The End of February…. Stock Market volatility, All eyes on FED and Economic numbers.

It had been an interesting weeks of sorts with the S&P and DOW hitting highs of 1,380s and 12,700s respectively during the week. The week’s market gain was lost today with the S&P and DOW  back down to the 1,335 and 12,301 respectively.  So what happened here? To put it simply; consumer spending and the high price of oil. If you recall in my earlier post i outlined a simplistic model on the types of recessions and the two variables affecting the economy (Consumer spending and Housing). With the current Housing problems, many eyes may very well be on consumer spending on indicating the condition and possible short term direction of the economy. Yesterday’s news indicated that consumer spending has been flat  since January and as expected the market took a hit downwards to our current levels. The Market seems to be trading back to the 13,25-40s ranges for the S&P.

Fridays have traditionally tended to be difficult days to trade due to lack of liquidity and volume. Major moves were all taken up close to the open and not surprisingly in one direction. JP Morgan (JPM) was a great short today with the stock down $1.50 currently. Decent volume of around 22 million shares allowed some adequate size positions to be taken during the open. As expected Financials are taking a hit today with Citi Group (C) down almost 88 cents. The Big story today was ofcourse American International Group (AIG) which is down more than 7% ($3.70). AIG posted around $5.3 billion in losses mainly due to the credit crisis which have affected so many financials. They apparently also own $42 billion in bonds which are insured by bond insurers. I talked earlier about the recent problems in the Bond insurance sector and this may not bode to well for AIG or the market. The Pit today at the Chicago merchantile Exchange also appeared confused and the bears seemed to be back in significant strength. 

All eyes should be on the FED and econonomic data in the month of March. There are already rumours on the market that the FED might cut rates ahead of their upcoming meeting. Speculations on a .75 cut may also be in the play.

-Danial Jameel (www.daytraderlog.com)

The Weekly Market Wrap up… Market gains and then slides back down.

It has been pretty interesting the past week as the market is still trying to ascertain the condition of the economy and find direction. The Futures and Stock exchanges saw gains during the last following the FED’s commitment to battle the recession, The government stimulus package and Mr. Warren Buffet’s positive views on the economy. As expected the situation is still very volatile and the market declined again today. S&P index is around the 1328-1334 range which is the lowest range this week.

The Financials continue to take a hit with Citigroup (C) on a new low of below $25. interesting plays today included Sprint (S) which despite the tank in the market continued to rise. Size breaking at $8.55 allowed a big position to be taken with an out at around $8.70. Sprint is currently at $8.77. Other plays included citigroup (C), General Motors (GM), Bank of America(BAC) and BMY. Fake sizes and pushers continue to dominate the market throughout the day which allows both quick opportunities and cause for caution when taking position ahead of big sizes.

Coming back to the economy: The question on most people’s mind continues to be ‘where does the economy go from here?’ “Is this time to start looking for a bottom or are we going to continue with the declines?” Apparently as far as the FEDs are concerned the economy is in reasonable shape and will eventually correct itself by the end of 2008. The housing and financial troubles are no doubt causing many problems, however they are expected to correct themselves in the near future. In my opinion, things will take a little longer to fix than the FED is expecting. Problems with the Bond insurance and Housing are far from over. Manufacturing numbers released this week by the Philadelphia FED were also viewed as disappointing. Finally, another interesting point to note is the current stock market rip may be more due to the fact that traders are speculating (*Cough* betting) the Fed will cut another .75 off the interest rate. If this is the case then greater caution must be taken during the current market volatility and all eyes and ears pointed towards economic indicators and the FED.

- Danial Jameel (www.daytraderlog.com)

Next stop mortgage backed bonds… Market conitnues to slide

I stated my expectations in my last blog that the market would continue it’s slide down. So far apart from brief rips in the NYSE and S&P futures (and other US markets) followed by profit taking action, not much is happening and we are slowing sliding down. Investors seem overly cautious in entering the ring and are waiting until there is a more clear direction on the economy. The S&P went down to 1,324.89 with the Dow at 12,136.86 ( 0.90% lower). From a day trading point of view lack of action and liquidity often makes it difficult to make good profit and the search is always on for stocks with movement and good ranges.

Today the financials took a decent hit with Citi Group (C) closing below 26 (it was 29 something a few days back!) and might just go back to its low of 24-25 if the market continues to slide (the range before the fed cut interest rates). According to an analyst on CNBC today, the financials account for almost 40% of the action on the major US markets. In my opinion the fact that they are in such a bad shape and overly cautious will likely have a negative impact on NYSE and other Stock markets in the coming weeks. The main worry for today seemed to be primarily focused on the mortgage backed bonds and investment firms are duly in the process of lowering their ratings on companies such as MBIA. It still isn’t clear whether we are going to be in a recession in the near future but the market is definitely taking a beating and the economy needs to resolve several issues before we can expect a bounce back.

Now for some Good news… the government stimulus package seems to be coming through and the FED have clearly indicated that they are willing to fight the recession beast. We may expect some more interest rates cut in the near future as the Feds help stabilize the economy. Where the market bottom is, that cannot be answered accurately but stock such as Citi group hitting the 24ish range seem like an attractive buy for the longer term (the stock was well above $55 same time almost a year back). The Arabs swimming in their recent oil wealth certainly seem intent on buying a stake in Citi and I wouldn’t be surprised if another round of investments comes in on Financials such as JP Morgan, Citi, Goldman etc. if the market continues to decline.

For us daytraders, it’s not easy times to trade (depends on the stock and strategy we use ofcourse) but money is still being made on the right stocks driven by momentum and big plays. Speaking of nice opening/closing plays Pepsi (PEP) had nice rip of almost 3 dollars on Thursday. Hopefully you guys were in on the action. Cheers

- Danial Jameel (www.daytraderlog.com)

The Stock Market slides further down… recession jitters?

Well the market finally decided in the short term after the fed cuts where it wants to go and down seems to be the direction. S&P Futures closed at  1,326.45 lower than yesterday and finally broke that week long 1,340-1,380 range. In some ways this is understandable as the market will take time to resolve its issues unless we are heading for a recession. Our old friend Alan Greenspan indicated this months ago and it seems he could yet again be right unless the Fed actively pounce on this by slashing interest rates. Mr. Greenspan did something similar during the tech crash of 2001 where interest rates went down to 1%! Ironically this may have been a major impetus for the sub prime mortgage boom as demand for housing rose. Fast forward 2007-08… the very same sub prime mortgage crisis is causing the current market problems.

For those of you who aren’t entirely sure what causes recession and the indicators us economist (well I’m only a major in economics) look at. Using a simple example, like earthquakes there are different types of recessions from moderates to the killers. Moderate recessions are usually the result of production inventories exceeding demand and as a result manufacturers sharply cut production over the short term until the demand and supply stabilize. The more worrying ones arrive when the demand itself decreases and these become more of a headache when it affects either consumer spending or housing (*cough* sub prime mortgage).

So living in the monetarist world it will be up to the Fed to battle the recession beast and up to the government to provide stimulus packages which in my opinion don’t really help (except for the fact that maybe minor tax cuts by Uncle Sam will convince people to spend more). Speaking of Uncle Sam, Mr. Bush’s record breaking current and next year’s fiscal budget of $3.1 trillion will make it much more difficult for the state to provide a meaningful shot in the arm to the economy. They will most likely end up taking money away from social care oriented programs. Yes expect cuts in Medicare, veteran medical care, feed the poor programs etc. (well he did say he was a War President). Finally, before i go back to the topic (daytrading) I would like put in my 2 cents of international relations as well (sadly that’s my other major). War my dear friends costs a lot of money even if you fighting in an oil rich country. The current export of Iraqi oil (apart from the stuff being smuggled away by those vested interests) remains pre-Gulf War II levels.  Add in multi national corporations whose incentive is profit maximization (not stability), and security firms (whose incentive is…well… keep the chaos going so they have a job!) and you exacerbate the problem many times over. Perhaps, one day i will venture into political blogging as well.

Back to Daytrading. Not much happening in the market these days, good plays today included a certain seller on AMD who would literally drive down levels with decent size (400,000 to 600,000 shares). If you have access to big share sizes a punch short for a few levels would have resulted in quick nice returns Other decent moves included CHK, DIS, AXP (decent movement), and C (the usual). Pepsi has earnings so it should be interesting to see what Pepsi (PEP) is up to tomorrow. There wasn’t much action on PEP during the trading day. Futures were ebbing to new lows which indicated the lackluster performance of the market and I shall be expecting similar progress tomorrow.

- Danial Jameel (www.daytraderlog.com)

A Glossary of terms and concepts

The first blog as you can tell was written in haste during the close of the market. Now that I have time on my hand I guess it is important to explain certain terms and concepts for those who are not familiar with the trading world.

Long or going Long: This is when you have bought a certain amount of shares of a stock (e.g AMD). This is the classic example of buy low sell high concept.

Short: A little trickier than the previous definition and the best way to explain this would be through an example. Basically this occurs when you know the price of a share is going down in value. So lets assume Mr. Sam has item X worth $10 today and you know that tomorrow it is going to go down to a market value of $5. You simply borrow item X from Mr. Sam (promising to return it to him tomorrow) and sell item X on the market today for $10. Tomorrow you simply go to the market and buy item X which has gone down in value for $5 and return the item X to Mr. Sam while pocketing that extra $5! That is how traders make money regardless of the market going up or crashing.

Rip: A rise in the price levels of a certain equity (stock value is going up)

Tank: A decline in the value of the equity (Stock value is going down)

Level 1:The current Bid and Offer price of the stock on the market (e.g Citigroup is currently 27.80 – 27.81; 27.80 is the Bid while 27.81 is the Ask).

Level 2: Orders sitting at prices below or above the Market price (Level 1) of the stock.

Punch: To hit into the next price level, indicating that you are willing to take the amount of shares instantly instead of waiting on the Bid or Ask level.

Ask Level: This is  the lowest price an investor will accept to sell a stock. In the case of Level 1 ask, that is the current price an investor will accept to sell a stock.

Bid: This is the current bid (level 1) or minimum bid that investors seek to buy a stock.  

Futures: Legally binding standardised agreements to buy or sell a commodity, currency or security at a fixed time in the future, at a price agreed upon today (source: www.nzsuperfund.co.nz/index.asp)

S&P: An Index of the 500 widely held US Stocks. (Standard & Poor; think of it as a basket of major stocks which may indicate the condition and movement of the market).

DOW: Same as the above but a different index.

Feel free to add any terms that you think are missing or unclear.

- Danial Jameel (www.daytraderlog.com)

The Volatile NYSE Market… and yes the introduction

Volatility: I guess the best way to start of this blog would be to scratch your head over the current market volatility. The Feds cut rate by .50 last week which did little to calm the market and so far no big push has been seen (however it did help the market recover and the S&P futures to a more bearable 1340-1390 range). It seems investors are playing it cautious and we see every big jump followed by profit taking. 

Today the futures seemd to be in the 1340-1360s range with no major moves on the stock apart from the massive dirty plays going on these days. For Day traders who are used to seeing fake size and pushers will be amused at the new heights this is being taking towards. Case in point: One gentleman/lady (yes girls trade too!) decided to put up almost a million shares on city group (Ticker: C), push it for two levels and then pull it a few seconds later after getting short on the other end (to our bitter amazement). This is just one example of the kind of games being played for those who play very short ranges. Now my question is have the traders gone so desperate to make some $$$ that we are seeing so much fake size all the time or have the day traders realized that the big guys (yes that includes the specialist) are in too much trouble these days and letting them get away with it.

Desperate times call for desperate measures i suppose.

And yes the introduction…

   This Blog is all about the NYSE and Day Trading. It is also a quasi personal journal which will record my daily progress/adventures into the crazy world of NYSE. Incase you are wondering who the hell I am, well simply put I began trading in the winter of 2005 for a major day trading firm in Canada (sorry no names). I will do my best to reveal what I see everyday in the market and document both my major successes (when I have them) and failures (we all loose sometimes). Also I will be dealing the NYSE market with major emphasis on stocks i trade (which is usually large caps or fast moving stocks).  I hope this blog will be useful to you guys for both entertaining and trading purposes ( and a learning curve so my mistakes are not repeated).

So Lets get the ball rolling with a Jim Cramer favourite quote:

“Bulls and Bears Make money. Only Pigs get slaughtered…”       

-Danial Jameel (www.daytraderlog.com)