RIMM Is Still An Avoid
June 30, 2008 11:04 PM
I do not like RIMM here. I am not sure if it is a short as it “could” make a new reversal at any time. I think the trade is just too difficult and should be avoided until we have clarity. The gap lower should have been the short, IMO, not chasing lower. The short really was once $127.63 cleared on the gap lower and it became obvious the stock was not going to reverse on the day. From here on, it is a bit of gambling, IMO. But it would have to clear the gap high of $128.01 to have any chance of an advance I believe. If you are already short in that range, I see nothing to make the case to cover here.
I still think the hype surrounding the new phone will “eventually” draw buyers. But I guess their report in the earnings will dampen that as they warned that expenses related to new phones would be a drag. It wasn’t the earnings that punished the stock, IMO. You can short it but you HAVE to know what you are doing. Any sign of a reversal you need to exit. So this trade should be left to the pro’s, IMO.
Dow Symmetry?
June 30, 2008 8:40 PM
I saw that the Dow was down 7.6% in Q1 and 7.6% in Q2. If you are a believer in symmetry in the markets, then that would put the Dow next stop at around 10,600. I am not sure if I am a believer in symmetry or not, but something interesting to ponder.
GM And F: I Agree With Cramer On This
June 30, 2008 8:18 PM
Without having a very strong understanding of balance sheets and cash flows, I would not touch either GM or F regardless of how cheap they become UNLESS it is a trade. I warned long ago on GM when i said “someone wake me when GM hits $10″.
The problem is oil, debt, and product mix. GM and F may sell small cars, but can they sell them at a profit. The vast majority of the profits, especially with F, came from SUV’s and trucks. I do not believe either can survive if the market stays where it is or the current management stays in place.
Let’s look at how “asleep at the wheel” they are. The short term answer to mileage and gas prices was OBVIOUSLY hybrid vehicles. Toyota leads the way and introduces a broad line. What does GM and F do? They emphazise “flex fuel” vehicles. Here is a newsflash: Corn ethanol is the single dumbest idea in the last 20 years, possibly longer. I have mentioned this many times before. It has an energy coefficient of 1.1 while sugar cane ethanol is 1.3. It makes zero sense on any level.
Point being, if GM and F cannot meet cash flow going forward, do not get lured in by the dividend. I believe they will both have to eliminate it, which begs the question why they haven’t done so already?? If they cannot get to positive cash flow, they both may have to file for bankruptcy at some point. I am not saying that will happen, but it would not surprise me, in the least.
Market Recap:Pretty Much Went As Planned
June 30, 2008 5:53 PM
I posted this weekend that I thought “if the market opened flat to slightly negative, the early weakness is likely to reverse”. Bingo. When the market opened, I also warned to “watch out for a late reversal”. Right on target. I also posted that in my Reader Interaction comments that ” although I have been negative on UPS for months, UPS looked like a good risk/reward trade here”. $2 bucks plus off the low.
Here is something to keep in mind - timing. If RIMM opens where it did and reachs near your price for a risk/reward trade at 10:00, the trade is long if you want to take that trade. If it reaches the price in the last 30 mins, the trade is an AVOID - you have no time left. Unless you are going to hold the trade, which I believe is risky, at best. Timing, Timing, Timing. Make sure you have enough time left in the day to get the bounce you are looking for.
Keep in mind i did not say LONG any names today…as I have mentioned I am negative on the market here. I just wanted to give people a heads up as to what I saw was “likely” today.
Watch The Early Low’s
June 30, 2008 9:26 AM
I still believe there will be an attempt to reverse weakness early. We have Chicago PMI at 9:45 EST, so we should know direction pretty early. If we can hold 1280 area for time, the market could make a decent move here early. I still smell late selling, so be careful. I believe the Friday low was 1272.75. Even if we clear that we “could” reverse, not sure. If we clear it late into the close, the market is likely in big trouble.
Futures Down To Flat, Oil Up, Quarter Ending, Be Careful of The Close
June 30, 2008 8:42 AM
I have grown so tired of these supposed experts paraded on CNBC talking up the economy. “The economy has held up amazingly well”. “The economy should rebound”…bla bla bla. I have heard this exact same nonsense for 6 months on a daily basis. The only credible person on their “panel” this morning is Art Cashin with UBS. He seemed far more skeptical of the market and the consumer. Probably because he is a trader and knows the market almost certainly has to go lower. ‘
Anyhow, if we move up today, watch out for a reversal late in the day. I just do not believe any strength can hold here. Whether strength is sold today or in coming days, I am not sure, but be careful. My “hunch” is any strength today will be sold late as it will end of quarter “window dressing”. Essentially this means funds will want to show their customers they are in the “winners” and not in the “losers” going into the next quarter. This obviously is for future sales, not sound financial management. Shocking, I know…ha.
The market is still FAR too bullish here to me. The VIX is still reasonably high, etc. There seems to be no fear as has been the case for months - and they have been wrong, as I have warned.
RIMM: Decision Time Here
June 29, 2008 9:55 PM
RIMM was one of the stocks I mentioned why we possibly could see some strength tomorrow. This is likely to be a difficult trade, especially since I have no confidence on any level that we have seen the market lows here. If we can hold the line here in the market, RIMM should see strength. I consider $128.98 and important high. If that clears, we could start to fill the gap. I still believe that the market will eventually move lower, but a 1-3 day move higher would not surprise me.
We should know where we are at pretty early on. The only news on the board is Chicago PMI at 9:45 EST.
Market Direction: Monday, Mild “Relief” Rally Possible
June 29, 2008 10:54 AM
It appears that we may get an attempt to hold the line here for a possible small rally, but I am not certain of it. There are numerous stocks that rejected the lows on Friday including AAPL, RIMM, UPS, the transport ETF IYT, QQQQ, etc. If we open flat to slightly lower, look for an early reversal attempt on both the Dow and SP.
Do I believe we have seen the ultimate lows? I would say almost no chance. But for now, this is what I would look for. Keep in mind, if futures are way down Monday, then this would change.
If you just have to be long this market, pick out one of these and look to be long above Friday’s low. Mininmizie your risk here (as always) and try and be long as close to the low as possible. If it clears, I would personally exit as it is possible the market could continue to slide. I personally think the market will go lower, just maybe not tomorrow.
Market Search: If You Just Have to Be Long - Rails
June 28, 2008 11:59 AM
If you just have to be long the market here, the rails should reverse before the market. They have a significant advantage over trucking with high oil, IMO, and if oil is going to hold these levels (and it appears likely) then the rails should fare far better than the market.
Historically, the transportation index has been looked at to lead the market (Dow theory). The reason for this has been simple. If the economy was doing well, then more goods would be transported and profits in that sector would lead the way. While I am always reluctant to say “it is different this time” as those are the 5 dumbest words in investment history, it is different now. Rails can ship cheaper than trucking with deisel at these levels. Therefore, while I am skeptical on the entire index because trucking is a part of it, rails should reverse prior to the market, IMO.
IYT is the transports ETF. It was actually positive Friday. If you just “have” to be long here, the trade is long above $86.64. However, I believe any strength in the market is likely to be short lived, so I am not recommending any long trades here. Just want to provide commentary as you may not agree with me.
Keep in mind, if we get more bad news, I believe we will eventually see mid 10,000 level on the Dow. So there “probably” is no hurry to say “all aboard” here.
WLT Skyrockets: That’s Why I Suggested To Cover
June 27, 2008 5:45 PM
WLT skyrocketed today as I thought it might do yesterday. It tried to reverse several times off the low yesterday and couldn’t do it, probably because the market was getting crushed. I am a little surprised that JRCC did not make a similar type of move. You have to be very careful when trading commodity type stocks as it is like there is constantly breaking news. In general, I would say it is a mistake for most people to attempt to trade them because of that. My call made anywhere from $6 to $10 in a couple of days, depending on where someone took it. If they had taken it several times, then would have made far more, obviously.
But once I saw the dollar open Thursday, I thought oil was “likely” to skyrocket and thought WLT was likely to reverse off any weakness. That is why I posted to NOT short it further and also I mentioned in my intraday comments that ”I would personally cover here”.
WLT made a low today of $95.75 and then skyrocketed to a high of $109.15. Incredible move, to say the least. I would have said to go long, but it was far too difficult a trade and I was not certain. The volume was huge today. Shorts and longs likely saw what I saw and everyone scambled. I just looked at the volume chart and the vast majority of the volume came once $107.97 cleared. Shorts scrambled to cover. Never doubt the significance of numbers.
This is why trading is not just simply saying “lower before higher”. You have to understand what is going on and what may happen and why.
Going forward, I would not chase WLT long here. I do not believe it was “justified” in taking out the high and appears to be short covering. In addition, I have no firm number to be long. Leave it alone.
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