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Chinese Stocks Heat Up – Voice of the People
Zacks highlights commentary from People and Picks Member «inthemoneystocks».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Chinese Stocks Heat Up
Chinese stocks are flourishing today after the Shanghai Index jumped to 2347.53, +57.04 (+2.43%). This pop set the China solar stocks on fire with Trina Solar Limited (ADR) (TSL) trading at $9.00, +0.80 (+9.76%). Others like JA Solar Holdings Co., Ltd. (ADR) (JASO) and Suntech Power Holdings Co., Ltd. (ADR) (STP) are also having a big day.
Some Chinese small caps are still at or near their 52 week lows despite the market rally in January 2012. These are catching fire. Sino Clean Energy Inc. (SCEI) is surging today, trading at $1.44, +0.09 (+6.67%).
The key is to look for Chinese stocks that are still trading at or near their chart lows. These may be the next explosive movers. There are not many stocks that are still cheap in this market, and speculative money is searching for the next big mover. Any small cap trading near its lows is a candidate, especially Chinese plays.
Gareth Soloway
InTheMoneyStocks.com
About the Zacks Community
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
Follow us on Twitter: http://www.twitter.com/PeopleAndPicks
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=7867.
Read the full analyst report on TSL
Read the full analyst report on JASO
Read the full analyst report on STP
Read the full analyst report on SCEI
Gasoline On Fire – Voice of the People
This morning, the United States Gasoline Fund (UGA) is trading higher by 0.45 cents to $55.50 a share. This tells us that gasoline prices at the pump are going to be higher if you have not noticed already. The average price for a gallon of regular gasoline in the United States is $3.57 according to AAA.
High gasoline prices are a direct tax on the U.S. consumer. It is always important to remember that consumer spending accounts for roughly 70.0 percent of the gross domestic product in the United States. Short term traders should watch for intra-day resistance on the UGA around the $56.00 level.
Some other oil and energy ETF’s that are trading higher this morning include the United States Oil Fund (USO), iPath S&P GSCI Crude Oil Total Return (OIL) and the United States Heating Oil Fund, LP. (UHN). Traders and investors must remember that high energy prices have always come back to hurt the stock markets. These energy vehicles will usually trade inverse to the U.S. Dollar Index.
Nicholas Santiago
IBM Leads as Investors Hope for Apple Dividend – Voice of the People
The markets are floating higher as IBM Corp. (IBM) leads the charge. The stock is hitting new all time highs at $198.86, +4.99 (+2.57%). This is accounting for about 20 points in the Dow Jones Industrial Average on the day. It is the biggest component and is making up a majority of the Dow move today.
In addition, the NASDAQ is leading today as all eyes are on Apple Inc. (AAPL). At 1PM ET an investor meeting will get under way. Investors are hoping the company declares a dividend. Apple makes up 20% of the NASDAQ 100. This makes any move in Apple a major market move.
The Dow Jones Industrial Average is getting very close to 13,000. As the institutions and Federal Reserve continue to push more and more people into the market, a close over 13,000 for the weekend is likely. The media would pounce on this and it would ultimately coax more investors to the long side next week. This always happens towards the end of an up cycle in the market and should be a big warning to smart traders and investors.
Weakness After AAPL Signals Selloff – Voice of the People
Weakness After AAPL Signals Coming Sell Off
You could hear the cheer from CNBC commentators as Apple Inc. (AAPL) reported monster earnings. This truly was a great earnings report. The jubilation started in the media and spread to the little investor. Proclamations of 1380 on the S&P 500 were constant along with “tomorrow” will be a monster up day in the markets.
However, here the S&P 500 sits on the negative side. The SPDR S&P 500 ETF (SPY) is trading at $131.28, -0.18 (-0.14%). The NASDAQ is only slightly higher on the day. Most major technology companies are selling off today while Apple is responsible for the gains alone.
One thing to learn is to ignore the Wall Street hype and focus on the charts. By focusing on the charts, it was clear that the markets were overbought and there was little if any upside left. The euphoric state of the media is used to coax the small investor into the markets. As they buy, the institutions sell. This is classic and marks the top of the market in the short term. Remember, when the markets are at their highest point of happiness and the media is pumping the strongest, sell your longs and go short.
Gold in 2012 – Voice of the People
Gold in 2012
Gold is headed higher. Main reason: Asia’s China and India. Both countries are on track to be 40 percent of the global population. India has been focused on gold for a long time. China, with about 1.4 BILLION people that have no retirement planning or coverage, has authorised its people to own gold, strongly advising its peoples to buy gold, almost assuring its people that gold values will increase over time, and is making efforts to see that gold, when exchanged, is only done through China sanctioned exchanges, brokers, dealers.
As reported on MarketWatch, “Gold gains on China’s buying binge” “The country imported a record 103 tons from Hong Kong in November, up 19% month over month and up 483% year over year,”
For the rest of the story, here’s the link: http://money.msn.com/market-news/post.aspx?post=5682d586-ab3e-46f0-9ce2-ea81417183b4&_nwpt=1
Understanding the Rally… – Voice of the People
Stock markets continue to rejoice on hopes and dreams of a path through the European mess. Italian yields dropped sharply today after major austerity measures were pushed through. The SPDR S&P 500 ETF (SPY) is trading at $126.80, +1.94 (+1.55%). In addition to optimism about Europe, economic data in the United States continues to be strong. Most amateur traders are looking to buy the market into the end of the year, expecting a Santa Claus rally to continue, but extreme caution must be used.
First, traders and investors alike must recognize that the Dow Jones Industrial Average is up approximately one-thousand points in the last week. Buying now is paying a premium on the market that is not needed. Second, remember this market is bipolar. One week the savior is born and the markets will never go down, while the next the world is doomed due to Europe and the crisis. Paying up for anything is a fool’s game as the pro traders take money from the weak minded.
Projections for 2012 are grim. While we may float and limp into the end of 2011, next year will be another rough one with a fair amount of downside and wild swings.
Looking at positives and negatives are always important. The positive for the rally today is easy to spot. The financial sector is rocking. Stocks like JPMorgan Chase & Co. (JPM) are having a monster day. The banks are leaders in the market and their strength confirms that the rally will hold today. JPMorgan is trading at $33.83, +1.50 (+4.64%).
Commodities are weak today. Everything from oil to gold, silver and natural gas seem to be left out of the rally. This may be a signal dumb money is chasing the rally and jumping out of commodities. The SPDR Gold Trust (ETF) (GLD) is trading at $168.44, -1.48 (-0.87%).
Again, the key as a trader is to avoid the emotional decision. Investors chasing the rally now are falling into emotion and that is why they always lose money. Stay patient and follow the charts. They will tell you the truth.
Gareth Soloway
Agriculture Stocks Still Stuck in the Mud – Voice of the People
This morning, all of the major stock market indexes are trading sharply higher. For the most part, the rally is broad based as most important stock sectors are climbing. The one sector that is struggling and continuing to show weak relative strength is the agriculture sector. Many of the leading stocks in this sector are actually trading lower as the major stock indexes climb.
Potash Corp (POT) is considered the leading agriculture stock in the market. POT stock is trading lower by 0.74 cents to $40.18 a share. The stock has some short term intra-day support around the $39.65 area which is a double bottom support area on the daily chart. Should this level fail to hold up the stock is vulnerable to further declines. The daily chart should have very good support around the $36.00 level on the daily chart.
Other leading agriculture stocks that are not participating in today’s early morning stock rally are Mosaic Co (MOS), Agrium Inc (AGU) and CF Industries Holdings Inc (CF). All of these agricultural leading stocks still remain weak on the daily charts. These stocks are all trading below the important daily chart 50, and 200 moving averages which put these stocks in a weak technical position. Traders should wait for a better daily chart pattern before committing to these names.
Nicholas Santiago
Oil Soars: These Energy Areas Are Next – Voice of the People
Oil Soars: These Energy Areas Are Next
As spot crude oil has pushed through the $100 level, the upside is somewhat limited. Oil is up over 30% in the last six weeks and with the global economy still weak, it is hard to imagine it will push much higher. Investors are searching frantically for the next big energy area. There are some obvious places that money should start to flow.
Natural gas continues to be the obvious answer to some easy money upside. With oil back above $100, a natural switch towards the cheap natural gas should begin. Natural gas is a cleaner and cheaper energy source. With the commodity trading at or near 52 week lows, it makes sense in this range. Some natural gas stocks to watch are Chesapeake Energy Corporation (CHK – Analyst Report) and Devon Energy Corporation (DVN – Analyst Report).
Another possible area for investment is in solar stocks. This sector has been crushed but as it trades at multi year lows and oil moves over $100, it begins to make sense as a speculative investment. Best of breed stocks like First Solar, Inc. (FSLR – Analyst Report) and cheap China solar producers like Suntech Power Holdings Co., Ltd. (ADR) (STP – Analyst Report) are likely to appreciate over the next year from current levels.
What is the most robust investment strategy? – Voice of the People
What is the most robust investment strategy?
That is the set of investment rules that has proven to be profitable with minimum risks (drawdowns) over prolonged periods of time.
Do those rules exist? Yes, they do.
Just back test the total collection of 14,022 active and inactive stocks in Research Wizard and see that these 14,022 stocks combined compounded 7436%/year with a maximum drawdown of -26% over the past 12 years. That scan takes a full 10 minutes on my new laptop and immediately reveals the errors in the Dbase. But even without these errors, this is the most profitable and safest portfolio approach ever.
But it is not practical. The portfolios are equally weighted and the smallest stocks that only trade a few shares are pushed up by buys much more so than being pushed down by a sell. That asymmetry in those very small stocks is responsible for these tremendous gains, not any fundamental. When you take out these tiny stocks by imposing daily dollar volumes in excess of $500,000 and share prices larger than $1.5 and cap sizes larger than $100 million, you are left with 3446 stocks that suddenly only compound 6.4%/year with the high risk of a maximum drawdown of -60%. When you take the 200 smallest stocks of that collection, you start compounding 22%/year with a somewhat higher risk of -71%. There are only 200 ZR#1’s fulfilling those minimum size requirements. These 200 ZR#1’s compounded 18%/year over the past 12 years with a -54% risk. Hence, not using fundamentals gives you a +4%/year edge over the 200 ZR#1 stocks of the same liquidity.
If you would know the share price a week from today, you could make tremendous amounts of money. Just program in RW the selection rule i5[Recent+nW]/i5[Recent]>0, so that you only select stocks that increase in share value during the next n weeks (n=1, 2, 3, ….). When you apply such forward testing on earnings or margins, you don’t compound steady gains. However, you do compound steady gains when you apply such foreknowledge to estimate revisions. For instance, try i44[Recent+3wks]>0. When parties are holding back that information, they could make enormous amounts of money.
Back testing is only a reliable tool as long as your watch list of back-tested stocks doesn’t change over time. Hence, when a stock of your list becomes inactive, your back-tested results change, as this stock is not available any more. Zacks retroactively started to put back the inactive stocks in its dbcmhist in November 2009. It showed that the back-tested results of mid and large caps were hardly affected by the inclusion of inactive stocks. This so-called survivor bias is more important for the smaller caps.
So are there relatively stable watch lists from which you consistently, over 20 to 32 years, can pick sub selections of up to 50% of those stocks and then steadily compound up to 40-50%/yr with maximum risks between -15% and -30% and hardly suffer from survivorship?
The answer is yes, you can, without using any fundamental or TA analysis. Our 32-year deep back-test programs and quantitative watch-list design just proves that to be true. Does that mean that 32 years of proven past performance holds any promise for future performance? Except for using foreknowledge or flash trading, it is the best you can do. But stocks are like neutrinos. Neutrinos don’t carry any charge and are thus invisible for light waves. Pure mass is only inertial without any wave character. That lack of wave character is also with stocks and prevents you to make any future prediction with any certainty. Heisenberg’s uncertainty principle doesn’t hold for particles without a wave character. It doesn’t hold for neutrinos and stocks. You can only manipulate them when you have the instruments.
JPMorgan Chase Is Still the Stock Market Barometer – Voice of the People
Zacks highlights commentary from People and Picks Member «inthemoneystocks».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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JPMorgan Chase Is Still the Stock Market BarometerIf you want to know what the stock market is doing just follow J.P. Morgan Chase & Co (JPM – Analyst Report). This stock is the leading financial company in the United States and possibly the entire world, therefore, it will generally lead the major stock indexes. At this time, there is a banking crisis going on around the world. Sure, the European banks might be where all of the recent focus is, however, all of these banks have some exposure to European debt and that is why these bailouts are being talked about or tried by the central banks.
JPM stock has staged a sharp three day rally and so has the major stock market indexes. If JPM stock begins to slide this short term rally could end as quickly as it began.
Other financial stocks that are trading higher today include Goldman Sachs Group Inc (GS – Analyst Report), Deutsche Bank AG (DB – Snapshot Report) and Credit Suisse Group (CS – Snapshot Report). All of these stocks are very important and should be followed, however, JPM stock is certainly the most important and a stock market barometer.
Nicholas Santiago
InTheMoneyStocks.com 
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
Follow us on Twitter: http://www.twitter.com/PeopleAndPicks
About ZacksZacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=7867.
Read the full analyst report on JPM. GS
Read the full analyst report on DB
Risks, Probabilities, Uncertainties… – Voice of the People
Zacks highlights commentary from People and Picks Member «JohntheWizard».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Risks, Probabilities, Uncertainties and Prediction in the Stock MarketWhen you look up the word “probability” in the Oxford Dictionary, it tells you it is a “sense of certainty”, “probably” means “almost certain”. Mathematicians modeled the concept of probability but not the concept of certainty or uncertainty. We apparently can speak of a 70% probability that we are in a bull market.
Mathematically, you define probability as the ratio of selected events (occurrences) and the total number of events. Since the total number of events or total population may be too large to scan, you usually limit your population to a certain sample size. That limitation enables you to calculate the reliability of your calculated probability.
In mathematics, probabilities don’t say anything about future behavior, because they are calculated from historical data. Only mathematically calculated correlations over time may give you a hint on future prediction if you are able to show that the correlations you found are causal. Causal means that you are able to assign a certain cause to a certain effect and that this “always” holds. As an example, the same binding forces in a water molecule cause the same sunlight to spread into the same rainbow as long as water and sunlight exist.
A statement like “we are in a bull market with an assigned probability of 70%” implies that the present market will first go to new highs before dropping down to deep lows. Hence, that probability implies a certain future predictability. If that probability is just an expression of your gut feeling about the future, that is fine. But when this probability is based on the calculations of correlations in the stock market and when these correlations are proven to be causal, then you can predict future stock market performance. Except for price manipulation, mathematicians have proven that such correlations do not yet exist. That proof is the sole reason for that past performance doesn’t warrant any future performance. That is the sole reason that the mathematician Harry Markopolos was able to unmask Bernie Madoff already in 1999. It took the SEC nine years to react.
Averaging the gut feelings of all investors or analysts may mislead you into the illusion of common sense. As each sense is personal and not an objectively established data point, there exists not a common base for averaging. You are averaging apples and oranges.
On February 12, Tickerbandit wrote: “Anyway there is a distinct nature to the way corrections begin. They NEVER come without warning. But first signs ALWAYS occur before the indices top out, which are most effected by large capitalization issues.”
So here we ALWAYS have an observable and unique warning causing the future event of a correction. Apparently, past performance does warrant future performance.
Opposing views usually create new wisdom.
The most recent picks by «JohntheWizard» are:
A sell rating on China Green Agriculture (CGA – Snapshot Report),
a sell rating on eHealth (EHTH – Snapshot Report) and
a sell rating on NBT Bancorp (NBTB – Snapshot Report).
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
Follow us on Twitter: http://www.twitter.com/PeopleAndPicks
About ZacksZacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=7867.
Read the full analyst report on CGA
Read the full analyst report on EHTH
Robbing the Markets Blind on McDonald’s – Voice of the People
Zacks highlights commentary from People and Picks Member «DiviMO».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Robbing the Markets Blind on McDonald’sToday let’s look at “Big Mac”: McDonald’s (MCD – Analyst Report):
First, I’m disclosing that I own MCD stock. However, our trade today involves writing (cash-secured or naked) PUTs on MCD. When you write a put, you receive the current premium immediately. The entity buying the PUT from you has the option of putting the underlying stock to you to purchase at the assigned strike price. Hence, one always writes a put on a stock one doesn’t mind owning if assigned.
Currently MCD is priced at 90.30 as this is being written.
By looking at the chart and the technicals I see that the $82.50 level has reasonable support as it rests. As well MCD Stock at $82.50 is below the 100 day moving average which McDonalds Stock has retested at least twice but perhaps three times in the last two months.
Also the 200 day moving average is just below the $82.50 strike. This means that should MCD Stock decisively break the 100 day moving average this could signal a change in trend, I will have the chance to buy back my $82.50 puts on McDonalds Stock and roll them lower. As long as I do not wait too long should the 100 day moving average break, then I will have time to roll down for a net credit on any roll.
Presently though, the strength in MCD Stock tells me that it is a good time to writing puts, albeit far out of the money and when possible, at the 200 day moving average. With the volatility high in the present market as investors fear debt issues, the US slowdown in the economy, high unemployment, housing sales, and a number of other worries, put premiums in MCD Stock are excellent and make writing puts highly profitable even when doing so far out of the money.
MCD stock has had excellent support at the 82.50 – 83 price level during the last few months of high volatility. With the current market strength this month, and the excellent results of MCD’s earnings and dividend increases, one has high odds (excellent risk/reward ratio) of MCD not falling below 82.50 and if it did, one, as explained, can do an option roll-down.
Important is the RSI Indicator (Relative Strength Index) for McDonalds Stock. It remained fully positive on the big sell-off days.
Of interest was the MACD Indicator (moving average convergence divergence) when looking at the big sell-off days. The sell-offs produced just a mile negative amount and in each case MCD Stock quickly recovered as did the MACD Indicator. Important is the RSI Indicator (Relative Strength Index) for McDonalds Stock. It remained fully positive on the big sell-off days . The most important of the indicators was that MCD Stock failed to break the 100 day moving average.
So here’s the trade.
WRITE MCD (cash-secured or naked) PUT on the DEC 82.50’s for a premium of $91 per contract.
Final note: ‘Robbing the Market Blind’ subscriiption information will be forthcoming soon.
As of another option, if one wanted to take a more aggressive play with higher risk is to:
WRITE MCD (cash-secured or naked) PUT on the DEC 85’s for a premium of $135.00 per contract.
Let me remind you when writing puts for income that stock selection is as critical as what strikes to select to sell. Writing puts for income is a strategy of small monthly gains
Final note: ‘Robbing the Markets Blind’ subscription info will be forthcoming. The information provided can come from our own analysis or those found on the internet that can provide a winning trade. We scan the internet for winners. Some of the information provided above came from our internet friends. Posts via DIVIMO on this site document the other trade pick selections. Currently our documented picks are 100% winners. Disclosure: I own MCD stock.
The most recent picks by «DiviMO» are:
A buy rating on NiSource, Inc. (NI – Analyst Report),
a sell rating on Whirlpool Corp. (WHR – Analyst Report) and
a sell rating on Medco Health Solutions (MHS – Analyst Report).
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
Follow us on Twitter: http://www.twitter.com/PeopleAndPicks
About ZacksZacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=7867.
Read the full analyst report on MCD
Read the full analyst report on NI
Read the full analyst report on WHR
European Banks Are Talking to Us – Voice of the People
Zacks highlights commentary from People and Picks Member «inthemoneystocks».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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European Banks Are Talking to UsThis morning, all of the leading European financial institutions are selling off sharply to start the day. The European banking crisis seems to be getting worse by the minute. Traders can easily see stocks such as National Bank of Greece (NBG – Snapshot Report), Deutsche Bank AG (DB – Snapshot Report), Credit Suisse Group (CS – Snapshot Report), UBS AG (UBS – Snapshot Report), and countless other financial institutions are trading lower by more than 3.00 percent or more. This is not a sign of a healthy financial system, it is a sign of a coming default in the European Union.
The stock market has already priced in a Greek default despite all of the news out of Europe last week saying that would not happen. Investors are just wondering who will be next country to default after Greece. Will it be Italy, Spain, Portugal, or perhaps even France. The French banks have sold off sharply over the past month, the French financial institutions do not seem any better then Greece at the moment.
There will certainly be more news out of Europe this week telling the world that everything will be fine in the European Union. Traders and investors should not listen to the noise from the talking heads, traders should listen to the price action on the charts. Right now, the charts are telling us there is a likely default in the European Union.
Nicholas Santiago
InTheMoneyStocks.com
About the Zacks CommunityIn 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
Follow us on Twitter: http://www.twitter.com/PeopleAndPicks
About ZacksZacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=7867.
Read the full analyst report on NBG
Read the full analyst report on DB
Read the full analyst report on CS
Traders Wake to Reality – Voice of the People
Zacks highlights commentary from People and Picks Member «DiviMO».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Traders Wake to RealityThe market action today is certainly telling. It appears that many investors really did believe that the Federal Reserve would commence a third round of quantitative easing. Why anyone would believe this is a possibility strikes me as quite odd. Interestingly the FED admitted the economy is expected to be in poor shape for a long time.
The first two rounds did not reduce unemployment and did not stop the housing tumble. I have said since January that the keys to the year would be Jobs and Housing and the Finance sector. These issues are forefront for the economy and so far nothing has worked. QE1 and QE2 were terrific for stocks but there was lots of warning that the Federal Reserve was going to change direction.
Yet investors still want to believe, just as many believe Greece won’t default and the European Crisis will be averted. How this is going to happen is definitely beyond me. So far the European leaders have made no real progress and certainly appear to not only not truly grasp the situation, but have no real strategies on how to solve the situation.
Today’s drop is just another sign that the bull market is over. It may go down in history as the shortest bull market in history, but definitely it is over. For those who are into stocks there will be lots of opportunity ahead for buy on weakness and selling into rallies.
However for those who like me prefer options, this volatility is playing right into our portfolios. Put premiums are higher and I have been selling puts on large down days, such as today, in order to take advantage of the volatility.
There is no need to rush. Investors should take their time and pick strikes carefully. I have not been able to update all my trades, but I will do my best to bring them up to date over the coming days. Here is my strategy going forward
On stocks you hold, write deep in the money Calls. On days like today, put premiums have been ‘jacked’ up high, writing naked or cash-secured puts is a winning strategy, buying 1x index etf’s in small increments is a strategy (in my case those are non-commissioned that have no trading restrictions). I am not one to short stocks. Buy good strong dividend stocks that have a history of ‘bouncing back’ when times are better.
Played properly, staying in a bear market can lead to terrific returns, but it is important to be careful and not get greedy. Close profitable positions early to lock in the profit and then look for new opportunities. Stay with large cap, quality stocks. Take your time as patience will definitely be rewarded in any bear market.
Keep some cash always available for big down days and watch using margin. I prefer to keep margin to a minimum or not use it at all.
PS: My attempt is to provide you with only with one person’s opinion of how to play this market. I hope you found this blog straightforward, not ambigious and hopefully helpful.
The most recent picks by «DiviMO» are:
A buy rating on NiSource, Inc. (NI – Analyst Report),
a sell rating on Whirlpool Corp. (WHR – Analyst Report) and
a sell rating on Medco Health Solutions (MHS – Analyst Report).
Forget Europe. This Is Worse – Voice of the People
Zacks highlights commentary from People and Picks Member «inthemoneystocks».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Forget Europe. This Is WorseAs you all know, the banking crisis in the European Union is an absolute disaster. Most of the countries in the European Union are insolvent and they will have to likely default at some point. Whether or not there is a structured default remains to be seen.
At this time, the European Union is likely pass this European Financial Stability Facility (EFSF) to help bailout all of the Euro-zone banks in the near term. This plan is simply paying off debt with more debt. While it may keep the European Union together for a little while longer there are still going to be major problems in the region for a long time to come.
Believe it or not, there is a bigger problem lingering in the global economy. It is not the European debt crisis, it is not the massive U.S. debt crisis that grows every day. It is a Chinese slowdown that could cause the stock markets to decline further. The Shanghai Index (China) made a new 52-week closing low last night.
China is the growth engine of the world; they produce most of the goods that people buy and use. The Shanghai Index has actually lead the global stock markets for years now. If you look at the March 2009 low on the S&P 500 Index and the rest of the major stock indexes in the United States you can easily see that the Shanghai Index actually bottomed in November 2008. This is clearly indicating to us that the Shanghai Index is the leading economy in the world.
China is facing many problems at this time. The country has a housing bubble in place. Real estate prices are much too expensive compared to the average wage. Next, the Chinese economy is facing high inflation. This is obvious in Chinese housing and the cost of food for the people who live in the nation.
The Chinese are also starting to face an uprising in the labor force. The Chinese workers are demanding raises and better work conditions. These are all problems that are happening right now in this massive country. People must understand that the nation has a population of 1.3 billion. Any economic slowdown will hurt that country.
This morning, the Chinese ADR’s are behaving terrible. Leading stocks such as Baidu Inc. (BIDU – Snapshot Report), Sina Corp (SINA – Analyst Report) and Sohu.com Inc. (SOHU – Analyst Report) and Netease.com Inc. (NTES – Snapshot Report) are declining sharply lower on a day when the stock markets in the United States are rallying higher.
This is not the type of action that is healthy. Remember, it has been Chinese investments around the world that everyone has been hanging their hopes on. If the Chinese stop investing in different places around the world the entire global market will slowdown. This is worse than the European crisis.
Nicholas Santiago
Will September Be the Month of the 1,000-Point Drop? – Voice of the People
Would it surprise you? It won’t surprise me.
This bear market rolls into its fourth month since the highs hit in early May.
It’s failed at least three times in attempts to hit a newer high.
We’ve had a number of up and down days with big drops this month. Is the 1,000 point drop going to happen with the next big ‘bad news’ or ‘bad disappointment’ day?
What catalyst could turn the markets upward? I see three things that could cause a turn in market direction, an upward trend in Jobs, an upward trend in Housing, and/or a new round of quantitive easing by the FED (although even that may not help). I don’t see any upwards trends in Jobs or Housing.
What if?
There’s still opportunity to make money in this market but you need to go to the ‘dark side’.
My advice. Stay protected (i.e put options, inverse ETF’s) and listen to the market and disregard personal bias, do not be in denial (keep your head out of the sand).
Do Not Stop Looking at This Chart – Voice of the People
Traders must continue to watch a chart of the U.S. Dollar Index. This morning, the U.S. Dollar Index futures (DX U1) has pulled back a bit from its overnight high. This pullback in the DXY has helped the major stock market indexes to bounce a little off the morning lows.
When the DXY declines the major stock indexes will usually inflate and trade higher. Should the DXY rally higher throughout the trading session traders should expect the major stock indexes to see some more selling pressure as the markets continue to deflate.
Energy and commodity stocks are very sensitive to the action in the DXY, therefore, these stocks will usually trade inverse to the U.S. Dollar Index. Traders can watch leading stocks such as Exxon Mobil Corp. (XOM – Analyst Report), ConocoPhillips (COP – Analyst Report) and Freeport McMoRan Copper & Gold Inc. (FCX – Analyst Report) to be under pressure on the back of a stronger U.S. Dollar Index. Should the U.S. Dollar Index decline or fade from the open these stocks are likely to bounce off the morning lows.
When the Dollar Pops the Markets Drop – Voice of the People
All traders should now be watching the U.S. Dollar Index very closely. This morning, as soon as the U.S. Dollar Index futures (DX U1) caught a bid and started to trade higher the major stock indexes began to sell off. Right now, the markets are trading inverse to the U.S. Dollar Index, especially after the opening bell rings at the New York Stock Exchange.
Traders should remember that this is also Wednesday before options expiration which is generally very volatile and turbulent. Traders should expect the unexpected in the major stock indexes and in the U.S. Dollar Index.
The leading stock sectors that will generally trade inverse to the U.S. Dollar Index will be the commodities and energy sectors. Therefore, traders could watch stocks such as Chevron Corp. (CVX – Analyst Report), Cliffs Natural Resources Inc. (CLF – Analyst Report) and Freeport McMoRan Inc. (FCX – Analyst Report) to trade inverse to the U.S. Dollar Index.
Nicholas Santiago
Knowing Stock Market Technical Levels Make You Rich – Voice of the People
Over and over again the markets reward those investors and traders that use technical analysis. I am not talking about nonsense like stochastics, MACD or RSI. I am simply talking about looking at the chart and using common sense to determine price, pattern and time. To 99% of the public, this is a foreign language. However, it is the way to become filthy rich.
Let’s give a great example. Going into Tuesday of this week, everyone knew the markets were going to take at tumble. The previous day, when the markets in the United States were on holiday, Europe took a major hit, dropping almost 5%. Right away, smart traders go to the charts, trying to figure out whether or not the markets will dump to the August 9th, 2011 low of $110.27 on the SPDR S&P 500 ETF (SPY) or just gap lower and reverse higher.
A technical trader simply had to look at the chart and connect the pivot lows. If you connect all the lows from August 9th, they form a perfect trend line. The next step is to understand this line.
Understanding the line is simple. Should the market close below the trend line, the markets would be in break down mode and see the $110.27 SPY low within days. Should they rally back above that line, upside would follow for days.
Sure enough, the markets closed above the trend line and held off the bears. Traders who utilized this bought the market into the close yesterday. They are being rewarded with big time profits today.
The Only Sector that Needs to Be Followed – Voice of the People
If we have learned one thing since the 2007 top, it is that the financial stocks are the most important sector that a trader or investor can follow. When the financial stocks decline, it is prudent to expect the major stock indexes to follow right behind them.
In 2008, the financial crisis was all about the large banks and in 2011 it is still all about the large banks. This time the banking crisis has emerged from across the pond, the European Union. This problem will not just disappear anytime soon. This crisis is very complex when it comes to a bailout as there are so many different nations involved.
The simple solution would be to simply allow these banks to default and go into bankruptcy. Sure, many bond holders would lose money, however, the crisis would be solved. The problem is that the bond holders are the banks.
In the United States the biggest and most important bank to follow is JPMorgan Chase & Co. (JPM – Analyst Report). This bank might be the most important bank in the world when you think about it. Traders should follow this stock closely, when the stock declines it is a sign that the markets are going to decline.
The opposite is true when JPM stock can rally higher the stock markets will usually rally. This morning, JPM stock is trading lower by 0.44 cents to $34.74 a share. Once again, this stock is lower and so are the major stock indexes in the United States. If by some chance JPM stock can rally higher during the trading session you will see how fast the major stock indexes reverse and trade higher. This stock is now the barometer for the stock market.
Other important financial stocks that traders should follow include Deutsche Bank AG (DB – Snapshot Report), Credit Suisse Group (CS – Snapshot Report) and UBS AG (UBS – Snapshot Report). These stocks are some of the most powerful financial companies in the world.
Usually, the financial sector will trade like birds of a feather that flock together, however, sometimes they break away from the pack and trade on their own. Traders and investors should still continue to follow JPM stock as it will usually tell us everything we need to know.
Nicholas Santiago
As Oversold As We Have Seen It – Voice of the People
There is nothing but selling taking place at this time. Stocks are being sold with a vengeance. This tells us that there are a few large financial institutions that have been caught on the wrong side of this market. In the past, when a major hedge fund or prop desk was under water on a position the other big fish will press there short side bet and drive the nail in the coffin for the struggling firm.
We can only wonder who is caught on the wrong side of Bank of America Corp. (BAC – Analyst Report) at this time. This stock has plummeted lower today by more than 15.0 percent. The rumors are circulating throughout Wall Street that some whale is caught on the wrong side of the tape. This is likely to be what is taking place at this time.
On the flip side, these markets are extremely oversold and extended. This market can certainly go lower over the course of the year, however, in the short term this market is due for some kind of significant bounce in the near term. There are so many stocks that have been decimated over the past two weeks. Many of these stocks are trading around important support levels. Volume has also been massive and this is generally a sign that the selling could be getting close to subsiding.
Often traders and investors usually sell out at these levels when fear increases, however, this is when traders should begin to take small shots at long positions for bounces. Should a stock market bounce occur it may not last very long, although if and when a bounce does take place the short term bounce could be significant. As a good rule of thumb, if you are uncertain just stand aside. There will always be better trading environments.
Goodbye Good Friend – the Bull Market Leaves – Voice of the People
Goodbye Good Friend – the Bull Market Leaves
In my opinion the bull market is over and the bear market is beginning. This doesn’t mean stock prices will collapse immediately.
Bear markets are a different type of beast. They have sideways actions, big bounces and bigger sells. The bear market of the 1970’s lasted almost the entire decade. It was a great time for option premiums. The bear of 2000 to 2003 and 2007 to early 2009 were pretty severe with losses of more than 50%.
The chance of this bear market seeing such collapses is probably as great as any previous ones. Just remember that bear markets take months to unfold and normally collapse near the end. In-between there are lots of opportunities to make profits. There is no need to fear a bear market, but it is worthwhile implementing different strategies and remaining conscious of the fact that the bull market is probably ending.
My strategy, part of it, will be purchasing index puts on any bounce higher. The future DiviMo and BearMo postings and commentary will relate to my strategy during the bear market period. Meanwhile for my positions that have covered calls, I will be taking opportunities in any rise in stock values to sell calls in the money as I am sure that many of the covered calls once sold in the money, will eventually end up out of the money as stocks pull lower.
The bull market – Mar 2009 to April 2011 – was fun, entertaining, profitable and educational. As stated in an earlier blog, this will be MightyMo’s last blog….that is the plan at least until there is a direction turn in the market or our strategy changes.
The most recent picks by «MightyMo» are:
A buy rating on Complete Production Services (CPX – Snapshot Report),
a buy rating on Ryder (R – Analyst Report) and
a buy rating on The Talbots (TLB – Snapshot Report).
Anatomy of a Bear Market – Voice of the People
Zacks highlights commentary from People and Picks Member «BearMo».
For more Voice of the People, visit http://at.zacks.com/?id=7872
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Anatomy of a Bear MarketA bear market should never be confused with a correction. Correction can be severe but bear markets are far worse. A bear market is a period in time when the price of securities fall. There is usually widespread pessimism and negative sentiment grows as the bear market lingers. Bear markets normally see enormous price drops and as prices fall, investors become even more pessimistic and normally end up selling stocks at even lower prices.
Usually a drop of 20% or more and a continuation of declining prices that lasts longer than 2 months constitutes a bear market.
Bear Markets can easily wipe out 40% or more of an indexes value. They can wipe out much higher amounts of individual stocks.
The bear market of 2007 to 2009 saw losses of 56% in the market index .
Bear Markets normally last a minimum of 6 months out to 2 or 3 years.
Eventually panic will ensue as investors give up on stocks and will sell at any price driving stocks to new lows as investors flee stocks.
Warren Buffett has a name for bear market panic. He referred it to as “blood in the streets”.
Whether panic is the time to buy stocks, is difficult to say. I prefer to buy stocks after a panic and when there is a bit of a rally starting. The exception would be a core dividend stock (with a proven bounce-back in good times history) whose price has fallen to provide an excellent yield.
Postscript: In my prior blog, “The Bear, Embrace It,” I provided possible strategies to employ in a bear market. I also indicated what I did and what I am doing going forward. In today’s world, in lieu of cashing out with losses, with the amount of inverse ETF’s available and with a good understanding of options, one can play in a bear market and win.
The most recent picks by «BearMo» are:
A sell rating on Terex Corp. (TEX – Analyst Report),
a sell rating on Horsehead Holding (ZINC – Snapshot Report)
a sell rating on Short-Term VIX ETN (TVIX).
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more about People And Picks, visit http://at.zacks.com/?id=7870
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Read the full analyst report on TEX
Read the full analyst report on ZINC
Free Stock Analysis From Zacks Includes Zacks Long-Term Recommendation and Target PricePlease login or register to post a commentWhy I Sold Puts Yesterday but Might Buy More – Voice of the People
Why I sold puts yesterday but why I plan to possibly buy more
I will give you my rationale of why I plan to purchase additional puts (possibly as early as today).
Yesterday’s selloff involved quite a bit of computer stock selling. It’s been said that 70% of the shares traded of s&p stock shares on a given day are done by programmed computers. The algorithms used are top secret but as a individual investor I can take advantage of this by knowing that on big down days MACD can indicate to me what the computers are doing.
Even though the VIX was raising, the MACD for the last half hour was flat. This indicated to me that the programmed computers were no longer selling and that today could start out as an up day. That’s exactly what it is doing this early morning.
The premiums on the SPY puts however were continuing to increase and I felt it was a great opportunity to lock in profit.
Computer trading while feared by many, actually helps to keep volatility up. Volatlity, while difficult for investors to become accustomed to, actually benefits those of us who sell options. When the market pulls back in a big way, it marks an opportunity for me to sell puts. When the market bounces I often have a chance to purchase those puts back and get ready to sell them again.
Yesterday afternoon, with the VIX going up and the MACD flat, it told me the put premiums were OVER VALUED. This made an excellent selling time to lock in profit. By selling my SPY puts when I did I received a great premium for a very short period.
From a technical analysis standpoint, here’s the technicals I use. As stated previously, I look at the MACD. I look at the VIX. I chart and utilized Bollinger Bands and the Parabolic SAR. The parabolic SAR, if you chart program allows it to be shown is an excellent short term indicator of equity direction but dangerous. It needs to be used in conjunction with the other indicators.
Finally, I chart three moving averages – the simple 10MA, the geometric 20MA and geometric 30MA. Even using all these indicators, no one can predict market direction correctly 100% of the time but it does lower the odds in your favor.
I am using those today to sell if there is an advantage of buying the puts back.
There are a number of good strategies. This is one that appears to work for me. No strategy is perfect. I sure someone call find fault in it. However, good or bad, I hope you found it informative. Isn’t this better than writing blogs attacking people?
New Kids On The Block – Voice of the People
New Kids On The Block
Recently, there has been a new wave of initial public offerings reaching Wall Street. Everyone is getting very excited about all of the new internet companies that are roaring on the market place. This year we have seen companies such as LinkedIn Corp. (LNKD) and Pandora Media Inc. (P) become publicly traded companies. These two stocks have seen volatile trading action since their IPO, however, the demand for these stocks before coming public was enormous and over subscribed.
The internet is the new form of media. People can now access the internet 24 hours a day, seven days a week through their computer or cell phone. This revolution is here to stay and the internet competition is getting fierce. Many investors are now waiting for companies such as Groupon, Living Social, Twitter, and even Face Book to become publicly traded in the near future.
At this time, we have not seen so many internet and technology companies coming public since the 1990’s. Most of these stocks have real business models and many of them actually make some money, unlike the majority of the dot coms in the 1990’s.
Some of these companies will be swallowed up or taken over in time by the likes of Google Inc. (GOOG – Analyst Report), Microsoft Inc. (MSFT – Analyst Report) and Apple Inc. (AAPL – Analyst Report). This could be exactly what the doctor ordered for the stock market in the next few years.
It is no secret that the stock market only moves higher when it is artificially inflated by a weaker U.S. Dollar. Perhaps in due time, the new tech companies can make a real difference in the economy. We shall see. I’m rooting them on and hope they are all successful.
Stocks, Forex and Gold 