Archive for December 2011

Open thread   14 comments

It doesn’t look like the markets are going anywhere today, unless something happens at the end of the trading today. So I am going ahead and rolling out this long weekend’s open thread, where you folks can discuss any topic you like.

As for me, I am talking spy movies. Since I saw Mission Impossible: Ghost Protocol yesterday, I am going out on a limb and calling Tom Cruise’s Ethan Hunt the American James Bond. Cruise’s MI films are every bit as much fun as the old James Bond films, and I will happily see the next one whenever he decides to make it.

My only complaint about the latest Mission Impossible film: They messed with the theme song in a bad way. When you have a great theme song, making it sound like something else is risky, and in this case they made it worse. Listen for yourself (if you dare):

While I am on the topic of spies and theme songs, how about a top 3 list of the best James Bond theme songs?

1. Live and Let Die–by Paul McCartney and Wings (1973): On a side note, Live and Let Die was my favorite James Bond film, mostly because it was one of the most unusual of the Bond films, with a lot of magic elements, not to mention some tremendous acting.

But the best Bond theme ever sealed the deal for me. McCartney nailed what was necessary for a Bond film, with a driving rock tempo combined with occasional slower sequences demonstrating a certain sadness which suited the film.

2. Nobody Does it Better–by Carly Simon for The Spy Who Loved Me (1977): While I liked The Spy Who Loved Me, the theme song (written by Marvin Hamlisch and Carole Bayer Sager) is a perfect ode to James Bond, and needs a singer with pipes like Carly Simon to pull it off.

3. James Bond Theme–by Monty Norman and arranged by John Barry for Dr. No (1962): The signature Bond theme which has been used in many Bond films, and which everyone will instantly recognize. The best tribute to the song (from Wikipedia):

The theme, as written by Norman and arranged by Barry, was described by another Bond film composer, David Arnold, as “bebop-swing vibe coupled with that vicious, dark, distorted electric guitar, definitely an instrument of rock ‘n’ roll…it represented everything about the character you would want: It was cocky, swaggering, confident, dark, dangerous, suggestive, sexy, unstoppable. And he did it in two minutes.”

Happy New Year folks!

PORTFOLIO UPDATE: My portfolio finished the day down 0.12%.

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Posted December 30, 2011 by edmcgon in Editorial/opinion, Open Thread

Daytraders corner   43 comments

Market volume has been light all week, so it is safe to assume it will remain that way today. The S&P 500 keeps flirting with the 200 day moving average at 1258, and don’t consider a 1263 close yesterday as “breaking the resistance”. In fact, the higher the S&P closes, the more vulnerable it becomes to a big drop, as the short option protection falls away (the VIX closed at 22.65 yesterday, which is fairly low).

Another thing to consider: In the past 10 years, the S&P 500 has closed lower 7 times on the last trading day of the year, only closing up in 2002, 2003, and 2008. Even though futures are positive now, there is no guaranty that is how we close. Another thing to keep in mind is that movements on the last trading days are typically small (several times in the last 10 years, the S&P has closed with movements of less than a point).

My suggestion: Unless you see a large movement in the markets, it might be best to sit today out. If you do daytrade, shoot for smaller percentage gains than you normally would.

Posted December 30, 2011 by edmcgon in Daytrading

The Last Trading Day of 2011: Ed’s Daily notes for December 30th   18 comments

Bloomberg: Soros Sees Gold Prices on Brink of Bear Market
There is a lot of evidence for a bear market in gold. But how far down will it go? Jim Wyckoff at Kitco shows the next psychological support level at $1,500. Although gold is bouncing today (currently at $1,571), will it last?

My prediction: Strengthening currencies (as the world economy dips into recession) will create a headwind for gold prices in 2012, eventually causing them to drop.

Bloomberg: Slowing China Manufacturing Calls for Easing
If you need to see some of the effects of Europe’s problems, look no further than China, where:

A purchasing managers’ index was at 48.7 in December from 47.7 in November, HSBC Holdings Plc and Markit Economics said today. A reading below 50 indicates a contraction.

Export orders fell in December for the first time in three months and domestic demand was “sluggish,” today’s report said. Demand for cash ahead of the week-long Chinese Lunar New Year holiday starting Jan. 23 may give officials an additional reason to cut banks’ reserve ratios after a reduction last month that was the first since 2008.

Keep in mind that cutting banks’ reserve ratios won’t solve the problem of China’s decreasing export demand.

CNBC: Elections Could Change the Game in Europe in 2012
Watch European politics in 2012. Start with France:

France, the euro zone’s second-largest economy, will hold presidential elections on April 22 and May 6, followed by general elections in June. President Nicolas Sarkozy, who with German Chancellor Angela Merkel has led the euro zone’s response to the debt crisis, is facing a challenge from Socialist party candidate Francois Hollande.

Hollande is “highly unpredictable,” Alistair Newton, senior political analyst at Nomura, told CNBC.com.

“Hollande has a different perspective on Europe to Sarkozy,” he said.

He warned that, while Hollande is relatively moderate, there is growing strength on the extreme left wing of his Socialist party – as shown from the surprisingly good performance of candidate Arnaud Montebourg in the primaries.

Hollande has promised to “renegotiate the [European Union] agreement to put what it lacks today” and said he would push to include European Central Bank intervention and a new euro bond – both measures opposed by Germany. He has also stated that he would not vote for the balanced budget part of the agreement, which has to be implemented at the national level.

“I don’t see how he could reverse Sarkozy’s pension reforms and make a balanced budget,” Newton said.

Disagreement between the euro zone’s two largest powers could be disastrous at this point.

“This could cause a serious setback for the political process in Europe, and after years with Merkozy’s intensifying leadership it could become rather uncomfortable for the financial markets to watch a Hollande publicly showing that he is very much in disagreement with German Chancellor Angela Merkel on several accounts,” analysts at Danske Bank wrote in a note.

Admittedly, this is speculative. But if French elections end up placing France in opposition to Germany within the European Union, it could leave the EU paralyzed if another one of the PIIGS fails.

And let’s not forget the Greeks:

There are also elections in Greece scheduled for February, where the ruling government, led by Lucas Papademos after a surprise change in late 2011, could face a nasty shock. With protests continuing in Athens, there are concerns that support for anti-euro parties may grow.

The worst-case scenario would be if the Mediterranean country had a disorderly default on its debt and didn’t exit the euro, according to Newton.

As Yogi Berra might have said, “Europe ain’t over until it’s over.” And it ain’t over.

Posted December 30, 2011 by edmcgon in Economy, Market Analysis

A bad day to go short: Ed’s Daily Summary for December 29th   2 comments

Watching my portfolio today, I felt like Lloyd Bridges in Airplane:

My portfolio picked a bad day to go short:
EDZ: -0.37 to $19.74 (-1.84%, -1.84% overall)–bought at $20.11 today
EPV: -1.84 to $47.00 (-3.77%, -3.77% overall)–bought at $48.84 (doubled today)
EUO: -0.08 to $20.27 (-0.39%, 7.59% overall)–bought at $18.84
GLL: -0.44 to $20.27 (-2.12%, -2.12% overall)–bought at $20.71 today
NNVC: 0.01 to $0.60 (1.69%, -22.08% overall)–bought at $0.77
SPXU: -0.20 to $12.98 (-1.52%, -1.52% overall)–bought at $13.18 today
TZA: -0.10 to $26.10 (-0.38%, -0.38% overall)–bought at $26.20 today

OVERALL: -1.18%

Fortunately, I fully expected to carry some of it into tomorrow or even next week, as I expect the markets to either open the year poorly, or dive shortly thereafter. In the meantime, where did I put my glue…

Posted December 29, 2011 by edmcgon in Humor, Portfolio

Update: ProShares UltraShort MSCI Europe (EPV)   16 comments

Does anyone think Europe is fixed? Does anyone want to invest in European stocks now? Me neither. So I decided to double my position in ProShares UltraShort MSCI Europe (EPV) at $47.66, bringing my dollar cost average down to $48.84.

However, considering this is a double position, I plan to sell half of it as soon as it turns profitable (probably by next week).

Posted December 29, 2011 by edmcgon in Portfolio Moves, Strategy

Preparing for the new year: Buying shorts   54 comments

Looking over the investment landscape going into 2012, I am taking a serious look at what to add to my portfolio in these last days of 2011 in order to profit in the 1st quarter. Here is my shopping list today:

1. Direxion Daily Emerging Markets Bear 3X Shares (EDZ): Problems in developed economies will hit the emerging markets like a ton of “brics” (pun intended). A small position in EDZ is a nice addition. I am looking to pick this up as close to $20 as possible. Considering the 52 week high on EDZ is $37.92, you can see the potential for appreciation here.

2. ProShares UltraShort Gold (GLL): Gold has broken through bottom resistance, and is starting to have a 2008 feel to it. A small position here is a good play on overall currency strengthening. Think of this as “recession protection”. I am looking to add GLL at $20.50.

Along with my previous purchases shorting Europe (EUO and EPV), and a daytrading strategy involving heavy use of SPXU and TZA, this creates a solid strategy heading into the dangerous 2012 economy.

On a side note, you will notice I am not shorting the U.S. equity markets on a longer basis, and that is because I see the U.S. markets as volatile, but without as much crash danger as other economies. We may get a crash in the U.S., but it will be like the old saying: When the U.S. markets get a cold, the world gets pneumonia. You will get more bang from shorting a U.S. crash in other world markets.

UPDATE: Added GLL at $20.71. Added EDZ at $20.11.

Posted December 29, 2011 by edmcgon in Portfolio Moves, Strategy

Daytraders corner   49 comments

Yesterday was an important day in the markets, because the S&P 500 began the 3rd consecutive day above it’s 200 day moving average, only to finally fall below it, where it closed at 1249.

Right now, stock futures have the S&P opening at 1247. However, I think the next stop for the S&P is 1235, the 50 day moving average. I would be surprised to see the S&P go lower than that today.

Right now, I have a small order in for SPXU at $13.25 in the pre-market. Although the Media is playing up today’s weekly jobless claims report, don’t expect that to have a monster impact on the low-volume markets today. Yesterday was a good indicator of what we can expect for the rest of this week.

Posted December 29, 2011 by edmcgon in Daytrading