One month ago the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) wastrading at $134.75. Panic was rampant in the media as stocks like AppleInc. (NASDAQ:AAPL) collapsed lower. The media and analysts on CNBCadvised investors to run for the hills as the fiscal cliff loomed large.
I sat looking at the charts, watching the S&P 500, NASDAQ and Dow JonesIndustrial Average. I could not see the markets going lower. The charts justdid not confirm what the media and analysts were saying. I used the PPTMethodology, a proprietary strategy developed over the last decade toanalyze the charts. Once again, I saw upside in the charts, not downside.The calculations were showing a move on the SPY to $144.00. Wow. A$10.00 move on the SPY to the upside while everyone was ready to jumpoff a cliff.
I advised my members inside the Research Center to start buying stocks.Trade alerts went out to buy Chevron Corporation( NYSE:CVX),International Business Machines Corp. (NYSE:IBM) and other large caps.Within days, the market was soaring higher and within the last few days, themarket hit the SPY target of $144.00. Profits were taken.
Once this target was achieved, I started to warn of downside. The PPTMethodology, this proprietary strategy that I had spent so much timedeveloping was giving a sell signal. "Be ready for a pull back today", Iwarned members. Sure enough, the SPDR S&P 500 ETF Trust(NYSEARCA:SPY) is trading at $142.61, -0.93 (-0.65%).
Going forward into the end of the year, look for a little more downside butnot the same type of flush we saw a month ago. Small shorts can be taken(I have already). Once the fiscal cliff issue has been resolved, the marketswill see a near term pop which can be faded. Further downside is likelyafter. [more]
Nearly everyday after the U.S. presidential election we have heard about the U.S. fiscal cliff. This is a term used by the media and politicians to describe the effects that will automatically kick in at the end of 2012. Americans can expect automatic tax increases and spending cuts which is what the politicians are supposedly trying to do anyway. So why not just simply go off of the cliff and nature take its course? You see, the politicians all want to capitalize on the moment and seem like they won something in these ridiculous negotiations that are taking place right now. Politicians never fail to take advantage of the political theater in Washington. The District of Columbia should be called Hollywood or Broadway with all of this acting and drama that takes place.
The only way anything productive ever gets done by politicians is when there is a crisis of some sort. Currently, there is fifty percent of the country that does not pay taxes. There are wars that the United States are involved in all over the world. People on welfare, or government assistance in the U.S. is now around 47.0 million, please keep in mind that there are roughly 300 million people living in the United States. Social Security is broke, and the national debt is over 16.2 trillion dollars and growing. In my humble opinion, I can't even believe we are even discussing a fiscal cliff.
Can a household run on unlimited debt? The answer to this question is no. If an individual does not pay his bills he will go bust and have to file for bankruptcy. A family cannot simply live off of their credit cards forever. At some point, the credit issuing bank will simply cut the family off and no longer lend them any money, however, in government it is different. The government can continue to borrow and borrow more money from a host of different places. The best solution for us all might be to simply go over the so called fiscal cliff.
This morning, leading retailer Wal-Mart Stores Inc (NYSE:WMT) is coming under heavy selling pressure to start the day. This decline is certainly weighing on the retail sector. Short term traders should watch for intra-day support around the $68.92, and $68.50 levels.
Some other leading retail stocks that are falling lower at the start of the trading day include Costco Wholesale Corp (NASDAQ:COST), Target Corp (NYSE:TGT), and TJX Cos Inc (NYSE:TJX). Generally, when the leading retail stock is lower many stock in the industry group will follow.
Post by: Nick Santiago [more]
For the last month, the media has harped on the declines in Apple Inc. (NASDAQ:AAPL) being due to end of year tax selling. With capital gains and dividend taxes set to rise dramatically next year, investors want to pay the lower tax rate on the gains this year.
Taking profits this year on big gains is definitely the smart thing to do. However, in the midst of selling your stocks that have moved up, do not miss out on easy gains in other trades. This is the less publicized angle but in many cases more profitable as an end of year trade.
Stocks like Intel Corporation (NASDAQ:INTC), Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL) have all dropped tremendously in the course of 2012. Based on this, there will be short covering into year end as shorts take their profits to pay the lower tax rate on the gains as well. It does not matter how you got the profits, all investors will have an incentive to take their profits no matter how they got them, short or long. On beaten down plays that are highly shorted, an imminent pop may be under way. Does it not make sense to buy beaten down plays that are highly shorted for the easy end of year pop?
In addition, tax loss selling will be null and void this year. Tax loss selling occurs when investors sell their losers to offset their gains, thus avoiding tax this year. Smart investors should be holding their losers into the new year and then selling them. By doing this, they will have the deduction on gains where the tax rate will be far higher.
This morning, the major stock indexes are all trading sharply higher to start of the trading day. On the surface, everything looks wonderful in the stock market. The highly followed Dow Jones Industrial Average is trading higher today by 86.00 points in the first thirty minutes of the session. Many traders and investors seem to be betting on another inflationary push by Ben Bernanke, who will be announcing his latest policy statement tomorrow.
The Federal Open Market Committee (FOMC) begins a two day meeting today. Tomorrow afternoon, the Federal Reserve will announce its interest rate policy for the United States. Chairman Bernanke will also hold a press conference tomorrow afternoon explaining his actions, while taking questions from the press. Many institutional traders are now expecting the Federal Reserve to announce another stimulus program since its current "operation twist" program is scheduled to expire. This past September, the Federal Reserve announced its latest quantitative easing (QE-3) program in which the Federal Reserve will purchase $40 billion worth of mortgage backed securities (MBS) a month.
The fed funds rate which is the overnight lending rate to the large banks such as J.P. Morgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC), and Citigroup Inc (NYSE:C) is currently at zero to a quarter percent. So there is really no expectation that the fed funds rate will change tomorrow. The Federal Reserve has already promised that interest rates will remain extremely low until late 2015. While low rates are good for people looking for loans, many people do not seem to qualify for loans any longer. So in reality, the savers in the United States seem to get punished as they will make basically zero interest by keeping their money in the bank. The fed funds rate has been at zero to a quarter percent since December 2008.
A fair case can be made that Chairman Bernanke has bailed out the politicians as they continue to spend money at an alarming rate. The U.S. national debt is now at $16.2 trillion and climbing. President Obama now wants the debt ceiling removed before the fiscal cliff deal is settled. Every citizen in the United States would need to pay $51,967.00 in order to pay off the current U.S. debt. Gross domestic product (GDP) remains between 2.0 – 3.0 percent in the United States, This number is rather weak when you consider all of the government spending. According to the Mercatus Center at George Mason University about 49.0 percent of all Americans receive some form of government benefits. These are troubling numbers that could be problematic over the next couple of years.
Traders should view this current stock rally as another inflation prayer by the financial institutions to the central bankers that control the money supply. Wall Street always loved a good inflation created stock rally. Lets see if Ben Bernanke will play Santa Claus to Wall Street and the politicians once again.
The markets sold sharply early in the day as Fiscal Cliff worries continue to bubble up. In addition, Apple Inc. (NASDAQ:AAPL) collapsed lower, dropping to $545.56, a drop of $30.39. The iPhone maker continues to see end of year tax selling and worries over future growth after missing two quarterly earnings estimates in a row.
By mid-morning the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was down to $140.37, a loss of 0.88. At this point the President came on television to make what seems to be his daily Fiscal Cliff update. For the first time since this fiasco began, his comments seem genuinely dovish towards reaching an agreement with Republicans. The market sensed compromise and began to rip higher. The SPY turned a 0.88 loss into a gain of $0.80, a whopping $1.68 reversal.
With compromise in the air, the market hopes to avoid the Fiscal Cliff. For the first time since this mess began, the President seemed to say "we can meet in the middle somewhere".
The charts spelled this move up out perfectly. Not only did the SPY hit key support at $140.45 but there was a perfect bottoming tail at the lows. A bottoming tail is a reversal signal and oh did the markets reverse. Upside intra day resistance on the SPY is at $142.05, $142.30 and $142.90. Downside support will remain as the low of the day at $149.37.
This morning, most of the leading financial stocks are trading higher at the start of the trading day. Generally, as long as the financial stocks hold up and trade higher the major stock indexes will usually remain buoyant. Should the leading financial stocks begin to rollover or sell off then all bets are off as the major stock indexes will often follow the financial stocks.
The most important financial stock that any trader can follow is J.P. Morgan Chase & Co (NYSE:JPM). This financial giant should be called the real bank of America. When JPM stock declines it will usually take the entire industry group with it. Traders can just look back to May 2012 when JPM stock declined after it's massive trading loss and you can see how it took the entire financial sector lower. This stock carries a lot of weight psychologically on the markets. Today, JPM stock is trading higher by 0.15 cents to $40.72 a share. Short term traders should watch for intra-day resistance around the $40.90, and $41.35 levels. The daily chart of JPM stock remains in a trading range, the low range is around $39.25 and the high range is around the $42.75 level.
Some other leading financial stocks that are trading higher today include Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), Deutsche Bank AG (USA) (NYSE:DB), and Goldman Sachs Group Inc (NYSE:GS). Earlier today, it was reported that Citigroup Inc is cutting 11,000 jobs worldwide, this news is helping the stock to trade higher by nearly 5.0 percent on the session.
U.S. listed Chinese stocks were hammered today as the Securities and Exchange Commission began to crack down on Chinese affiliates of the top four accounting firm in the United States. These accounting firms are Deloitte, Ernst & Young, KPMG, PwC, and BDO. The SEC says these accounting firms are required to produce auditing documents of foreign companies if they are listed on U.S. exchanges. Large cap Chinese firms like Baidu.com, Inc. (ADR) (NASDAQ:BIDU), SINA Corp (NASDAQ:SINA) and Sohu.com Inc. (NASDAQ:SOHU) are all taking a beating on this news.
This news for the most part is punishing the large cap Chinese stocks unjustly. It is somewhat assuming there are some accounting irregularities that would come to light when these papers get filed. While this has been the case with small reverse merger Chinese ADR's, to assuming billion Dollar Chinese companies are cooking the books may be a stretch.
BIDU is trading at $90.12, -5.78 (-6.03%). It's low today was a new 52 week low at $89.16. Forward earnings for 2013 have BIDU making $6.02 in profits. If this is the case, the P/E will be around 15, lower than Google Inc (NASDAQ:GOOG). With the Chinese market at their disposal, growth should be higher than Google in the near term.
Lastly, the daily chart of BIDU has major technical support at $88.00. Should that fail to hold, $82.00 and $77.00 are the next two levels.
With these large Chinese companies trading on U.S. indexes, it all comes down to facts. Is there accounting up to par? If it is, this is a fantastic buying opportunity in the near term. SINA, BIDU, SOHU are all trading at cheap levels with a Chinese economy receiving stimulus from their government.
The markets opened sharply higher on the day. Positive economic news out of China coupled with Fiscal Cliff optimism did the trick. This extended a run in the markets from a low on November 16th, 2012. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) had been trading at $134.70 on this date but has since rallied to the highs today of $142.92.
This level hit today coincided with a major gap fill going back to November 6th, 2012. Other proprietary PPT Methodology calculations confirm this as a near term high on the market. Since the gap higher, the markets have fallen back to the flat line. Many stocks have rallied significantly and are now ready to pull back. I will lay them out below.
1. Amazon.com, Inc. (NASDAQ:AMZN) has surged from a low of $218.18 to a high today of $254.16 in two weeks. This is a monster move with no significant pull backs. A pull back will occur into the daily 50 moving average at $242.00.
2. Google Inc (NASDAQ:GOOG) has also seen a major price surge as today it slammed into the 50 moving average on the daily chart. No sooner did it hit this level, the stock began to pull back. It is likely the stock will continue to pull back for a week into the $678.00 level. The stock hit a high of $705.89 today.
3. While most investors and analysts on Wall Street are loving Lowe's Companies, Inc. (NYSE:LOW), I tend to go the opposite way. The stock has been ripping higher of late due to Superstorm Sandy and the mess it caused. It is showing signs of being toppy at this point after already factoring in the rebuild. A near term pull back is beginning and should take the stock down about 10%.