First Time, Long Time – Buying Index Longs

For the first time, in a long time, I am buying the indexes for a trade (and may hold some long-term).  Near-term we are very oversold on internal indicators and while we might try to move sideways to unwind that, I firmly believe that corporate earnings will do well. The jobs data today was mixed, some good (private sector adds of 50k from May and lower unemployment percentage) but employment is clearly not expanding.  I look at sector like technology, where balance sheets improved greatly (most firms have 20% cash per share ratios) and recent acquisitions should only drive earnings growth. We will see in time if I am right but as fear increases, so does my long exposure to equities.

Positions: Long QQQQ, IWM, SPY, TYH (3x bull technology)

Market Outlook – July 2, 2010

Going 100% cash last week reaped dividends, haha.  Above is a chart on the S&P showing critical support and resistance levels. On the downside from here,  I see S&P 1000 then 976; however, I say it’s only a 30% chance we see those levels. I put money to work around 1,118 and am above 60% invested actually. Financials showed signs of capitulation and I took long rentals in the FAS as a result around $17.80.  The jobs report will be vital today but unless it’s horrible, it should be baked into the stock prices. Earnings will determine our next move; however, give we have lost 900 points on the DOW in 9 days, I like the risk/reward for the upside.

June 24, 2010 – S&P 500 Levels

The action on Wednesday was rather constructive from my point a view, as the S&P 500 had a clear test of support and ended up closing above the support, finishing the day of about .33% I believe.  My new support level will be yesterday’s low, which is around 1,085 and a close below that would be a push to about 1,070 on the S&P.  Resistance seems to be the classic 1,100 level but may drive harder at 1,130 as quarter end markups “may” begin, as well as some key earnings reports coming up (RIMM after the bell for tech).

I covered the balance of my trading shorts today, put on a few longs but will go 100% cash on a breach of 1080, as I believe we can fall at least 3% on that breach.

June 23, 2010 – S&P 500 Levels

Looking at the S&P 500, there looks to be a 42 point range.

Upside level: 1,129 (+3.1%)

Downside level: 1,087 (-0.7%)

20 day MA – 1088 (key level to watch)

AAPL

The image above is a highlight from BofA’s Apple Analyst Report, published today. The key point that wanted to expound on is on the argument that Apple is “expensive” at $270 a share. I would like to offer a different view, based on a few things:

1) Apple has a cash heavy balance sheet. Apple has near $55 in net cash per share, nearly 20% of the stock price, which many tech firms OF THE SAME GROWTH can vouch to. Look at CRM, NFLX, AMZN, etc.  Yet at just 19x CY earnings, why should AAPL trade at a higher multiple, with it’s massive cash hoard. CRM is trading at like 70x PE and 0 net cash per share.  Therefore, with a premium balance sheet, AAPL deserves a premium multiple.

2) Apple is still very cheap in relation to historic multiples, as highlighted in 2008 and 2009.  The growth is just as high as previous years and the multiple is only 19x this years estimates, compared to 30x in 2009, and 40x in 2008.  To trade at a PE of last year, the stock has 50% upside.

3) Multiple catalysts are still evident as the iPad is stil first generation, the new iPhone is already sold out, and it’s still running on an exclusive carrier – AT&T and could double cellphone shipments with a Verizon contract.

4) Smartphones are the way of the future – period.  Smartphones are going to growt 35% y-o-y until 2013, as the phone become “more common” and old handset cellphones because less attractive. Apple has a 3G phone valued at $99, which steals competition from Research in Motion, in addition to having a corporate market to penetrate, as well large international markets like China.

Market Outlook – June 22, 2010

Futures rebounded rather strong this morning, as oil began to tick up from being almost $2 down to nearly flat.  Housing data was a disappointment but from my perch, it was expected as alot of the demand was pushed up from the tax credit. Even if the data was great, I would have ignored it because it would have probably been a statiscal anomoly. 

Regardless, I took in the remaining balance of our trading shorts in financials and small cap indicies.  I rather book a nice 4% overnight gain in FAZ and TZA, with a high probability of window dressing into quarter end.

We added some long trading rentals into the swoosh down today  (and I will add to the dips unless we close or breakthrough 1095 on low volume. Yesterday’s selloff was not that surprising, as volume was thin in the morning and adv/del was just 13:1.

Be back later with the wrapup…

Market Wrapup – June 21, 2010

Nice read today on the equity markets, as we tailed off at the end. Alot of the action was rather weak, particulary in the technology sector, with the almight Apple (AAPL) having a 10 point swing intraday. In addition, some of the large cap banks gave up most of their gains as well and I took in some of the FAZ we bought earlier in the day for nice intraday gains of 6%. We covered some of our Russell short as well, as I think a test of 1,100 on the S&P is probable, especially with the housing data coming this week; however, I don’t want to be a hog and not take profits on some nice intraday gains.

I will be back tomorrow, have a good night!

Subs: Selling PMI

I am ringing the register on PMI from last week’s buy.

Nice +3.8% 2 trading day gain

Market Outlook – June 21, 2010

Nice ramp today in the equity markets off the China Yuan news, in addition to seeing some of the financial related names (credit cards – V and MA) ease a bit with “lighter” regulation tone on network fees. For our subs, I continued to sell the ramp today and even pressed a shorts for the first time in weeks, as I simply believe the math makes since and we bought heavily in the 1045-1065 zone. I think it makes more sense personally to get a little hedged here as we caught a near 7% equity move in 2 weeks (near a yearly average) so I want to lower beta.

Off the China news, I see a few implications for retail and believe that is why the sector is performing weakest. Higher import prices out of China (reflecting the new currency adjustment) could hamper profitability, coupled with the facts that many are giving up on the consumer off weaker retail sales numbers. Alot of people are also shorting the long bond via buying the TBT with the news but I am very skeptical of that. If jobs continue to be slugglish and the FED not wants to expand its MBS program, they might begin buying long bonds to keep rates down and flatten the long end of the curve.

One of the biggest weaknesses I see in the market is the Baltic Dry Index. The BDI is down for the 17th day and nearly 40% from the 4,000 level, that was made just 2 1/2 weeks ago. This could be a signal that growth is slowing, which in return wants me to pare away from risk.

Subs: Selling some longs rentals into the ramp

Taking off some longs now that subs bought in the hole over the past 2 wks:

Selling BRK.B at $79.76 +13.5% profit
Selling all KGC at $18.74 +10.2% profit
Selling 1/3 XL at $18.04 +7.8% gain
Selling 1/2 MU at $10.05 + 19.1% gain
Selling 1/2 WFT at $15.02 + 17.4% gain

Our laggards remain: GNK