Kapitall.com is a fun, stock trading game that would appeal to new investors as well as experienced ones. To more accurately measure an investment thesis against actual practice performance, tools offered by Kapitall will be incorporated on this site.
So far, three portfolios created have cumulatively returned 30.9%. Although the market continues to drift steadily higher alongside lower volatility and lower volume, the cash levels on the Kapitall portfolios have increased to take advantage of future opportunities.
To test Kapitall's tools for sharing information, below is a chart on Chesapeake Energy.B denotes 'buy' and S denotes 'sell.' E denotes 'earnings' and D denotes dividend payment.
Chesapeake Energy contributed about 4% gains in one of the practice portfolios:
As QE2 or quantitative easing via POMO unfolds in the United States, look for U.S. currency to weaken.
Companies in the energy and gold sectors will benefit as demand for these commodities increase. Credit easing will also increase risk tolerance, which will support expanded price-earnings multiples for the stocks (investors will be eager to pay a premium).
Therefore, oil and gold companies would be an area of interest for investors.
Showing posts with label oil. Show all posts
Showing posts with label oil. Show all posts
Sunday, January 23, 2011
Sunday, June 07, 2009
What is Next: Stock Rally or Selloff?
How does one not become distrustful, cynical, and doubtful about things being merry again overall?
Wise words would dictate that the stock market is all-knowing, and is a forward indicator of the health in the economy, but who exactly said these words?
I am doubtful that all is well for the economy despite most major indexes now up 40% in a 3 month period. Annualized, that is a 120% return. Investors need to pay careful attention with market prices (all stocks on average are up 40%) rising to quickly against declining fundamentals. Look out also for speculators to take profits, further adding pressure to stocks in oil and gold to possibly sell-off.
What has changed over the past few months are LIBOR spreads. LIBOR spreads are not at worrying levels, implying that banks should begin lending again with credit flow improving. In that time, distressed companies in the resource sector and in REITs used that opportunity to raise cash and to improve balance sheets.
I noticed news media continues to report bad news by ending articles with suggestions that "this might be an indicator of a bottom." Most recently, in the U.S., unemployment increased 345,000. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent.
On Mish's blog, he notes the following:
As noted on CalculatedRisk, the current recession is now one of the worst recessions since WWII in percentage terms (not in terms of the unemployment rate):
Additional Areas for Concern
I realize that this entry is admittedly full of "concerns." It's no wonder that bankers, stock traders, and investors pretty much always have a grim look, even in good times, but I digress.
Bonds/U.S. Dollar
Over the past two weeks, yields in longer-term U.S. Treasuries rose. This indicates that the "great" economic experiment to pump money into the system is being rejected by the economic system. Look for repercussions to take place in the currency market (weakness of the U.S. dollar, Pound, Euro) in the days and weeks ahead.
Commodities
I am not convinced that the rally in the energy sector will hold. Ditto for gold and for silver. The rally is not even based on an argument about inflation. The strength in this sector is due largely from countries like China accumulating raw materials in place of accumulating U.S. debt or assets in U.S. currency. Watch out for the possibility this summer for a sell-off in gold and oil, and a flight to safety to the U.S. currency. The way things play out will depend on how well the stock market holds its level of confidence, especially if economic figures continue to show a deterioration in unemployment, effects of de-leveraging, and the impact of a permanent decline in consumer spending (and higher savings rate).
Charts:
US Dollar Collapse: Double Peaked between Oct/08 and Mar/09.
Volatility, what volatility?
Wise words would dictate that the stock market is all-knowing, and is a forward indicator of the health in the economy, but who exactly said these words?
I am doubtful that all is well for the economy despite most major indexes now up 40% in a 3 month period. Annualized, that is a 120% return. Investors need to pay careful attention with market prices (all stocks on average are up 40%) rising to quickly against declining fundamentals. Look out also for speculators to take profits, further adding pressure to stocks in oil and gold to possibly sell-off.
What has changed over the past few months are LIBOR spreads. LIBOR spreads are not at worrying levels, implying that banks should begin lending again with credit flow improving. In that time, distressed companies in the resource sector and in REITs used that opportunity to raise cash and to improve balance sheets.
I noticed news media continues to report bad news by ending articles with suggestions that "this might be an indicator of a bottom." Most recently, in the U.S., unemployment increased 345,000. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent.
On Mish's blog, he notes the following:
- there are 9.1 million people are working part time but want a full time job. A year ago the number was 5.3 million
- The official unemployment rate is 9.4% and rising sharply. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.
It reflects how unemployment feels to the average Joe on the street. U-6 is 16.4%. Both U-6 and U-3 (the so called "official" unemployment number) are poised to rise further.
As noted on CalculatedRisk, the current recession is now one of the worst recessions since WWII in percentage terms (not in terms of the unemployment rate):
Additional Areas for Concern
I realize that this entry is admittedly full of "concerns." It's no wonder that bankers, stock traders, and investors pretty much always have a grim look, even in good times, but I digress.
Bonds/U.S. Dollar
Over the past two weeks, yields in longer-term U.S. Treasuries rose. This indicates that the "great" economic experiment to pump money into the system is being rejected by the economic system. Look for repercussions to take place in the currency market (weakness of the U.S. dollar, Pound, Euro) in the days and weeks ahead.
Commodities
I am not convinced that the rally in the energy sector will hold. Ditto for gold and for silver. The rally is not even based on an argument about inflation. The strength in this sector is due largely from countries like China accumulating raw materials in place of accumulating U.S. debt or assets in U.S. currency. Watch out for the possibility this summer for a sell-off in gold and oil, and a flight to safety to the U.S. currency. The way things play out will depend on how well the stock market holds its level of confidence, especially if economic figures continue to show a deterioration in unemployment, effects of de-leveraging, and the impact of a permanent decline in consumer spending (and higher savings rate).
Charts:
US Dollar Collapse: Double Peaked between Oct/08 and Mar/09.
Volatility, what volatility?
Monday, October 06, 2008
Banking Credit Illiquidity Now Global
The illiquidity problem taking place in the U.S. has now spread to Europe. Two things now must happen for liquidity to be restored in the banking system at a global level. One: the U.S.will need to take a secondary drastic but convincing step in restoring confidence. Two: European leaders must work together (not independently from one another) to come up with a concerted effort to restore liquidity.
The chances have increased that the EU will have to lower its interest rates. The US will likely do so on Oct 27th.
Indicators
Two things to monitor in today's markets: volatility (VIX) , and the US dollar. As mentioned in Tech Talk, capitulation has not yet been reached. The VIX spiked over 35, but volumes must be far higher than average over the next trading sessions whilst VIX settles to 35 and below.
Monitor the US Dollar, as the dollar's strength is now leading the price of commodities, namely weaker oil and gold.
Fibonacci @ 38.2% represents the support level for VIX:
USD support is @ 78.87 (not far from the 81.73 close).
Charts from: http://stockcharts.com/charts/gallery.html?$USD
Important note: support prices as outlined on the charts are very speculative. Fundamentals are poor for the global financial markets. For now, price support levels should only be used as a guide.
Thursday, September 25, 2008
Seeing Beyond the $700B Smoke of Distraction
I found a great counter-argument to the market's assumption that the stock market is still healthy. I, personally, am having difficulty assuming the markets will rally between November and April (on seasonal strength). The current smoke screen investors are facing is the 700B bailout making its way through congress.
Let's look at the figures to see beyond today's headlines.
In the U.S. for August, 2008:
http://seekingalpha.com/article/97377-the-perfect-storm-even-with-bailout-economy-is-hurting
http://news.yahoo.com/s/ap/20080925/ap_on_bi_ge/economy;_ylt=AkeTtzMaEZ4Qh04Yh.1sAi5u24cA
It remains clear that although I believe by sentiment that the markets will stabilize or even rally, the fundamentals are not there yet for a sustained rally.
I am really torn as an investor and as an analyst: the market is more ripe for short-term trading than for value investors who like to buy and hold. It is for this reason that one might find my notes contradictory from one entry to the next.
The market simply needs to hope that the government bailout action will at the very least restore liquidity in the debt markets in the face of declining employment, lower home prices, and higher commodity prices.
I found a great counter-argument to the market's assumption that the stock market is still healthy. I, personally, am having difficulty assuming the markets will rally between November and April (on seasonal strength). The current smoke screen investors are facing is the 700B bailout making its way through congress.
Let's look at the figures to see beyond today's headlines.
In the U.S. for August, 2008:
- Durable goods orders declined 4.5% .. Source: @ http://www.census.gov/indicator/www/m3/adv/pdf/durgd.pdf
- Fresh claims for unemployment benefits jumped sharply to 493,000 (it last reached the 500,000 mark in September 2001)
- Even after adjusting 50,000 jobless claims (hurricane Ike), the 4-week average of 443,000 claims was last reached November, 2001
- new home sales plunged by 11.5 percent in August, (1 percent dip that had been expected). Annual seasonally adjusted annual sales rate of 460,000 is the slowest pace since January 1991
- The average price of a new home fell in August by 11.8 percent to $263,900, the biggest one-month drop on record
- The median home price was down 5.5 percent to $221,900.
http://seekingalpha.com/article/97377-the-perfect-storm-even-with-bailout-economy-is-hurting
http://news.yahoo.com/s/ap/20080925/ap_on_bi_ge/economy;_ylt=AkeTtzMaEZ4Qh04Yh.1sAi5u24cA
It remains clear that although I believe by sentiment that the markets will stabilize or even rally, the fundamentals are not there yet for a sustained rally.
I am really torn as an investor and as an analyst: the market is more ripe for short-term trading than for value investors who like to buy and hold. It is for this reason that one might find my notes contradictory from one entry to the next.
The market simply needs to hope that the government bailout action will at the very least restore liquidity in the debt markets in the face of declining employment, lower home prices, and higher commodity prices.
Thursday, August 21, 2008
So Much for Cheap Oil
I am feeling the disdain for tracking wildly fluctuating trading signals plaguing today's market. When it is up one day and down the next, it is like watching fish swimming around a fish bowl: there is no prediction in direction for markets.
Today, for example, oil rose $6 to $121.88 or 5%. This is in contrast to the sentiment that the bubble has popped for energy prices, and that the US dollars' strength was its pin. Concurrently, gold prices fell too and was thought to keep falling.
None of the big moves taking place should be taken seriously, bullish or bearish. The reason is that the volatility index has not reached extreme levels. There has been no sell-off or accumulation yet, marking any beginning or end of major trends.
One thing that needs to be noted, though, is that the sell-off in oil might be complete, and that oil prices might resume its upward trend. See the chart below.
Source: http://stockcharts.com/charts/gallery.html?DUG
The UltraShort oil ETF (above) broke down its uptrend, and is danger of reaching pre-run up prices. Notice the increase in volume on the most recent sell-off. This would mean that a play world economies will be faced with energy-induced inflation against a backdrop of tighter credit conditions. Look for oil prices to potentially rise an additional 12%.
I am feeling the disdain for tracking wildly fluctuating trading signals plaguing today's market. When it is up one day and down the next, it is like watching fish swimming around a fish bowl: there is no prediction in direction for markets.
Today, for example, oil rose $6 to $121.88 or 5%. This is in contrast to the sentiment that the bubble has popped for energy prices, and that the US dollars' strength was its pin. Concurrently, gold prices fell too and was thought to keep falling.
None of the big moves taking place should be taken seriously, bullish or bearish. The reason is that the volatility index has not reached extreme levels. There has been no sell-off or accumulation yet, marking any beginning or end of major trends.
One thing that needs to be noted, though, is that the sell-off in oil might be complete, and that oil prices might resume its upward trend. See the chart below.
Source: http://stockcharts.com/charts/gallery.html?DUGThe UltraShort oil ETF (above) broke down its uptrend, and is danger of reaching pre-run up prices. Notice the increase in volume on the most recent sell-off. This would mean that a play world economies will be faced with energy-induced inflation against a backdrop of tighter credit conditions. Look for oil prices to potentially rise an additional 12%.
Tuesday, August 05, 2008
Further Reading, Part 2.
TSG Stock Market Letter is Another essential newsletter that I have found to be useful in analyzing the stock market. The August 1st newsletter can be summarized as follows, in the context of commodity prices:
- Oil prices had previously held up because investors wanted to park their money in oil instead of the US Dollar. Now that the US dollar is strengthening, oil prices have begun to unwind.
- The strong emerging markets is contrary to the performance of these stock indices. As a result, there is a strong likelihood that the demand for oil in these markets is declining or is on the way to decline:
- Falling CRB Index is good for the DJIA:
Charts taken from: http://tradesystemguru.com/content/blogcategory/34/68/
With oil now trading at a low of $118, it may be possible for energy prices to violate my support target prices. In my posting on July 29th, I had called for additional downside of 11.9%. However, should the sell-off accelerate, I will need to establish new support downside prices for oil.
Tuesday, July 29, 2008
Oil Prices is the Key to Stock Market Recovery (Part 2)
In short, I was wrong to some extent in my last post to some extent that the housing market is the key to your growth mutual funds rising from the ashes. It is only one component of the recovery. Still, the health of real estate will have a direct impact on the financial sector. On that note, real estate is very illiquid. As a result, things will take a...very...long...time (at least until 2009, if not 2010) to play out from the perspective of establishing support levels and even being bullish once again. Let's not get ahead of ourselves for now.
The more immediate imaginary key to the recovery in the stock market is the price of oil. As I had maintained in several of my entries, oil prices have been correcting. Unfortunately, oil only has about an additional -12% to the downside before it either finds support or trades lower. That means that the rally we are about to see might be short-lived.
I really don't like short-term trading, despite analyzing technical charts for short-term profits. My style is still buy and hold, and hold forever, but in today's market, the weak global economic health and weak stocks would mean that the sophisticated investor ought to participate in shorter-term trades to enhance returns.
In short, I was wrong to some extent in my last post to some extent that the housing market is the key to your growth mutual funds rising from the ashes. It is only one component of the recovery. Still, the health of real estate will have a direct impact on the financial sector. On that note, real estate is very illiquid. As a result, things will take a...very...long...time (at least until 2009, if not 2010) to play out from the perspective of establishing support levels and even being bullish once again. Let's not get ahead of ourselves for now.
The more immediate imaginary key to the recovery in the stock market is the price of oil. As I had maintained in several of my entries, oil prices have been correcting. Unfortunately, oil only has about an additional -12% to the downside before it either finds support or trades lower. That means that the rally we are about to see might be short-lived.
I really don't like short-term trading, despite analyzing technical charts for short-term profits. My style is still buy and hold, and hold forever, but in today's market, the weak global economic health and weak stocks would mean that the sophisticated investor ought to participate in shorter-term trades to enhance returns.
Wednesday, July 02, 2008
Stock selection is only one factor in successfully profiting from the equity market. The more significant weight for a portfolio performance is sector allocation. For those who don't like to play the short-selling side of trading, I would recommend a small allocation on bear funds. In Canada, I like HXD.TO It has a beta of 2, meaning it is twice as volatile as the TSX Index. It's counterpart is HXU.TO.
Since I remain bearish on both the energy and the financial sector, I favor investors consider having no more than 5% of their portfolio on HXD.TO. It's better to profit in a falling market than to watch 100% of it exposed to the bear.
My target is for this hedge is $19.90, a 9.50% on top of today's gains.
Since I remain bearish on both the energy and the financial sector, I favor investors consider having no more than 5% of their portfolio on HXD.TO. It's better to profit in a falling market than to watch 100% of it exposed to the bear.
My target is for this hedge is $19.90, a 9.50% on top of today's gains.
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