Housings Glut Of Inventory

I had to laugh today watching Bob Toll declaring that everything is coming up rosey now for home builders.  This from a man who has continually sold and not bought shares of his own company throughout 2009 which is obviously not a testament of a man who has faith in the future or stability of his firm.   They may tell stories of fewer cancellations, but do they talk about their existing homes sitting unsold?   Homes which sitting idle, are draining their cash reserves as they pay the bank each month on their credit line?  I don’t think so. [shakes head]

Having a 25 year mortgage lending and new construction background, I am one of the many that feel there is much more pressure to come on builder margins and profitability with a huge glut of home inventory to come in 2010.  An excellent piece of research in this area was recently done by T2 Partners which I would strongly recommend anyone peruse if they’re interested in the subject.    While I have no short position at this time, I do intend on getting very short the sector via IYR in the months to come; most likely in February 2010.  A word to the wise, however.  If you believe builders are fine now as an investment, then maybe you’ll believe me when I state I’m a natural blonde and I have a bridge in Brooklyn to sell you as well.

To Our Veterans

These, in no particular order, are shots taken from the Veterans Memorial Park near my home.  Unveiled in 2003, this is a on-going work in progress to honor those who have and do fight for freedom worldwide. 

Covering wars and political conflicts from WWI to Desert Storm, the bricks surrounding the park also outline historic dates in the strife for world peace.  From the Normandy invasion, falling of the Berlin Wall, Pulitzer Peace Price being awarded to Martin Luther King and much, much more. 

To all of those who have served and currently serving AND to their families, we deeply thank you for your dedication and sacrifice.

Short Or Long Industrials & Rails

Small capital risk in shorting XLI tomorrow at the open on this rectangle pattern with a stop above $27.60 and if it holds, the downside target of $25.30.  Note while rectangles as generally a continuation pattern, please note todays Doji.  I feel current market indecision will take it back down as it has the last two months.  This move may not seem like much to some, but I’ll take a 10% move in 7-10 days anytime and twice on Sunday

Another area for possible shorts are the rails.  Most are forming megaphone or rectangles which like the industrials, formed Dojis today at upper resistance.   Good area for a low capital risk short trade.  In KSU [right] I will place my stop above the swing high of $27.60

A last note:  These formations could also turn into triple tops or if they break higher here with volume, deemed double bottoms.  I am merely going with the current market indecision on   attempting to short them rather than long.  If you feel the market is going higher – go long off the formations.  Just food for thought.

Silver Bells Not Ringing

With all the focus on gold, I’ve shifted my focus to other precious metals and become pretty bearish on silver as of late.  On a percentage basis, silver has actually outperformed the yellow metal so the theory goes, those with the largest gain have the most to give back.  Now watching it recently, silver failed to achieve a new swing high.  I’m not going to theorize on *why*; I’ll leave that to the pundits.  Merely reading the charts, negative divergence is in both MACD and Slow Stochastics leads me to believe the weakening in silver will continue.  So call me Mrs. Scrooge; I’ve bitten the bullet.  I am long a sizeable position in ZSL (ultra short silver) with a stop @ $4.52

Monday Evening

MCO is tradeable on a breakout or breadown of its triangle *if* it’s accompanied with increased volume…..or watch the $26 level for a possible Head & Shoulders bottom; again volume required.

Failure To Act And Excess Reserves

Could not help but post this from John @ acrossthecurve.  He was one of the eight bloggers who sat down with Treasury officials last week and seems further disgusted at the Feds lack of fluidity injection; or more so, action in the opposite direction of what mainstream feels should be taking place here.

 Nov. 9 (Bloomberg) — The U.S. unemployment rate may rise to a post-World War II high of 13 percent in the aftermath of the recession, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.  

“This is going to be the mother of all jobless recoveries,” Rosenberg said today in an interview on Bloomberg Radio. “At the beginning of the year, who was calling for unemployment to go up to 10 percent?”.  Rosenberg said the recession, the deepest since the Great Depression, “is truly secular in nature” and said the economy is “in a post-bubble credit collapse.”

Also of interest is this paper from the NY Fed on Why Are Banks Holding Excess Reserves; reserves over and above what is required.   Just a mere glance to the chart right and one can see the amount is staggering.   Obviously the money is not flowing back to consumers and small business in terms of lending so is this an inflationary (or deflation or hyperinflation) hedge or in preparation for the glut of foreclosures and write downs to come in 2010?  I urge you to read the paper and arrive at your own conclusions.  Happy trading.

Long Or Short

Life intervened again this weekend as my middle daughter came home college and I donned my Julia Child apron to cook & bake items for her to bring back and feed the hoards in her dorm.  I now smell like butter and flour. *augh*   How very Laura Petrie of me.

So it’s Sunday evening and everyone’s wondering how the market’s going to trade based on the healthcare bill but rather than argue, I say turn off your television.   Just remove the emotion and trade the charts in front of you.   fwiw tomorrow is a Bradley Model date which means we should see a break of direction one way or another.  I say thank God because this sideways action is boring me to death.  Here are the long & shorts I’m looking at tomorrow.   There are a million more out there; I’ve just been limited on time so I’m keeping it simple.  Just turn off the boob tube……….and trade the charts.

If the market is behaving bullish:  Long TRV on a breakout **if**it’s accompanied with increased volume.  Overhead targets & resistance marked.  Stop below Fridays low.

Long GS **if** it breaks above the trendline.  Stop below $171.   First target $178

I even like a long BIDU if I can get it near $400 as its back in its channel and accumulation is rising big time.

If the market gaps up, fails and turns bearish:  Short CNA back to the gap

On Line Gaming – Growth For The Future

If you’re like me and you want to put something in a drawer for your kids, I’d say take a look closely at an on line China gamer like PWRD.  If my Father were alive I’m certain he’d be rolling his eyes, arms crossed shaking his head at this premise [he would fight wanting to learn computers at all] but there’s no denying that computers are here to stay.  Nor the fact that each day, more and more children and teens worldwide are on line practicing their spelling & math with fun animated characters or shooting their favorite computer-generated evil warlord. This is not to mention adults doing the same or playing a hand of Texas Hold ‘em.  Yep, on-line gaming is here to stay  Computers aren’t for MS Word anymore.    

All that being said Iwas impressed to read this article from BusinessInsider.com outling the projected revenues in the sector.  While there’s a definite downside to the arena in terms of scams and spammers, we find con men in every step of life.  Just consider Doctors performing unnecessary surgery, TV envangelists conning folk to turn over their life savings or those miracle pills promising to help you lose weight without dieting.  It would then seem obvious as with any long-hold proposition, it’s buyer beware and perform your due diligence.  It would seem equally obvious, though, the long term potential in the sector favors a drawer position. Note:  fwiw PWRD is in a triangle on the Daily – set an alert for upside or downside break for a nice $10 swing trade

The Retail Sale

Retail has rallied along with the mass market but I noticed, hadn’t quite broke down as much as other sectors.  Some retailers were still above trendline support but then it occurred to me that as 3Q earnings have been released, retailers had yet to do so [kicking off this week].   So I took my pointer and looked for retailers that had broke below trendline support; my theory being that we ARE in correction mode and those who have broken, now will have that overhead resistance as a good area to initiate  a short position with little risk in terms of capital.

This a.m. I set a trigger to short TJX at $38.75 with a .50 stop.  It filled while I was gone with the high of $38.83 so I feel pretty good about my decision.  My first target is $35.90 which is just above the 23.6% retracement level and then I’ll decide from there.  It may take a few days but for once the retailer is on my and I’m making money off of them

FOMC Minutes

http://www.federalreserve.gov/newsevents/press/monetary/20091104a.htm