Roasted: GMCR's Revenue Recognition is Called into Question

Anyone notice GMCR today?  What a drop, and on huge volume. 

This stock has been very strong..it will be interesting to see how this one plays out.  I'll be watching this one closely as it's entered a value area..an area that makes the stock attractively priced.  First level for GMCR to take out is today's highs..this is where I'll be looking to go long for a gap fill trade.


TLT

Keep and Eye on that Euro

Yes, gold has been all the rage and it keeps climbing higher but, you don't want to neglect that Euro.  The Euro has been incredibly strong and is continuing to show strength.  At the very least, you want to be watching the Euro closely because as long as it continues to trade higher, gold and equities should follow suit.  Here's a chart of FXE, the Euro ETF:

Note that I pointed out the volume.  Currencies in the spot market do not have volume reported, at least not legitimate numbers.  If one wants to get an idea of volume in the currency market, one has to look at futures or an ETF.  I don't watch the currency ETF volume very closesly, but I do keep an eye out for massive spikes.  You can see from the chart above the three days of massive volume the etf had.  That was a heads up that this move would have some momentum behind it and it did. 

I'll be trying to post a little more regularly now..work has been insane and I've still been trying to get caught up after my 2 week vacation.  I have recently checked my website email and there are a few people waiting on responses from me.  I sent you guys a quick email over the weekend and I will be getting back with you soon.  Your patience is appreciated.

Hope everyone's trading is going well.

TLT

Interesting Spread Trade: The Yield Curve Steepener via ETFs

It goes without saying that there's been some interesting trading in bonds lately.  We all know that bonds, especially treasuries, are in a bubble.  The big question is: when does it end?  Some pros have already called the top in bonds and others say there's no telling how low the fed will bring down yields.  What I find to be interesting is the relationship between the shorter term bonds versus the longer term bonds. 

Here's a chart of SHY, which is the Barclays 1-3 Treasury Bond fund etf:

Notice in this chart that prices took a small dip recently but have retraced most of the fall and appear to be ready to re-test their highs.  I would state that this is a pretty bullish looking chart.  Now compare that to the daily chart of TLT, the Barclays 20+ year bond fund etf:

This price action in TLT has taken a dip just like SHY, however, it has failed to rebound at all.  In fact, it appears to be testing it's uptrend and is looking dangerously close to entering the 3rd Stage of a trend which is the top prior to the Stage 4 crash.  The weekly chart of TLT looks quiet bearish, however I'm going to leave it up to you to look at it as I don't won't to overdo the number of charts in this post. 

One last chart that is interesting.  This is a weekly pair chart of SHY and TLT together.  So when looking at this chart, for the price to go up, SHY would continue to go up and TLT would go down, or SHY would go down but TLT would go down more.  Here's the chart:

In the above chart, you can see that I highlighted 3 different areas of price action.  The first is "Normalcy" which is where prices of SHY:TLT have been during relatively stable times.  The "Nervous Market" area is where prices have been when the market is concerned about another severe crash..where we are now.  "End of the World" is where prices went when it looked like the financial system was going to break down all together..that was as bad as things could get without a collapse of the entire banking system. 

The question is:  do we think it's likely we'll go back to the "End of the World" zone or will bonds trade back to the Normalcy area?  Short of a Sovereign default or something outrageous happening, I'm betting we trade back to normal levels and maybe even overshoot those levels if people panic and dump their treasuries.  Time will tell.

TLT

SPY Entering Bearish Resistance Zone

 It will be interesting to see how the market reacts to the levels we're at.  So far, the resistance is holding.  Anytime the market repeatedly tests the same resistance point, it's like fuel for the fire that is building and all we need is a spark. 

Lately it has paid to be skeptical of such moves and fade them or to sit it out all together.  I'm personally waiting it out as far as equities are concerned.  There's a lot more interesting action going on in Bonds and Currencies right now..such as bonds are calling for stocks to sell off from the resistance but currencies are favoring a break out.  Who will win?  More importantly, how will you be able to tell when someone wins and then capitalize on it?  These are the questions you should be asking and incorporating into your current game plan.

TLT

Close!..but not quite there yet

It's no secret that Treasuries have been hot lately..the only question is:  when will it end?  TLT nearly registered a sell signal today..coming very close to flipping the V-Stop on the daily chart.  The next few days should be interesting because TLT is also oversold on the Stochastic.  If you're in the camp that believes that Treasuries will continue to rally, this is the time to be loading up.  It is a great risk-to-reward entry point for the longs.  That being said, I'm on the other side, as I've been short via TBT for two weeks now.  I've just got beginning small position on and I will add to the position a couple of times after the V-Stop flips..if it flips.

The great aspect of this trade is the potential for treasuries to crash hard if/when they begin to fall.  Be extra careful if you happen to own any bond mutual funds or bond etfs.  I told my grandfather to consider unloading some of his bond funds into this strength (just some, not all) and his brilliat financial adviser told him that the bond funds won't drop until interest rates begin to rise.  Excellent advice!  Can you pick up on my sarcasm?  I pointed out that it's not when interest rates begin to rise that will be the problem, it's when the market begins to believe that interest rates could rise...and whenever that happens, it will happen quickly.  The important reason to unload bond funds into momentum is because there's the rush to exit scenario that could be very likely and in this day in age (post flash crash and 2008 days) we all know that you don't want to sell when you feel you have to because it will already be too late. 

Hope everyone's having  a great week so far.

TLT

9-11

A man from New Zealand, I'll just refer to him as John, recently told me a story about his experience with 9-11 and I think it's worth sharing.  During the entire year of 2001, John and his wife lived in Saudi Arabia.  The company that John worked for was doing work for Saudi Arabia and he and his wife were living in one of the western style foreigner compounds. 

John worked with people of several different nationalities, including:  Australian, British, and Canadian.  Furthermore, he worked with lots of Arabic men from Saudi Arabia and a handful of other Arab countries.  When the news of the attacks was spreading around the world, John and several of his co-workers were horrified at the reaction of some of their arab co-workers...these men were celebrating.  In fact, some of these men were talking about throwing a party to celebrate the attack on America.  Deeply disturbed, the men from New Zealand, Australia, and Britain knew they had to do something to show their disapproval, but they didn't know what to do and they certainly didn't want to raise too much of a fuss given their location. 

One of the Australians had an idea.  He noted, and this was well known, that all of the Arabic men had facial hair..all of them.  Some of the "western" men had beards and mustaches too.  So they devised a plan to all come into the workplace the next day noticeably clean shaven to stand out from their counterparts and show their contempt towards the celebratory reaction of their counterparts.  The men came in the next day without any beards, mustaches, sideburns or anything even resembling facial hair.  The plan worked.  The men that were celebrating the day before realized how upset the English speaking men were and they got quiet and never threw a party..at least in front of the English men. 

John thought it was very important to share this story and I'm certainly glad that he did.  It's amazing to hear stories of support from men that live on the other side of the world and really didn't have to take a stand in one way or another..but men that did take a stand and show support out of principle and love for their fellow brothers. 

I was hesitant to post this story because I don't want it to be taken the wrong way.  In no way am I trying to come across as anti-Muslim, anti-Saudi, or anti-Arab in general.  The story is told as one of support and courage, not condemnation.  I don't believe that all Muslim and Arab people support the 9-11 attacks and I think the majority of them are very fine people that are just going about their own lives.  Just like any population or country, there are always some bad apples...and America is certainly no exception (just check out that crazy guy in Florida).

I want to offer up a big thanks to everyone around the world that supported our country in a time of need.  Please keep all the victims and their families in your thoughts and prayers.

TLT 

So What's New with the Market?..not much

Prices have literally chopped back and forth for months now.  This has been a very difficult market environment for lots of traders and investors and I've not been an exception.  That being said, there are still plenty of people that are actually making money in this.  They are the ones who have adapted to the volatility and lack of follow through.  They are suspicious of any rally or sell off and  book profits quickly into momentum..something that's easier said than done.

Personally, I've found the swings in the currency market to be easier to track and trade than the stock market.  I am holding a couple of longs and will put on some shorts if this market breaks down but other than that, I'm letting the stock market play out and prove itself a little before I get committed to either side of the market.

Good luck out there.


TLT

I'm Back: Been on Vacation

Been traveling for the past couple of weeks and obviously I haven't updated the blog in a while.  It's just as well since the market continues to chop back and forth, which doesn't really work well for my trading.  My wife and I were in Greece and a handful of other countries and it was a very interesting trip.  It was especially interesting to speak with Greek people about their country's problems and get a feel for their views and perceptions of the issues their country is facing. 

I'll start regularly posting again in a couple of days..I need to get my feet back on the ground here at home and then dig into what's been going on in the markets while I was away.  Fortunately, I was able to loosely keep up with the overall markets via BBC and sometimes Bloomberg TV, but I was not able to get on the internet very much. Be back soon with some thoughts on trading and market commentary.


TLT