Let's Do the Twist

     The FOMC meeting concludes today with the market widely expecting the Fed to implement a new program to help stimulate the economy called Operation Twist.  The Fed has a dual mandate which is to keep inflation in check and promote employment.  With the economy struggling along and the unemployment rate remaining around 9% expectations are that the Fed has to do something to stimuate growth.  Back in the 1960s, the Fed implemented a program called Operation Twist so named because "The Twist" was a popular dance craze at the time.  The Fed bought longer term bonds and sold shorter term bonds on their balance sheet to flatten the yield curve.

    "By doing so the Fed drives down the desirability of 'safe' investments, making riskier options like investing in a business instead of government debt more attractive," says an article on Yahoo! Breakout. 

    This hopefully encourages investors to take on more risk by selling government bonds and buying stocks.  It also could potentially help the housing market by lowering borrowing costs.  The Fed is to make an announcement later today on what if anything they will do to help stimulate the economy.  Whatever they do, it will move the markets.

FOMC statement

     Well the Fed statement came out and as expected is going to implement the program known as "Operation Twist".  From the FOMC statement...

     "To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

     Stocks reacted negatively to the news with the DJIA now plumbing new session lows down some 170 pts.

Final Recap

     Wow, the markets did not like that at all!  The Dow went straight down after the FOMC meeting results finishing 282 points lower!  I don't know what happened to set off all that selling and will have to look into it.  I suspect it is the algos that run the markets nowadays took the markets down because of no surprise stimulis from Bernanke.  Regardless, it looks as if we are heading back down the trading range and I suspect we might break through the bottom this time.  Lots of global growth names are getting slammed right now like CAT and EM's look very weak and of course Dr. Copper who has a PHD in economics is signaling problems.  I might put on a R2K short tomorrow or a European short. I don't like the looks of this market right now.  Today's reaction to the Fed was pretty bad. 

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

Italy downgraded!

Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!   

      Yesterday, after the markets closed S&P downgraded Italian debt from Triple A to A+ rating citing a heavy debt load and weak growth and a dysfunctional political environment.  Hmm, sounds familiar?  Amazing they didn't cut it before.  S&P are real idiots and probably should be arrested for causing so much havoc in the financial markets.  How can you cut the US debt before you cut Italian debt, it makes no sense unless you have an agenda!  Not saying that the US debt deserves a triple A rating but the bond market sure thinks so with 10 years below 2 percent!!  Italian debt is junk and it's a travesty that S& P is only now getting around to downgrading Italy! Put them out of business, they are worthless!  Now there is word that the SEC is investigating insider trading by hedge funds ahead of the US debt downgrade.  S&P are crooks, lock them up and throw away the key!

     The Italian debt downgrade seems to have had a limited impact on the markets so far as futures dropped about 80 pts on the news but have since recovered and moved into positive territory.  Markets opened with a 40 pt gain but quickly sold off into negative territory before recovering.  Gold and oil are both up even with a stronger dollar and the euro is down. 

     European stocks are solidly in the green at 7:18 AM PST with the FTSE up 1% and the DAX up 1.5%.  The Hang Seng index finished up 100 pts while the Japanese Nikkei played catchup from yesterday and fell 140 pts.

     The markets seem to be trading fairly well ahead of the 2 day FOMC meeting where it is widely expected the Fed will do another bond buying operation called Operation Twist.  This is where they will try to extend the duration of their portfolio of bonds by selling shorter duration bonds and buying longer duration bonds.  The size of their balance sheet will remain the same but their mix of bonds will change.  I don't see how this is going to help things because the 30 yr is already around 3.2%.  How low do they want it to go?

Stocks I'm watching
     AAPL-  Apple is making another new all time high in early going as the breakout continues.  Fast Money traders speculated that AAPL is becoming a safe haven and I had been saying that for awhile now.  AAPL has hit an all time high of 419.87 just below the magical level of 420.  OK AAPL has just hit 420 for a new all time high, so to speak.

     MCD-  McDonalds is trading very well again today up about 1% outperforming the overall market.

     IAU-  Gold is bouncing back nicely after yesterday's selloff as the chop continues.  IAU is up 1.3 pct in the early going.

     NFLX-  Netflix is down another 8% today as investors are piling out of the stock after yesterdays perplexing move by CEO Reed Hastings to split the company in two.  Netflix is the cool name, nobody gives a hoot about Qwikster!

     EEM-  Emerging markets have been underperforming US markets pretty significantly recently.  I'm not sure what's causing this.  It could be the stronger US dollar and lower commodity prices or perhaps investors fear a slowdown in the global economy.  Whatever the reasons, it is definitely worth monitoring.

One month chart of SPY(SNP 500 in yellow) vs EEM(in blue) the emerging markets index.  As you can see EM's have underperformed by about 7% coinciding with a rise in the US dollar.

Final recap

     Markets sold off in the final hour of trading today.  This was not a good finish for the bulls.  We are near the top of the range and had a big intraday reversal going from up 150 to up 10 at the bell.  I suppose it is a small victory that we did not go negative.  I got caught up in the selloff as I got stopped out of my AAPL today for about 413.63.  I had been raising my stop as I went along and AAPL got hit hard in the late day selloff and my stop was triggered.  It was still a very nice trade as I made 5% in about 5 days.  AAPL looks like it has topped for now but I will be looking to get back into AAPL at some point.

     The Dow finished up 10 pts and the SNP 500 was down by about 2 pts but the NASDAQ was down almost 1%.  NASDAQ had been outperforming recently but got hit hard in the late day selloff. Gold was up 30 bucks and oil was up a buck to 86 and change.

     This could be the top of this recent rally and we might start heading back down again.  Small caps performed very poorly today as well.  The wild card is the FOMC meeting going on.  Whatever the Fed says in the next few days will move the markets.

PS  Hey everybody, if you are interested in trading, I want you to check out a friend's blog.  It's called the Chartographer's Map Room.  This guy really knows his stuff and he's definitely a better trader than me!  So check it out if you are interested, especially if you are starting out looking to get into it, he has a lot of good advice.

http://swingtrading101.blogspot.com

Apple Breakout City!

Disclaimer:  Nothing in this blog should be construed as a recommendation to buy or sell any securities!  Please do your own due dilligence before buying any stocks or bonds!  

      I was just checking out the futures before bed and I noticed they were down about 1.5%.  Apparently, the Greeks are having some problems with their budget...AGAIN!  They are having problems meeting their budget cutting targets to get the next tranche of bailout money from the rest of the EU.  The Greek economy is in major contraction and trying to get more money out of the greek people is like squeezing blood from a turnip!  This has renewed the fears of traders who have pushed down stock futures.  US Dow futures are down 141 pts and the London FTSE is down 1%.  The German Dax is down 2% and the Hang Seng is down 450 pts as of 12:25 AM PST.  It looks like it could be another interesting day tomorrow!  I was hoping for a continuation of the rally but it looks like we are going to head back down in the trading range we've been in for a month now.

6:36 AM PST Update

    Stocks open lower investors fret over Greek default scenario.  Investors are dumping Euro's and European stocks today as fears of a Greek default grow.  Over the weekend, EU finance ministers met to discuss the situation but failed to come up with any new resolutions and German chancellor Angela Merkel lost another regional election putting more doubt into Germany's participation in the bailout.

     The IMF told Greece that it needs to make more cuts in government spending to receive a new 8 billion bailout payment.

     "Additional savings measures were needed to cut the public deficit to a sustainable level and reduce the public sector's claim on resources—code for axing jobs and cutting pay and pensions—while improving tax collection rather than adding further taxes," said a CNBC article.

     The Euro was down by 1.5% and European stocks were down 2.5% or more.  Oil was down over 2% and even gold was down about 1% as the dollar strengthened.    The 10 year US treasury bond yield cratered to 1.96% as traders sought the safety of US Government debt.  The DJIA was down 200 pts in early going and the dollar was up against a basket of currencies by about 1%.

1:14 PM PST Update

     Markets surged in the last hour trading after news broke that Greece was near an agreement with its lenders.

     "Greece is near an agreement with its international lenders to continue receiving bailout funds, a Greek finance ministry official said on Monday after a conference call between Finance Minister Evangelos Venizelos and inspectors from the EU, IMF and ECB, known as the 'troika',"said CNBC.

     The Dow Jones Industrial Average after being down 250 pts in the early going finished down 109 pts after the last hour surge.  The SNP 500 was down 1% and the tech heavy NASDAQ was outperforming down .36%.  The NASDAQ was green at one point during the day as AAPL hit an all time record high.

Stocks I'm watching

    AAPL-  Apple was up 11 bucks and hit an all time high at 413.23 earlier today.  This is trade is working out very well for me so far and if I had any more money I would be adding to this trade right here.  There could be another 10-40 dollars of upside right here.

                                  Break out city!



    NFLX-  Netflix after earlier being up 3% finished down 7%.  They are splitting their DVD and streaming services into separate businesses.

    We realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

-- Reed Hastings, Co-Founder and CEO, Netflix

    If I had some nads I'd short the shit out of NFLX right now.  NFLX is a broken high growth stock and I think there is much more downside to go.

                                    U-G-L-Y you ain't got no alibi, charts ugly!

     IAU-  Gold tanked today after the dollar rose against a basket of currencies.  Gold is trading the opposite of the dollar recently.  When the dollar goes up, gold goes down.  Gold looks like it is going to chop around for awhile as it consolidates it's huge gains from the past few months.  My gold trade isn't working too well for me right now.  I won't be adding to it unless it goes past my original buy price.  I won't be selling it either.

     MCD-  McDonalds is performing real well in a bad tape up .59% at the close.  MCD is a classic defensive play in this environment and I am looking to add it to my portfolio.  It has a nice 2.8% dividend yield as well.  Problems include exposure to Europe, but they have nice growth in Asia and people like their cheap eats in this economic environment.  Their chart looks pretty as well.

                                       Its always a good thing when the price goes from the lower left to the upper right.

     DBC-  Commodities across the board got smoked today on dollar strength.  Copper fell 4%, oil fell 2.5% and gold of course fell 2%.   If copper drops because of dollar strength that is okay but if its down because of economic weakness, it's bad.

     Today's action at the end of the day makes me constructive on tomorrow.  If Greece get's their money it should be all systems go.  Tomorrow, the FOMC starts their two days of meetings to discuss monetary policy.  The market is expecting something called Operation Twist to come out of these meetings as the Fed looks to stimulate the economy.  Let's see what happens.

PS  Hey everybody, if you are interested in trading, I want you to check out a friend's blog.  It's called the Chartographer's Map Room.  This guy really knows his stuff and he's definitely a better trader than me!  So check it out if you are interested, especially if you are starting out looking to get into it, he has a lot of good advice.

http://swingtrading101.blogspot.com