Blue Horseshoe Loves This Finance Blog

A lot has been made lately about the crush of selling in interest rate sensitive sectors (see below) and for good reason.  The five sectors highlighted below have an average excess negative return to the S&P of more than -14% over the last three months... a period during which the S&P already had a return of -1.2%. Much of the performance in energy related sectors can be attributed to supply/demand rebalancings... while volatility in Asian equity and global high yield markets has prompted many investors to move out of - and begin to bet against - previously high performing natural resource and basic material sectors. Yet, amidst all of the selling in these sectors, the broader US equity market has been able to maintain a relative calm.  For how long that calm lasts is up for debate and I've made my position clear as to which direction I see equities moving in the next 6 months.  Regardless of what the future holds, the facts are self-evident that in the here-and-n...

When periods of falling prices cause short term moving averages move below longer ones, market technicians refer to it as a 'death cross.'  The term itself is perhaps excessively draconian but the implication of these events can be substantial... especially when algorithms are executing trades on technical signals. Last week, I posted that bearish 'technical factors are quantitatively stronger' when making the case for, what I believe will be, a market correction.  On Monday, the market produced another bearish signal as the 20 day moving average moved below the 100 day.  This death cross or mini-death cross - seeing as how it's only the 20 day - isn't a big deal by itself... but when taken in collection with other signals, it gives me further confidence in my market outlook. The picks being produced by the factor model also bear out my expectations by their proportions alone.  Here they are for Tuesday: LONGS Breakouts: AFSI PM CMG EQIX UA Trends: TSO HFC JBLU ...

This post apparently was deleted, so I'm republishing it here... In an episode of 'Friends', after discovering that his apartment had been robbed, Chandler was asked what his insurance company said; to which he replied... "they said, 'YOU DON'T HAVE INSURANCE HERE, SO STOP CALLING US!'" However trite the allegory, it illustrates the need we all have to be protected. At one point or another, everyone's heard that the best way to invest is to buy and hold.  The idea being that the longer an investor's time horizon, the less exposed he or she is to random events or deviations from an expected return.  While this approach seems simple enough, it is (more often than not) difficult for investors to simply turn a blind eye to the drastic impacts short term market volatility can have on their retirement, college and general savings.  Possibly more difficult is for an endowment, foundation or pension to meet immediate obligations when years wort...

As my legions of loyal fans, you all know that I've been calling for a market correction since I first started this blog... a week ago.  Downward momentum seems to gaining steam at this point and the factor model bears that out too. First, a quick recap of last week's performance.  I made 209 intraday picks last week. 51 of those picks moved more than one half of their ATR in the predicted direction (day-over-day) 46 moved more than one half of their ATR in the opposite direction 112 closed day over day within one half ATR in either direction... I consider this a push 4 picks moved more than 2 ATRs in the predicted direction while 7 moved more than 2 ATRs in the opposite direction Winning percentage (not including pushes) was: 52.5% Here are the picks for tomorrow, Monday the 27th: LONGS: Breakouts EQIX ATVI Trends TSO VLO NKE COST SGEN INCY IBB ILMN MET JPM REGN MS DG NOC NFLX Reversions CAT SHORTS: Breakouts: DD INTC APD COH INVN CVX MOS BITA SPWR ACM NUS TXN NVDA GLW ASML X...

With all of the earnings coming out next week, here's a look at how to catch some potential volatility...    1) TWTR reports earnings on Tuesday, the 28th, after the market close.  Should the much maligned micro-blogging site have a good quarter, its stock could see some nice upside. The trade:      Short 1 July 31st $37.5 call for $1.8      Long 3 July 31st $43 calls for $0.6           The trade gives you +12 delta points for every -1:3 portion you put on.      The breakeven price is roughly $46      If TWTR finishes next week below $37.5, the options expire worthless and the credits and debits completely cancel each other out for 0 loss.    2) FEYE reports earnings after the bell on Thursday, the 30th.  The stock has performed well of late fueled by data security concerns.  However, should the company's earnings fail to inspire futu...

In the 2005 film 'Good Night, and Good Luck,' Edward R. Murrow is portrayed by David Strathairn (and brilliantly so, I might add) as justifying his cause for the persecution of  Joseph McCarthy by saying "I simply cannot accept that there are on every story two equal and logical sides to an argument." This portrayal of history reflects my vantage for the justification of the current levels of US equity markets which haven't seen a 10% sell-off since 2011.  Now, its beginning to look like the argument for a technical correction is gaining favor.  The facts that the S&P has tested its highs 5 times in the last 6 months, each time failing to break out, and bearish technical factors are quantitatively stronger (see below) lend favor to the case for a market repricing. The bearish technical factors as measured on the SPY I referenced above are: All short and medium term moving averages are negative (20, 50 and 100 day MAs) The CCI (a momentum calculation) is negati...

The band Radiohead has many classic songs, one of which is titled 'I Might Be Wrong.'  The scarcity of lyrics in it leaves much open to interpretation in regards to its meaning.  The title of the track, however, seems a bespoke fit for the resilience of the equity market.  Greece sits on the perpetual verge of ruin and economic exile (which might also be its only shot at salvation, but I digress)... Natural resources and commodities are in freefall... Global high yield is being punished and the value of the US Dollar is heading back up to its highs.  I would think the cocktail of the factors would be enough to spook investors... but as Thom Yorke says, 'I might be wrong.' Perhaps strong corporate earnings, the kind of which we saw from AMZN after the bell today, are enough to keep investors invested. Regardless, here are the names to watch on Friday, but be mindful of any earnings announcements prior to the start of the session... BREAKOUT LONGS: ACN TSO AFSI ICPT AL...

Next week will be another busy earnings stretch with some notable names reporting across a myriad of sectors that epitomize the good, the bad and the ugly. First, the good... biotech has been one of the best performing sectors in a year of general market apathy.  The group will be front and center early next week and here are some of the names to watch: ESRX  GILD  MRK  PFE  VRTX  AMGN  SGEN  The bad sectors are kind of like the food at a sports bar... it's all varying degrees of bad but none of it is good. Let's start with the least bad.  Technology has been a mixed bag thus far with some names showing upside lately (i.e. GOOG and FB).  Other parts of the sector have been burned, however.  Cloud computing and virtual storage stocks have been punished and a strong quarter can do a lot to turn the tide back in their favor.  Here are the names reporting next week: AKAM  EQIX  TWTR  YELP  FB  WDC  FEY...

Because I don't really care that blogging is about 10 years behind the times, I'm back for another daily intraday watch list. Earnings season is still in full effect... the only thing I'd be on the watch out for is the crude inventories report that comes out at 10 EST in case you're playing energy names.  Also, be on the lookout for CELG earnings and what that can do for other biotech names... the sector has been one of best performers of the year. Here we go... LONG BREAKOUTS: SGEN DST TIF CMG ACN DNKN UA GME SHORT BREAKOUTS : TMUS HLF FEYE RAX SNDK LONG TRENDS: UNH GS EXPE INCY HCA BMY CME DG SHORT TRENDS : GMCR UNP WYNN SSYS KORS AKAM CVX LOW XOM Z VIPS LNG LONG REVERSIONS: XOP only if crude is trading higher Good luck everyone and don't forget to keep practicing at www.chartarcade.com

Yesterday, I posted a couple of swing trades and I wanted to give some added color on the Akamai Technologies short and why I think this trade has a high probability of success from a technical standpoint. The chart below is a screenshot of a factor model I built to identify technical patterns.  In it, AKAM is highlighted and there are a few things that stand out. The trend is your friend -- the pattern is in a medium term downtrend as represented by the normalized 50 day moving trend which is -0.084 (for the sake of comparability, volatility and trend calculations are normalized). Buy on the dips and sell on the pullbacks -- The stock has recently reverted back up to its 50 day moving average, has bounced off of the resistance level and (for the time being) is trading below the declining measure. The variances all line up -- The stock has a miniscule variance to its key resistance level taking a short term reversion out of play.  The moving average variance is ni...