Stock Trading

US Rating Likely to Be Downgraded Again: Merrill

 While not completely unexpected, this is not a fun prospect.  Seems likely that many traders will be looking to gold for some capital appreciation in the coming months.
Published: Monday, 24 Oct 2011 | 3:11 AM ET
By: Reuters

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade — either from Moody’s[MCO  32.00    0.62  (+1.98%)   ]or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden.

A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report.

“Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added.

The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by November 23.

If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013.

Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile U.S. economy, Merrill said.

In the same report, the bank reduced its 2012 and 2013 growth forecasts for the United States to 1.8 percent and 1.4 percent, respectively.

If there were a downgrade, it was not clear which ratings agency would move first.

Moody’s Investors Service, which has a negative outlook on the United States’s Aaa rating, said it is looking at several other factors, including the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, to decide on the rating.

“It’s not that we’re waiting just for this committee to decide on the rating,” Steven Hess, Moody’s lead analyst for the United States, told Reuters in an interview last week.

Failure by the committee to come up with an agreement, he said, “would be negative information but it is not decisive in our view about the rating.” To be sure, Hess did not rule out the possibility of an early move on U.S. ratings if the country’s economy slips into recession.

So far, however, the economic performance “is certainly not super positive but not a disaster either,” he said.

Fitch Ratings, on the other hand, still has a stable outlook on its AAA rating on the United States, meaning it is more likely to revise that outlook to negative before actually downgrading the rating.

In its latest report on the United States, Fitch says a “negative rating action,” which could be only an outlook revision, could result from a weaker-than-expected economic recovery or by failure by the bipartisan committee to reach agreement on at least $1.2 billion in deficit-reduction measures.

See full article here

Monday, October 24th, 2011 Education, News, Stock Trading No Comments

Short Squeezes, Turnaround Tuesday and ETF Day Trading


Remember the article last week in which Larry Connors warned of impending short squeezes?  That is part of what hit yesterday – the bear is still roaring, so use this opportunity to look for short entries.  Just be careful and stay timid!
By Larry Connors | TradingMarkets.com | October 05, 2011 08:57 AM
 

That was a terrific 400-point reversal yesterday and the market is now back in neutral territory with the 2-period RSI of our Country Fund ETF Universe at 40.18 and the Main ETF Universe at 48.22.

Yesterday’s rally was a very normal, bear market, short squeeze rally where they allowed the shorts to pile in the previous few days and even further in the morning and then, from a rumor about a bailout of Europe, the buyers came in (some with fresh money but likely even more from panicked short sellers).

Again this is normal and if it follows a traditional path, it could go a few days. If this does occur, we’ll look to be heading into the weekend with some indices short positions. In the meantime, the longer term trend is down, we have the Advanced Micro Devices (AMD | PowerRating) and Direxion Financial Bull 3x Shares (FAS | PowerRating) positions with options, and we’re in a good position no matter which direction the market takes for the remainder of the week.

Special Notice – Today at 1 pm ET I will be doing a 30 minute webinar discussing an ETF Day Trading Program we’ll be teaching at the end of the month. This program has historically thrived in high volatility environments like the one we’re in now and yesterday alone in actual trading there were accounts (in real time) which saw gains of 10% and higher.

If you would like to attend today’s ETF Day Trading webinar (or receive a copy of the recording), please call our office this morning at 973-494-7311, ext. 1.

The above is from Larry Connors’ Daily Battle Plan.

To learn more about the Daily Battle Plan, click here for more information.

Larry Connors is founder of TradingMarkets.com

Wednesday, October 5th, 2011 ETF, Larry Connors, Stock Trading No Comments

Anticipating High Probability Market Turns


Kevin Haggerty is never a man to be ignored.  This particular article covers a number of good angles on the markets, but is probably most aptly aimed at day traders.
By Kevin Haggerty | TradingMarkets.com | September 30, 2011 12:34 PM
 

From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.

Commentary for 9/30/11

The previous commentary was on 9/22 and the SPX finished -3.2% that day and -6.5% on the week. The intraday low on 9/22 was 1114.22, down from the 1220 resistance on 9/22, and has since rallied +7.3% to the 1195.86 intraday high on Tues. It then declined -4.7% to the 1139.93 intraday low yesterday, before the last hour “magic move” into the 1160.40 close, but as I am doing this commentary this morning it has traded down to an 1140.68 low. It is the end of Q3 today, so a repeat of another late S&P 500 futures induced “magic move” will not be a surprise.

The increased volatility is obviously positive for day traders, but the daily price action is dictated by the headline European sovereign debt news, and to a lesser extent by the obvious global slowdown, which in reality is also a recession in the real world for the US, but the media pundits are reluctant to admit that because they might get a “bully warning” from the current administration, which is either totally incompetent, or just sticking to their plan to grow Government at the expense of the private sector, and create an even bigger welfare state we have already.

The USD correlation sets up multiple day trading opportunities and I have included some actual Trading Service strategy trades from yesterday which highlights the short SPX/long TLT opportunity keyed off the 12:30PM bar range B/O by the UUP [USD] The SPX B/O of a 9 bar range below 1162.24, and also below all the EMA`s, eventually made an intraday 1139.93 low before the vertical last hour manipulation to finish at 1160.40.

However, the ridiculous SPX +2.15% opening period move to 1175.87 on the 9:45AM bar, on essentially nothing of significance, set up the extended VB trade on the short side to start the day. The inside bar short entry below 1172.70 versus the +1.0 VB at 1173.70 was banked on a 3.27 point reversal after the 1156.01 low on the 10:45AM bar. That was followed by the 12:30PM bar intermarket correlated trade trade on the short side in the SPX, and/or long side in the TLT.

There were many other opportunities on the equity long side that were signaled by the 12:30PM bar UUP range B/O but these were the obvious ones yesterday based on the USD correlation.

It is tough to have anything other than a negative market bias, and I still think the SPX will break the 1101.54 low and .382RT to 667 from 1370.58 That will bring the .50RT at 1019 [-25.6%], and .618RT at 936 [-31.7%] into play. The DAX has already declined -34.6% in this bear market from 7600 to 4966, made a possible double bottom at 4974 the other day, and closed at 5640 today, or + 13.3% in 5 days. There is a short term change in trend if it can take out and sustain a move above 5656, but the odds favor the US equity market going lower.

There is some significant Pi symmetry from the 3/6/09 bear market low in mid-Oct, and also some long term Fib time symmetry in the end of Oct based on the 10/10/02 769 and the 3/6/09 667 bear market bottoms. You can get the complete description of all the Oct symmetry by taking a one week trial subscription to the Trading Service and checking the commentary for 9/2911.

The monthly SPX 5 RSI is 22.56, which is the most O/S since the 3/6/09 667 monthly low, which was 5.69 The SPX topped out at 1371 on a key Pi date from 3/6/09 bottom, with the monthly 5 RSI at 85.01 The trading service members were all over that opportunity because they recognized the key elements in identifying significant market turning points. If the market makes new lows and sells off into Oct then we will have another high probability market opportunity on the long side which would take the SPX back to at least the 12 month declining EMA which is now 1240 or at a minimum to the 1228.75 .618RT to 1576 from 667.

SPX29A chart

TLT29 chart

UUP29 chart

Click here to find full details on Kevin’s courses including Trading with the Generals with over 20 hours of professional market strategies. And for a free trial to Kevin’s daily trading service, click here.

Monday, October 3rd, 2011 Stock Trading 1 Comment

ETF Trading with Larry Connors: Markets Price-In Bad News Ahead of Weekend


Here is some great end of week/end of month/ end of quarter analysis from Mr. Connors.  Pay special attention to this admonition: “But with short interest so high and everyone (except the long only crowd) positioning themselves for the worse, any good news is going to lead to large rallies. If the good news is structural, the rally could be very substantial”.  In other words, don’t get caught with your SHORTS down!  :)
 
 
By Larry Connors | TradingMarkets.com | September 30, 2011 08:55 AM 

 

It’s only appropriate that the morning of the last day of the quarter is again dominated by negative news from Europe. The unwinding of long positions followed by the triage has led to one of the more volatile quarters in history. And the media, with their lack of insight, is having a wonderful day leading most stories with “this is the worst month (quarter) in X years for (fill in the index or commodity here)”.

The market is getting to the point where it’s now priced-in a lot of bad news. Should the news get worse, prices will move lower in Q4 (you don’t need me to tell you that). This is especially true as just about everything broke under its 200-day this quarter. But with short interest so high and everyone (except the long only crowd) positioning themselves for the worse, any good news is going to lead to large rallies. If the good news is structural, the rally could be very substantial.

For us, we’re going to continue to trade as we have. I’m very grateful for the high cash levels and the short positions we’ve had this past month and our traditional bear market portfolio has begun to take shape. Add the hedging in (for both the long and short side) and we’re well positioned to handle whatever the political and economic environment brings through the end of the year.

For today, the market is still in neutral territory and even though the futures are down 1% at 7 am, there’s still the potential for the powers that be to try to run the market higher as they did yesterday in order to make the month/quarter look better. Overall though, the trend is down and there is no short-term bias on either side (you can further see that with so few set-ups today in The Machine).

Have a great weekend!

The above is from Larry Connors’ Daily Battle Plan.

To learn more about the Daily Battle Plan – including access to Larry’s daily ETF trading signals, click here for more information.

And for more on ETF trading, be sure to visit us here to check out the book that Stocks, Futures and Options (SFO) Magazine called one of the best trading books of 2009: High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading.

Larry Connors is founder of TradingMarkets.com

 
Friday, September 30th, 2011 Education, Larry Connors, Stock Trading No Comments

Financial Transaction Tax—Story of Failure

This horrible idea pops up in the U.S. every few years, too.  Apparently, politicians everywhere have a difficult time with the idea that there is chunk of money somewhere they aren’t carving a piece out of. 


 
Published: Tuesday, 27 Sep 2011 | 4:55 PM ET
By: Bob Pisani
CNBC Reporter
 

 

A financial transaction tax? It didn’t work when it was tried in Sweden.

Another potential factor in today’s late market drop: word that the European Commission will unveil a financial transaction tax on bond and stock trading, as reported by DealBook.

This is a variation on the Tobin Tax, first suggested by Nobel Laureate James Tobin, who proposed a tax on currency transactions.

France and Germany are reportedly in favor, but the UK and Sweden are not, and with good reason: it didn’t work when it was tried in Sweden.

In 1984 Sweden instituted an 0.5 percent tax on the purchase or sale of equities…a 1 percent tax on a round trip! It was doubled in 1986, and was subsequently modified depending on how long the security was held.

The result: taxable trading volumes fell, and the taxes collected were disappointing. Also, revenues from capital gains taxes fell at the same time (duh), so any gains from the transaction tax were offset by the fall in capital gains taxes.

The tax was abolished in 1991.

Read original article here

 

 

Wednesday, September 28th, 2011 Education, News, Stock Trading No Comments

ETF Trading with Larry Connors: Rallying Toward a Short Term Top?

Here are some important thoughts regarding market behavior – think twice if you are looking at placing bets on a long term up trend:


By Larry Connors | TradingMarkets.com | September 28, 2011 08:48 AM
 

The strong rally we were anticipating has now played itself out. With prices significantly higher than they were at the bottom last Friday morning, the market is overbought. This does not mean it can’t run higher for a few days, especially if good news comes out of Europe, but it’s getting closer to a short- term top.

The 2-period RSI of our Country Fund Universe has moved from 2.2 last week to above 80 today and is signaling some very early short signals here in a number of markets. As I mentioned, the Daily Battle Plan is going to be expanded to cover more potential set-ups and ideas each day beyond the ETF set-ups. Therefore there are no trade suggestions today; those we will be covering next week. In the meantime, it’s time to start locking in any long gains you may have if you played the rally and start scaling in on the short side.

The above is from Larry Connors’ Daily Battle Plan.

To learn more about the Daily Battle Plan – including access to Larry’s daily ETF trading signals, click here for more information.

And for more on ETF trading, be sure to visit us here to check out the book that Stocks, Futures and Options (SFO) Magazine called one of the best trading books of 2009: High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading.

Larry Connors is founder of TradingMarkets.com

 
Wednesday, September 28th, 2011 Larry Connors, Stock Trading No Comments

New Market-Wide Circuit Breakers Coming

Circuit breakers are more apt to make us think about our houses electrical system than trading, but Bob Pisani has an interesting post about coming changes to systemic ‘circuit breakers’ in the stock market.  Aimed at avoiding a cascading failure in equity prices, circuit breakers give everyone some time to catch their breath and let go of some panic – and with some of the gut churning drops we’ve had in recent years, it looks like the SEC wants to make these a bit more frequently invoked.

 

Published: Tuesday, 27 Sep 2011 | 1:30 PM ET
By: Bob Pisani
CNBC Reporter
 

After much delay, the SEC is filing proposals to revise the existing market-wide circuit breakers.

The changes reduce the percentage declines needed to halt trading and simplifies the structure of the circuit breakers. It also changes the reference index from the Dow Industrials to the S&P 500.

The current circuit breakers, adopted in October 1988, kick in when the Dow Industrials drop 10, 20, and 30 percent.

The only time the circuit breakers actually kicked in was Oct. 27, 1997, when traded was halted twice.

And that’s the problem: they were useless during the “Flash Crash,” because the Dow never dropped more than 10 percent.

The SEC has put out the proposed changes for a 21-day comment period.

The changes will greatly simplify the current cumbersome structure. It will:

1) Reducethe market decline percentage thresholds necessary to trigger a circuit breaker. Instead of 10, 20, and 30 percent declines, the threshold will be reduced to 7, 13, and 20 percent declines from the prior day’s closing price.

2) Shorten the duration of the trading halts to 15 minutes.

3) Simplify the time when the trading halts kick in. Now there will be only two trigger periods: those that occur before 3:25pm (when trading would be halted for 15 minutes), and those that occur on or after 3:25pm, when there would be no halt in trading.

4) Recalculate the trigger thresholds on a daily, rather than quarterly, basis.

The individual stock circuit breakers, which halt trading if the price of an individual stock moves 10 percent or more in a five-minute period, remains in effect.

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Read original article here

Tuesday, September 27th, 2011 Education, News, Stock Trading No Comments

URANIUM RESOURCES: PENNY STOCK ON THE RUN: DOWN 4.7% (URRE)

If you’ve been trading for any time at all, you know the alure of trading penny stocks.  Indeed, the skilled trader CAN make a lot of money when he/she gets in at the right time.  But the article below shows just how dangerous this approach can be:

Sep 26, 2011 (SmarTrend(R) Spotlight via COMTEX) — Uranium Resources (NASDAQ:URRE) is one of today’s worst performing penny stocks, down 4.7% to $0.72 on 0.2x average daily volume. Approximately 238,000 shares have traded hands today vs. 30-day average volume of 1.3 million shares.

High volume often signals a change in trends. Shares of Uranium Resources are currently trading below their 50-day moving average (MA) of $1.23 and below their 200-day MA of $2.05.

SmarTrend scans for speculative penny stocks under $1 for reversals in trends. A large price movement may signal continuation or reversal of a trend.

Uranium Resources is in SmarTrend’s Industrial Metals & Minerals industry and this industry is currently in a Downtrend. An industry trend that matches the stock’s trend helps to add conviction to the stock’s Downtrend and price prediction.

SmarTrend currently has shares of Uranium Resources in a Downtrend and issued the Downtrend alert on May 23, 2011 at $1.55. The stock has fallen 51.1% since the Downtrend alert was issued.

Write to Chip Brian at cbrian@mysmartrend.com

Read original article here

As always, regardless of whether you are trading penny stocks or ‘real’ stocks, have a real plan and size your positions appropriately!

Timorous

 

Monday, September 26th, 2011 News, Stock Trading No Comments

Cramer: Enbridge: The Pipeline Play

Jim Cramer provides some welcome insight into a stock play which leverages oil without directly trading either the commodity or the big oil companies themselves. Take check it out.


Friday, September 16th, 2011 Commodities, Jim Cramer, Stock Trading 1 Comment

Cramer: Off the Charts: Tech-Buying Season

Jim Cramer does a decent job of analyzing the relative performance of SOXX vs. QQQ, and discussing what that might mean for the next few weeks / months in the tech markets.




Wednesday, September 14th, 2011 Education, ETF, Jim Cramer, Stock Trading No Comments