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How Will Jackson Hole Affect Gold? 8.29.2012

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During this period, gold went up from an average of $841.75 to its all time high of $1917.90 on August 2011, which is an increase of 227% over a 3 year period. This shows an explicit relationship between QE announcements and gold. The key question remains: will there be an announcement of QE3 on Friday? Recent increases in commodity prices of gold, silver, and platinum suggest there is something on its way. In my opinion, no actual implementation of a QE3 will take place, but there might be an extensive discussion of the possible actions that are available to the FED. If you take a closer look at the market you can see that consumer confidence is stable, the market is testing its 2012 highs, housing is improving and inflation is right around 2%. Why intervene? Will an announcement of inaction affect the gold market?

It is likely in the short-term, but in the long-term definitely not. The recent bull run in gold and the way it is consolidating right now, suggests there is more room for the upside. Also, current gold accumulation by Central Banks shows a growing interest in the metal over 2012, as the graphs below will show. The Central Bank appetite for gold hit a record in Q2 2012. Gold buying in Q2 2012 rose to 157.5 tons. On an annualized basis this means an astonishing 628 tons. There appears to be a solid floor under the gold price.

gold1

gold2

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Morning Rage 8.29.2012

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The Hang Seng slipped 0.1% being drug down by a 4.2% slide from Want Want China, a foodmaker. Although Want Want posted a better than expected first half profit of 38%, its revenue was still below expectations. The big trade to day comes from Permira, a European private equity firm, who sold a 750M dollar stake in Macau Casino. Evergrande, a Chinese developer, lost 3.1% due to falling margins as they cut prices to sell homes. China Life insurance was 2% after its chairman told reporters there were not promising prospects for increasing investment yields this year, it seems they appreciate the honesty.

The FTSE 300 is down 0.4% at the moment on weak results from French luxury goods companies L’Oreal and Bouygues. Bouygues slid 8% and was downgraded by Citigroup to sell. L’Oreal lost 4.2% and suffered a UBS bank downgrade to neutral from buy. Italian Bank Banca Monte deiPaschi di Siena lost 6% in an already troubled area. Around Europe France’s CAC is down 0.7%, the DAX 0.6% and the Madrid General 0.5%.

In commodities today energies are all currently starting down. Gold is also down, while silver is up 1.65%.

Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu

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Trade of the Day (GOOG) 8.28.2012

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GOOG SearchTrade: Selling the $GOOG August Weekly 680-685 Call Spread for $1.50

Risk: $350 per 1 lot

Reward: $150 per 1 lot

Notes: good risk vs rewad that does NOT break thorugh the recent highs of $580

UPDATE 9.11.2012  Not every trade will be a winner, this Spread went to $5 and at least it is over.  One loser every 5 times isnt bad.

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Nordstrom Company Profile 8.28.2012

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Fundamentals

Forward PE

14.60

Price-to-earnings-growth

1.52

Price-to-sales

1.06

 Long Term Chart

 Nord1

10 year weekly chart has been a very strong stock since the market bottom in 2008. From the closing price on 11/17/2008 ($7.13) to the closing price of today 8/27/2012 ($57.68) this stock has returned over 700%.

Short Term Chart

Nord2


 









 Price is currently in an uptrend approaching the 50% median line around $60. Price is trending above the exponential moving averages (8, 34, 50, 100, and 200). Watch over today’s high at $58.37

  Options Flow

nord4

89% of today’s option volume was on the call side.

A large amount of $57.5 calls where traded today, open interested in that strike is currently 5,703 contracts.

Additional Comments

  • Trading within .86% of an all-time high
  • 3.35% of the float is currently short
  • A recent analysis downgrade with a target of $59

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September Seasonal Stock Performance

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Post Labor Day performance is defined by a Triple Witching Week where stock options, index options, and index futures all expire at the same time on the third Friday of the month. The third week of September, the week of expiration, as been slightly bullish since 1990. The following week is consistently bearish posting only 3 positive gains in September since 2000.

The end of September is prone to weakness due to institutional portfolio restructuring; the last day of Q3, this year on september 28th, has been down 10 of the last 14 years. From 1995 to 1999, the Dow average 4.2% gains, only to follow with a six year losing streak averaging -5.9%. The Dow recorded two positive years in 2009 and 2010 averaging a 5.0% gain. For the last seven years, the S&P has posted gains in September with the exception of 2008 during the financial crisis. The NASDAQ also posted gains for the past five years with the exception of 2008.

Alex Kalish holds a masters in economics from Suffolk University.

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Crude Declines Despite Tropical Storm and Refinery Explosion 8.28.2012

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The main reason for the fall in prices is the shutdown of refineries along the Gulf Coast.  The storm is expected to halt production at 12 of the nation’s largest refineries along the Gulf Coast, lowering their demand for crude in the short term.  The thought that the storm may lead to the United States opening their strategic reserves to make up production also contributed to the decline in crude today.

Despite the fall in crude, gasoline and heating oil did not see the same decline.  With refineries shut down and no reserves of refined products to be released the supply of heating oil and gasoline will be disrupted far more than crude supply.  The spread blew out in trading today but closed off of highs.   

With the concern over production in the Gulf fading markets now look to Venezuela and try to evaluate how much the explosion at the Amuay refinery will impact the price of crude.  The explosion occurred early on Saturday morning with a confirmed death toll of 41 people.  The fires are still burning but Venezuelan officials say that the situation is completely under control.  The refinery is capable of producing as much as 645,000 barrels per day, and officials claim that the refinery will be fully operational within 2 days of the all clear.  The shutdown of this refinery doesn’t appear to be having a large effect on prices in the short term, but medium term effects will depend on whether or not the Venezuelans can stick to their time table for reopening the refinery.  

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Morning Rage 8.28.2012

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Despite Japan’s outlook China still managed gains as  the Hang Seng adding 0.1% today helped by strong performance from steel. Baoshan Steel and Iron announced plans to buyback 5B Yuan of A shares and jumped the maximum 10% in Shanghai. China Mobile rose 0.6% and was the top booster of the Hang Seng. Foxconn International Holdings dove 8% and is now down 47% in 2012.

Europe is down 0.4% on a doubtful macro-economic outlook as investors are reluctant to trade without stimulus. Spain’s economy contracted further in Q2 giving more incentive for companies to stay away from the region. French Bank Credit Agricole rose 0.6% as it grows closer to closing the deal to sell its Greek arm. Kingfisher, Europe’s biggest home improvement retailer, fell 4.3% after being downgraded by BofA Merrill Lynch to underperform from buy.

Ford is planning of bringing over its Lincoln brand to China, which is expected to be the largest luxury market by 2020.

In commodities, crude and silver are both set to begin up today while gold and natural gas are both down.

Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu