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Halftime Report 8.9.2012

Everyone that I talk to is bearish on this market. After brainstorming, we figured out why markets are rising, even though our economy still appears to be injured. Our answer was QE3.

I am satisfied that the market did not rally after the release of today’s initial claims number beat expectations. Do you see an improvement in the job market?

S&P 500 futures were down 2 points to 1396.25, Dow futures fell 26 points to 13094, and NASDAQ futures gained 2 points to 2708.75.

Gold futures rose 70 cents to $1616.70 and WTI crude futures were up 20 cents to $93.55.

Soybeans rose 46.40 cents to $16.4640 and corn rose 12.60 cents to $8.2320.

Elizabeth Arden Inc. (RDEN) gained over 10% after reporting increased sales and margins, yet a 33% fall in profit.

E-Trade Financial Corp. (ETFC) gained 6% after news that the current CEO will depart. The position will be filled by Frank Petrilli, a current member of the board of directors.

Yelp Inc. (YELP) gained over 6%, making this week’s gains nearly 30% after a report of a 67% gain in revenue during the previous quarter.

Boingo Wireless (WIFI) fell over 23% after reporting earnings below analysts’ estimates. This happens to be one of my least favorite companies in the country as I receive daily Spam e-mail requesting that I use their services.

David Cornes holds a degree in economics from the University of Montana.

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Signs the Market is Getting Complacent – Put/Call Ratio and Bull Pct. Index – 8.9.2012

As you can see in the graph below, the S&P 500 curve and the Put/Call ratio were near convergence. The relatively low Put/Call ratio in this case coupled with the S&P lingering around the significant 1400 level leads me to believe that a rally would not be out of the question with macroeconomic expectations such as QE3. PutCallRatioGood

David Cornes holds a degree in economics from the University of Montana.

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Movers and Shakers – MNST – 8.9.2012

The energy drink company reported an increase in Q2 earnings of 30%, however missed analysts expectations. Gross sales grew by 28.7% to $678.9 million with net sales up 28.2% to $592.6 million. Analysts’ expectations for sales were $596.1 million. Profit rose to $109.8 million or 59 cents a share, missing expectations of 61 cents a share. Last year at this time, MNST reported profit of 45 cents a share or $84.2 million.

In recent years the energy drink industry has taken off. Year-to-date MNST is up 47%. Although production costs have risen, MNST’s customer base remains strong as the energy drink sector remains popular. I myself prefer coffee, so I am not drawn to MNST’s product line, however the numbers do not lie, people want Monster Energy drinks.

David Cornes holds a degree in economics from the University of Montana.

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Morning Rage 8.9.2012

The Hang Seng climbs just over 1% to a 3 month high lifted by the real estate market. StanChart, who
we have heard a lot about this week, rose again today 4.3%. Property data released today showed sales
rose in July prompting stocks forward. Evergrande, China Resources Land, and China Overseas Land rose
4.0%, 2.3% and 2.6% respectively. Li & Fund gained 3.1% ahead of its first half earnings with a first half
profit of 312M. Consumer inflation was down to 1.8% from 2.2% in China and factory output was at
9.2% in June, the weakest in over 3 years.

The FTSEurofirst inched forward .1% with a boost from miners due to Chinese inflation data. Banks and
commodities also helped prop the market as Standard Chartered also gained in Europe up 3.8% fighting
its accusations. Norwegian offshore engineering group Subsea 7 gained 5.8% today. Dane drugmaker
Novo Nordisk added 2.8% with better than expected 2nd quarter revenue. A few German stocks held the
country down as Porsche lost 4.6% and their second biggest lender, Commerzbank, dropped 4.4%.

Interesting news from Morgan Stanley as machines replace traders in the bond and interest-rate trading
divisions, this is due to sluggish activity and to prepare for a time when they will trade live stocks.

Commodities are looking mixed this morning with crude and gold up and natural gas and silver currently
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

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Doherty at the Close 8.9.2012

Overseas, the Asian markets closed broadly higher, tracking previous gains in the U.S. and Europe. Japan’s Nikkei Stock Average rose 0.9% to a one-month high and China’s Shanghai Composite gained 0.2% to rise for the fourth straight day.

In other corporate news, Walt Disney (DIS) rose 1.35% when they reproted fiscal earnings that exceeded expectations but revenue that fell short of expectations. Priceline.com (PCLN) dropped signifcantly, -17.28%, after they beat Q2 EPS estimates, but substantially lowered their third quarter outlook among uncertain economic activity. Finally, Bloomin’ Brands, owners of Outback Steakhouse and Fleming’s steakhouse, surged on their IPO after lowering its offering price and the number of available shares.

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VIX Outlook 8.8.2012

The VIX has been surprisingly crushed in the previous month, considering all of the Euro debt crisis talks and talk of QE3. S&P 500 futures (ES_F) seem to be trading flat or in a directional trend these days without much movement nor fuel for the fire.  I am puzzled why the ES is reaching near pre-crisis highs without much good news appearing. Unemployment has been above 8% for over 40 weeks, global economies are worried about sovereign defaults and Treasury yields are trading at their peak.

From the chart below, you can see that the current price of the VIX is trending toward the period low of 14.26. In my opinion, I think that right now is a great time to go long this index using a bullish option play, given that I do not think this index can go lower, and I do not think that volatility will stay this low in these times of economic uncertainty.

The current front month VIX is trading at 13.66, implying a 3.9% move in the index over the next 30 days. I believe that the VIX is trading at a deep discount as I believe that global tensions are building up for ia sharp movement in the ES with a highly probable movement outside of the 30-day estimated value.  If I were going to trade this contract outright, I would put my target around 30, a level easily reached with any movement in the VIX.

VIX Term

VXX

David Cornes holds a degree in economics from the University of Montana.

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