Mylant's Money Blog

SPY will Open Lower Boring Day

No knew news! We seem to have a very boring week ahead of us.

The European debt woes are playing havoc upon the world markets. A new flare-up in Europe's debt crisis
hit world stock markets Thursday after Ireland announced it would sink more billions into its failed banks and Spain's public debt rating was downgraded.

There is no news as we end this quarter and get ready to jump into a new one, so maybe it was a good week for traders who knew what to look for. Do not expect the markets to move up today with European debt being the primary news the day.

GNP news should surface today, but economic growth tailed off sharply in the spring and probably isn't faring any better now.

Stock futures slipped Thursday as investors entered the last day of the quarter cautiously. An upcoming report on first-time claims for unemployment benefits and a final reading on second-quarter gross domestic product kept traders from making any big moves

Silver- (SLV) Nice Looking Rally

SLV – Anatomy of a Healthy Rally

by Dr. Duru

In mid-May I tried to make a case for buying silver as a complement to holdings in gold. At the time, the gold/silver ratio looked ready to break lower and provide silver some lasting out-performance. Instead, silver peaked for the rest of the summer and gold regained its edge. Over 4 months later, the gold/silver ratio is  finally at its low for the year and silver is now looking stronger than ever trading at all-time highs (thanks to many of the world’s central banks).

As I reviewed the chart for the iShares Silver Trust ETF, SLV, I was struck by the strength of so many of its technicals. Poor volume has been a major complaint that I (and so many others) have had about the stock market’s rallies since last winter, so seeing the strong buying support for SLV is a welcome relief. Of course, I think this strong buying support is well-justified by the fundamentals of de facto competitive devaluations amongst the world’s major industrial economies.

The chart below has many attractive features that I wish I could find in more stock charts. In late August, silver swiftly broke out from a months-long consolidation pattern. This consolidation began with strong buying and ended with a resumption of strong buying. All summer, this consolidation held around the support of the 50-day moving average (DMA) and the 200DMA. As if that was not enough, the last two weeks of this near straight-line rally has featured two days of bullish engulfing patterns where sellers took SLV below the low of the previous day and then buyers closed out the day higher than the previous day’s high. None of this means that SLV cannot pullback; it likely will at some point soon. But this behavior does indicate that buying interest is strong and should be sustained for quite some time, especially as so many major currencies continue their race to the bottom.

American Airlines (AMR) Time to Play Options

AMR Corp American Airlines

Call options on the parent company of American Airlines are flying off the shelves. AMR's shares are up. Optimism on AMR Corp., as well as a number of other carriers, follows Southwest's decision to purchase AirTran for $1.4 billion in cash and stock.

AMR Corp. is scheduled to report third-quarter earnings on October 20, 2010. Perhaps investors are initiating bullish stances on AMR heading into earnings.

• Traders gravitated to the November $7.0 strike where more than 31,000 call options changed hands versus previously existing open interest of 14,043 lots.
• Most of the contracts, roughly 25,000 calls, were purchased outright at an average premium of $0.43 apiece.

This is a typical play using an announcement as the building block for movement up as the Airline Industry is now making money. With the announcement of earnings coming later in October and investors are expecting a good report, the anticipation to jump on the bull train is very hot right now!

S&P 500 ETF- SPY Weekly Trade Analysis (9-26-10)

The S&P 500 ETF ,” that uses the symbol “SPY,” has been influenced by the stock market this week. Its stock price stands at $114.82 As we learn in MSN Money Snaphot they write this about the Fund: “The investment seeks to correspond generally to the price and yield performance, before fees and expenses, of
the S&P 500 Index. SPDR Trust is an exchange-traded fund that holds all of the S&P 500 Index stocks. It is comprised of undivided ownership interests called SPDRs. The fund issues and redeems SPDRs only in multiples of 50,000 SPDRs in exchange for S&P 500 Index stocks and cash."

From a weekly chart, we can definitely see that the bearish movement that we were experiencing for 12 weeks has been broken and we are on a bullish climb. Now, whether this is a continued climb long term, that we have yet to see. None of our Indicators are giving us a long term hint as to where we are going and therefore we will hold on to the long trading range we have been writing about for some time.

So now we are gaining confidence in the market.The Economic Cycle Research Institute (ECRI), a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning.

For the week ending September 17, 2010

• WLI is 122.2, down from the prior week's reading of 122.6.
• The lowest reading for WLI this year was 120.4 for the week ending July 16.
• WLI growth moved higher to minus 8.7% from a revised minus 9.3% a week ago.
• The last positive reading for WLI growth was for the week ending May 28, 2010 when it stood at positive 0.1%.

Commenting on the data, Lakshman Achuthan, managing director at ECRI said,

After a brief plunge in the late spring, the WLI has been fairly stable throughout the summer and into September, suggesting that it is still premature to predict a new recession.

So it appears we have the momentum on our side if we are bullish (at the present). 99 stocks on the S&P 500 hit 52 week highs this week, that shows momentum! We are rallying quite a bit lately without any significant pullbacks! So what does this mean?Jerry Slusiewicz sums up the positive trend this way: In the span of a few weeks, a new consensus view has emerged that the double-dip scare of July/August has diminished. New bullish technical patterns have emerged such as a break above 1132 on the S&P 500 and 2342 on the NASDAQ. The charts show a pattern of higher lows and higher highs since the July bottom. The markets have also crossed above the neckline of an inverse head and shoulders pattern which when measured properly should run the markets back to the old highs of this year. The technical picture certainly has a lot more positive aspects that didn’t exist just a few short weeks ago. There is now a shift in trend that could really make this market go.

So yes we are turning bullish but still be cautious in your trading. We need a pull back eventually, so don;t get caught in a bullish run without knowing this, or at least keeping it in mind. Gold is also hitting record highs and that shows a lot of fear still in the markets. Just be cautious in your trades and remember that we are at a turning point here. We will either go long or pull back...watch!

Markets Should Open Higher on Housing news

We definitely have a defined downward pattern over the last couple days visible on our 60 minute chart. The pattern looks fairly strong also.

What happens today will be reflected in the early morning announcements before the bell.

·         Orders to U.S. factories for durable goods likely took a tumble in August because of an expected sharp drop in demand for aircraft. Economists surveyed by Thomson Reuters expect total orders for durable goods to have dropped 1 percent in August. Still, they believe that orders excluding transportation rose 1 percent.

·         Sales of new homes likely rose from record lows in August, but the housing market remains weak despite low mortgage rates and cheap prices.

As for Obama’s plan for $50 billion in financial loans to small businesses—well, “Ninety-one percent of small business owners surveyed in August by the National Federation of Independent Business (NFIB) said all their credit needs were met. Only 4 percent cited a lack of financing as their top business problem. “ So don’t expect it to have any affect. Markets should open higher today in anticipation of the two reports being better than last week.

Mr. President- Leave My Health Care Alone!

As I read about these new health care laws going into place, I cannot for the life of me figure out why we have to be penalized like we are. You are leading our country and yet our health care is rising in price now for no reason. Maybe you should consider looking at Colorado where I live.

Anyone can get health care coverage in Colorado. No one needs be denied coverage.

We have small group plans that employers give employees. Even an individual owner who is self employed can qualify for one of these plans on their birthday. There is no denial of coverage here. Everyone can and will be covered.

For those who are healthy and want to save some money we have the individual health arena. Here companies are allowed to underwrite & even turn down people for coverage. But it is not all that bad. Most people qualify for this type of coverage and the healthy people don’t need to pay as much for coverage they do not need. Pregnancy coverage is a rider on a policy like this, we do not have to pay for it along with other coverage we don’t need. It is our choice.

For those who are unemployed but may not qualify for the individual health insurance arena, we have a program called Cover Colorado. The price is a little more than the Individual Arena, but less expensive than the small group. They will not be denied coverage. They can get coverage if they need it for anything.

No one is denied coverage or dropped from coverage as long as they are paying their premiums.

In Colorado, everyone can find coverage. If someone doesn’t have coverage, it is because they chose not to pay for it. If someone just does not have any money at all to pay for health care, we have the Colorado Indigent Care Program that provides huge discounts for medical care to those that qualify.

In Colorado, everyone can be covered, if they want to be.

Okay Mr. President go find your few examples here that fall through the holes and aren’t covered but want to be, you will find the reason being is they may not be able to afford it but make too much money for the Indigent program. Well, your answers to our health care are not helping.

Your ultimate plan is to do away with the Individual Arena of Health care that provides so many benefits to people at a discounted rate. You are trying to make everyone—EVERYONE pay more for no reason at all. You are trying to make us all pay Small Groups rates when we don’t need to. Well, I want the choice to pay for what I want.

Prices are increasing drastically. I am not happy about this. But you are wrong; it is not the evil empire
Insurance companies that are the problem.

I do not see why the Insurance carriers have to raise their rates 20%+ every year…year after year. Now I agree that does not seem right. But neither does the billing of the medical centers. My son broke his hand last summer. He went to the specialist, brought in his own x-rays and was told he needed his hand put in a caste. Tell us something we didn’t know. $900+ bill. He was told they would knock the bill in half if he paid it all up front. Then it was over $260 every time he needed a new caste put on!

I had a friend who went to the emergency room for food poisoning. She was in the ER for 3½ hours. They gave her two IV’s and an anti-nausea pill. Cost-- $2200.00 they told her they would knock 40% off the bill if she paid it right then. Don’t just look at the Insurance Companies, the medical facilities are robbing us and the Insurance companies blind.

And let us not forget the tort system. Almost every other commercial on TV is about a class action law suite against a medical institution for some drug or another anymore.

If you are going to fix the system, then fix the system. Stop playing with my health care. Address the tort system; address the billing practices; and address the Insurance Companies. Either do it right or don’t do it at all.

I don’t know what you think the problem is, but it’s not getting health care. In Colorado, anyone can find health care. You are not helping us—robbing us of choice and then raising our rates almost 30% to 40% more in the Small Group Arena and then MAKING it MANDATORY that we buy it. You are not helping at all.

Mr. President, if you are not going to address the real problem with health care then leave ours alone.

SPY Options Trades this Week!

We started preparing for our trades last weekend and put together a number of trades with the SPY for the end of this week as options were to expire.

As we drew this map that helps us define risk, we put together three different strategies this week. 

We like making money as the markets go up and down. So our strategies are designed after such a manner.

We put together a naked Call sales strategy and sold 250 calls at 116 on Monday late morning. This was a safe enough level that we believed the markets would not make this move even in a good week. 

We were right up to this evening. We are trading comfortably at 113.05. Even on a huge day Friday we will not reach this level. So we will make a good profit after expiration. 250 options at $6.00 each will bring us $1500.00. After this, we put together a naked Put sale also. This was a little easier since we are now trading against the trend. 

The 108 level was easier for us to sell at a higher rate on the same day at the same time because the markets have been predominately bullish. This has allowed us to double our profits from selling the naked call. 

We expect Friday to expire and all our profits stay in tack.

Biogen (BIIB) A Company Worth looking At

Biogen Idec Inc. (BIIB)

Sector: Healthcare

Industry: Biotechnology

Biogen Idec Inc., a biotechnology company, develops, manufactures, and commercializes novel therapeutics in the areas of neurology, oncology, immunology, cardiopulmonary, and hemophilia in the United States and internationally. The company’s marketed products include AVONEX for the treatment of relapsing multiple sclerosis (MS); RITUXAN for treating relapsed or refractory, low-grade or follicular, CD20-positive, and B-cell Non-Hodgkin’sLymphoma (NHL); TYSABRI to treat relapsing MS; and FUMADERM for the treatment of severe psoriasis.

How valuable is the Stock?

How does one know how valuable a stock is? Cash is King! If this is the case, BIIB has what it takes to blossom as an investment. When we think about value we have to think about the potential growth. How much potential? Something called the price to sales ratio gives us the best indicator of this. The more money a company has coming in through sales compared to how much working capital it has speaks volume of its health. The lower the price/sales ratio, the healthier it is. If we compare BIIB to its industry, we find a mind-blowing embryonic possibility to sprout and grow. The industry is heavily indebted to research and comes in with an 101.11 ratio while BIBB stands at 2.89. It screams; “I have what it takes to get bigger!” If we take seriously “Cash is King,” then the second most important thing we need to consider is how much money is flowing through this company as compared to its price. This is called the price to cash flow ratio. The closer the ratio gets to that magical “100” the less capability a company has. “100” means it can just pay its bills because the value of the company is equal to the amount of money coming in and no more. The industry stands at 18.70 while BIBB shows off one half of that, coming in at 9.10. We have an abundance of upside potential compared to the industry as a whole. Since we compare companies to their industry to define their health there are two more ratios that we consider. Each ratio is defined by how low it is. The lower the better value the company has. The price to earnings ratio (P/E Ratio) and the price to book ratio also come in lower than the industry as a whole.

Our conclusion- this is still highly under valued! We give it an “A”

How profitable is the Company?

If a company has a good sales force and the money is flowing, that is a possible good sign for an investment. But alone, this is not good. What if a company brings in money but then spends it as fast as it brings it in? What if it costs them almost as much to make a sale as it does to sell? These are important things to think about and know if you are going to put your money into a company. To know things like this, I would ask the question: “How much money is left over from a sale after you pay all your costs to make that sale?” This is called the gross margin. Comparing the industry to BIIB, the industry comes in at 63.20%, so for every dollar sold, 63.2 cents is left over. It costs the industry 36.8 cents to make one dollar. BIIB’s gross margin is blistering 91.3%. Wow! This means that it is costing ARCC only 8.7 cents to make a dollar. This is less than half the industry as a whole! The only other question I would ask is: “How good is the company at controlling its costs?” This is sometimes referred to as the net profit margin. If we divide the net profit by net revenues we come up with a %. The higher the % the better at money management the company is. The industry’s net profit margin is an over burdened (-5.4%). So, for every dollar they make (after taxes) their REAL profit is, well they don’t have one yet! BIIB comes in at an astounding 24.1%! They are far more profitable than the industry as a whole. The 5 year margins also have ARCC above the Industry as whole.

Our Conclusion- this company is extremely profitable! We give it an “A”

Recent Growth

Knopp Neurosciences granted Biogen Idec (BIIB) exclusive, worldwide license to its late-stage treatment for amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease, and potentially other indications. The compound, KNS-760704, is a novel oral neuroprotective therapy that has received orphan drug designation in both the United States and Europe.

Biogen will make a $60 million equity investment in Pittsburgh-based Knopp and pay the company $20 million. Biogen Idec will lead the development of KNS-760704 for ALS and its potential commercialization in global markets, with Knopp providing development support and conducting certain U.S. commercialization activities under the direction of Biogen Idec. Knopp will also be eligible for up to $265 million in additional payments based on the achievement of development, regulatory, and sales milestones; and tiered, double-digit royalties on worldwide sales.

Our SPY, QQQQ, & DIA Drivers are now Bullish Avatars for the Market

S&P at Top of Range: Is the Third Time a Charm?

by Tickersense

Once again it seems the S&P 500 is in all too familiar territory. Yesterday's rally closed above the 200-day average for the first time since early August, and as shown below the index was previously unable to sustain current levels.

Some technicians look for confirmation in the form of back to back gains, a 50bps rally off today's economic news could b

e that confirmation but futures are still tentative this morning (-1.90 pts now).

Recent resistance is marked below by a grey dashed line. Peaks have been occurring at about 1130, so look for a breakout above there. If not then we're stuck in the same old trading range, although with the market's strings of 1%+ moves we can hardly call it boring. Either way look for the market to pick a direction and move from here, there is probably equal upside and downside risk of about 5%.

Economic Recovery: Main Primary Drivers Now Becoming Headwinds

thank you for your contribution Cullen Roche

Two of the primary drivers of the economic recovery are now becoming headwinds. In an interview on CNBC yesterday, Jan Hatzius of Goldman Sachs described why he is more bearish than the consensus. His primary concerns are the inventory and stimulus headwinds. In a similar strategy note UniCredit expressed the same concerns and provided some more detail. They believe these two trends alone could shave 6 to 7 points from GDP:

Our expectation of a significant growth slowdown is largely based on the assumption that the growth at the end of 2009/ beginning of 2010 was supported primarily by temporary factors,

whose contribution will not only decline in the course of this year but is even likely to become negative. As the following chart illustrates, the fiscal program (American Recovery and Reinvestment Act) and private inventories added roughly 5 percentage points to growth in both the fourth quarter of 2009 and the first quarter of 2010. In the spring, this contribution already dwindled to half a percentage point, and in the second half of 2010 as well as 2011 both components are likely to shave roughly 1½pp off growth. The swing is, therefore, a considerable six to seven percentage points.

Market Randomness- BBY Trade; Data Overload; Gold Pull Back

Best Buy Co., Inc. (BBY)

Shares of the consumer electronics retailer are up 1.25% to stand at $34.31, but earlier rallied as much as 2.9% to touch an intraday and one-month high of $34.86. It looks like a number of options investors are initiating bullish positions on Best Buy today ahead of the firm's second-quarter earnings report scheduled 
to be released ahead of the opening bell on Tuesday. One optimistic individual enacted a ratio call spread.

• Buying 3,500 calls at the October $35 strike at a premium of $1.35 each.
• Selling 7,000 calls at the higher October $37 strike for premium of $0.64 apiece
• Net premium paid to establish the spread is reduced to $0.07 per contract.

Busy Week with Data

This week we have a long list of data to work through. We are cock-eyed right now, rasping for anything that gives us hope. We have celebrating "news that isn't bad as it was before" instead of good
news. We are really reaching in this market.

We have a whole lot of activity this week as you can see by this schedule.

"We'll also get two other monster announcements on Thursday... capacity utilization, and industrial productivity. We call them monsters simply because they have such a strong and consistent correlation with long-term market trends. And, both have been trending higher - with the overall market - since the middle of last year. Both are also expected to inch higher this time around, which is good news for the true long-termers."

Precious Metals Correction Coming?

Many people are bullish on Gold (GLD) and the other precious metals, but some are talking about a correction coming soon. There is talk of those in gold to tighten your stops just in case this correction comes in the next week. 

This is not long term, this is a short term correction. Just be careful.