August 8th: Ed’s Daily Notes and Traders Corner   11 comments

urs-grizzly(hat tip to The Blaze for the pic)

The S&P 500 levels to watch today:

UPSIDE: 1910 (bottom of the Bollinger Bands), 1911 (August 6th’s low), 1913 (August 5th’s low and the 100 day moving average), 1916 (August 1st’s low), 1921 (August 4th’s low), 1924 (May’s high), 1927-1928 (2 data points), 1930 (July’s low), 1936-1937 (2 data points), 1955 (50 day moving average), 1960 (20 day moving average), 1968 (June’s high), 1991 (July’s high and the all-time high), and 2010 (top of the Bollinger Bands).
DOWNSIDE: 1904 (August 7th’s low), 1885 (150 day moving average), and 1861 (200 day moving average).

S&P 500 Daily Momentum: Bearish
S&P 500 Daily Overbought/oversold: Neutral (leaning oversold)
S&P 500 Weekly Momentum: Bearish
S&P 500 Weekly Overbought/oversold: Neutral (leaning oversold)
S&P 500 Futures: Leaning positive
Overall: It should be noted the guy in the picture above is a professional bear trainer. Unfortunately, the bears running the markets lately aren’t quite as trained, having already chewed the head off this market (figuratively speaking). The S&P 500 is already down 4.1% from it’s all-time high in July, and easily broke through the 100 day moving average yesterday. The next stop looks like the 150 day moving average at 1885. Until we get a strong reversal, expect more bearishness, with occasional dead cat bounces to keep the technicals from getting too oversold.

And now for the news…

Fox Business: Listen Up Retailers, We’re Just Not that Into You

One of the few people I miss with not having cable/satellite is Neil Cavuto. He was always funny and/or insightful, and the editorial above falls in the latter category:

So I’m reading this great story in The Wall Street Journal this morning about shoppers fleeing physical stores. I could have saved the enterprising reporters Shelly Banjo and Paul Ziobro the trouble and told them it’s because a lot of us can’t be bothered. We’re just not into it anymore. It’s a hassle, it’s a pain, and for those who abhor the process (that would be me), it’s now officially prehistoric.

This is why I don’t buy retail stocks any more: It is a dying business model. I suppose I might buy one as a short-term investment, but only if it got obscenely undervalued (the land the stores are on might be worth something, assuming they don’t lease). As for the retail business, the only retailer on my watch list at the moment is Amazon (AMZN), and they are obscenely overpriced right now (485 trailing PE).

On the other hand…

New York Times: Plot Thickens as 900 Writers Battle Amazon

ROUND POND, Me. — Out here in the woods, at the end of not one but two dirt roads, in a shack equipped with a picture of the Dalai Lama, a high-speed data line and a copy of Thoreau’s “Civil Disobedience,” Amazon’s dream of dominating the publishing world has run into some trouble.

Douglas Preston, who summers in this coastal hamlet, is a best-selling writer — or was, until Amazon decided to discourage readers from buying books from his publisher, Hachette, as a way of pressuring it into giving Amazon a better deal on e-books. So he wrote an open letter to his readers asking them to contact Jeff Bezos, Amazon’s chief executive, demanding that Amazon stop using writers as hostages in its negotiations.

The letter, composed in the shack, spread through the literary community. As of earlier this week 909 writers had signed on, including household names like John Grisham and Stephen King. It is scheduled to run as a full-page ad in The New York Times this Sunday.

Amazon, unsettled by the actions of a group that used to be among its biggest fans, is responding by attacking Mr. Preston, calling the 58-year-old thriller writer “entitled” and “an opportunist,” while simultaneously trying to woo him and his fellow dissenters into silence.

This is an incredibly stupid move by Amazon. It is one thing to have a pricing battle against one of your manufacturers, but it should be a basic rule of retailing that you should NEVER insult your product. That should be considered a corollary to the main rule of “The customer is always right”, since the customer wants the product, and insulting the producers of the product calls into question the customer’s intelligence.

Mind you, I am not picking sides in this battle. I am only saying Amazon dropped the PR ball on this one. They did more damage to themselves than anything the writers could have done.


11 responses to “August 8th: Ed’s Daily Notes and Traders Corner

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  1. Marshall and Ed, thoughts on AL and KAI on pullback in market?

    • Bobb,
      I kind of like AL. The financials are a bit of a mixed bag, but they show potential (the levered free cash flow is worrisome, but they have shown good earnings and revenue increases). Airplane leasing seems to be popular among the wealthy, so it has a future. The only thing I would be concerned about is that it is not a moated business by any stretch of the imagination. Still, I would like to see a pullback before buying. Maybe around $31-32?

      You have the right idea on KAI. It has fairly clean financials, but needs a pullback before it’s a bargain. I wouldn’t pay more than $37 for it. Don’t expect to get rich on this one, but it would make a decent diversifying play for a long-term dividend portfolio.

    • Bobb – I have to say I do not know anything about these two companies. As I have mentioned, I do screen and rank about 3,000 stocks once or twice a month. These are purely quantitative. KAI was #569 and AL was 1770.

  2. waiting on 3 uvxy positions to get called today. I have gains of 7.6, 5.6 and 9.8%. for calls at 27, 33 and 35.5. UVXY is by far my largest position and this will free up a ton of cash.

  3. Quiet board today. I am off on vacation to Cape Cod next week. Am really looking forward to sitting out on my veranda and just reading and relaxing. I have downloaded three new books on my Kindle – The Good Lord Bird, Life After Life and Dogtripping: 25 Rescues.

    I am also finishing up week 4 of my Coursera on line course on Social Psychology. I highly recommend people to look into Coursera, it is free and terrifically well done.

    I am actually have a solid day as two of my top ten holdings are doing very well. GPS had very good SSS and is up almost 6% today. They are my first re entry into retail and have been a solid pick. Then RIOM is rally benefitting from spike in gold prices due to global tensions. I have said it before, I do believe there is a place for gold or gold miners in all portfolios.

    Happy Friday everyone!

  4. Marshall and Ed, I own SB and I am at breakeven point right now. Wondering thoughts on if I should continue to hold, sell or buy on any weakness?

    • Junker – I know very little about SB. I suspect the answer lies in how they have hedged their business. Dry bulk shipping is about as commodity as it gets, so your profit is tied very tightly to your daily rate. If they have locked in some decent longer term deals, they might be ok. But if they are having to take whatever the current spot rates are right now, they may struggle.

    • ojunker,
      I kind of like the play, but not yet. I think the shippers could drop a little more. At this point, it is worthy of adding to your watchlist. If you are a real long-term player, you could possibly go ahead and add it, but be willing for it to drop before it rises.

  5. Ed, at one time, I recall you were looking into a Mongolian ETF. Do you still recall the name or ticker and what is your feeling about an investment today?

    I’d appreciate you thoughts.

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