iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,658 Blog Posts

Santa Ben Is Coming

You better be good, Santa Ben is coming to town.  Everybody have an excellent holiday.  Remember, the holidays are all about forgiveness.  Don’t forget to forgive yourself too.

http://youtu.be/2e5TYdNqJ8M

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Lets See Who Shows Up For Work Today

The early AM has seen prices in the S&P gently levitate after gapping down Sunday evening. After finding support near Friday’s low near 1418 the market has lifted over five handles and as of 9:15 AM is pricing an open within yesterday’s value area.

Key levels from Friday’s balance are the volume price of control at 1422.75 and the value area high and low at 1426.75 and 1416.25 respectively.  Below Friday’s low the next key area is last Monday’s value area low at 1415.75 and below there we want to see bulls holding last Monday’s low, otherwise they risk a quick blow to their confidence on this shortened trading day.  Taking out Monday’s lows, the lows of last week could set the tone for the week.

Keep an eye on the key levels from Friday for a cue on who make their way to market this Christmas eve:

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The Upper Middle Class Is Fucked

My second major theme for 2013 is that department stores all face serious headwinds, and are the most vulnerable industry.  Here’s a link to my first theme going into 2013.  Anyone who loves the stock market and has been dragged out shopping during the holiday season should love this piece.

First off, I never shop in department stores unless I’ve been dragged there by my girl.  What that means is when I’m there she’s shopping, I’m a pack mule for carrying cargo.  Mentally I’m completely removed from the shopping experience, instead diverting my mental capacity to investigation.  I look at the racks, what people are shopping for, ask for a manager and see how long it takes, and talking to employees about their sales goals.  This is old school channel checks, it’s incredibly subjective, and perhaps only a defense mechanism for my otherwise disdain for being dragged around town.  BUT, this year, I’m telling you as objective as I possibly can, volumes are down.

CASE IN POINT: Sephora.  This is one store where I can get concrete information.  Their store at The Somerset Collection, our best shopping center, and a top 10 grossing store nationally for the company, is missing their sales targets by nearly 10%.  They’re also over on their labor budget.  I consider the products they carry especially sensitive.  Ladies from the upper-middle class need makeup because, as Chuck Bennet so eloquently stated, without it they’ll “get no handbags.”  Women don’t bend the budget knee and give up their beauty products without a fight.  It’s the first in three years they haven’t blown their sales forecasts out.  Red flag.

The second force, the big chipper, the internet.  Yes of course I know department stores have a huge online presence, but they also have huge physical shops–full of expensive sales reps, nice warm air, shined floors, and well you get the picture–overhead.  Smart phones are more prevalent than last year and shopping on the go (read: at work) easier.  Out on the internet the competition is leaner, have better developers, and way more budget flexibility to advertise.  Department stores a losing online.

Finally, we’re going over the fiscal cliff. Whatever, WHATEVER the fuck that means.  Rest assured either by simply being more cognizant of the risk or the high likelihood of it’s occurrence, the upper-class expect higher taxes.  And they’re bitter in general.  They watch way too much news.  Cliff imagery.  Domestic Terrorists.  Doom’s day preppers.  NRA.  Careless citizens snapping pics of people moments before death by train.  Increased hurricane damage.  It’s all enough to BUY A GUN, at the least.  Suddenly, blowing money on RL over at M seems less important.  Why not go on EBAY and get a ten pack of polo shirts from Izod or APP?

With all this in mind, I took to the almighty PPT.  I was happy to receive thesis support instantly, Department Stores are the lowest ranked industry in the service sector.  Their January seasonality is 50/50 with an abysmal average return less than 1%.  Things perk up slightly in February, and March is downright bullish, seasonality speaking.  Here’s a very brief fundamental comparison:


According to these few fundamental comparisons, Sears obviously is getting their ass kicked.  Shorting shares of SHLD has been a well publicized trade, it has been a loser .  The stocks up nearly 30% this year.  Shorts could get their redemption this year.  But I see more vulnerability in the slightly higher end (but not too nice, remember upper-middle class).  Which makes me not want to short KSS, except investors may be ready to dump the shares after watching their modest annual gains gap into the red earlier this month, POOF!  JCP already crushed their shareholders this year, down big.  It’s more vulnerable to a squeeze higher on its inevitable march to zero.

Mostly I’m interested in Macy’s (M)  and Saks (SKS).  I suppose a head-to-head comparison is in order.  After all, either of these stocks aligns well with my overarching thesis.    For now I’ll leave you with my short-term chart annotations for all the highlighted stocks:

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Are Farmers Investing For A Bumper Crop?

The agriculture chemical sector grabbed my interest this week.  The sector saw a modest improvement in its hybrid scoring last week and the charts are set up well.  Also, I’m looking to build a few themes going into 2013, and I like the story in farming.  We had quite the scare last summer with farmers across the breadbasket reporting low yields.  The media ran the story hard, possibly because they saw it as a piece to advance their global warming agenda, possibly because it created buzz and sold advertisements.  There’s no question it pumped up (artificially?) corn and wheat prices.  I’m sure you remember, but check out the respective corn and wheat price charts, via finviz:

If farmers had even average yields, and didn’t hedge down their profits too much, they were able to take their products to market at higher prices, and could be sitting on cash piles.  Irrigation systems are a possible investment, but an easier investment for a farmer is a beefed up nutrient and genetic regiment.

With that story in mind, I also like the sectors seasonality, which according to The PPT, has better than a 60% chance of increased prices in both January and February.  If I’m building a theme going into the New Year, I want something that will hit the ground running.

Before taking to the charts, I wanted to compare a few key fundamental statistics:

My takeaway from the above data is that Monsanto (MON) appear to be you innovator.  They’re the only company pumping a serious R&D budget.  Potash Corporation (POT) although having the lowest beta, is the highest risk stock with the worse cash position.  They need demand to come in, or they could be in trouble.  However, POT has the highest ROE, and although I didn’t do any risk adjustments, any such adjustments would only solidify their ROE out performance considering their beta.

I didn’t put the dividend yield stats on my chart, but POT currently has the highest yield.  I see the yield as a risk.  With their low cash position, they may be pressed to reduce the dividend.  This could affect share price.

Year-to-date, it appears much of the negative news could be baked into the share price of POT, they’re had an abysmal performance this year.  There could certainly be an element of “catch-up” built into the name.

Taking to my precious, the charts, we can see big time innovator MON flirting with annual highs, threatening another big breakout.  Also, both MOS and POT are sitting on key support levels.  Should we see strength in these names, both names have room for us to scale some profits well before swing highs, allowing us to book some gains which would reduce our cost basis should we choose to swing the names for multiple months:

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Down But Never Out

Strong bounce thus far this morning in the S&P, pumping hard off of a key support level.  Financials continue to behave very bullish although the session is still early.  We’re into the back-and-fill range I highlighted this morning after getting a telegraphed bounce off of Monday’s value area high:

 

Although I’m down over 1.5% today and counting, I used this morning’s pop to clean out all the degenerate positions from my portfolio.  All except one, BGMD.   I can’t let this position go unless it gets seriously weak.  It flagged hybrid oversold yesterday with an impressive dataset and look at this chart:

 

 

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Finally Some Snow

I woke up this morning to the first sight of snow on the ground.  It’s just a light dusting, mind you, but even the slightest glimpse has me in a better mood than last night.  Let it snow, let it snow, let it snow.

I got all bulled up yesterday afternoon after seeing the S&P thoroughly auction the EXACT price range I had laid out in the morning yesterday and then break higher.  Typically, this is a very bullish event.  It says to me, the buyers and the sellers came to the town square, exchanged their paper while wearing top hats, the sellers were quite pleased with the amount they had sold and went home for the day, but more buyers were left around in the afternoon, possibly drunk on eggnog, and they were still interested in buying.  Only the sellers were gone so their teased them back into the square by throwing snow balls at their windows.

Little did they know the world was ending today, and they would wake a giant laser beam armed algo who would melt all the snow and leave only a bottomless pit where the buyers once stood.

And here we are today, still alive after the attack.  Take a look at where we’re set to open, around 1422, not as bad as it looks on the freaky overnight tape:

 

 

We’re set to open right around Monday’s value area high, an area we snapped through and never looked back.  Well here we are, throwing back to the scene of the crime where this week’s breakout started. Chess mentioned in his special fiscal cliff video last night that even though it appears we could see extreme volatility today given the overnight action, the busy news headlines, and option expiration it’s quite possible to be a quiet day given the light holiday trading action.

A mild session favors the bulls going into next week, and if they can hold the key levels of support I’ve outlined in the above profile, I we can stay constructive on the market.  Keep your head on the open.

 

Update: Futures took another cliff jump down to 1418 as soon as I published.  Be prepared for anyting, including a flush.  Key off of the support levels highlighted.

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Preparing for a Beating

Everyone has a plan until they get punched in the face.” – Mike Tyson

In many ways I feel like my accumulation of degenerate OTB names is a result of two events that occurred earlier this week.  First was my showcase of the alcohol sector with a spotlight on BF-B, CEDC, and BEAM.  I’ve been watching CEDC run like a Romanian goat higher unable to buy the name.  Second was Tuesday morning.  I saw all the signs of accumulation and a big run higher coming, so I put over 10% of my portfolio into SKS and SHLD only to watch them sit the massive pump out, opting instead to trade sideways then down.  Thus concludes my recap of time wasted. Mostly I want to remember to stick to the plan so I thought an iteration would serve me well.

What matters now and tomorrow is how we’re going to pirate coin from the market.

We shall see how she looks in the morning.  I see little reason to turn to the profile at this hour because there’s plenty of overnight action ahead.  Let it play out and we’ll take a look bright and early.  I have a feeling I’ll be cutting a few names in the AM, but I will certainly exude patience and let the morning develop.

One important caveat to this unexpected action is receiving no accolades after making a near-perfect top call.  Our good friend The PPT flagged hybrid overbought on the close Tuesday.  Chalk up another win for the algos.

See you in the morning.

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Santa Rally In Context

I continue to see a high level of caution among traders on twitter.  The wall of worry is lined with the carcasses of shorts and the volume is low.  Going into Friday, I want you to keep the weekly SPY chart in mind, and everyone’s favorite home intruder, Jolly Saint Nick.  Does this look like a chart you want to short? 

I have 14 longs, zero shorts, and 25% cash.  I want more exposure in fewer names.  Should the markets continue to rise, I will address that matter next week.  Have a holly jolly evening.

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Higher

The market continues the holiday levitation today with steady strength in the financials giving bulls confidence.  Bulls have recaptured the important 1434-1436 price area highlighted this morning and have sustained trade above.  Should they hold price into the bell,  I strongly consider adding to winners.

My favorite pick going into Christmas is online shopping giant AMZN which is fast approaching 52-week highs.  Other lotto plays I’m currently long include AN, PQ, BGMD, and GLUU.

How we close today will let us know if this rally has teeth.

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Settling Unfinished Business

Tuesday’s trend day higher left some interesting price levels behind as we moon shot higher.  Often times, when a price level is not thoroughly auctioned, the market will return to those levels.  It’s quite possible that is how we will spend today’s trading session.

Although yesterday was an inside day, where price consolidated within the range of Tuesday, we did see price fall lower toward the closing bell, pushing price down below both yesterday’s and Tuesday’s value area.  As of 8am the globex session seems to have bumped its head on the value area low zone I’ve highlighted below:

Trading today in the non-auctioned price zone I’ve highlighted would be constructive and we can expect high quality charts to still provide high probability trades.  Globex lows coincide with the low of the orange box above.  Should we sustain trade below 1428 that’s our cue to cut laggards and consider scaling profits in winners.

Above 1434-1436 we can consider getting more aggressive into the close of the week.

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