30-31 Jan 2010 Weekend Comments

If the saying "as goes January, so goes the rest of the year" holds true, Wall Street could be in for a rough year. The major market indexes dropped nearly 4% across the board last month, setting an unnerving tone for the rest of 2010. What's more, the S&P 500 Index (SPX) broke below its 80-day moving average for the first time since the March 2009 bottom last week, providing more technical fuel for the bears.
As for the CBOE Market Volatility Index (VIX), the fear barometer remains trapped between its 10-month moving average, near the 27 level, and its 20-week moving average, near the 23 level.
Economic Calendar
The economic calendar offers up December's personal income and spending data, as well as December's construction spending and the January Institute for Supply Management (ISM) manufacturing index today. On Tuesday, January's auto sales and December's pending home sales reports will hit the Street, while the January ADP employment report, the ISM services index, and weekly crude inventories are on tap.
On the docket for Thursday are weekly initial jobless claims, the fourth-quarter productivity report, and December's factory orders. Friday ends the week with a bang, as January's unemployment rate, nonfarm payrolls, and December/s consumer credit report are on tap.

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29 Jan 2010 Market Recap

Traders woke up this morning to a surprisingly robust report on fourth-quarter gross domestic product (GDP), with the Commerce Department noting a 5.7% expansion in the U.S. economy. This marked the fastest rate of growth since the end of 2003, and the Dow Jones Industrial Average (DJIA) rallied to an early triple-digit gain. However, a closer look suggested that the upbeat report was mostly the result of businesses restocking inventories, rather than a meaningful rebound in consumer spending, and early optimism soon faded. Investors also considered the Senate's unenthusiastic reappointment of Federal Reserve Chairman Ben Bernanke, with the beleaguered Fed head receiving more "no" votes than any other chairman in history.

The Dow Jones Industrial Average (DJIA – 10,067.33) finished on a loss of 53.1 points, or 0.5%, breaching support at its 20-week moving average for the first time since April 2009. The Dow shed 1% this week, and ended January with a loss of 3.5%.

The S&P 500 Index (SPX – 1,073.87) backpedaled 10.7 points, or roughly 1%, and joined the Dow in violating its 20-week trendline for the first time since April 2009. The SPX gave up 1.6% this week, and tumbled 3.7% for the month.

Finally, the Nasdaq Composite (COMP – 2,147.35) plunged 31.7 points, or 1.5%, to finish beneath its own 20-week moving average. The COMP wrapped up the week on a deficit of 2.6%, and settled the month of January on a steep loss of 5.4%.

Levels to Watch in Trading:
Dow Jones Industrial Average (DJIA – 10,067.33) - support at 9,000; resistance at 11,000
S&P 500 Index (SPX – 1,073.87) - support at 950; resistance at 1,300
Nasdaq Composite (COMP – 2,147.35) - support at 1,900; resistance at 2,600

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29 Jan 2010 Pre-market

The S&P 500 Index (SPX) began the week trading below potential very strong resistance at its 80-day moving average, and the weeks' events have the index trading about 1.3% below this key technical benchmark. Return back to the 80-day trendline could send the SPX back to the 1,150 within the next few weeks, while a failure here could send the index down to the 1,050 area.

Headlining earnings news, Amazon.com Inc. (AMZN) reported fourth-quarter net income of $384 million, or 85 cents per share, as sales rose 42% to $9.52 billion. Analysts were expecting earnings of 72 cents per share on revenue of $9.04 billion. In electronic trading, AMZN was up 2.67%. Call options were popular ahead of AMZN's report, . The stock could benefit from a bit of short-covering following the event, as some 3.28% of AMZN's float is sold short.

In the tech sector, Microsoft Corp. (MSFT) posted second-quarter net income of $6.66 billion, or 74 cents per share, as revenue rose 14% to $19.02 billion. Analysts were looking for a profit of 59 cents per share on $17.9 billion in revenue. Ahead of the open, MSFT was up 1.51% in electronic trading. Optimism was riding high on the shares ahead of the company's report.

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28 Jan 2010

The Dow Jones Industrial Average (DJIA – 10,120.46) ended the day on a drop of 115.7 points, or 1.1%, as only six of its 30 components managed to defy the downside bias. Procter & Gamble (PG) led the advancing blue chips with a 1.4% rise in the wake of its earnings report, while Bank of America (BAC) added 1.2%. Among the 24 laggards, Hewlett-Packard (HPQ) and American Express (AXP) fared the worst. The Dow is now positioned south of its 20-week moving average, which hasn't been breached on a weekly closing basis since early April 2009.

The S&P 500 Index (SPX – 1,084.53) swallowed a daily deficit of roughly 13 points, or 1.2%, and is also in danger of notching a weekly close below support at its 20-week trendline. Finally, the Nasdaq Composite (COMP – 2,179.00) endured the steepest slide, ending the session with a drop of 42.4 points, or 1.9%. However, the COMP is still perched narrowly above its 20-week moving average.

Crude futures finished nearly unchanged today, with traders unable to decide whether they should buy low or stay away entirely. The commodity looks like a bit of a bargain after tagging a six-week low on Wednesday, but yesterday's bearish inventory report proved difficult to dismiss. Additionally, today's disappointing jobs data offered little hope for a rebound in energy demand. With most players staying firmly planted on the sidelines, crude oil for March delivery gave up just 3 cents to finish at $73.64 per barrel.

Gold futures also finished on a minimal deficit, rebounding admirably from steep losses earlier in the session. The precious metal plummeted to an intraday low of $1,074.40 per ounce, its lowest price since Nov. 3, 2009, as the U.S. dollar benefited from an influx of safe-haven buying interest. However, traders have been eyeing support near $1,075, and gold's flirtation with this level prompted a surge of technical buying. February-dated gold futures finished on a nearly negligible dip of 90 cents at $1,083.60 per ounce.

Levels to Watch in Trading:
Dow Jones Industrial Average (DJIA – 10,120.46) - support at 9,000; resistance at 11,000
S&P 500 Index (SPX – 1,084.53) - support at 950; resistance at 1,300
Nasdaq Composite (COMP – 2,179.00) - support at 1,900; resistance at 2,600

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23-24 Jan 2010 Weekend Market Analysis

Highlights of the past week
While US banking giants reported more quarterly losses ($7.6 billion for Citigroup and $194 billion for Bank of America respectively) President Obama announced a major shake-up of the banking sector on Thursday. Plans included a ban on retail banks using their own money to bet on the stock market, alongside the potential break-up of some of the bigger banks. The impact was felt immediately, with Goldman Sachs, BoA and JPMorgan's share prices falling between 4% and 6%. Friday morning saw repercussions on the FTSE, with falls for Barclays (-3.9%), RBS (-2.2%) and HSBC(-0.2%), while inter-dealer broker ICAP plunged 6% to 400p a share.
Up until then the major story of the week had been the protracted takeover of Cadbury by US food giant Kraft. Cadbury's board has advised shareholders to accept Kraft's revised offer of 840p per share, in a takeover move worth £11.5 billion. It wasn't all good news for Kraft however, as its largest shareholder Warren Buffet expressed doubts over the move. Elsewhere, US technology firms had a mixed week. Google saw Q4 revenues of $6.67 billion, up from $5.7 billion the year before. Google's share price dropped on Thursday though, as the figures came in lower than expected. IBM also saw healthy Q4 results, making a profit of $4.8 billion, up 9% from the previous quarter.
Meanwhile the week's macroeconomic data revealed that UK unemployment dropped for the first time in 18 months. The ONS report showed the total number fell by 7000 between September and November 2009, and now stands at to 2.46 million – the first drop since the recession began. However UK government borrowing figures showed that there is still work to be done, with a new record for the month of December of £15.7 billion, albeit less than expected, an indication of the biting impact of the recession on the government's purse strings.
The week ahead
In a quiet week for economic releases at home, the major standout is GDP data for the fourth quarter on Tuesday, which should confirm that the UK economy has returned to growth. Across the Atlantic, Q4 GDP is released on Friday, while on Wednesday the FOMC will reveal if it is to keep US interest rates at their record low.
It's another busy week on the US reporting roster, with a number of notable companies releasing quarterlies. Among the names to look out for are Apple, who kick-start the week on Monday, internet giant Yahoo on Tuesday, followed by Microsoft and Amazon on Thursday. At home meanwhile it's a quieter week, but BSkyB's half-year numbers will be closely watched on Thursday.

Does this mean it's all over? Hardly! Earnings have been pretty solid. It seems the public has been punishing companies that beat their estimates, but not by enough. Google is a prime example. I guess the owners selling 5 million shares each over the next couple of years doesn't help either.

So what is the next move? That's a very tough one to forecast. Taking profits is our first rule… and several down days are sure to have a reversal day to shake the weak hands out.

Oil was another spot where we expected negative movement. The excess inventory and recent pops in the Oil price did not seem to logically work out for us.

Gold and silver have also taken a beating with the Dollar rally. We know that JPM is profiting nicely from the drop in the Silver markets. The main question will be if they can hold their December lows. Big picture economics tells us that we want to be long Gold, but short term traders are going to wait until they feel it has bottomed.

Volume coming in on support of the Dec. lows may we worth a small gamble… with tight stops to get out if the lows are violated.

We have broken some major trend lines, but the bull forces will most likely come back this week with the earnings schedule.

This long term trend break shows us there will be higher volatility (and more uncertainty) in the markets… especially over the next few weeks with earnings. Volatility has moved up, and if the market rallies back into the consolidation, it should settle down… and may be worth dabbling for the right price.

.It's going to be a crazy week with earnings and more economic news

Economic

Earnings

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22 Jan 2010 Analysis & Trading Activity

US stocks are on a three-day losing streak, the worst the US market has performed since October. Investors remain unconvinced about the strength of the 10-month rally



I still think is shallow correction that makes this a buying opportunity for high quality names on the pullback. 1085 is a critical level in the S&P [.SPX 1091.76 -24.72 (-2.21%) ], . If we break below it the market could slide substantially.


In the SPY the put to call ratio right now is 2-1,which suggests options investors are more bearish than bullish.

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21 Jan 2010 Analysis & Trading Activity

Analysis



U.S. stocks suffered their worst one-day decline in nearly three months Thursday as bank shares fell under the threat of new regulations, while the basic-materials sector suffered from worries about global tightening.

After closing at 15-month highs on Tuesday, the Dow Industrials [.DJIA 10389.88 -213.27 (-2.01%)], S&P 500 [.SPX 1116.48 -21.56 (-1.89%) ], and Nasdaq Composite [COMP 2265.70 -25.55 (-1.12%) ] are down well over 2 percent over the past two days. This gives the Dow its worst 2-day decline since August, and the S&P 500 and Nasdaq their worst 2-day losing streak since October.

On a day when Goldman (GS 160.22, -0.94, -0.58%) reported a full-year profit of more than $13 billion, President Barack Obama proposed that banks and financial institutions that contain banks should be banned from running proprietary trading operations unrelated to serving customers.





SPX closed right on 47 SMA, and major support line and we will wait tomorrow to see if its going to break below that level (1114) and see the long waited correction, or it will just bounce off. In normal trading times where technical analysis are in order, this will be buy signal. But please do not rush as the markets are news driven. If you are in rush to get in trade tight risk management is a must. Look the at chart below:







From my Trading Diary

FUTURES
DATE TYPE REF # DESCRIPTION FEES COMMISSIONS P/L BALANCE
01/21/10 BAL Cash balance at the start of today 115390.06
01/21/10 TRD 67070230 SOLD -1 /ESH0 @1133.75 -3.5 115386.56
01/21/10 TRD 67070624 BOT +1 /ESH0 @1132.50 -3.5 62.5 115445.56
01/21/10 TRD 67070689 SOLD -1 /ESH0 @1133.25 -3.5 115442.06
01/21/10 TRD 67070696 BOT +1 /ESH0 @1133.25 -3.5 115438.56
01/21/10 TRD 67071504 SOLD -1 /ESH0 @1133.00 -3.5 115435.06
01/21/10 TRD 67071595 BOT +1 /ESH0 @1132.50 -3.5 25 115456.56
01/21/10 TRD 67072160 SOLD -1 /ESH0 @1133.00 -3.5 115453.06
01/21/10 TRD 67073037 BOT +1 /ESH0 @1131.00 -3.5 100 115553.06



OPTIONS
Order ID Description

67195747 SOLD -10 VERTICAL FAZ 100 FEB 10 19/20 CALL @.26
To use the margin from sold bull put spread FAZ 16/17 Put


67196434 SOLD -1 VERTICAL AAPL 100 FEB 10 200/195 PUT @1.70
To use the margin from sold bear call spread AAPL 220/250 Call

67197359 SOLD -1 XLNX 100 FEB 10 24 CALL @1.45
Close the trade with 100% profit. Originally bought XLNX 24 Call @ 0.70, because of upgrade news

67198428 SOLD -10 VERTICAL SPX 100 (Weeklys) JAN4 10 1125/1130 CALL @.70
67198463 SOLD -10 VERTICAL SPX 100 (Weeklys) JAN4 10 1100/1075 PUT @.50
I sold this 2 verticals Half an hour before expiration, collect 1.20 for 30 min pretty safe :)

67201212 BOT +10 CONDOR SPX 100 FEB 10 1115/1120/1125/1130 CALL @.30
Very cheap condor, will close it on Monday, just need little up move in next 20 days


67202207 BOT +1 XSP 100 FEB 10 112 CALL @2.05
S&P 500 is on 47ma, looking to bounce off the support after bigest 2 days fall in 2010

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