Archive for June, 2008

A Defense of 12,000

So far, the futures are up about 30 points. The Dow nearly closed under 12,000 yesterday, but didn’t.

It looks like the bulls are trying to keep the Dow above water.

Look, i wouldnt be shocked to see the market rally for a few days. Hell, I wouldnt be shocked to see the market rally 600 points from here. But should it? I don’t think so.

But the market really doesn’t care what I think. And that’s why i’m going to let the price action dictate my actions.

Needless to say, I think if the Fed runs their mouth about inflation at next weeks rate meeting, the markets will head down on the fear of higher interest rates. The question is whether the market will break under its Februrary lows.

If it does, that would be a shorters fantasy.

The Big Bleed

Man, the markets have just been tanking over and over again.

It’s either inflation, or slower growth, or earnings – it seems there’s always a good reason why the market will drop.

Now the Dow Jones is set to test its February lows. I say if it breaks under 12,000 – it should make it down to 11,600.

Whether it gets past there or not is another story completely. So we’ll see.

But the truth is, the economic fundamentals suck harder then a Dyson vaccum cleaner. So i wouldnt be shocked to see the market do a slight rally at 11,600, only to fail and move under.

If the market breaks under 11,600, i’m shorting the Dow.

By the way, this blog will soon be moved to our redesigned IDE website (which has blogs).

I’ll be posting a link up in the next few weeks. So stay tuned!

Opportunity Comes a Knockin’

Finally – after days of stressing because there were absolutely no good opportunities, I found a few.

First, Aixtron (AIXG). They fell a bunch today on no news. I think in a day or two, they will begin another bounce. Then there’s BHP who’s fallen yet again today. Once that RSI bleeds oversold, I’m a buyer!

There are a few other opportunities that are close to fruition – and I can’t wait for them to be ready.

After all, I need a new motorcycle! And it’d be awesome to pay for it with the proceeds of a few good market plays.

As far as the market goes, it’s going crazy. Volatility is ticking much higher (VIX is above its 200-day) and it seems to me that an important safety net is now gone.

You see, most thought we’d have a second half recovery. But thanks to the big pop in unemployment and rising inflation, that thought went right out the window on Friday.

Now what’s left to prop up the markets? Well, rate cuts were helpful. But guess what? Bernanke is talking about rate hikes!

The market surely won’t like rate hikes in the middle of a recession because it means things would slow down even further.

And now this is a fear that is making the rounds on Wall Street.

We’ll see how it all plays out.

A Drink for Lost Opportunities

Sometimes I wish I had just placed my money where my mouth was.

So let me open up a beer and pour it in the name of ‘lost opportunities’.

In the post before this one, the Dow Jones was over 100 points. I told you it was overbought and should move down.

Here we are 60 points later. And the Dow Jones is only up about 44 points. The Dow actually dropped further then that.

You may wonder how the heck I could’ve played that move.

Simple. By buying puts on the Diamond ETF (DIA). The Diamond tracks the Dow Jones. So if you expect the Dow to drop, play the Diamonds.

By buying a slightly out of the money, front-month put option, I would’ve banked a nice 12% move in just a couple hours. The one I was looking at in particular was the June 123 Put.

If anyone has any questions – feel free to ask!

Up 107 – so far

See what happens when there are big sell-offs that occur when there is no new market news? It tends to reverse the next day (not all, but some).

So far, the Dow is up over 100 points. Anyone who shorted the Dow this morning hoping for all hell to break loose, were only successful in having hell break loose inside their portfolio.

Right now, the Dow Jones is overbought (meaning it should come back down a little to breath).

Even with all of this volatility in the past few days, I’m not finding anything worth trading. BHP Biliton (BHP) is one of the closest. But its RSI needs to get more oversold before BHP becomes attractive.

Another candidate is Dollar Tree (DLTR) and Family Dollar (FDO). I love me some discount retailers. They recently announced better than expected same store sales. And this is a trend we should see increasing in the months ahead.

The only problem is getting them at a good price.

Of Stock Market Spankings…

I tend to not look for an extension of a stock market spanking into a new week. That is, unless there was some huge news that caused the spanking in the first place.

So what happened on Friday? The market dropped nearly 400 points on news that was already available.

Oil hit new highs… big deal? Oil’s been hitting new highs for the past few months.

And we lost jobs… big deal! We’ve been losing jobs for months!

Just goes to show you how fickle this market is. These are spanking that should’ve taken this market well under 11,000. But has that happened yet? Nope.

Traders keep thinking we’ll have a second half recovery. And that we will completely avoid a recession and begin expanding, while inflation dies down.

Sounds like a make-believe world that can never really exist, if you ask me.

End result? I’m not playing the market short today. I’ll look for individual stocks for my opportunities.

Oh, and solar stocks are showing alot of weakness. Many are failing to close above their 200-day moving averages. I’d love to see a close above these averages, but don’t expect it anytime this week.

Electric Cars Would be Nothing Without It

I’m not talking about lithium-ion batteries.

I’m talking about the mineral that manufacturers use to make them; graphite.

Here’s some research I pulled up…

According to British consultancy firm Merchant Research & Consulting Ltd., global demand for graphite will rise by 50% in the coming 5-7 years thanks to growing popularity of lithium-ion batteries, commonly used in mobile phone production.

I wonder if this group even realized the demand future car batteries would have on graphite.

It’s funny, because the next thing I did was try to figure out if there was a graphite shortage. And there is, sort of. The shortage isn’t worldwide (at least I haven’t found anything that says that) Instead, the shortage is local and is only for certain types of graphite.

For instance people have a hard time getting graphite in China. So the Chinese turn to the US (which has more expensive, better quality graphite).

So the mission now is to find some good graphite producers or explorers so that I can dig through their yearly and quarterly statements. The reason I’m doing that is two-fold.

One, to see whether the company is any good. And two, to get more detailed information about the graphite industry. It’s amazing what you’ll learn going through a few reports and presentations.

Already, I’ve found that China and Sri Lanka are the graphite powerhouses in the world. But China is having a shortage and Sri Lanka just can’t get their political situation in order. This is stressing supply of graphite.

Now, companies in Canada are laying claim to significant graphite finds. These are the companies I’ll be looking at. Another company I found, SGL Carbon, looks like a good play. But it is a European company. So beware.

I’ll let everyone know what I find.

How Times Have Changed

I remember just ten years ago when talking about the latest V8 powered sports car was always a hot topic. I also remember when everyone wanted an SUV.

Heck, I still want one.

But that’s just not the case anymore.

As I was looking at various motorcycles on Craigslist, I saw many people offering to trade their SUV or gas guzzler for a decent motorcycle.

Can you blame them? Some people are spending upwards of $100 just to fill up once!

This ‘high gas’ price thing has created a cultural phenomenon. I’ve alluded to it before and talked about how this was necesary for the formation of a speculative bubble.

Today I read an article that cements how popular culture is taking in this whole ‘green’ phenomenon.

From ecogeek.com…

According to a study done by GM (of all people) as part of this year’s Challenge X competition:

Close to nine in 10 women (88 percent) say they’d rather chat up someone with the latest fuel-efficient car versus the latest sports car.

Eighty percent of American car buyers would find someone with the latest model fuel-efficient car more interesting to talk to at a party than someone with the latest model sports car.

More than four out of 10 (45 percent) 18-43 year-olds say it’s a fashion faux-pas nowadays to have a car that is not green or environmentally friendly.

If i’m reading this right – that means the whole concept of big men on scooters may not be so gay after all (even though, I still think i’d look it!). It may even help men cement future relationships with environmentally friendly ladies.