The Market Financial

Tried to post this chart on twitter, didn’t work for some reason

Staff and Wire Reports — Thu, 09 Feb 2012 04:22:00 +0000

You think its going one way and then it fails to pass a certain fib level and another pattern emerges, making the previous one invalid. M was the white pattern, W the smaller yellow. W still valid, target 2.465, b/o then 2.476. If it doesn't break out of the last, smaller gray circle (if it breaks down inside that circle) then it'll make the yellow W invalid, create a possible smaller M, and, interestingly, the larger white M can still be in play.

Follow the rules: Cut losses quickly; Don't overtrade; Take profits/sell into strength; Don't chase, watch for the pullback; Have a plan and stick to it

View my other posts/give me some advice at http://part-timepennystocktrader.blogspot.com/. Follow me on twitter @BNGESG.

Everyday Is Groundhog Day

Nicholas Santiago — Wed, 08 Feb 2012 20:28:22 +0000

Once again, the major stock indexes have found a low by the noon hour and then floated higher into the afternoon. Nearly everyday we see the same pattern repeat over and over. The trading volume remains extremely light which generally favors the upside in the stock market. Traders must remember the old market adage that states, never short a dull market. The words light volume can be substituted for dull. Since December 19, 2011 the average volume in the SPDR S&P 500 Trust (NYSEARCA:SPY) is around 120 million shares a day. The three month average volume in the SPY is around 210 million shares. It is easy to see what a dull market this really is at this time.

Traders must continue to watch and follow the U.S. Dollar Index Index very closely. When the U.S. Dollar dips the major stock indexes flips higher;. the opposite is also true when the U.S. Dollar Index rallies. This is exactly what we have seen today and nearly everyday since mid-December. Everyday is Groundhog Day in this market.

Nicholas Santiago
InTheMoneyStocks.com

Why Putin lies about his input to economic growth in Russia?

Staff and Wire Reports — Wed, 08 Feb 2012 20:27:00 +0000

One of the biggest lies from Putin is that he has pulled out the Russian economy from ruins and given it a big push. It is not true because the evolution of real GDP per capita in Russia follows the same path since 1998, i.e. the push to the economy had been given by President Yeltsin. Figure 1 presents the measured real GDP per capita in Russia since the start of transition in 1991. We have also plotted our prediction as based on a physical model of transition from socialism to capitalism.

The years of Putin’s presidency are characterized by inertial economic growth, which is not different from the previous years. There is no chance that Putin could make any difference. On average, the rate of real economic growth in Russia was of 4.0% per year since 1998. According to our model, the rate should be around 5% per year for the level of GDP per capita in 1998-2007. This means that the Russian economy has been lagging behind its potential output.

Figure 1. Observed and predicted evolution of real GDP per capita in Russia.

Chinese Stocks Heat Up

Nicholas Santiago — Wed, 08 Feb 2012 19:13:17 +0000

Chinese stocks are flourishing today after the Shanghai Index jumped to 2347.53, +57.04(+2.43%). This pop set the China solar stocks on fire with Trina Solar Limited (ADR) (NYSE:TSL) trading at $9.00, +0.80 (+9.76%). Others like JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) and Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) are also having a big day.

Some Chinese small caps are still at or near their 52 week lows despite the market rally in January 2012. These are catching fire. Sino Clean Energy Inc. (NASDAQ:SCEI) is surging today, trading at $1.44, +0.09 (+6.67%).

The key is to look for Chinese stocks that are still trading at or near their chart lows. These may be the next explosive movers. There are not many stocks that are still cheap in this market, and speculative money is searching for the next big mover. Any small cap trading near its lows is a candidate, especially Chinese plays.

Gareth Soloway
InTheMoneyStocks.com

Why income inequality is very difficult to analyze?

Staff and Wire Reports — Wed, 08 Feb 2012 18:12:00 +0000

There are several major agencies reporting various measures of personal income. The Census Bureau, CB, measures personal incomes in household surveys (CPS ASEC) at an annual rate. This measure is called Money Income, MI, and includes various types of personal income. The CB provides these estimates to the Bureau of Labor Statistics in form of distributions over age/race/sex.

The Bureau of Economic Analysis also carries out annual estimates of gross personal income, GPI, as based on administrative records but does not provide any dependence on age/race/sex. In that sense the BEA reports only the cumulative number and does not allow inferring any evolution of personal income distribution in time. The most important similarities and differences of the CB and BEA measures are discussed in depth in this CB document.

The IRS also measures and reports personal incomes filed for tax purposes. Since 1996, the IRS has been publishing detailed tables of personal incomes distribution is various income bins. This is similar to the CB reports but includes capital gains as income source.

Unfortunately, multiple purposes and multiple agencies reporting personal incomes make it difficult to follow up actual evolution of income distribution and income inequality in the US. There is no unique way to merge all data in one consistent table and to estimate the distribution of income over age/race/sex and to calculate any quantitative measure of inequality like Gini coefficient or Thile index. We illustrate the difficulties with two plots. Figure 1 shows the portion of personal income reported by three agencies in nominal GDP. The BEA reports around 85% of GDP as personal incomes but does not include capital gains. The CB and IRS both report only 55% to 62% of GDP as personal incomes with a very large difference in sources of income.

Figure 2 shows the portion of population with income as defined by the CB and IRS. There is a dramatic difference of 30% between these agencies. In other word, the IRS does not count as personal income what approximately 30% of the total population define as money income. This might be not a big difference in total income when all personal incomes are summarized over this 30 per cent of population.

One may conclude that the way these three major agencies consider and resolve the problem of personal income and income inequality is counterproductive and confusing for any quantitative analysis. This also means that the speculations about income inequality are mostly qualitative and thus emotional.

Figure 1. Portion of personal income in GDP.

Figure 2. Portion of people with personal income in total population.

Key Stock Trading Analysis

Nicholas Santiago — Wed, 08 Feb 2012 17:57:23 +0000

The markets are hovering slightly lower on the trading day. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $134.58, -0.21 (-0.16%). While the markets remain overbought, the free money policy of the Federal Reserve and light volume propping has created the best start in 25 years in the market. The scary aspect of this is that the rocket will eventually run out of fuel and fall to earth quickly. The question is simply when?

Bank of America Corp (NYSE:BAC) hit the daily 200 moving average today at $8.09. It now looks like it could pull back. The chart is extended with the market and upside potential is limited short term.

Apple Inc. (NASDAQ:AAPL) continues to plow higher. It is trading at $472.10, +3.27 (+0.70%). This stock continues to be the leader in the technology sector, following amazing earnings. If you are looking for a short, it is wise to look in other places until Apple at least hits $500 a share.

Semiconductors continue their trek higher. However, major resistance on the Merrill Lynch Semiconductors HOLDRS ETF (NYSEARCA:SMH) is coming into play. Look at the $35.25 as a short term top and shorting opportunity if hit. Stocks like Intel Corporation (NASDAQ:INTC) remain dramatically extended.

As the market continues to float, preparation must be made for the next big move.

Gareth Soloway
InTheMoneyStocks.com

What the VIX Kitchen Sink Chart Says

Staff and Wire Reports — Wed, 08 Feb 2012 16:08:00 +0000

One of the more interesting developments of 2012 has been to watch the diminution of the strident bearish narrative that has been focused largely on the collision course between a preponderance of debt and low or negative growth. The bullish beginning to 2012, however, has not prompted many in the way of converts to the bullish camp. Instead, there have been whispers of “…overbought…” that have turned into a soft murmur and are now verging on becoming a loud chorus. Suddenly the general consensus seems to be that stocks just do not deserve their current lofty valuation.

In this type of environment, many investors become particularly susceptible to confirmation bias and scramble to find one or more indicators which will tell them what they have already begun to believe: that a major correction is likely just around the corner.

For better or for worse, a look at the VIX is often one of the first stops for those who are looking for evidence of a market reversal.

In the chart below, I have updated and extended a chart from three years ago that I call my “VIX kitchen sink chart” – as it pokes and prods the VIX in a number of different ways. Standard VIX analysis attempts to determine whether the VIX has strayed too far from historical norms, whether this be in the form of moving averages, Bollinger bands or other mechanisms. I have even included a separate rate of change study (with its own Bollinger bands) and a Bollinger band width study below the main chart in order to provide a couple of additional analytical twists.

The bottom line, however, is this: if stocks are overbought and a correction is indeed just around the corner, the VIX does not appear to be aware of any such inevitability. Instead, it looks a lot more like business as usual in the land of the CBOE Volatility Index.

[source(s): StockCharts.com]

Disclosure(s): none

What the VIX Kitchen Sink Chart Says

Staff and Wire Reports — Wed, 08 Feb 2012 16:08:00 +0000

For better or for worse, a look at the VIX is often one of the first stops for those who are looking for evidence of a market reversal.

[source(s): StockCharts.com]

Disclosure(s): none

Joy Global Could Be Telling Us Something

Nicholas Santiago — Wed, 08 Feb 2012 16:04:31 +0000

Joy Global Inc (NYSE:JOY) is a leading manufacturer of mining and farming equipment. The stock has been selling off over the past two trading sessions. This morning, JOY stock is declining lower by $2.00 to $90.70 a share. When a market leader such as JOY stock declines it could be telling us that the mining business is beginning to slow down. BHP Billiton Ltd (NYSE:BHP) is also trading lower today by $1.15 to $80.62 a share. Earlier today. BHP reported earnings and guided slightly lower in 2012. It is important to note that mining and mining equipment related companies have lead the markets higher recently.

Leading mining and farm equipment manufacturers such as Caterpillar Inc (NYSE:CAT), Deere & Co (NYSE:DE), and Tractor Supply Co (NYSE:TSCO) are all trading lower. If the mining and mining equipment sectors starts to rollover it could tell us that the recent stock market rally is coming to an end.

Nicholas Santiago
InTheMoneyStocks.com

Agriculture Stocks Send Mixed Signals

Nicholas Santiago — Wed, 08 Feb 2012 15:19:20 +0000

This morning, the leading agriculture stocks are all trading higher to start the day. The Market Vectors Agribusiness ETF (NYSEARCA:MOO) is trading higher by 0.46 cents to $53.34 a share. The MOO is trading above all of the major daily chart moving averages which puts the stock in a strong technical position. Traders must recognize that the MOO is now getting a little extended and overbought. This tells us that a pullback or consolidation could be in the cards soon for the agriculture ETF. Short term traders can watch for intra-day resistance around the $53.50, and $54.00 levels.

Other leading agriculture stocks that are trading higher today include Potash Corp Sask Inc (NYSE:POT), Agrium Inc (NYSE:AGU), and CF Industries Inc (NYSE:CF). All of these stocks remain very strong on the daily charts. These stocks are now getting short term overbought and may need to pullback or consolidate soon.

Nicholas Santiago
InTheMoneyStocks.com