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Philip Davis
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  • Ten Percent Tuesday – Over Or Under?

    We are right on our 10% lines for the Dow, S&P and Nasdaq.

    The S&P rests just 6 points under our final line of resistance on the Big Chart and the Dow and Nasdaq have been over the line since the beginning of the month. Now it's up to the S&P to put up or shut up as we test 1,359, which is exactly were we expected to top out on this rally - only we expected it months from now.

    We went over the Dow components previously and determined they were a bit stretched at 12,749 and the Nasdaq would be under the mark if not for AAPL - and a sell-off there along with an overall pullback in the Nasdaq can lead to an extremely rapid decline in the index. Obviously it seems like my timing is off with AAPL just hitting $505 yesterday but, on a run from $420 pre-earnings, that's 20% and certainly due for a $16 pullback to test $485-490 in the very least.

    SPY WEEKLY That's 3% and AAPL is 10% of the Nasdaq so 0.3% of a drag coming there is very likely and I have long been pointing out to Members that the Tech sector - minus AAPL and AAPL partners - is not having a very good year. That's why the rally does not make sense - AAPL is strong but many, many other techs are weak yet they have all been moving in lock-step higher and higher and higher - up 450 Nasdaq points (18%) since Thanksgiving - despite 70 out of 100 of the components having lower revenues and lower earnings than they did a year ago.

    GOOG and AMZN both missed, with AMZN earning less than half of what it earned in Q4 of 2010. Financials are down 21% from last year's Q4 reports - what is everyone so excited about? That sector is the largest in the S&P! Overall, earnings in the S&P are up 2.7% from Q4 2010 - a drastic slowing of growth from the 33% gains we had over Q4 2009. Taking out the drag of the Financials but leaving in AAPL, S&P earnings growth is 8% over last year.

    BAC WEEKLY As you can see from David Fry's SPY chart above - we're already 10% higher than we were last February and last February we certainly thought (forward-pricing…
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    Disclosure: I am short DIA, IWM, USO.

    Additional disclosure: Positions as indicated but subject to change.

    Tags: BAC, SPY, AAPL, XLF
    Feb 14 9:17 AM | Link | Comment!
  • BOEasy Money Thursday – Greasing The Wheels

    More free money!

    That's the way we like to start the day as the BOE pumps another $75Bn into the mix and, best of all, their currency went UP on the news because "whisper numbers were for $100Bn." Now that we know the magic formula, we can start a rumor that the Fed will print $3Tn and then, when they ONLY print $2.5Tn - the Dollar will become much more valuable. See, I'm starting to think like a Central Banker!

    Also in the "bad news must be good news" pile as Greek Finance Minister Evangelos Venizelos (wouldn't it suck to live in Greece with a name like Bob Smith?) heads to Brussels with NO DEAL. That's right there is still no deal on the Greek bailout that has boosted the markets by 22% since October. They do claim that the only remaining issue is pension cuts but all the Florida voters who picked Romney will soon find out how easy that is to accomplish.

    Just last February, I was writing a Thursday post titled "Greece is the Word" where I warned that the 4.23% CDS rate hitting Greek bonds was unsustainable and that turned us bearish right at the top of the rally at S&P 1,344. Yesterday, the S&P was back to 1,349 and I wonder if Greece never happened - would I have continued to be bullish with the markets at this level?

    On the whole, even WITH the snowballing Greek crisis, we "only" fell to 1,249 in March so, with Greece all fixed - maybe we can afford to be a bit more bullish. I'll be more comfortable with the upside once we see that Greece is not a "sell on the news" event but, as I noted yesterday, our last 10 bullish picks did quite well and a few of them are still playable and certainly there are still opportunities out there to pick up good stocks fairly cheaply.

    Take DMND, for example. Last night, the stock fell from $37 to $20.50 as the beleaguered company will have to restate their last two years of earnings and that sent the CEO and two CFO's out the door and does, in fact, constitute a "material adverse change" that will allow PG to, at their discretion, terminate their deal to merge their Pringles division into DMND in exchange for a…
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    Disclosure: I am short USO, DIA, IWM, GLD.

    Additional disclosure: Positions as indicated but subject to change.

    Feb 09 4:10 PM | Link | Comment!
  • Still Thinking On Thursday – Can’t Get Bullish

    I am trying!

    I watched Fox news for hours last night and I did learn thatWarren Buffett is an evil, criminal mastermind who must be stoppedand that Obama is soft on the Taliban so following through on his pledge to end the war is nothing more than an insidious plot to garner votes by…. uh…. doing what he was elected to do - THE FIEND!!!

    Damn, see - it's not working. I'm hardly any dumber (but I am much less tolerant of poor people and minorities) and I still can't get behind this market rally. Oh wait, before we get off the Fox topic, I want to point out another "big" news story they featured. It seems that we're finally cracking down on welfare recipients who spend their money at strip clubs. The House passed a bill yesterday as bill sponsor Charlie Boustany (R-LA) pointed out that, with all these welfare people spending the Government's money at the strip clubs, he had to wait over a half hour to get a table so he could spend the Government's money at the strip club. Outraged Congressmen passed the bill 395 to 26 (women) as this was an issue that really hit home for them!

    DejavucreditequityIf we finally hold our chart levels, my mission this weekend is to kill as many brain cells as possible so I can stop understanding the news and just buy the f'ing dips, which will be our game plan until the levels are blown again and it's safe to switch our brains back on. On the right, we have a Rorschach Test for the day to see if you can be oblivious enough to go bullish at the top of our range.

    If this chart doesn't bother you - you may be ready to rally! You are also ready to brush off the OWS movement as "squatters" - something else I learned on Fox last night. That's right, they are not protesting - thousands of people are actually gathering in parks to get "free rent" as they can't possibly have a legitimate complaint against the rampant abuses of Capitalism that are tearing this country apart.

    Well maybe not this country but Japan is sure about to break as Finance Minister Azumi calls out the Fed's "pledge" to keep rates microscopic through
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    Disclosure: I am long EDZ, UUP, SQQQ.

    Additional disclosure: Positions as indicated but subject to change

    Tags: FXE, EWJ, DIA, UUP
    Feb 02 8:36 AM | Link | 2 Comments
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