Transports $IYT Showing Weakness, AAR Rail Numbers Less Bad But Negative YoY, Industrials In Rising Wedge, Sector ETFs 50dma and RSI Comparisons

Numbers out of railfax through October 17 are LESS bad than July/August of this year but they are still negative year-over-year and year-over-2007. Railfax posts weekly reports using data from the Association of American Railroads. Below is a snapshot of this week's "Total North American Rail Traffic - Combined US, Canadian and Mexican Traffic". I don't see any gains over 2008 or 2007 however traffic data is LESS negative from mid-2009 to now (chart below of 13 week rolling averages). I provided the most recent AAR Rail Time Indicators video update below (for September).

Source: Railfax
Source: Railfax


Will AUD/USD, $FXA Retrace the WHOLE 2008 Move?

Will AUD/USD (Australian Dollar priced in US Dollars) and the the etf $FXA retrace 100% of it's losses peak to trough from 2008? Here is the FXA chart and I slapped on some triangles. We are at another inflection point to ride. This chart and the BRL (Brazil Real) are the underlying currencies of the successful global reflation trade so far. There have been minimal retracements. Waiting for resistive forces.....

Sergey Brin at Web 2.0 Summit 2009 (Video)

Sergey Brin (Google founder) had a conversation with John Battelle (Federated Media Publishing) at the Web 2.0 Summit on 10/23/2009. Found at OreillyMedia channel on Youtube.


Financial News for 10/24/2009: S&P, Bernanke, China, Goldman..

  • S&P 500 Retreat Signaled by ‘Bearish Wedge’: Technical Analysis (Bloomberg)
  • Bernanke Says Financial Firms Should Pay for Closings (Bloomberg Video)
  • Goldman Sachs Still Paid for Swaps on Redeemed Bonds (Bloomberg)
  • VIX Futures Show Lingering Risk of Stock Swings: Chart of Day (Bloomberg)
  • U.S. Risks Japan-Like ‘Lost Decade’ on Stimulus Exit, Koo Says (Bloomberg)
  • Irish Bar Values Plunge 40% as Pub Culture Mirrors Economy Bust (Bloomberg)
  • China Economy May Slow Next Year, Stephen Roach Says (Bloomberg)
  • Obama Declares Swine-Flu Emergency (WSJ)
  • Capmark, Big Commercial Lender, May File for Bankruptcy (NYT)
  • Capmark Financial near bankruptcy: WSJ (MarketWatch)
  • U.S. Bank Failures Exceed 100 for Year, First Time Since 1992 (Bloomberg)
  • Blackstone plans IPO for Merlin Entertainments: report (MarketWatch)
  • Existing-home sales rebound to 2-year high (WashingtonPost)
  • Suit: Cocaine, sex in Madoff's workplace (CNN)
  • Shift to e-books to hurt bookstores, analysts say (AP)
  • CIT Warns of Big Losses if Investors Reject Plan (NYT)
  • Icahn Could Become Top Shareholder at CIT Group (WSJ)
  • JAL faces $8.8 billion excess debt if liquidated: source (Reuters)
  • GM board to reconsider Opel in early November (Reuters)
  • Secondary Market Now Driven by Mega-Funds, Not LP Liquidity (PE Hub)
  • DEALTALK-Las Vegas Sands loan faces bumps, may pressure IPO (Reuters)
  • Soros says taxpayers right to resent bank bonuses (Reuters)

Big Unusual Volume On XHB November $16 Calls, Existing Home Sales and Tax Credit Speculation (Chart, Links, 10/22/09)

Big money moved into the $XHB November $16 Calls today, probably betting on the existing home sales number tomorrow at 10:00am. Also, speculators could be placing bets on a potential tax credit extension (ACUMA Comments: Extending the $8,000 First-Time Homebuyer Tax Credit-Reuters). About 100,000 November $16 calls were bought for 0.30. On the minute chart using OptionXpress (anyone have an embeddable options chart?) showed that 40,000 and 45,800 hit at .30 at around 2:36. An institution threw $2.5 million on this trade. The trade might not be speculative, it could be hedging a voluminous short position. But lets say someones got a mil to burn and wants to see XHB over $16.30 by November 20 expiration. A total of 123,000 November 16 calls traded with 7,000 open.

On the ISE, XHB option volume was 7.6x average volume and the ISEE exploded 10,600% to 856 with 21,770 calls opened/2,540 puts opened on the International Securities Exchange. The chart is being squeezed in a triangle just above $15 support from 2008. It closed at $15.38 today just above the 50 day moving average on strong volume. RSI and MACD have been trending lower with neutral price movement, however both are hovering around the neutral 50 and 0.0 level respectively. Obviously a breakout or breakdown would be a nice trade. It's also testing the downtrend from 2007. Are these calls levering up here?

XHB Chart (Courtesy of Stockcharts.com)




Articles:
Calls go through roof in homebuilders (optionMONSTER)
SPDR S&P Homebuilders (XHB) $15.28 +3.38% (WhatsTrading)
Bullish bets placed on the home builders: XHB TOL LEN (Trading RM, LLC)

Also this is interesting: Goldman Sachs Positive On Homebuilders Ahead of Earnings/Tax Credit Extension (XHB, DHI, MTH, TOL) - (Street Insider)

Hat tip Adam Warner on StockTwits today.

NYT, WSJ, Google and HuffPost at Web 2.0 Summit on Journalism (10/22/09)

Wow... The Wall Street Journal (Robert Thomson), Google (Marissa Mayer), New York Times (Martin Nisenholtz) and Huffington Post (Eric Hippeau) talk about the evolution of journalism with John Battelle of Federated Media Publishing at the 2009 Web 2.0 Summit. They talk about reporting, stealing content, traffic, advertising etc. Title:"Discussion: Whither Journalism?". Web 2.0 content jacked courtesy of Oreilly Media on YouTube. So will Rupert make a major move and bring volatility to journalism?

Niall Ferguson: US Dollar Could Lose Another 20%, $UUP Around $22 Support, Put/Call Open Interest Ratio and Short Interest (10/22)

On Tech Ticker from the Buttonwood Gathering, Harvard Economist Niall Ferguson said the US Dollar could lose 20% by year end. Major points he made:
  1. The stock market rally from the foreign investor's perspective has been an illusion because "the dollar's depreciation negated all the appreciation of the S&P 500 from March". Why would they want to hold dollars with a sliding currency and no investment returns.
  2. The real trade weighted dollar index is "only down 9% from it's post crisis peak, it could go another 20% and be well within historical probability."
  3. Reserve currencies don't last forever.
  4. "Fed could get pushed by the bond market into monetizing more debt".

The Fed Owns Crossroads Mall in Oklahoma City, $24 Million Listing Price

Bernanke will give you this mall for $24 million. Here is the Crossroads Mall website.

Articles:
FEATURE: Deserted shopping mall bleak symbol of Fed bailout (Reuters)
Fed Chairman Bernanke: Crossroads Mall landlord (NewsOK)
Bear Stearns Rescue Turns The Fed Into A Lawsuit Magnet (Business Insider)
Fed becomes reluctant landlord (Reuters Blogs)



View Larger Map

Hang Seng Property Index, Henderson Land (0012) Break Out, 39 Conduit Unit Sells For $57 Million!

Distressed Volatility (仿旧波动) - China Section (中国科)

I am testing the waters on the HKEX (Hong Kong Stock Exchange) on Google Finance. I've been watching the Hang Seng Property Index (HSNP:Hong Kong) and Henderson Land Development (0012:Hong Kong) on the HKEX for a few weeks now. The Hong Kong Property Index broke out of a symmetrical triangle recently and ran all the way up to 30,000 (above the August highs). It is currently trading at 29,952 after reaching 30,112 a moment ago. I talked about this trade on October 5 and October 13 when it was approaching the potential break out point. It could fly or retest support from here.

Henderson Land Development (0012:Courtesy Google Finance)
Hang Seng Properties Index break (HSNP:Courtesy of Google Finance)

The reason why I'm watching the Hong Kong Property sector is because Henderson Land Development just sold a unit (翠錦園:39 Conduit Road)‎ for a world record price of HKD439 million aka $57 Million!

This is from the press release:
"A Record Breaking Deal that Tops Asia

Mr. Lam stated, "The supply of new luxury residence in Mid-Levels is extremely scarce while luxury properties in such area have always been a sought after choice. We have recently witnessed record-breaking deals in luxury property market. As a result, we have offered exclusive previews of showflats of 39 Conduit Road for selected VIP buyers the past weekend. Market response has been encouraging and we have received numerous enquiries since then. Among all our deals, the top floors special units recorded a HKD71,280 per sq ft (68th floor, unit A, size at 6,158 sq. ft) deal that totaled to HKD439 million. The deal also created records in numerous area, including the followings:

* Record-high of construction price per square foot
* Price per square foot surpasses all residential properties including mansions and houses
* Set new record among properties in Asia
* Challenges to be the highest global price per square foot on split level units (comparing usable area)
* The second highest deal in '39 Conduit Road', reached HKD64,605 per sq ft (68th floor, unit B size at 6,144 sq.ft) deal that totaled to HKD397 million. The Deal also sets a record deal in Hong Kong property market. " (Source: hld.com)
Recent News & Views:

China markets up as Hang Seng property index surges 5.8pct (ProactiveInvestors.hk)
Hang Lung boss a skeptic over sky-high luxury prices (The Standard)
Legislators slam Hong Kong developer's tall storeys (AFP)
In Hong Kong, a $56.6 Million Apartment (New York Times)
Hong Kong Has World's Most Expensive Apartments (조선일보(영문판):Chosun.com)
Singapore's DBS Group retains "buy" rating for Henderson Land Dev't (HK$57.50) (ChinaKnowledge)
Hong Kong flat 'most expensive' (BBC News)
Hong Kong apartment sold for a record 57 million dollars (Rabihdagher.com w/ BBC Video)

Here it is...
Source: AFP

Prechter on Fibonacci, Fractals and Financial Markets (Video Documentary/Socionomics Institute)

Robert Prechter on Fibonacci, fractals and financial markets.
"View a 7-minute clip from the groundbreaking documentary from the Socionomic Institute, History's Hidden Engine, which discusses the existence of the Fibonacci ratio or "Golden Number" in many of life's systems, including the financial markets. To view the entire 1-hour documentary for FREE, click here." (Source: ElliotWaveIntl)



Full disclosure: Although I do work as an affiliate for Elliott Wave International, I have followed Bob Prechter's work and am confident in the quality of his products and services.

Brazil Taxing Foreign Debt, Stock Purchases, BZF, EWZ, USD/BRL at Resistance (Charts). Will It Work?

Brazil is trying to slow down hot dollar inflows by imposing a tax on foreign based "real" denominated fixed income and stock investments. Will it work? Brazil is a commodity exporter, and higher commodity prices and Chinese demand have made it a target for hot money, carry trades etc (interest rates are at 8.75%). The iShares MSCI Brazil Index Fund ETF has been on fire and so has the real. The trend is your friend, but watch out for a strong reversal (it closed at 73.20 -4.04% in after hours).

Recent option activity: EWZ saw a November Put spread on 10/16/09. 10,000 November 74 Puts were bought at $3.10 and 10,000 69 Puts were sold at $1.45 according to Andrew Wilkinson of IB. That trade will profit below $72.35. It could make it. Someone also bought 2,000 November 75 calls that day for $3.30.

Brazil Real Cut to ‘Underweight’ at RBC on Tax (Bloomberg)
Brazil’s ‘Desperate’ Tax Won’t Stem Currency’s Rise, Cunha Says (Bloomberg)
Brazil’s ‘Moment’ at Risk as Real Gains, Freitas Says (Bloomberg)
Brazil Exchange-Traded Fund Plunges 3% on Tax on Foreign Inflows (Bloomberg)

US Dollar/Brazil Real (USD/BRL)

ForexProsForex Charts Powered by Forexpros.com - The Forex Trading Portal.


BZF (Brazil Real ETF)


EWZ (Brazil ETF)


Hat tip 0HEDGE for tax news.

Will Currencies Be The Next Lehman? Einhorn's Speech (Dollar, Euro, Pound, Yen, Gold)

With all of the money printing going on globally, many people believe there will be a currency crisis and eventually a repricing of sovereign debt risk (US Treasuries priced in US Dollars, JGBs in Yen). Lets not forget the aggressive currency players betting on a prolonged period of 0% interest rates by shorting US Dollars and putting on carry trades (selling lower yielding dollars for higher yielding currencies BRL, AUD). So there are definitely people trying to profit off of the demise of purchasing power. Kind of reminds me of Lehman shorts and CDS holders pre-bankruptcy. Commodities investor Jim Rogers has been warning about a currency crisis for a while now (see his CNBC interview on June 16.).

So now hedge fund manager David Einhorn of Greenlight Capital, who publicly shorted Lehman before it's demise, is positioning for a currency crisis by buying gold. He's not singling out the US Dollar either, he doesn't have faith in the Yen, Euro or Pound. The full speech PDF is available at Rolfe Winkler's Reuters blog post. Interesting points he made:

"I believe there is a real possibility that the collapse of any of the major currencies could have a similar domino effect on re-assessing the credit risk of the other fiat currencies run by countries with structural deficits and large, unfunded commitments to aging populations..."

"I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Gold did very well during the Great Depression when FDR debased the currency. It did well again in the money printing 1970s, but collapsed in response to Paul Volcker’s austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked.

Prospectively, gold should do fine unless our leaders implement much greater fiscal and monetary restraint than appears likely. Of course, gold should do very well if there is a sovereign debt default or currency crisis..."


"....When I watch Chairman Bernanke, Secretary Geithner and Mr. Summers on TV, read speeches written by the Fed Governors, observe the “stimulus” black hole, and think about our short-termism and lack of fiscal discipline and political will, my instinct is to want to short the dollar. But then I look at the other major currencies. The Euro, the Yen, and the British Pound might be worse. So, I conclude that picking one these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.

Along these same lines, we have bought long-dated options on much higher U.S. and Japanese interest rates...."

He was right about Lehman and the bond insurers, so keep an eye on gold. He did say he could be wrong if "our leaders implement much greater fiscal and monetary restraint" (Volcker style interest rate policy). But he's been right more than he's been wrong... We shall see!

Medical Marijuana Inc. MJNA Up On Obama's Medical Marijuana Guidelines (Videos, Press, Charts - 10/19/09)

I don't usually look at penny stocks but today is the exception. Medical Marijuana Inc. (MJNA) and Cannabis Science (CBIS) popped today on Obama's new medical marijuana guidelines: Medical Marijuana Policy Eased by Justice Department (Bloomberg).

"Oct. 19 (Bloomberg) -- The Obama administration is advising federal prosecutors not to seek criminal charges against those who use or supply marijuana for medical purposes in accordance with state laws".


Medical Marijuana Inc. (MJNA) is up 20% today at 0.32 last time I checked. Below I found an interview with the CEO. He might be high but he thinks it is the next Microsoft! Go to the website: Medicalmarijuanainc.com.



Also, "Breaking News: Cannabis Science (CBIS) Reports Obama Administration Issues New Medical Marijuana Policy; One More Step Toward Legalization As The Federal Government Won't Prosecute Medical Marijuana If Compliant With State Law" (Reuters/BusinessWire).




This is interesting.. Crime around medical marijuana dispensaries in Colorado. They should just legalize it. Maybe we will see Marijuana Farm REITs down the road.


Full disclosure: I do not have possession of Medical Marijuana Inc or Cannabis Science and there is no recommendation to buy marijuana stocks, or pot on this post.

CIT 3/2011 Bonds at $55, CDS 40bps, Icahn Offers $6 Billion Loan

An update on the CIT Group mess... Icahn, the largest creditor is offering to underwrite a $6 billion loan. I also provided a view of the CIT Group retail note that matures on 3/15/2011. It is trading at $55 and yields 54.17%. View the quote and charts at FINRA.org's Bond Center. As of 7/16/2009 Moody's rates the bond at Ca and S&P CC. Looking at Markit's quotes, CIT Group CDS trades at 40bps up front.

CIT 3/2011 Note Price (Courtesy FINRA.org/Marketwatch)

Egan-Jones On Why Carl Icahn's CIT Overtures Are Irrelevant (Zero Hedge)
CIT’s Changes Do Little to Enhance Debt Swap, CreditSights Says (Bloomberg)
Icahn offers CIT Group $6 billion loan (AP)
UPDATE: Icahn Offers To Underwrite $6B Loan To CIT (WSJ)
Icahn Offers CIT $6 Billion Loan, Calls Board ‘Incompetent’ (Bloomberg)
Icahn offers CIT 6 bln dlr loan, blasts board (AFP)
The Daily Docket: CIT Amends Exchange Offer (WSJ/Bankruptcy Beat)
CIT Sweetens Exchange Offer (WSJ)
CIT Group Revises Debt Plan (NYT)
10/13: CDS On CIT Hover As Bankruptcy Looms (Derivatives Weekly/subscription)
10/5: If CIT fails, Goldman wins -- with a $1 billion payoff (DailyFinance)
10/5: CDS in the spotlight in Goldman purchase of CIT debt (Financial Times)

S&P, SPY Elliott Wave C, 50% Fibonacci Retracement Charts

Robert Prechter uses the Elliot Wave Principle to determine market moves. He correctly called the March lows and is now predicting a wave lower based on momentum indicators, sentiment and the Elliott Wave principle (10/5 interview). What is it....
The Elliott Wave Principle
In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott's work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost's forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
When investors and traders first discover the Elliott Wave Principle, there are several reactions:
  • Disbelief – that markets are patterned and largely predictable by technical analysis alone 
  • Joyous “irrational exuberance” – at having found a “crystal ball” to foretell the future 
  • And finally the correct, and useful response – “Wow, here is a valuable new tool I should learn to use.”
Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices.
Natural systems, including Elliott wave patterns in market charts, “grow” through time, and their forms are defined by interruptions to that growth. 
Here's what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this “punctuated growth” appears in market data is only natural – as Robert Prechter, Jr., the world's foremost Elliott wave expert and president of Elliott Wave International, says, “Everything that thrives must have setbacks.” 
Basic Elliott Wave PatternThe first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “impulse waves,” and “corrective waves.”
Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market. 
A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or "correction," of the progress achieved by any preceding impulse wave. 
As the figure to the right shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.
What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do. 
You have only just begun to learn the power and complexity of the Elliott Wave Principle. So, don't let your Elliott wave education end here. Join Elliott Wave International's free Club EWI and access the Basic Tutorial: 10 lessons on The Elliott Wave Principle and learn how to use this valuable tool in your own trading and investing."

I attempted to chart out some waves on SPY and also provided trends and Fibonacci retracements on the S&P 500. Mr. Prechter please comment with your thoughts.

Here is a potential "corrective" wave formation. To attempt a breakdown $SPY needs to break below 107.5 support and retest the 50 day moving average (103.74).

Charts courtesy of Stockcharts.com
Attempting wave patterns from 2007 peak to March 2009 trough. "C" must be confirmed before declaring this move a bear market rally.


The S&P 500 closed at 1,087.68 and is near the 50% retracement level (1,121.44) and 61.8% retracement (1,228.74). The S&P is also close to the downtrend that hits the y-axis around 1,160 and is near July 2008 resistance (1,200). Which number will be hit before we see a correction 1,121, 1,160, 1,200, 1228 or.... 1,576. That would be a great black swan.


Is it time to hedge a potential wave? I know this goes against the Bernanke liquidity trade, but there HAS to be a decent correction at some point! Watch the streaming S&P chart below to see what happens. By the way, visit the Afraid To Trade blog by Corey Rosenbloom for Elliot Wave analysis.