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Morning Rage 9.17.2012

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I expect the performance of US indices this week to have a more honest QE3 reaction after exploding upward last week. Indices futures for the Dow, S&P, and Nasdaq are all down 21.00, 3.25 and 4.25 points respectively.  Metals futures are all down slightly before the market opens with Platinum and Palladium losing the most, 16.10 and 11.70 respectively. Crude futures are down 0.20%.

One of my favorite ETFs to follow in the aftermath of QE3 announcements is SPDR Gold Trust (GLD | $171.8). GLD is down $0.35 in after hours trading after taking a $0.49 gain on Friday. The Oct ATM straddle is priced around $7.00 about a 4% expected move. After the QE3 announcement, a higher probability of currency manipulations around the world will have investors continue to invest in gold.

Apple stock (AAPL | $691.28) is up 2.68 points in pre-market trading to $693.99. Apple set a presale order record with the new iPhone 5. I expect the stock will jump over $700 before the end of the month but, due to the volatility over the past week or so, it may jump back and forth over the $700 line.

Google stock (GOOG | 709.68) was up three and a half points on Friday, only slightly short of its all time high. The stock has hit a resistance point below $715.00. 

Alex Kalish has a master’s in economics from Suffolk U.

Questions, comments and suggestions welcome: alexk@keeneonthemarket.com

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Market Recap 9.14.2012

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In a statement released yesterday the FOMC outlined their plan to purchase $40 billion worth of mortgage bonds every month.  The Committee also announced its intention to continue purchasing long-term debt in an effort to put downward pressure on long-term interest rates. The program means that the Fed will add around $85 billion to its $2.8 trillion balance sheet every month until economic conditions improve.  The program has a more or less open-ended time frame.  The Fed will evaluate the strength of the economy and will continue to ease until economic conditions, mainly unemployment, improve. 

Apple (AAPL) hit a new all time high today of 696.98.  iPhone 5 pre-orders opened today selling out in less than a minute.  The tech giant now has a market cap of over $648 billion.  The iPhone 5 is scheduled to be shipped next Friday.

Consumer prices index saw its biggest gain in 3 years. Retail sales were higher for the second month in a row.

Earnings next week:

Tuesday- FedEx

Wednesday- Auto-Zone, General Mills, Adobe Systems, Bed Bath and Beyond

Thursday- CarMax, ConAgra, Rite Aid, Oracle

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Halftime Report 9.13.2012

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Oil and Gold are both up 6.00 and 0.68, to 1,778 and 98.99 respectively. Platinum futures are up 31.80 and are quickly catching gold. The EUR/USD exchange rate gained 1.13% up a penny and a half to 1.3136 euros per dollar.  Strangely, the US dollar is gaining value against the Japanese Yen, up about $0.77.

Analogic Corporation (ALOG + 13.67%) is a technology company that designs and manufactures advanced medical imaging and security systems. ALOG hit a new high today of 78.73, up about 9.50 points. Shares exploded today after its quarterly results and guidance topped expectations. Analysts expected a EPS of $0.71, a surprised of $0.25 per share as earnings were $0.96.

Bank of America (BAC | + 1.60%) had a second day of huge volume. The stock has been downgraded by at least 5 analysts, yet it continues to creep higher. 226.6 million shares were traded today already.

Google Inc. (GOOG| +$6.16) jumped up almost 6 points in the first half to 712.20. Google has been extremely volatile this week. On Wednesday it was down around 685.00 and gained almost 18.00 points yesterday.

Apple Inc. (AAPL | 1.99%) is up an astounding 13.61 points. Sitting at 696.56, AAPL has hit a new high, again. The iPhone 5 pre-orders were sold out within an hour this morning which may have drove all of the bears away from the stock, after some questioned the value of upgrading.

US economic news released today includes the CPI, retail sales, and industrial production. All reports are released on a monthly basis. Production is down 1.2% overall, with manufacturing losing 0.7%. Retail sales grew 0.9% beating last months 0.8% growth. Finally, CPI grew by 0.6%. Food and Energy prices accounted for 0.5% of this months change, however, year-over-year change in CPI were all energy and food at 1.7%.

Alex Kalish has a master’s degree in economics from Suffolk University.

Questions, comments, and suggestions are welcome: alexk@keeneonthemarket.com.

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Where Do Interest Rates Go From Here? 9.14.2012

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While issues like gold and silver contracts may come to mind during an announcement like this; there is a plethora of interest rate sensitive underlings that are either helped or hurt by these actions.

One of the most popular trades has been the high yield trade; naturally involving the real estate investment trusts (REITS). REITS must, by law, distribute about 90% of their net income as yield to investors. These massive dividends, which can be seen as an extrinsic value difference in the option chain and big gaps/candles on the chart, are then distributed to shareholders.  Considering these are rather interest rate sensitive; they can be an indicator for the greater interest rate environment. AGNC rallied over 3% this week to a new all time high and the bond etf TLT got wacked by over 2.3%; closing its candle body nearly on its 150 day moving average and its lower wick near its 200 day moving average.

While the ebb and flow of the bond market may be challenging to understand, especially why anyone would accept such a low yield and high principal risk, it is interesting to look at other yield curves. Below is a chart of the Swiss yield curve against the USA yield curve; one can observe the negative rates in Switzerland (because of the currency peg); so is not only us having to deal with bad rates. While prospects may see dim and challenges seem monumental…there are trading opportunities in the interest rate market around the world, but more importantly it is still morning in America.

Across the pond the FT reported that, “investors in the €1.1tn European money market fund industry are facing losses as big managers prepare to pass on the impact of negative short-term interest rates.” American debt is still considered a staple of safety to the market, even though we are nearly at our fiscal tipping point. 

 Chart1mark

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-mail mark@keeneonthemarket.com with questions & comments 

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Morning Rage 9.14.2012

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Fed’s current strategy of buying long-term securities and selling short-term is ineffective. Further policy accommodation is warranted, and the fed will expand purchases of securities while extending the current federal funds rate and:                                                                                                                                                                                          

  • The Fed will purchase 40 billion dollars a month of mortgage backed securities, which will be in an increase in holdings of long term securities of about 85 billion dollars a month till 2013
  • The goal is to increase downward pressure on mortgage rates and long term rates in general, providing support to the housing sector by encouraging home purchases and refinancing
  • If the Fed does not see improvements in economic and financial developments in the upcoming months they will continue purchasing MBS as well as additional asset purchases as appropriate, called unlimited quantitative easing
  • The Fed will continue to control prices but is focused on unemployment
  • Policy will continue passed recovery, to provide assurance to households and businesses, the target rates are 0% to 0.25% through mid-2015
  • Projecting unemployment rates of 6.0 – 6.8 by 4th quarter 2015
  • Projected inflation of 2% a year
  • Fed earnings are remitted to the treasury and will help reduce federal deficit and debt

With that news, the DOW was up 206.51, 1.55%, to 13,539.86, S&P up 23.43 or 1.63% to 1,459.99. Overnight, Dow and S&P futures gained 63.00 points and 7.25 points respectively. Crude oil futures are up 1.79% to 100.07. Yesterday before the announcement, our trade pick at KOTM was to purchase a call fly on GLD, a Gold ETF. After the 12 pm announcement, GLD rose 3.41 points, a 2.03% gain, and continued to gain points overnight up another 0.44 points. As the policies around the world try to keep up with the Fed announcement, investors will be looking for stable currency. I am expecting buyers to continue pushing Gold prices up, and GLD to move up into a range of 174.00 to 178.00 and higher by 2013.

What happens if Fed policy fails? Bernanke explicitly stated that the Fed will continue its easing until employment gets better, with no real time frame. At some point, if unemployment and GDP are not improving, uncertainty about whether or not the Fed can effectively change the economy will make for a strong bear market. Don’t lose sight of the Fed’s progress over the next twelve months. 

Alex Kalish has a master’s in economics from Suffolk University.

Comments, suggestions, and questions welcome: alexk@keeneonthemarket.com.

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Market Recap 9.13.2012

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The Federal Reserve today released its projections for GDP, unemployment and inflation for 2012 and 2013. GDP estimates were lowered for both years, 2012 reduced to 1.7% – 2.0% from 1.9% – 2.4%. Estimates for 2013 were reduced by 2%-3%. Unemployment estimates stayed relatively the same for 2012 at 8-8.2%, while 2013 estimates narrowed but stayed in the old range, now between 7.6%-7.9%.

After the report was released, Ben Bernanke, the Chairman of the Fed, held a press conference to discuss the quantitative easing announcement earlier today. Bernanke expressed concerns for those who hold interest-bearing assets, but then went on to say low interest rates support homes and businesses throughout the economy. With no specific target, it isn’t clear where the Fed will begin and end its economic tweaking, however, Bernanke explained that the purpose is for general improvement in the labor market by reductions in unemployment among other indicators.

Tomorrow’s economic events include the Consumer Price Index Report, Retail Sales Report, and an Industrial Production Report. The CPI is expected to gain about 0.2% to 0.9%. Retail sales are also expected to grow less than a one percent. Industrial production is projected to shrink.

Google Inc. stock was $3.81 away from its high hit last week. Google stayed steady most of the day but exploded upwards around 12:30 pm, and continued its way up to close $15.16 higher at $706.04. Some products consumers are looking forward to from Google are Google Fiber and Google Glass. Google Fiber is currently in Kansas City but is planning to expand into five more cities in Kansas soon. Google Glass, a light electronic device in which data is projected into the users field of view, is set to be released next year.

Alex Kalish has a master’s degree in economics from Suffolk University. 

Questions, comments and suggestions welcome: alexk@keeneonthemarket.com

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