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Robert Duval
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Professional Independent Trader, 16 years. Started as a equity index futures floor trader, now swing / intermediate trade, US stocks, international ETFs and stocks. Believe in correlation of markets, must understand all markets to trade one well. Self taught by studying myself and other... More
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  • Dec 6th Market Update, Positions, Charts And Targets

    As we move towards year end, I'd like to outline my positions, charts and targets moving into 2015. Note as I am an active trader, I do trade around positions, and I use tight stops. Positions may change at any time, however all of the following have a clear thesis and rationale.

    Certainly the large cap indexes remain persistent, although divergences remain from my previous instablog post, where I discuss these in detail. This post I will confine to my individual sector ideas.

    SHORTS. I continue to stay the course on shorting the most popular "high flyers", especially second tier names with limited to no GAPP profitability. Readers will notice I will rotate somewhat, if a name has a large selloff or sentiment becomes completely negative, I will cover and move to another name. Shorting is difficult of course, as we are in a extreme momentum driven market in the Nasdaq, and squeezes can develop at any time in this environment.

    I am currently up approximately 20% on total tradable assets on CLOSED positions -- which include some of the same names below. Below are OPEN positions as of Friday, a brief update, target, and current profit.

    (NASDAQ:GPRE) --Ethanol producer. Thesis relates to lower gasoline prices, along with Republicans winning the House and Senate, pressuring future ethanol mandate.

    Short from 27 area, + 2%. I was short this stock earlier from 35, covered 30, and have re-established as my only current energy short. Breaking 25 leads to considerably lower targets. GPRE Chart

    GPRE data by YCharts

    (NYSE:TCS) -- Specialty retailer. This name is a recent IPO that is coming down on valuation and unmet expectations. I covered the stock on its post earnings selloff to 16, and have reshorted on its big bounce. Now it is selling off again.

    Short from 22 avg, now 17.50, + 20% so far. Target double bottom of 15.50. TCS Chart

    TCS data by YCharts

    (NASDAQ:GPRO) -- Camera maker -- short via 2015 options. Special situation on this new IPO. Large lockup of stock ends late December and more in February. Currently have rolled January options into April as position needs more time. 70 is a key level, breaking this could lead to low 60's quickly. Currently offside about 30% on option position.

    GPRO Chart

    GPRO data by YCharts

    (NASDAQ:TSLA) -- certainly the most hotly debated stock on SA, is a core short. Thesis is opaque accounting, slowing North American growth, Lower Gasoline prices, and imminent high quality competition. A recent short.

    Stock is starting to sell off, facing a key test at the 218-220 level.

    Short from 238, + 6% so far. TSLA Chart

    TSLA data by YCharts

    (NYSE:TWTR) Core short position. Company is in disarray, with insider selling, management instability, and a confused vision. Stock is gradually breaking lower below 39 support, after multiple attempts to rally, big target is post IPO lows at 30, where I would substantially cover. Short Avg. from 39.50, + 2.5%

    TWTR Chart

    TWTR data by YCharts

    (NYSE:YELP) -- I actually am a bit surprised by this one -- as thought the last EPS report wasn't that bad. However I am listening to the market -- and after trimming, increased my position on Fridays' break below recent support. Short from avg. 55.20, + 2.5% Target -- $50.00 -- below that is a lot of "air" for lower prices. YELP Chart

    YELP data by YCharts

    (NASDAQ:QQQ) options. I have a good position in March 100 put options on the QQQ, expecting a healthy pullback. The QQQ hit 90 briefly on the October pullback, even 95 would make this a nice trade. The QQQ is extremely overbought currently, a number of its key components have topped out, including (NASDAQ:AAPL) on an interim basis at least. The key sector here is the semiconductors to watch (NYSEARCA:SMH) -- which has gone absolutely parabolic. When -- not if -- this uptrend breaks, so will the QQQ's. I am offside currently 25% on this option position. Note option positions are both multiples more volatile, and therefore I hold a fraction of the size of a stock position.

    QQQ Chart

    QQQ data by YCharts

    AAPL Chart

    AAPL data by YCharts

    SMH Chart

    SMH data by YCharts

    LONGS --

    (NYSEARCA:EPI) (NYSEARCA:SCIF) (NYSE:TTM) (NYSE:HDB) ---all India positions -- and (NYSEARCA:EPHE) -- Phillipines. I am flat on the whole group, (Less than 0.1%), as they have gone quiet near recent highs for some time. This has been extensively discussed as a long term macro theme, next catalyst would be an Indian CB rate cut next year, which should occur with lower oil prices.

    EPI Chart

    EPI data by YCharts

    SCIF Chart

    SCIF data by YCharts

    Gold positions. (NYSEARCA:GDXJ) Silver (NYSE:SLW) --- to me I am impressed with the resiliency of both Gold and Silver off of the post - Swiss Vote lows, both hold near important resistance, even with a runaway US dollar. An Indian Rate cut may be a catalyst here. (India is a large buyer) Above 1240 -- Gold -- and 17 -- Silver -- are key levels.

    SLW -- I am flat with a 24 entry. (GDXJ) has been disappointing so far, my entry is 28 area for a 12% open loss so far.

    SLW Chart

    SLW data by YCharts

    GDXJ Chart

    GDXJ data by YCharts

    Norboard (NDB.TO) -- is my longer term housing play -- this 10% yielder is bought for the Divy, and is trying to break out against long term resistance above 24-25. One day housing will come back in the US, this is a conservative play. Long 24.60, - 2.5%

    NBD Chart

    NBD data by YCharts

    Best wishes to all investors in 2015. I don't expect any major movement in December, these positions are set up for next year. (although it would be a bonus if there was).

    Regretfully there is open disbelief in some quarters than making profitable short trades by mortal human beings is impossible. That this is the case, should be a cautionary sign in itself, about the one - sided sentiment out there.

    To that end I post a few charts from my last series of trades, now closed, in which one can observe if by holding positions for any length of time in the recent past, a profitable result would have occurred:

    P Chart

    P data by YCharts

    ANGI Chart

    ANGI data by YCharts

    WPRT Chart

    WPRT data by YCharts

    CLF Chart

    CLF data by YCharts

    Disclosure: The author is short GPRE, GPRO, TWTR, YELP, TSLA, TCS.

    Additional disclosure: Author has multiple positions, which can change at any time. This is not financial advice and Author is not an advisor. Do your own Due Diligence.

    Tags: QQQ, EPI, GDXJ
    Dec 06 12:18 PM | Link | 34 Comments
  • Trends And Developments: Checking Under The Hood Of A Powerful Bull Market

    It has certainly been a powerful Bull Market rally from the brief October correction. And make no mistake; lets call this market what it is: A Secular Bull; which it has been since breaking the 2007 highs last year.

    It has been a learning experience for me as a trader; who used to focus on the indexes from my floor trader beginnings, and gradually and incrementally have developed something approaching competence in individual stocks.

    I am learning --- and investors / traders always learn through losing money -- that I am better off with a relatively agnostic attitude and positioning in the major indexes, to maintain focus on a select and changing group of sectors and individual stocks.

    With this I confess to having no idea where the SPX and other averages will be heading through the remainder of the year and into 2015, other than markets are (always) akeen to a bucking bronco attempting to kick participants off.

    However; the recognition of a powerful bull does not invalidate short side opportunities and observation of divergences; I discuss some of these, below.

    First I find it interesting, as the FED has concluded tapering, foreign central banks have ramped up action -- the BOJ and PBOC in quick succession, along with ever increasing chatter, if little meaningful assertive action, from the ECB. For all of this --- the US market response -- as measured by the "average" US stock, not the (SPX) -- has been tepid: Note the (NYSEARCA:IWM) has been quite flat, and was rejected from a double - top on Friday in the 118 area:

    IWM Chart

    IWM data by YCharts

    Supporting this somewhat -- is I have had a net short position, of varying degrees in various energy stocks (now covered) and Nasdaq high priced momentum stocks (more or less maintained) for the last number of months, and I am finding these to be profitable positions even during this powerful SPX rally. This may be an indication -- that in spite of very positive US data, the rally may be growing more defensive in nature: (see SPX, and Utilities charts)

    ^SPX Chart

    ^SPX data by YCharts

    XLU Chart

    XLU data by YCharts

    Please see below the following charts, I am short this group of momentum leaders. NFLX, TSLA; and PCLN, which are disappointing on profitability and facing higher costs and competitive inroads: (from leaders like AMZN and AUDI, which has announced a serious competitor in development to the Tesla S model)

    The key issue -- high margin business's ALWAYS attract quality competition. In a healthy market for these stocks -- competitive pressures would be ignored. The market always makes the news relevant, so there has been a sea change, in this environment; at least for this group:

    NFLX Chart

    NFLX data by YCharts

    TSLA Chart

    TSLA data by YCharts

    PCLN Chart

    PCLN data by YCharts

    TWTR -- on the other hand --I see as a expensive social media company without a clear vision, and with heavy insider selling.

    TWTR Chart

    TWTR data by YCharts

    And a poster child for over- valuation, Gopro, which is selling substantial stock through founding shareholders, and has run from it's IPO at 24 to recent highs in the 90 area. This is a camera company -- that would market itself as an internet content company. In my view, it isn't, and will be revalued:

    GPRO Chart

    GPRO data by YCharts

    In addition to this group of stocks; I am noticing, in spite again of that wonderful US data -- long bonds represented here by (NYSEARCA:TLT) are not only not forming a bear trend as widely anticipated, but look to be forming a rounding base:

    TLT Chart

    TLT data by YCharts

    And now to Gold:

    Gold is moving higher; and particularly the Gold Miners as represented by (NYSEARCA:GDXJ), which tend to be a leading indicator for gold prices themselves. There are possible catalysts here for a sustained move higher in gold. First, sentiment is quite washed out and most former gold bulls have "given up" on gold as an asset class for the time being.

    More importantly is the upcoming Swiss referendum on November 30th; which would require large purchases of gold to back the Swiss Franc. The Swiss central Bank has been printing enormous quantities of Francs to support a Euro peg to the Franc at 1.20 Euros to Francs.

    I believe the upcoming vote is an expression by some in their society that this form of currency devaluation has gone too far; and is a desire to impose discipline.

    I think this particular vote, which I expect to fail and cause a gold selloff, is less important than perhaps Switzerland as a potential leading indicator for other countries, and future push back against the unrestrained currency wars all over the planet.

    The bottom line, is Gold is becoming very interesting to me as a longer term asset class -- and more so; if the US dollar tops out -- which is a good possibility, at least on an intermediate basis.

    How will I trade it near term? I am long a healthy position in (GDXJ) and a few other stocks; if gold runs up sharply into the Swiss vote, (on short covering) I will reduce exposure, but be looking to re-establish exposure on dips. In other words, at this juncture, nimbleness is required -- at least until Gold's trend is proven:

    GLD Chart

    GLD data by YCharts


    GDXJ Chart

    GDXJ data by YCharts

    All in all -- there are some interesting trends under the surface of this amazing bull market in US equities.

    Best wishes to all investors.

    Disclosure: The author is short NFLX, TSLA, PCLN, TWTR.

    Additional disclosure: Consult your financial advisor. This is not financial advice.

    Nov 22 12:09 PM | Link | 24 Comments
  • Follow Up: The Case To Reduce Risk Now -- (Possible) Cyclical Bear Ahead.

    Structural Deflation continues to build in the economy:

    Market Leadership is weakening:

    International Markets do not confirm US Markets rebound:

    Markets are extremely complex organisms with multiple moving parts. Markets have also been said to be akeen to a bucking bronco -- they want to move without you the investor aboard.

    However this time I believe the real bucking action; also known as a "head fake" is the the sharp rebound in US indices the last 7 trading sessions, and investors should be using this rebound to cut risk and remain defensive for a considerable period of time.

    In this article I will cover a number of indicators and considerations on why this would be a wise course of action. This article will be a mile wide and an inch deep; please follow up with your own research. The Title also deliberately states -- (possible) cyclical bear market ahead.

    Little is certain in our world, and those stating certainties should be looked at skeptically. However I consider the upside with today's information as limited, and the downside considerable, so if these thoughts save anyone money, the objective has been achieved.

    1. Structural Deflation: It is well known Japan has been locked in a deflationary spiral for at least 2 decades; the current concern; is this pattern spreading to Europe. The catalyst in my mind; is quite simple, quite structural and powerful: weakening demographic trends in the intermediate term. I will not enter into a detailed demographic discussion, but when one looks at the statistics; Japan is a very old country, followed by Europe, in turn followed by China and the US. Africa is the youngest continent, and parts of southeast Asia have very favourable demographics as well, like the Philippines.

    Demographics are extremely important, as they are a key factor for organic consumer demand, housing and family formation. Now in the US there is the echo - boomers which will become a driver for the next housing boom; however US wage growth is so weak, this generation is more limited than past generations in organic spending ability.

    The US savings rate has been climbing, not falling, as remaining working Baby Boomers save for their retirement. This deleveraging trend has been expressed as a positive as it provides ability for future spending growth. In the long run I agree but perhaps not in the intermediate term -- as the sharing economy continues to grow. Perhaps Americans are beginning a downsizing, simplifying trend, and this is inherently deflationary; as opposed to the "live large" culture of the 1990's.

    On a wider scale -- I am watching commodities as a potential leading indicator with great interest. Coal and Iron Ore I suppose would be the leading examples, as slowing Chinese growth has pressured these commodities relentlessly. (NYSE:BHP) BHP Biliton sounded a message almost precisely like Saudi Arabia did in regards to the oil market -- we will keep producing to protect market share.

    Now many will say Iron Ore and oil are completely different markets, and they are, but they are affected by the same global economic forces; meaning demand. I am no expert on the world market for oil; but it seems to me when I observe oil fall that fast, from 110 to near 80 on WTI; the market is communicating, and I need to listen. Is oil beginning to follow Iron Ore, Copper and Coal into a protracted slide; into the 70's and below? I am not sure, but I can guess what the risk factors are to high - cost US Shale producers and Canadian oil sands plays. I don't believe this story is played out, yet.

    USO Chart

    USO data by YCharts

    Commodities; do have recent history as a leading indicator for growth and by proxy equity valuations -- and so bear close watching.

    2. US Dollar. The US dollar recently began a sharp upward movement, and is currently consolidating below major resistance. I believe we are just at the beginning of a major revaluation for the US Dollar, as the best house in a questionable neighborhood of currencies. The difference in monetary policy between Europe and the US will accelerate this trend.

    UUP Chart

    UUP data by YCharts

    Assuming -- and this is a large assumption -- no overt intervention by the US Federal Reserve to stem the rise, I see much higher levels against the Euro; Yen and Aussie and Canadian dollars, as commodities weaken. The Euro in particular I believe is held together these days by string -- I see risks to between 1.10 to parity to the dollar; and ultimately a split into a Northern Euro and a devalued Southern Euro. I see this as inevitable in the fullness of time.

    FXE Chart

    FXE data by YCharts

    A stronger US dollar will potentially have powerful deflationary effects on both commodities and earnings of US multinationals in the course of time.

    3. Tax climate is changing: From the cancellation of the Abbvie -- Shire PLC deal to discussions on revoking European Tax Haven status for corporations such as Apple and Amazon, Tax Authorities are adding a risk factor to valuations.

    4. Leadership: Key stocks like IBM, Google, Coke, McDonalds; and Amazon, are getting hit this quarter over weak growth trends; while in many cases this has been overlooked and excused in the past. It is said that it is never the news that is important, it is the reaction. Perhaps participants are no longer willing to give weak results a pass as they have been in quarters past. I continue to believe, on a larger scale view, the leadership is narrowing for this bull market, and that is a warning sign.

    I am personally short a wide spectrum of stocks (14 positions) and am solidly profitable -- even as the S&P and Nasdaq have screamed higher. It seems -- very narrow to me.

    5. Sentiment: I was interested to see, one week ago as markets plunged; Bullish Sentiment as measured by AAII actually rose, and absolutely soared this week, as bearish sentiment plunged. By this measure there is little fear of a sustained downturn:

    This is not constructive, as I have not observed a large, sustained spike in fear that would mark the end of a corrective period.

    In contrast; The "billionaire club" is still very cautious: Which should we follow?

    Lastly; my favorite TV indicator has reversed himself; again:

    6. International Markets: In spite of widespread belief of a European QE program; and better data, Germany; which has a 78% correlation with US equities -- frankly refuses to rally:

    EWG Chart

    EWG data by YCharts

    In addition; another product I follow; which is the developed world ETF - EX US -- every other developed country -- isn't bouncing very well. Not a lot of healthy confirmation for the sharp US Rally:

    EFA Chart

    EFA data by YCharts

    Now US; which is starting to form what could become a Head and Shoulders topping pattern:

    SPY Chart

    SPY data by YCharts

    Same with Transports:

    IYT Chart

    IYT data by YCharts

    And IWM small caps, still lag:

    IWM Chart

    IWM data by YCharts

    Conclusion: With US QE scheduled to end; I believe there is still an extended valuation adjustment period that needs to be worked through. I do not see the risk/ reward in adding aggressive exposure to most equities, at this time. Recommend raising cash and remaining at least partially defensive. Obviously an unforeseen event like the ECB buying massive quantities of Corporate bonds, or the US Fed immediately launching a new QE program, would be a caveat to the above post -- and continue to delay any corrective action.

    Disclosure: The author is short AMZN, USO.

    Additional disclosure: Consult your own advisor. Not investment advice.

    Tags: SPY, EFA
    Oct 26 12:37 PM | Link | Comment!
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