6-14 Morning Update, CPI data out

Premarket futures were up, but when CPI data came out the gains were erased. At open of bell it seems like investors forgot about the CPI data (“inflation is up”, 100% chance of Fed hiking rates) and sent the indexes up, for example the Dow went up over 80 points in the first hour…

… this sort of action puzzled me. My guess is that the CPI news was foolishly ignored, and investors created their own “self-proclaimed reversal.” There’s a lot of sentiment out there that the market has bottomed out, and this time they’re putting money where their mouth is…

… this only makes it harder to trade.

Some stocks to watch:

Infosonics (IFO)- filled in gap this morning, and buying has surged sending stock up.

Versasun (VSE)- IPO today, listed at $23.00, opened at $28.00, and went as high as $30.75. This ethanol stock is getting expensive fast. I wouldn’t be surprised if this opening performance got a boost from Pacific Ethanol’s (PEIX) news sending all ethanol stocks up today.

Comments »

It’s tough to hold on to a trade all day to only see your profits get wiped out in less than 5 minutes on a false rally. I shorted TIE with the idea that the Dow would have a sell off at the end of the day. My take was that since the PPI announcement didn’t bring sweeping market changes, that investors would turn to cash at the end of the day ahead of tomorrow’s CPI announcement. Anyway, I covered my position at end of the day, not wanting to be affected my tomorrow’s gap.
… nevertheless, I’m still bearish on TIE. Depending on the next few days, I may have to adjust my trading range from $35 down to $30.

Comments »

The PPI news came out, but the mixed data was confusing to the market. The Dow is everywhere- Started down, rallied up, and now a cup and handle is forming by noon. The news today was important, but the CPI data that comes out tomorrow will be more influential. There are currently two scenarios for the rest of the day- market reads data as inflation friendly and thus perceive it will extend to CPI’s results, or market will once again exit on fear of the unkown. It’s quite tricky here since a lot of the downside is already priced in.

Stocks showing midday strength:

• ZOLT, sell off on low volume early in the day, but is rapidly recovering.
• TIE, although the buy-sell ratio is skewed heavily to the sell side (5:82)
• GLG, although gold continues to slide
• AAPL, one of the strongest stocks of the day.

Interestingly, the Dow, S&P, and Nasdaq have approached their highs of the day at noon. Still, the “high” is not so high (about +30 for Dow), so let’s hang around for a potential fall out to the red.

Comments »

Time: 2:26 AM Hawaii

Premarket Update:

Stocks Showing Weakness

• JBL– (best bid @ 26.5 x 2,100) / down 14% to $27.51 on lowered outlook / ugly chart
• GLG – down on gold commodity, GG is down 3%, SLW down 4.47%
• TIE– down 2.86% to $30.30/ Buy-to-sell ratio is 10:100!! / huge sell order 14,650 @ 30.50 = $446,825
• KRY – was up a few minutes ago, but now falling. 23:126 buy-to-sell ratio!
• DIGE- down 4.13% to $35.73 on Cramer’s bearish comments

Stocks Showing Strength

• NVAX– up 16.15% on no news, very unusual
• BBY– up 4.7% ahead of earnings conference call at 10 am ET.
• FRG– up 7% to $4.43

Gold

– fell hard in London to $587.00, but so far showing small signs of reversal in New York exchange. If trend moves upward, go long GG.

PPI

– “Core producer prices up more than expected… 12-month gain held steady at 1.5% increase, which could help temper inflation concerns.” Expect a small rally, but do not trust it. The CPI announcement is more important.

Comments »

There are a few important events on the economic calendar that are lining up this week:

• Tuesday 6/13 8:30 AM- Producer Price Index (PPI). This announcement, which measure prices of goods at wholesale level, will no doubt affect the sentiment of the important CPI announcement this Wednesday.
• Wednesday 6/14 8:30 AM- Consumer Price Index (CPI). The CPI is the most widely sited inflation indicator. There’s no coincidence that Bernanke kept inflation speak on the headlines today.

Get ready! The market will react. What I’m looking for is data that shows the market overreacted to the inflation news, which hopefully leads to a lot of “gapping up.” Don’t forget, options expire in two weeks, so if there is to be stock price manipulation (a theory I can’t ignore), it should happen right about now.

MARKET OUTLOOK 6-13-06… not so good

Gold Falls Below $600!

As I type this, gold has dropped overseas and is trading near low $590s. This will hurt metal stocks in the morning (GG, EZM, CUP, TIE, RTI etc.), but be prepared for an attempt to resurface above $600… and be prepared for an extended decline. More bad news for Gold– dollar is gaining on the Euro and Yen, making a hedge in gold against the dollar looking less desirable.

Japan Stock Market Plunges 4%

Rising interest rates in the U.S. will only hurt their importers… for example, Japan. Investing overseas has crossed my mind during this temporary bear market, but that idea seems to be fading fast. First India, now Japan… I don’t want to imagine what would happen here if China takes a hit next. Can you believe that Bernanke has the power to cause a global sell off?!

U.S. Soccer Team Loses to Czech, 3 – Nil

The market is doomed! Not the best indicator, but the U.S. is officially on a losing streak… Dow, Nasdaq, and soccer.

… so, I’m not optimistic at all with tomorrow’s market. It’s pretty ironic that the cause of the markets’ current fall out will be a potential catalyst to turn things around! Yup, investors will be looking for good inflation news with this month’s PPI and CPI data which comes out in the next two days.

Day Trading Strategy

I’m getting set to short more stocks on continued panic selling. There’s just too much negative news right now. Nevertheless, it won’t be easy for day traders. Once again, I’m keeping it simple, sort of:

• TIE, ERS, GG, EZM, ZOLT, CMVT, FNET shorting on any continued weakness.
• Cramer bullish on WCI, so I’ll be ready to short it
• Cramer bearish on TIVO & DIGE, so I’ll be ready to short these too
• Trade metal stocks according to metal commodities

Wow, I couldn’t find a single descent stock to go long. But the PPI data is the wildcard. If it’s good, the market will pick up and I’ll switch my positions.

Comments »

So, you think TIE is a bargain?

That’s what I thought. For the first time in a long time I was ready to buy a lot of stocks long. My biggest temptation was to load up on Titanium Metals (TIE) because I felt it was a bargain below $32.00. Then I realized I was being stupid. For no reason I just felt the market was going to turnaround on Tuesday (tomorrow). Now that it’s the end of the day, looking back, TIE was one of the worse performing stocks of the day. So, I ended up not buying, and decided to stick to my plan- trading TIE closer to $35.00.

If TIE shows weakness for the majority of the week, I’ll be prepared to short this stock down to $25.00. From these charts alone, TIE doesn’t look like a bargain, but ready to fall hard.

[Intraday 6-12-06]
For the past few days, whenever the Dow struggles, TIE will have a noticeable sell off at the end of the day. It seems less people want to hold this stock overnight, which means more people think TIE is dangerous to hold (TIE trades at 32 times earnings). In today’s example, TIE fell apart after crossing below $32.00.

[Chart 5-day]
A drop from $38.00 to $31.50 in four days may look like a bargain, but in this case, the failed rally on Thursday + the stock falling below Wednesday’s low makes this a risky long entry point. Usually when this happens investors give up on the stock- sell to break even, or sell to cut losses. And a lot of the shorts enter.

[Chart] 3 Months
Finally, in the medium term, TIE’s attempted rally is in serious threat. TIE is in much need of a earnings report, but when that day comes, it would be risky to hold long because anything short of a blowout quarter will be disappointing and prove this “32 times earnings” stock is overvalued. If this negative pattern continues, or the market does not rebound, TIE will be a stock that gets hit hard. There’s no support in this high flying stock, so the risk-to-reward ratio is not worth it during this uncertain market. If you must go long, wait until the inflation news goes away!

Comments »