deutsche Bank (DB). He was calling for it to go to $0 on the 29th when it closed at $11.48. DB closed at $13.09 and is now at $13.43. I expect it to see $15 in short order. So Carter is indeed worthless. Why do I mention this today? Because he is trash talking the market this afternoon on CNBC. It is a guarantee we go higher from here.

2.On September 27th, I noted that the selling in the overall market, S&P 500 would stop. SPY closed at $215.57. It ran to a high of $216.16 before the recent pullback to $213.12. We are getting  close to the bottom of this down move when I review my various models. More on this early next week. Do not worry the world is not going to end.

3.On September 19th we noted that playing a short squeeze just to play a short squeeze is just a dumb idea. Witness Novavax (NVAX) that fell from $8.34 to $1.29. Rather play short squeezes where the shorts lose money time and again. On October 5th, Alnylam Pharmaceuticals (ALNY) fell from $70.30 to $36.21. Many had played this as a short squeeze without looking to see that the shorts did a good job of making money on this name.

4.On September 9th, we noted not to panic. The market bottomed on September 14th rising 2.36% by September 22nd.

New thoughts:

1.A Hillary Clinton presidency is a good, not a bad thing. Why? If you read her Wikileaks emails, she is much more moderate than the liberals want. If you are a Republican, like I am, who cannot stomach Trump, then this is a welcome relief. If you are a liberal and upset, then are you going to vote for Trump? I do not think so.

You may not like Hillary but she will be fine because her husband was the last Republican President once he went to the center in the mid terms of his first term. Remember Slick Willie passed the biggest tax cut in U.S. history, the exemption on capital gains for selling a house, $250,000 if single and $500,000 if married. President George W. Bush was a Keynesian, just like his father who never believed in Supply Side Economics, and let the deficit balloon so he was not a Republican.

2.The lunar cycle peaks tomorrow and markets could rally next week as we also have a options expiration. October options expiration from 2005 have seen 7 weeks moving higher and 4 weeks moving lower. Losing years were 2005,2007, 2008 and 2014. Clearly, 2007 and 2008 were driven by market meltdowns. So effectively only 2005 and 2014 were losing weeks unrelated to market conditions. The S&P 500 has been lower for the past two weeks so a rebound is not out of the question and is to be expected. More on the pin action over the weekend.

Enjoy the weekend, a Badger victory over Urban Meyer and the Hunter’s Moon!


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Carter Worthless

carter worthless

I saw yesterday that The Fly posted the video of Carter Worth aka “Carter Worthless” trash talking Deutsche Bank ($DB), saying it could go to $0. I knew that was a HUGE buy signal on this stock. Carter is not only worthless but dangerous. Then again, he is awesome if you fade him.

The problem with technical analysts is they always want to buy at a top and sell at a low. The problem with that is investors are conditioned to sell at a top and buy at a bottom. Never the two shall meet. The best technical analysts I know try to buy as the base ends and a name improves. Likewise sell a broad based top that begins to fade.

Back to Worthless and others like him, and there are many of which several reside on CNBC, they sound smart in how they present. Seems like they know how the game is played yet their analysis is based on their gut and not a rigid process that is repeated time and again.

The one thing I respect The Fly for is creating Exodus. Stick with analysts and pundits that have a rigorous quantitative process and fade those that put their finger to the wind.

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The Selling Stops Today


Why does the selling stop today? Very simple. Today is the last day for a trade to settle in September, T+3.

September is the month that the mutual funds do their tax selling. Most end their fiscal year in September. As such, they sell their dogs in September. So the selling is complete. Watch to see how $GILD and $BMY trade from here. It should improve as they were down -20% and -19%.

It was funny to see several well known analysts and media pundits recommend these names in September. They should know better.

Through 9/2 there were 4,586 stocks higher and 1,963 were lower which did not make this a huge year for tax selling. However, it was enough to cause September to be sideways to slightly lower, -1.14% through yesterday.

In my opinion, stocks to focus on for the rest of the year are stocks that are basing with heavy short interest where the short rarely make money with good fundamentals. Shorts in these names will get their faces ripped off by the dreaded Q4 Rally that materializes every year and as produced double digit gains in 2013,2014 and 2015.

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The Week Ahead A Busy One


1. Geopolitical Events. On Monday Federal Reserve Dallas President Rob Kaplan speaks at 1:30 p.m. EDT, and Minneapolis President Neel Kashkari speaks with no specific time. He gives the opening remarks at the “Too Big To Fail” Conference. Also on Monday OPEC holds an informal meeting in Algiers that lasts several days, and on Monday night the first Presidential Debate takes place. On Tuesday Federal Reserve Vice Chairman Stanley Fisher speaks at 11:15 a.m. EDT, and Federal Reserve Chicago President Charles Evans speaks at 1:30 p.m. EDT. On Wednesday Federal Reserve Chairman Yellen testifies before the House on bank supervision and financial market rules. Also on Wednesday Federal Reserve Regional Presidents Kashkari (8:45 a.m. EDT) Bullard (10:00 a.m. EDT), Mester (4:35 p.m. EDT) and George (7:15 p.m. EDT) speak. On Thursday Federal Reserve Atlanta President Lockhart speaks at 8:50 a.m. EDT, followed by Federal Reserve Chairman Yellen and then Federal Reserve Kansas City President Esther George at 4:15 p.m. EDT. The week concludes with the Congress having a deadline to pass a stopgap spending bill.

2. Economic Releases. Releases of note this week include the weekly chain store sales, oil/gas numbers, mortgage applications and new home sales, consumer confidence, durable goods, Q2 GDP, personal income, Chicago PMI and Michigan Sentiment.

3. Earnings Releases. Notable releases include CCL MTN NKE CTAS PAYX BBRY PEP CAN COST MKC.

Monday, September 26:

  • European Central Bank President Mario Draghi speaks to the European Parliament.

  • August New Home Sales are due out at 10:00 a.m. EDT and are expected to fall to 595,000 from 654,000.

  • OPEC holds an informal meeting in Algiers that runs through Wednesday.

  • The first Presidential Debate between Hillary Clinton and Donald Trump takes places at 9:00 p.m. EDT.

  • The latest NYSE and NASDAQ Short Interest is due out after the close and was compiled through September 15th settlement.

  • The Bank of Japan (BOJ) releases its latest minutes.

Tuesday, September 27:

  • September Consumer Confidence is due out at 10:00 a.m. EDT and is expected to fall to 98.8 from 101.10.

  • Federal Reserve Vice Chairman Stanley Fisher speaks at 11:15 a.m. EDT.

Wednesday, September 28:

  • Federal Reserve Chairman Yellen testifies before the House on bank supervision and financial market rules.

  • August Durable Goods are due out at 8:30 am. EDT and are expected to fall 10 -1/9% from 4.4%.

Thursday, September 29:

  • Wells Fargo (WFC) CEO John Stumpf appears before the House Banking Committee to answer questions about the bank’s account scandal. 

  • Q2 GDP (final) is due out at 8:30 a.m. EDT and is expected to rise to 1.2% from 1.1%.

  • Federal Reserve Chairman Janet Yellen speaks at 4:00 p.m. EDT.

Friday, September 30:

  • August Personal Income is due out and expected fall to 0.2% from 0.4%.

  • September Chicago PMI is due out at 9:45 a.m. EDT and is expected to rise to 52 from 51.5.

  • September Michigan Sentiment is due out at 10:00 a.m. EDT and is expected to rise to 90 from 89.8.

  • Congress faces a deadline to pass a stopgap spending bill before October 1st.

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$NVAX Falls -84.59% Friday, So Much For The Short Squeeze


Today we are going to write about the infamous short squeeze. Too often investors and speculators try and use the potential for a short squeeze incorrectly.

First, It makes no sense to buy a stock just because it is in a short squeeze. Contrary to what the media may report to you this is often a loser’s game. For years, I recommended stocks that were in short squeezes just because they were in a short squeeze.  That was the extent of how far our research went. That ended two years ago with a big advance in the research.

Why? Simply we created the ability to track how short sellers do each time they heavily short shares, which is very cool. No longer will I recommend a short squeeze without looking to see how the shorts have done historically.

If the shorts have a good batting average of making money, greater than 50%, when heavily shorted, then I will not recommend the name when it is in a short squeeze. Second, if the shorts have a batting average of less than 50% but they have made big money several times when it was heavily shorted, then I will not buy the name either. There is no reason to put yourself in harm’s way when we have 6500 stocks to potentially recommend as a long.

So a natural question is how do I determine when the short selling is heavy? Simply we look at the range of the short ratio over time. If the short ratio is the highest it has been in 5 years, then we say the short intensity is at 100%. My definition of heavy short selling is when the short intensity is above 80%. We then track it until it drops below 50%. We also track moderate short selling, above 50%. However, the sweet spot is heavy short selling. Now onto the good stuff and what happened Friday.

Earlier last week, I noted that Novavax ($NVAX) was heavily shorted again to some clients and prospects. Short sellers have made money 10 of 12 times when the short intensity level rose above 80% until the time it dropped below 50%.

When the shorts have a high batting average we assign a Heavy Grade on the Short Intensity of 5. Clearly, this name had a Heavy Grade of 5.

The first time that short sellers bet against it was in 1996 and they made 15%. The next time they shorted they pocketed 57%. For shorts this has been soak, wash, rinse and repeat time and again.


The average return for the shorts in this name when correct is 32.18%. Shorts made money 10 times when they shorted Novavax, so their batting average was 83%. 2 times they were squeezed and the longs made 20.78%.

With this type of history, why would someone try to play this from the long side when the shorts were pressing the stock? I do not know. Just remember the definition of insanity is doing the same thing over and over again with the expectation of different results.

But clearly, many of those long thought they were smarter than the shorts. Once again they were proved wrong  on Friday as the stock fell by -84%. That is not an error, yes it fell by -84%.


Many big firms owned the stock according to recent filings.  The largest holder was Fidelity.


As I talked to one of these holders on Friday, they told me that despite us being able to predict when such a drop was coming, they did not care to know about this data. It did not enter into their equation. They were fundamental in nature and this data would never enter into their buy or sell decision.

We like to follow the progression of data to information to knowledge. Data that is turned into information and then into knowledge seems worth knowing about. That is what we have done with short interest. Short interest is the data. The short intensity is the information. The Heavy Short Intensity Grade is the knowledge.

The ironic thing is that this knowledge is derived from fundamental analysis by short sellers. There are many other stocks in the biotech space that are vulnerable to a similar fate and we will be writing about some of them in the not to distant future.

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The Week Ahead: Lots Of Central Bank Action, Starts Today


1. Geopolitical Events. On Monday Japanese Prime Minister Abe speaks. On Tuesday President Obama will address the United Nations General Assembly. On Wednesday the FOMC and BOJ announce their latest interest rate decisions. On Thursday ECB Head Mario Draghi speak. The week concludes with the President’s Panel at the Philadelphia Federal Reserve.

2. Economic Releases. Releases of note this week include the weekly chain store sales, oil/gas numbers, mortgage applications and housing starts, existing home sales and leading indicators.

3. Earnings Releases. Notable releases include ASNA ADBE FDX LEN GIS RHT KMX CCL AZO FINL.

Monday, September 19:

Markets in Japan are closed for trading but Japan’s Prime Minister Shinzo Abe speaks in New York in a key speech.

Minutes from the Reserve Bank of Australia (RBA) are due out.

Tuesday, September 20:

Wells Fargo (WFC) CEO John Stumpf appears before the Senate Banking Committee to answer questions about questionable actions by the bank.

President Obama speaks to the United Nations General Assembly.

The Federal Reserve Open Market Committee (FOMC) begins a two day meeting.

August Housing Starts are due out at 8:30 a.m. EDT and are expected to fall to 1,190,000 from 1.211,000.

Wednesday, September 21:

The Federal Reserve Open Market Committee (FOMC) concludes a two day meeting and is expected to leave interest rates unchanged. Press conference to follow at 2:30 p.m. EDT with Federal Reserve Chairman Janet Yellen.

Overnight The Bank of Japan is out with its latest interest rate decision.

Thursday, September 22:

European Central Bank (ECB) President Mario Draghi speaks to the European Systemic Risk Board Conference.

August Existing Home Sales are due out at 10:00 a.m. EDT and are expected to rise to 5,475,000 from 5.390,000.

Also at 10:00 a.m. EDT, August Leading Indicators are due out and are expected to drop to 0.1% from 0.4%

Friday, September 23:

Several Federal Reserve Regional Presidents speak at the President’s Perspective Panel at the Philadelphia Federal Reserve.

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The Key To Today …Is Not To Panic

howard beale

The Media is all excited as the S&P 500 was down a bit more than -1%. Now it is down -0.94%.  It is early in the trading day and I would like to make the following points.

1.On 7/5 the S&P lost -0.68%. On 8/2 lost -0.64%.  On 8/16 lost -0.55%.  On 8/24 lost -0.52%.

2.On each of those days the advance/decline line finished at -2723, -3,042, -2,220 ans -2,145.

3.So far today the advance/decline is at -3,952.

Therefore, today is pretty nasty so far…but I repeat it is early and we need to see if the buy the dip buyer emerges in the afternoon. Also, key a bottom that materializes by 10:30/11:00.

On days like this some perspective is needed. My oversold indicator is at 27 and usually this marks a low when it rises back above 30. The last time we got below this level was on the Brexit puke and that was a great buying opportunity. I will alert all here when that happens.

Maybe a test of 2150 has to happen before a bottom is in. Maybe not. Currently, we are 9 points away from that.

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The Week That Was, The Most Hated Rally Continues

buzz lightyear

The week that was saw choppy action. The S&P 500 rose 0.05%. Monday was lower then Tuesday was higher. Wednesday was the worst day of the week dropping -0.29%. Thursday was the best day gaining 0.47%. Friday was lower.

The last time the S&P 500 move greater than +/-1% was on July 8th. As such, we are setting up for another such move. There have been 37 such days in 2016 but only one in July and none so far this month. Oh where oh where did volatility go?

Winners for the week were Conglomerates rising 3.3% and Services up 1.3%. Healthcare fell -08% for the week.

For the week stock indexes were mixed across the board. The S&P 500 rose 0.05%. The Russell 2000 fell -0.12%.

Each week I track the spread between stocks with a strong technical rank and those with a poor technical rank. Stocks with strong relative strength rose on average rose 1.34% and those with a weak relative strength rose at a slower rate 0.96%. The conclusion is that investors are not selling recent winners but letting them run. Moreover, buying weakness worked this past week and trying to short them did not.

Intraday action was all over the place this past week. Our confidence score on the intraday action was 51% after a strong week last week of 56%. The range is typically between 10% and 90%. On a intraday basis the Dow, S&P 500 and Russell 2000 have been higher for eight consecutive weeks. Pretty impressive.

For the month sectors in the red are Utilities, Energy and Materials. For the past three and six months, no sectors are lower.

The big worry for this week is whether profit taking take place as traditionally August is a tough month for stocks. So far, so good.

The week ahead sees economic data released for CPI, housing starts, industrial production, FOMC Minutes, leading indicator and Philadelphia Federal Reserve Manufacturing along with several weekly data releases like crude and natural gas inventories, jobless claims and mortgage applications.

Treasuries led by TLT rose 1.51%. Corporates led by LQD rose 1.06% while high yield led by HYG rose 0.90%.

Emerging markets (EEM) rose by 2.35% last week. Meanwhile, Europe (EFA) motored higher by 1.82%. China (FXI) also moved higher by 3.28%.

Conclusion: Investors continue to bid stocks higher especially outside the U.S. Failure to move above 2200 could bring 2100 into play.  The bottom line is the stock market is in the midst of the most hated rally in the history of the stock market where investors and professionals are both under invested as the fear of a repeat of 2007-2009 along with the upcoming election  has created a great deal of anxiety.

The stock market is in the midst of a “Buzz Lightyear Rally”, to infinity and beyond. Meanwhile, we remain with a bullish bias and are enjoying this move without much anxiety.

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Jackson Hole Is Now Moot


If  the July Retail Sales was another strong one, then yes the Federal Reserve Confab at Jackson Hole  could have been the Fed’s Waterloo. But it was not.

The fact is the July Retail Sales was anemic at best. The Federal Reserve cannot move with a data point like today’s retail number and who knows it may get revised in a month because IMO the data makes zero sense as the last several personal spending numbers do not validate this drop.

In fact, the chart below shows that personal spending just moved above personal income. A pretty interesting chart.

personal income and spending

Around 11:00 witness the Federal Reserve of New York cutting Q3 GDP to 2.4% from 2.6% and then closer to 12:00 the Atlanta cutting to 3.5% from 3.7%. Seems like they are in panic mode as well. But guess what, they can take some air out of the market so they will do it.

The best analysis of economic data I read day in and day out is Brian Wesbury of First Trust. I met Brian make in 1986 and have been a fan since I first met him. His commentary also is free and can be found on the First Trust website.

I am on the edge of my chair to what he says about today’s action. Once I know then I will post those thoughts here. Until then, have a great weekend.


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The Myth of Ramp Capital Part II


Yesterday I wrote about the 3:30-4:00 ramp.


Yesterday it was noted, “Since January, the best hours to own stocks are 11:00-12:00 and 12:00-1:00 when you track the Dow, S&P 500 and Russell 2000.  The chance of success here is 60% for both time periods. The next best period is 3:00-4:00. That batting average is down to 58%. It has been higher“.

In early trading today, the Dow/S&P 500/Russell 2000 sold off on the gap open. My definition of selling off is the opening print 9:30 to the close at 9:59. All three indexes were lower. Then we traded sideways from 10 to 11 with the ramp coming between 11 and 12.

If you knew that 11-12 is one of the two best hours year to date, then as you saw the move starting you would have the confidence to trade it. IWM moved 0.38% a nice move if you were able to play it. I did. Probably so did the HFT players.

There were several comments on why track hour by hour. The answer is simple. The HFT community starts new programs every hour on the hour. Personally, I think this is idiotic. It makes more sense to start a program when the intraday technicals indicate it is time to buy or sell.

Now we are at the beginning of the 1-2 time period which is the worst hour of the year statistically. As such, one should not expect much. Therefore, if we do move higher, then I would expect the rest of the day to have a positive bias. If we struggle, that is par for the course of 1-2.

Note one comment I made yesterday was that during the week of July 11-15 all three indexes struggled from 3-4 because they had made money earlier in the day and it was a big money week. If we get into the 3:00 hour  being up 15 or more points on the S&P 500 from 11 now, then Ramp Capital may not jam it to the upside from 3:30 t0 4:00. Especially with key several economic data points due out tomorrow.

The reason I model hours, days, weeks and months is that it gives me a perspective on what typically happens. Simply put this is a much better approach than guessing. Will not perfect, it does lead to a higher success rate.

The good thing about this piece is that come 4:00 you will know whether my analysis was useful or not.


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