Monday, November 01, 2010
The Rumor of This Blog�s Death Has Been Greatly Exaggerated�
I hate to plagiarize Mark Twain, but I wanted to keep the readers abreast of what I have been doing over the last couple of days.� I want to thank the many readers who have sent me e-mails to discuss what I can do with this blog going forward.� Here is the progress I have made since the Oct 28 announcement:
1) I am working with the compliance folks to get documentation and approval of what I write in this blog. As long as the discussions regarding positions are not real-time positions ( as far as stocks and options are concerned, I can likely still discuss the positions from an educational point of view.
2) I will slowly begin to discuss the topics of model building and use of neural nets for trading. I am primarily a pattern-based Boolean algebra guy when it comes to the models, but I can also discuss other ways in which one can take technical or price-related inputs to make price predictions in the future for stocks, forex, and futures. There is as much art as science in developing them, but what I want to discuss are the nuts and bolts of building persistently and consistantly profitable models.
It will be a few more days before I can get this done (and we may end up shifting to a three day a week format as my schedule is getting pressed a bit), but this blog will evolve to provide current market information and educational articles for swing traders in virtually any timeframe.
Stay tuned, and keep those e-mails and comments coming ( The e-mail address is buffalotrader100@gmail.com ).
Market Commentary - Nov 2
DJIA Industrial Average
Nov 1
Open: 11,120.30
High: 11,244.27
Low: 11,062.33
Close: 11,124.62
Change: 6.13 (0.06%)
RSI: 57
MACD (Delta): 12.26

Strategy: The US markets failed to charge up Monday after a strong opening, and closed on an almost flat note in a choppy session, as investors’ remained skeptical of Fed’s move in the upcoming meeting later this week, and remained cautious of outcome of mid-term US elections in 37 states. Markets continue to look tired at current levels, and are lacking a clear direction in absence of clear signals.
Commentary
Stocks in US edged up nominally Monday, but investors appeared to be cautious on eve of
After soaring more than 100 points earlier in the session, the Dow Jones Industrial Average closed just 6.13 points higher. The S&P 500 edged up just 1 point, and the Nasdaq slipped close to 3 points in an indecisive session. A stronger-than-expected readings on
Advancing stocks amongst the Dow constituents included Intel Corp 2.6%, Pfizer 1.2%, Hewlett Packard 1.1%, Microsoft 1.1% and Travelers 1%.
However, the laggards on the Dow were led by Kraft -1.5%, Chevron -1.4%, Du Pont -0.8%, Alcoa -0.7% and Home Depot -0.6%.
Major Advancing sectors in the day included Tech (+0.4%), Telecom (+0.4%), Energy (+0.3%) and Health Care (+0.2%).
However sectors like Utilities (-0.9%) and Consumer Staples (-0.1%) lost some ground in the session.
Meanwhile, a report on personal income and spending Monday reflected that personal income declined 0.1% while personal spending increased 0.2% in September.
Another government data showed that construction spending unexpectedly rose 0.5% in September, though economists had expected a 0.7% drop.
A strong manufacturing numbers out of
JPMorgan Chase shares slipped nearly 1% amid reports that the Securities and Exchange Commission is investigating the bank's $1.1 billion deal with hedge fund.
Cablevision Systems Corp. announcement last weekend that it has reached an agreement with News Corp. to return Fox programming to Cablevision sent shares of Cablevision up 1.7%, and shares of News Corp. also edged slightly higher.
Meanwhile, it is estimated that AIG has raised $37 billion by selling off one insurance subsidiary, and the initial public offering of a second, AIA Group Ltd. AIG's stock edged down slightly.
The dollar gained against major currencies like euro, the British pound and the Japanese yen.
Oil futures for December delivery also rallied Monday, gaining nearly 2%, to settle at $82.95 a barrel.
Gold for December delivery, however, slipped nearly $7 to settle at $1350.60 an ounce.
The Day Ahead
Tuesday
ICSC-Goldman Sachs Store Sales
FOMC meeting begins
Video: Fed Set to Continue to Ease Policy
Here’s more on the Fed’s upcoming meeting and their plans to continue to ease policy
Video: Outlook for Aussie
Reserve Bank of Australia rate hike coming up - here’s my take on the Aussie
Keeping an Eye on Armstrong World Industries (AWI)
Flooring maker Armstrong World Industries (AWI) is staging a breakout today from a 2 month base.... normally, I'd be all over this but earnings are Friday which means we have a binary event upcoming soon. That said, it is still very tempting as these long bases usually provide excellent breakouts. If I had 3 day time horizon I'd probably buy here and be out by Thursday as this one looks promising. Just passing it along, and I'll be interested to see what happens with the name Friday.
Armstrong World Industries, Inc. engages in the design, manufacture, and sale of flooring products and ceiling systems
China Growth, Wall Street Upgrade Propel Arch Coal
Some of the metals and mining names that will benefit from renewed growth (in excess of 9%) in China are moving this morning, including Arch Coal (NYSE: ACI).
insert.a.chart.ACI
A strong China market, strong China economic data, and a Wall Street research upgrade have combined to propel ACI 5.5% higher this morning. Friday's plunge from 25.75 to 24.20 has been totally reversed, which suggests strongly that Friday's low represents the end of a correction from the October highs at 25.31/37 and, if so, the start of a new upleg that should revisit the October highs on the way to 29.50-31.00 thereafter.
Only a decline that violates Friday's low (24.20) will wreck the current positive technical (and fundamental) set-up.
Bookkeeping: Restarting Apple (AAPL) Near Support
As with almost all first days of the month (and Mondays) the market is up strongly to start the day - you can almost set the watch to it. At least today there is some economic data to support it, unlike most occurrences.
I continue to try to force feed myself to buy "something" since the market "can only go up". Looking at the market, if there is a continued move up, one would assume Apple (AAPL) would help to lead the charge or put another way, it would be difficult to see the market continuing to charge without the name. Being amongst the most liquid names out there, I will start a 4.1% exposure as the stock sits right above key support. The stock has bounced off the $300 level three days in a row, which is not only a 'big round number' but also the 20 day moving average.
The advantage is allowing for a 2% leeway as a stop loss, one can exit if the market ever decides it can sell off again. I believe NASDAQ is now up 9 sessions in a row.... it is quite egregious.
Bookkeeping: Weekly Changes to Fund Positions Year 4, Week 13
Year 4, Week 13 Major Position Changes
To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.
Cash: 69.0% (v 69.2% last week)
20 long bias: 27.6% (v 26.3% last week)
4 short bias: 3.4% (v 4.5% last week) [Note: Long dollar positions considered 'short']
24 positions (vs 22 last week)
Weekly thoughts
Last week marked much of the same from the previous 2 months - the market sold off one of its non POMO days but generally drifted up or sideways on POMO days, as market participants feel "risk free" as the Bernanke put sits below the market. Action turned very quiet Thursday and Friday as traders sat on hands ahead of one of the busiest weeks of the year, if not *the* busiest in terms of news events. Economic data last week (home sales, durable goods, GDP) continued to essentially be ignored... the only selloff occurred on a WSJ leak of a QE program that might be smaller (on the front end) than speculators anticipated... but that was forgotten by the next day. The market has made it through 2 of the most tricky months - September which is historically the worst, and October which is the month of crashes. Now it enters the best time of year (November - May)...
The S&P 500 continues to run along the 13 day moving average and bounce repeatedly. Until this pattern changes, traders will play it. It will eventually blow up, most likely in spectacular fashion, but like a squirrel storing nuts ahead of winter - a trader can store up profits in anticipation of taking an invariable loss playing this "no brainer" trade.
While the trend is still up the 45 degree angle enjoyed in September and early October has slowed, and the market has become range bound since mid October in the S&P 1170 to 1190 range. This could either be a topping process or a new base being built for a new leg up. Until proven otherwise, as the index is above all key moving averages, one has to give the benefit of the doubt to the latter. Sector rotation has been taking place to some degree as some of the groups (such as technology) that led the market up in the early stages of this run, took a rest, and are now being run into again. The one positive is stock picking has seemed to mattered more of late, rather than the "student body" left trading that has come to characterize markets since mid 2007. How long this lasts is anyone's guess. (don't forget the gaps at S&P 1090, and 1110)
The U.S. dollar imploding was a catalyst for much of the first half of this run off the late August lows but was reaching extremes in sentiment three weeks ago. It staged a minor rally to work off some of that excess but truly only jumped to the 20 day moving average and now seems back in poor condition. The only saving grace for the dollar are potential moves by other countries central bankers to follow the Bernanke playbook and try to desperately weaken their currencies using similar 'printing' strategies. But no one is doing it in size and scale as the U.S. - hence hard to make a case for the U.S. dollar other than "shorting is a crowded trade". If the dollar falls to new (recent) lows - all bets off.
As the dollar 'stabilizes' in this range, the ramp in (some) commodity stocks has slowed - even though specific commodities themselves (i.e. cotton) continue to ramp. This is part of the rotation I spoke about above. Much of this money seems to have flowed right back into the new 'nifty 50' of the modern stock market - "the same old" names which trade at excess valuations, but speculators are willing to buy at any price.
---------------------------------
Economic news has not mattered in a long time as buyers step in under cover of QE2. This week would normally be dominated by the monthly jobs report Friday, but it is being overshadowed by the Fed meeting, and elections. Both events have been discounted to no end for months, but somehow we still seem to rally on the same story. Aside from these catalysts we also have the key ISM reports so it is an extremely heavy week in terms of data. The only question ahead is do we sell off on ANY news anymore; buy the rumor, sell the news now has been replaced by buy the rumor, and buy the news too.
Please note aside from the Fed meeting, the ECB and Bank of England also 'report' this week - it will be interesting to see if the Bank of England in particular does any 'retaliatory' printing to try to respond to the Fed. Also the Bank of Japan moved up its meeting specifically this week, in what seems like a sure sign they will announce something to combat the Ben helicopter drop.
Monday: Personal Income & Outlays (8:30 AM), ISM Manufacturing (10 AM) Construction Spending (10 AM) - the market keys on the ISM Manufacturing report, although Wednesday's non manufacturing is far more important in terms of economic impact. Consensus 54.5.
Tuesday: FOMC Meeting Day 1, Elections
Wednesday: FOMC Meeting Day 2 with announcement 2:15 PM. ADP Employment (8:15 AM), ISM Non Manufacturing (10 AM), Factory Orders (10 AM) - Consensus 54.0 on ISM.
Thursday: Weekly Claims (8:30 AM), Productivity & Costs (8:30 AM) - the first drop below 450,000 in a long time on weekly claims last week; while still a recessionary level in the 430,000 this report will be key to watch to see if the momentum can continue downward.
Friday: Monthly Employment Data (8:30 AM) - consensus +60,000 jobs and 9.6% rate
POMO days - the Fed is taking a break off POMO during its meeting (Tue/Wed) but primary dealers will be taking Fed cash to "buy stuff" Monday the 1st and Thursday the 4th. I think a big psychological change will happen when the market actually breaks down on a POMO day. It has now become accepted the market cannot selloff on a POMO morning, and everyone is now front running this. Again I will repeat what I say over and over (and over) - when EVERYONE knows something in the market it traditionally stops working. But not in this market.
POMO days is a new feature on the calendar - essentially the Fed has been pumping $20B a month into the market. With QE2 we should expect a figure of $100B additional each month at least on the front end, with a goal of perhaps half a trillion in the next 3-6 months. Then from there the Fed can exact language such as "we'll monitor it from there and continue to adjust to the market as we see fit" holding an anvil over the heads of bears from here to infinity.
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Portfolio
The market did little last week - key move was a selloff Tuesday on a WSJ leak about some smaller front end QE - but extending the duration. Market participants whined .... for a day. Then back to the regularly scheduled melt up as the S&P 500 hit the 13 day moving average and bounced. Precious metals caught a bid late in the week, after Bank of Japan QE details.
This market remains 'unshortable' and will .... until it is not. Until the 13 day moving average can be broken, and then the 20 day moving average - all shorts on the indexes are more of the 'overextended to the upside' variety which offer a short window to try to execute in. As I take profits in some names, I am forcing myself to find new names to replace the long exposure with, although I am increasingly uncomfortable chasing an incredibly complacent market which has essentially become 'faith based' investing: "POMO will make us go higher" "QE2 will make us go higher" "Elections will make us go higher" "Ben Bernanke is my master" et al. We have had some nice earnings winners such as Las Vegas Sands (LVS), and when these jump I am taking profits and rolling into new names or other stocks such as BorgWarner (BWA) which continue to show excellent relative strength. Finding new entries in non extended stocks remains a challenge. I eagerly await the day to make money on the short side again...
On the long side:
- Monday, I started a modest 1% position in Ford (F) after a very good earnings report - the stock was very extended so I did not want to chase with large exposure, until (if) it pulled back.
- Tuesday, a small stop loss in Bucryus (BUCY) was executed as the WSJ leak on QE, put pressure on the market in the opening minutes. After my stop loss was collected the stock immediately bounced well over 2%.
- A new position of 2.2% exposure was started in Citrix Systems (CTXS) after an excellent earnings report, and the stock breaking over some resistance.
- Wednesday, Whirlpool (WHR) was closed after an adverse reaction to earnings; took a 5% loss.
- Wednesday afternoon, I bought a 4.5% exposure in SPY calls for no reason other than "POMO" on Thursday morning. They were sold the next morning for a 20% gain...
- I sold almost all Las Vegas Sands (LVS) this week - as this is one of the new "nifty 50". Half the remaining position was sold just ahead of earnings for a 25% gain, and the remainder the next morning for a 36% gain. This was about a 6 week trade from where I bought most of the exposure.
- Thursday, sold 2/3rds of Rovi (ROVI) going into earnings for 'flat'.
- Closed Kinder Morgan Partners (KMP), mostly out of boredom, taking a 2% loss.
- Added some exposure to BorgWarner (BWA) after another excellent earnings report.
- Friday, started a position in a new name - Eastman Chemical (EMN) - which is about as cyclical as you can ask for.
- Acme Packet (APKT) had a nice report but did not react 'great', since I wanted to keep some long exposure going after sales earlier in the week I added some to this position, mostly out of default.
- Precious metals looked poised for a new run after resting for a few weeks - I restarted a position in Silver Wheaton (SLW).
On the short side:
- Friday, I took a little off the Powershares US Dollar Bullish (UUP)
position (our main hedge) as the dollar was rejected at the 20 day moving average and now sits in limbo.
PERSONAL INCOME SLIPS, SPENDING RISES FOR SEPTEMBER
Disposable personal income (DPI) slipped last month while personal consumption expenditures (PCE) rose, the U.S. Bureau of Economic Analysis reports. The mixed profile for September isn't surprising these days, although it does offer one more piece of statistical evidence for keeping optimism in check about the near-term prospects for economic growth.
The 0.2% drop in personal income for September is the first monthly retreat in a year. Disposable income, by contrast, rose last month for the third time in a row.
Measured by rolling 12-month percentage change, both income and spending remain firmly in the black, as our chart below shows. That's a reminder that economic recovery, while weak, is likely to continue forging ahead at the margins. But the macro revival is precarious, and today's update on DPI and PCE don't offer much reason to think differently.
The optimists will be cheered by the fact that consumption was generally higher last month. For the moment, the fear is overblown that Joe Sixpack is set to dive into a bold new lifestyle of thrift and throw the economy into a new recession. Durable and nondurable goods purchases, as well as services, posted higher consumption figures in September.
Meanwhile, the broad trend in private wages remains positive. On a year-over-year basis, paychecks in the private sector rose 2.4% for the 12-months through September. As the second chart below shows, that's roughly a return to levels that prevailed before the recession and financial crisis hit in 2008. This critical measure, in short, continues to climb. That's good news, and it's one reason why there's been an economic rebound from the depths of the Great Recession, even if doesn't feel like one on Main Street.
But if you're looking for reasons to stay cautious, you don't have to look very far these days. Private wage growth is still positive, but the trend is wobbly when looking at the monthly readings. Indeed, September's private sector wages increased by the thinnest of margins. What's more, monthly changes in private wages, while mostly positive this year, remain stuck in a low range that hovers just above zero.
It all comes back to the single-biggest weight on the economic recovery: jobs, or the lack thereof. The labor market is minting new jobs on a net basis, but at a pace that's unusually spare. Private sector payrolls have been rising on a net basis in each and every month this year, but the gains have been low and the trend has been slipping, as last month's update reminds.
Will this Friday's payroll report for October deliver more encouraging news? Maybe, or so one could reason after last week's update on initial jobless claims. As we reported last Thursday, new filings for jobless benefits dipped to their lowest level since July for the week ending October 23. Is that a sign that the labor market's about to enjoy a new round of improvement? Or is it just another bit of misleading statistical noise?
Too soon to say. Meanwhile, the consensus forecast among economists calls for more of the same: a sluggish recovery in the labor market. Dismal scientists predict another modest net rise in private nonfarm payolls for October, according to Briefing.com. At this stage of the economic cycle, there's only one thing that's going to convince the crowd that the economy's shifting to a higher gear of growth: cold, hard numbers.
We're now in the show-me-the-money stage of economic reports. Hope is nice, but it just won't suffice any longer. Until and if we see materially better numbers, the path of least resistance is one of expecting more of the same.
Yes, there's an economic recovery underway, and it's enough to keep us out of a new recession, at least for the foreseeable future. But that's about as good as it gets these days for peering into the future. And soon, perhaps sooner than we think, even that won't be enough.
THE BRAVE NEW (AND EVOLVING) WORLD OF ALTERNATIVE BETAS
PowerShares is planning to launch five factor ETFs based on the S&P 500, according to an SEC filing. It's one more sign that a new era is dawning for alternative betas and enhanced asset allocation opportunities.
The proposed ETFs from PowerShares:
S&P 500 High Beta Portfolio
S&P 500 Low Beta Portfolio
S&P 500 High Momentum Portfolio
S&P 500 High Volatility Portfolio
S&P 500 Low Volatility Portfolio
There's already a fairly intriguing lineup of funds targeting specific factors. A few examples include the S&P 500 VIX Short-Term Futures Index, AQR's trio of equity momentum index funds, the PowerShares DB G10 Currency Harvest Fund, the Merger Fund, and the iPathUS Treasury Steepener and iPath US Treasury Flattener ETNs.
The latest PowerShares proposal suggests that we'll be seeing more funds that mine previously untapped strategies/unconventional betas in the months and years ahead. Strategically speaking, an expanding menu of products targeting specific risk factors expands opportunity for asset allocation beyond the possibilities bound up with conventional betas. It's hardly a free lunch, but for sophisticated investors who understand the risks it all adds up to a productive evolution in fund choices. Indeed, more is better when it comes to the beta menu because in theory additional funds boost the ability to generate better results and weather rough investment seas.
Securitizing new factors has, in fact, been going on for years. It's old hat now, but once upon a time there was a new-fangled beta focus called small-cap and value equity funds, for instance. Over the years, the list has continued to lengthen, such as adding high-yield bond funds and emerging market equity funds. More recently, we've seen the first generation of index funds targeting foreign bonds denominated in foreign currencies. And, of course, there's also been an explosion of forex funds proper.
Overall, it's fair to say that fund companies have been filling out their product lines over the last decade or so in the basic corners of risk factors. As a result, there's a broad array of index funds targeting stocks, bonds, REITs and commodities, along with numerous subsets of each. There's also a niche arena with short and levered exposures as well. This phase of the securitizing standard betas is now nearly complete.
But the era of securitizing unconventional betas has only just begun. Why is this relevant? Because the trend of minting new funds that capture various factor exposures potentially opens the door to a wider menu of asset allocation possibilities. In theory, the ability to tap into an expanded set of betas enhances the possibility of juicing risk-adjusted return. Asset allocation benefits from additional choices, in part because investors can exploit the varying risk profiles and lower correlations between standard and alternative betas. As a 2009 research monograph published by MSCI Barra explained, an expanded palette of betas improves the strategic opportunities for raising return, lowering risk, or both.
The improved asset allocation possibilities are partly a function of lower correlations between alternative betas and their conventional counterparts. What's more, correlations between alternative betas are often low or even negative. Consider a table from the MSCI Barra paper, which summarizes correlations between a select list of factors:
The basic message is that alternative betas exhibit lower correlations with both standard asset classes and among themselves. The data in the table above, the MSCI Barra research observes, reflect that most of the correlations are below 0.25 and confirm that the risk premia captured unique return characteristics and offered diversification over this period. Note the highly negative correlation of -0.47 between Momentum and Value - two factors that are often deployed in quantitative equity investing. (A correlation of 1.0 indicates perfect positive correlation; a correlation reading of zero indicates no correlation, and -1.0 reflects perfect negative correlation.)
The accompanying challenge in this brave new world of alternative betas is that much of the common wisdom that's been developed with standard asset allocation will require an upgrade. Although academic researchers have long toiled in this arena, moving portfolio strategy to the next level for the masses is still in its infancy.
One aspect of this learning curve is understanding how alternative betas interact with one another. It's not always as intuitive as it is with standard betas. As such, mindlessly diversifying doesn't necessarily add value when it comes to non-standard factors. For instance, as MSCI Barra notes, the correlation between high yield and credit spread is high at 0.56, suggesting that these two factors are at least partially redundant.
By contrast, you can be reasonably confident that diversifying among all the standard betas is generally a productive move. If you only own stocks, for instance, you don't need to analyze a correlation matrix to rationalize the case for owning some bonds, REITs and commodities. Or, if you only only domestic stocks, expanding the portfolio into foreign equities is a no-brainer.
On the other hand, deciding if merger arb and convertible arb, or the carry trade and currency momentum, are complimentary pairings requires deeper analysis. Greater complexity can be a friend, but it may be a foe, depending on the investor, the prevailing market and economic conditions, and the set of factors under consideration.
The details matter for the individual funds as well. Simply rolling out a new alternative beta ETF or ETN in and of itself isn't a reason to buy the product. Expenses tend to be higher (perhaps dramatically higher) in this niche compared with the indexing of conventional betas, and so the stakes are higher for evaluating each fund on a case-by-case basis. The expected risk premium for certain alternative betas can look good on paper but end up as far less attractive (or even negative) in the real world after deducting expenses and navigating the extra layers of complication for mining these financial niches. Capturing the effects of some factors, in other words, can be costly and complicated compared with replicating standard betas.
Nonetheless, the future for asset allocation is evolving, one alternative beta product at a time. That's generally a step in the right direction. If we think of asset allocation as a chess game, portfolio management is shifting from a conventional one-dimensional board to 3-D chess. Accordingly, we're entering a new era of possibilities for minting superior results. But there's also more complication and higher expenses to consider.
The core rule of investing, however, is unchanged. The opportunity for earning higher returns comes prepackaged with the possibility of suffering bigger losses. Risk and return are still closely linked in new world of betas, even if those connections are becoming more nuanced and varied.
1st Day of November Tendency
I've discussed before how the 1st day of the month tends to have a bullish bias. This has been the case since the late 80s. (Perhaps due to the rise in popularity of the 401k.) In July 2009 I looked back to 1987 and broke down the 1st day returns by month.
For whatever reason, the 1st trading day of November has shown a positive bias for a bit longer than most months. Below are the results looking back to 1978.
Grain Market Analysis
$12.20 1/2 --- 10-day moving average
$11.78 3/4 --- 20-day moving average
$11.29 1/4 --- 40-day moving average
$8.17 -------- the contract low
Source: VantagePoint Intermarket Analysis Software
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$333.90 --- 10-day moving average
$324.40 --- 20-day moving average
$314.30 --- 40-day moving average
$236.70 --- the contract low
48.74 --- 10-day moving average
47.29 --- 20-day moving average
45.11 --- 40-day moving average
31.80 --- the contract low
$5.67 3/4 ---- 10-day moving average
$5.49 1/2 ---- 20-day moving average
$5.20 3/4 ---- 40-day moving average
$3.43 1/4 ---- the contract low
$6.88 3/4 ---- 10-day moving average
$6.88 1/4 ---- 20-day moving average1
$7.02 -------- 40-day moving average
$4.72 3/4 ---- the contract low
$7.37 ------- 10-day moving average
$7.31 3/4 --- 20-day moving average
$7.38 1/2 --- 40-day moving average
$4.85 3/4 --- the contract low
Choppy Trading Will Remain a Key Threat
EUR/USD
The dollar held broadly steady ahead of the US GDP data on Friday with markets reluctant to make any aggressive plays given the risk of volatility in the New York session.
Within the Euro-zone, leaders agreed that a new debt-crisis mechanism should be put in place by 2013 and this would be designed to lessen the risk of another Greek-style crisis. Overall confidence in the medium-term outlook will remain very fragile given the debt profile and any serious markets stresses could easily overwhelm official support.
The US third-quarter GDP advance reading was in line with expectations at an annualised rate of 2.0% with firmer consumer spending. The headline inflation reading was also in line with estimates, but there was a core reading of only 0.8% which reinforced market speculation that the Federal Reserve would have scope for additional monetary easing.
The Chicago PMI index was stronger than expected at above the 60 level, but the dollar was unable to make any progress and weakened steadily to test support levels beyond 1.39 against the Euro.
There was further dollar weakness in Asia on Monday with a peak close to 1.40 due to increased speculation that the Fed will adopt a more aggressive policy and the whole outlook for monetary policy is continuing to fan a longer-term lack of confidence in the dollar.
Caution was, however, evident in the options market with greater demand for Euro puts and this will make it difficult for the Euro to sustain much progress. Choppy trading will remain a key threat ahead of Wednesday's FOMC meeting.
Source: VantagePoint Intermarket Analysis Software
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Yen
The dollar was unable to gain any support following the US GDP data with a decline in US Treasury yields hampering the US currency. The US currency lost further support in early Asia on Monday with a test of fresh 15-year lows near 80.20.
The dollar then spiked higher with a peak close to 81.60 against the Japanese currency. Inevitably, the price action raised speculation over Bank of Japan intervention, but there were also reports that the move was due to a technical error and the dollar lost support very quickly.
The Chinese PMI data was firm which should offer some degree of support to risk appetite and may increase yen selling to some extent with a flow into high-yield currencies, although there will also be additional pressure for stronger Asian currencies. The dollar consolidated just above the 80.50 level.
Sterling
Sterling maintained a solid tone against the dollar ahead of the US data on Friday and then pushed firmly ahead with a high close to the 1.60 level. As the US currency remained under pressure, the UK currency moved decisively above 1.60 in Asia on Monday.
Sterling is continuing to gain support from reduced expectations that the Bank of England will move to additional quantitative easing in the short term. Markets will watch the latest business-confidence surveys very closely this week as they will be very important for underlying expectations and firm readings would further ease near-term pressure for more central bank action.
Sterling volatility levels are liable to remain higher in the short term with the Federal Reserve, Bank of England and ECB all making interest rate decisions this week.
Swiss franc
The dollar was unable to sustain a move above 0.99 against the Swiss franc on Friday and weakened to test support levels near 0.98 following the GDP data. The franc maintained a slightly softer tone on the crosses which made it easier for the US dollar to hold support levels.
An improvement in risk appetite and longer-term hopes for a more effective Euro-zone debt-crisis mechanism will tend to stifle defensive Swiss franc demand in the short term. There will still be a high degree of concern over potential longer-term G7 policies that lead to currency debasement and this will tend to limit selling pressure on the franc.
Source: VantagePoint Intermarket Analysis Software
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Australian dollar
The Australian dollar found support below 0.97 against the US currency in Europe on Friday and advanced steadily following the US data with a move back to the 0.98 area as the US currency came under renewed selling pressure.
The currency drew further support from an improvement in risk appetite during Asian trading on Monday with a high near 0.89 following solid Chinese PMI data. Domestically, the manufacturing PMI index remained below the 50 expansion threshold for October which will maintain unease over domestic trends. The currency will still spike higher if the Reserve Bank increases interest rates at the Tuesday meeting.
Read More at TraderPlanet.com »Jim Wyckoff's Morning Blog--Monday
Monday, November 1-Jim Wyckoff's Morning Web Log
JIM'S MARKET THOUGHT OF THE DAY *
The U.S. dollar index is under pressure again
Monday morning, and the commodity markets are
generally stronger. This week it is expected the
Federal Reserve will announce a fresh quantitative
easing plan--likely on Wednesday afternoon. I do
not look for strong downside price action in the
U.S. dollar index this week, as the "QE" is already
factored into the markets.--Jim
STOCK INDEXES
S&P 500 futures: The shorter-term moving averages
are bullish early today. The 4-
day moving average is above the 9-day. The 9-day is
above the 18-day moving average. Short-term
oscillators are neutral
early today. Today, shorter-term technical
resistance comes in at the overnight high of
1,189.70 and then at last week's high of 1,193.00.
Buy stops likely reside just above those levels.
Downside support for active traders today is
located at the overnight low of 1,180.60 and then
at Friday's low of 1,172.10. Sell stops are likely
located just below those levels. Wyckoff's Intra-
day Market Rating: 5.5
Nasdaq index futures: The shorter-term moving
averages are still bullish early
today. The 4-day moving average is above the 9-day.
The 9-day average is above the 18-day. Short-term
oscillators are neutral to
bearish early today. Shorter-term technical
resistance is located at last week's high of
2,136.75 and then at 2,150.00. Buy stops likely
reside just above those levels. On the downside,
short-term support is seen at the overnight low of
2,125.00 and then at 2,116.75. Sell stops are
likely located just below those levels. Wyckoff's
Intra-Day Market Rating: 5.5
Dow futures: Sell stops likely reside just below
support at Thursday's low of 11,080 and then more
stops just below support at 10,050. Buy stops
likely reside just above technical resistance at
11,125 and then at Thursday's high of 11,150.
Shorter-term moving averages are still bullish
early today, as the 4-day moving average is above
the 9-day. The 9-day moving average is above the
18-day moving average. Shorter-term oscillators
are neutral to bearish
early today. Wyckoff's Intra-Day Market Rating: 5.5
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Shorter-term moving averages
are bearish early today. The 4-day
moving average is below the 9-day and 18-day. The
9-day is below the 18-day moving average.
Oscillators are bullish
early today. Shorter-term resistance lies at 131
16/32 and then at 132 even. Buy stops likely reside
just above those levels. Shorter-term technical
support lies at 131 even and then at the overnight
low of 130 18/32. Sell stops likely reside just
below those levels. Wyckoff's Intra-Day Market
Rating: 5.5
DECEMBER U.S. T-Bonds
135 19/32--lifetime high
135 12/32--Previous Month's high
132 13/32--18-day moving average
131 25/32--second pivot point resistance
131 12/32--9-day moving average
131 11/32--first pivot point resistance
131 3/32--previous day's high
130 30/32--previous day's close
130 22/32--pivot point
130 14/32--4-day moving average
130 8/32--first pivot point support
130 --previous day's low
129 19/32--second pivot point support
129 18/32--previous month's low
129 9/32--100-day moving average
112 --lifetime low
December U.S. T-Notes: Shorter-term oscillators
are bullish early today.
Buy stops likely reside just above shorter-term
technical resistance at 126.24.0 and then at
127.00.0. Shorter-term moving averages are bearish
early today. The 4-day moving average is below the
9-day. The 9-day is below the 18-day moving
average. Sell stop orders are likely located just
below support at the overnight low of 126.02.5 and
then at 125.25.0. Wyckoff's Intra Day Market
Rating: 5.5
DECEMBER U.S. T-Notes
127 22/32--lifetime high
127 22/32--previous month's high
126 25/32--second pivot point resistance
126 21/32--18-day moving average
126 17/32--first pivot point resistance
126 13/32--previous day's high
126 9/32--9-day moving average
126 9/32--previous day's close
126 5/32--pivot point
125 29/32--first pivot point support
125 25/32--4-day moving average
125 25/32--previous day's low
125 17/32--second pivot point support
125 1/32--previous month's low
123 24/32--100-day moving average
111 9/32--lifetime low
U.S. DOLLAR INDEX
The December U.S. dollar index is lower in early
trading today. Bears have the solid overall near-
term technical advantage. Slow stochastics for the
dollar index are bearish early today. The dollar
index finds shorter-term technical resistance at
the overnight high of 77.56 and then at 78.00.
Shorter-term support is seen at the overnight low
of 76.96 and then at 76.75. Wyckoff's Intra Day
Market Rating: 4.0
CRUDE OIL
Crude oil prices are higher early today. Trading
has been choppy and in a range recently. In
December crude, look for buy stops to reside just
above resistance at $83.00 and then at $83.50. Look
for sell stops just below technical support at
$82.00 and then at the overnight low of $81.32.
Wyckoff's Intra-Day Market Rating: 5.5
GRAINS
Prices were higher in overnight trading. The key
"outside markets" are in a bullish posture for the
grains early today, as the U.S. dollar index is
lower, while stock indexes and crude oil are
firmer. Corn and soybean bulls have solid upside
near-term technical momentum. Wheat futures bulls
have also gained good upside momentum recently. I
look for still more upside price action in the
grains in the coming weeks.
Grain Market Analysis from Jim Wyckoff
Prices closed at a bullish weekly and monthly high close. Soybean bulls have
the solid near-term technical advantage. A four-month-old uptrend is in
place on the daily bar chart. The next near-term upside technical objective
for the soybean bulls is pushing and closing January prices above major
psychological resistance at $13.00 a bushel. The next downside price
objective for the bears is pushing and closing prices below solid technical
support at last week's low of $11.76 1/2. First resistance for November
soybeans is seen at last week's contract high of $12.48 3/4 and then at
$12.60. First support is seen at Friday's low of $12.25 then at $12.13.
$12.20 1/2 --- 10-day moving average
$11.78 3/4 --- 20-day moving average
$11.29 1/4 --- 40-day moving average
$8.17 -------- the contract low
Prices also closed at a bullish weekly high close. The meal bulls have the
solid near-term technical advantage. The next upside price objective for the
bulls is to produce a close above solid technical resistance at $350.00. The
next downside price objective for the bears is pushing and closing prices
below solid technical support at $323.00. First resistance comes in at last
week's high of $340.40 and then at $342.50. First support is seen at $335.00
and then at $332.50.
$333.90 --- 10-day moving average
$324.40 --- 20-day moving average
$314.30 --- 40-day moving average
$236.70 --- the contract low
bulls still have the solid overall near-term technical advantage. The next
upside price objective for the bean oil bulls is pushing and closing prices
above solid technical resistance at last week's high of 50.20 cents. Bean
oil bears' next downside technical price objective is pushing and closing
prices below solid technical support at 48.00 cents. First resistance is
seen at 49.50 cents and then at Friday's high of 49.75 cents. First support
is seen at 49.00 cents and then at Friday's low of 48.79 cents.
48.74 --- 10-day moving average
47.29 --- 20-day moving average
45.11 --- 40-day moving average
31.80 --- the contract low
a bullish weekly and monthly high close. Corn bulls have the solid overall
near-term technical advantage. Prices are in a four-month-old uptrend on the
daily bar chart. Corn bulls' next upside price objective is to push and
close prices above psychological resistance at $6.00 a bushel. The next
downside price objective for the bears is pushing and closing prices below
solid technical support at $5.42 3/4. First resistance for December corn is
seen at last week's high of $5.85 1/4 and then at the October high of $5.88.
First support is seen at $5.80 and then at $5.75.
$5.67 3/4 ---- 10-day moving average
$5.49 1/2 ---- 20-day moving average
$5.20 3/4 ---- 40-day moving average
$3.43 1/4 ---- the contract low
after hitting a fresh three-week high early on. Wheat bulls still have the
near-term technical advantage. Wheat bulls' next upside price objective is
to push and close Chicago SRW prices above solid resistance at the October
high of $7.39 3/4 a bushel. The next downside price objective for the wheat
futures bears is pushing and closing prices below solid technical support at
$6.65. First resistance is seen at Friday's high of $7.25 and then at $7.30.
First support lies at Friday's low of $7.11 1/4 and then at $7.00.
$6.88 3/4 ---- 10-day moving average
$6.88 1/4 ---- 20-day moving average1
$7.02 -------- 40-day moving average
$4.72 3/4 ---- the contract low
hitting a fresh six-week high early on. Bulls have the solid near-term
technical advantage. Bulls' next upside price objective is pushing and
closing prices above solid technical resistance at the September high of
$7.78. The bears' next downside objective is pushing and closing prices
below solid technical support at $7.13. First resistance is seen at the
September high of $7.78 and then at $7.85. First support is seen at $7.65
and then at $7.54.
$7.37 ------- 10-day moving average
$7.31 3/4 --- 20-day moving average
$7.38 1/2 --- 40-day moving average
$4.85 3/4 --- the contract low
Free stock picks for 11/01/2010
Free stock picks for 11/01/2010
LONG:

________________________________________________
SHORT:

________________________________________________
Watch ideas:
Long ideas:

_______________________________________________
TRADING THE OPEN
During normal market conditions our regular setups generally do very well regardless what time they are taken. Trading right at the open always adds risk. During this low volume choppy market of the summer this risk is more pronounced. It is recommended that new trades not be taken for the first 5 minutes the market is open. I will treat each new trade that sets up during this time as a gap trade and wait till the stock comes back and takes out its 10 minute high or low.
Trading is risky. It is our job as traders to reduce this risk and increase our chances of success.
IMPORTANT: Take only the opportunities that you really like and understand. Always enter a trade with a trading plan. If you have any questions, please feel free to ask me. There is a much greater chance of success in your trading if you understand the trade. That is very important. Taking just a few trades is enough to be a successful trader. Overtrading is probably the number one reason new traders fail. I personally mostly take swing trades. Please remember to keep that in mind!!!!!!!!!!!!!!! p>
_______________________________________________
DT - day trade
ST � swing trade
PT � position trade
DT-ST � starting with day trade and can turn to swing trade
ST-PT � staring with swing trade and can turn to position trade
_________________________________________________
If you have any questions, please feel free to contact me.
Good luck trading today!!!!
Ivica Juracic
http://xpertstocktrader.blogspot.com/
Video: Outlook for Fed Meeting
I guest hosted CNBC Squawk Box Asia this morning and we talked about the Fed meeting and upcoming elections in the U.S.. Here’s the first clip about the FOMC and the prospect of additional Quantitative Easing. Enjoy!
[Videos] 60 Minutes: (a) Anger in the Heartland (b) Deficits: Taxing the Rich
Two nice stories tonight on 60 Minutes having to do with the economy
First, the dichotomy between fantastic corporate profits in large companies - especially that of the multinational kind - versus the scorched earth left behind in the ecosystem, once the large companies move jobs offshore; this story is specific to Iowa and Maytag but of course is symptomatic of so many others as Ross Perot's "great sucking sound" plays out. A tangent in this piece is the utter despair the voters in the piece have with both parties, and how few believe their children will do as well as they did. All themes discussed at length the past 3-4 years on FMMF pages.
(13 minute video)
Two years ago, most Americans voted for change, and if the polls are to be believed, they're about to do it again.
In the latest CBS News/New York Times Poll, 80 percent said they want most incumbents out of Congress regardless of whether that incumbent is a Democrat or Republican.
There's a grim mood among people who were counting on a recovery that has now fallen flat. The economists who decide such things say that the Great Recession ended in June 2009. But since then, we've lost another half million jobs - which helps explain why there is so much anger in the land.
We saw a lot of it right in the middle of the country, among the people who've endured the recession longer than anyone.
--------------------------------------------
Second, can we fix the deficit just by "taxing the rich?" - this is like asking can we build a dam with 20 bags of concrete. In a broader sense this piece is again political - one side of the 2 headed monster handing away every benefit known under the sun, without having a way to pay for it.... while the other side of the 2 headed monster believing cutting taxes (to perhaps zero) will be fine in that environment. This story is told mostly through the context of a Washington state initiative to initiate an income tax on the upper income, and the normal dogma ensues. Special appearance by former Reagen budget director David Stockman who calls out his own party for ... well, dogma. [ Jan 20, 2010: What Can (Scott) Brown Do for You? Not Much... if you are an Incumbant]
(13 minute video as well)
When Congress returns after the elections on Tuesday, it will face one of the most hotly debated issues in the campaign: raising taxes on the rich.
That's President Obama's position: to keep the Bush tax cuts in place, except for those on the wealthiest two percent as a way to reduce the dreaded deficit.
It's an idea already percolating among the governors: eight states have increased so-called "millionaire" income taxes so far, as a way of avoiding drastic budget cuts on health and education. And on Tuesday, voters could make Washington State the ninth.
But with our national debt in the trillions, budget experts will tell you that just taxing the rich isn't enough.
MrSwing Lite - Swing Trading Picks - 11-01-2010
Some Potential Swing Trading Opportunities for today...
These stocks will be monitored by you every day!!! Follow the master plan and you will be on your way to learn to trade stocks like a PRO... enjoy...
The results are generated by my stock screener. Only the first 5 results are displayed here for every scan.
For full results, subscribe now to StockScanPRO for 30 days FREE, then only pay $9.99 a month!.
SECRETS TO GREAT RESULTS:
CONFIDENCE - PATIENCE- FOCUS - DISCIPLINE
Long Swings
Window
Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000)
and
(close() > 7)
and
(adx(10) > 30)
and
(pdi(10) > mdi(10))
and
(high() < sma(close,5))
Results for NASDAQ
0 results for NASDAQ:
Results for NYSE
Displaying 5 results of 22 for NYSE:
| ACE |
NYSE | ACE Limited | 10/29/2010 |
| ACN |
NYSE | Accenture Ltd | 10/29/2010 |
| ANF |
NYSE | Abercrombie & Fitch | 10/29/2010 |
| BAM |
NYSE | Brookfield Asset Management Inc. | 10/29/2010 |
| CBL |
NYSE | CBL & Associates Properties, Inc. | 10/29/2010 |
Results for AMEX
0 results for AMEX:
Results for NYSEARCA
0 results for NYSEARCA:
Swings
Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000)
and
(close() > 12)
and
(force_index(3) <= 0)
and
(force_index(13) >= 0)
and
(adx(10) > 30)
and
(high() < high()[-1])
and
(high()[-1] < high()[-2])
and
(close() > sma(close,10))
and
(close() > sma(close,20))
Results for NASDAQ
0 results for NASDAQ:
Results for NYSE
1 results for NYSE:
| F |
NYSE | Ford Motor Company | 10/29/2010 |
Results for AMEX
0 results for AMEX:
Results for NYSEARCA
0 results for NYSEARCA:
1-2-3-4
Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000)
and
(close() > 12)
and
((adx(10) + adx(20))/2 > 30)
and
(pdi(10)+pdi(20) > mdi(10) + mdi(20))
and
(low() < low()[-1])
and
(low()[-1] < low()[-2])
and
(high() < high()[-1])
and
(high()[-1] < high()[-2])
Results for NASDAQ
0 results for NASDAQ:
Results for NYSE
4 results for NYSE:
| DDR |
NYSE | Developers Diversified Realty Corporation | 10/29/2010 |
| EMN |
NYSE | Eastman Chemical Co. | 10/29/2010 |
| MTZ |
NYSE | MasTec, Inc. | 10/29/2010 |
| TTM |
NYSE | Tata Motors Limited | 10/29/2010 |
Results for AMEX
0 results for AMEX:
Results for NYSEARCA
0 results for NYSEARCA:
Cross
Scan Code From www.StockScanPRO.com:
(sma(volume,20)>=500000)and(close()
> 12)and(sma(close,5)>sma(close,15))and(close() <
sma(close,5))and(close() > sma(close,15))and(high() <
high()[-1])and(close() > open())
Results for NASDAQ
0 results for NASDAQ:
Results for NYSE
Displaying 5 results of 37 for NYSE:
| ADM |
NYSE | Archer Daniels Midland Co. | 10/29/2010 |
| APD |
NYSE | Air Products and Chemicals, Inc. | 10/29/2010 |
| AYI |
NYSE | Acuity Brands, Inc. (Holding Company) | 10/29/2010 |
| BGC |
NYSE | General Cable Corporation | 10/29/2010 |
| BHI |
NYSE | Baker Hughes Inc. | 10/29/2010 |
Results for AMEX
3 results for AMEX:
| DDM |
AMEX | ProShares Ultra Dow30 | 10/29/2010 |
| DIG |
AMEX | ProShares Ultra Oil & Gas | 10/29/2010 |
| OIH |
AMEX | Oil Service HOLDRS | 10/29/2010 |
Results for NYSEARCA
Displaying 5 results of 12 for NYSEARCA:
| ERX |
NYSEARCA | Direxion Energy Bull 3x Shares | 10/29/2010 |
| IJR |
NYSEARCA | iShares S&P SmallCap 600 Index Fund | 10/29/2010 |
| IVV |








