May 14 NYSE: Stocks rally on diminishing inflation fears, Yahoo acquisiton still in play??

As I stated in my last blog that this week will be all about economic numbers and we could expect a small rally on good news. The S&P Futures and DOW were both up with the futures hitting a high of 1,421 range before sliding back to 1,408.66 at the close. Consumer prices reported better than expected despite worries in the market at the affect of higher fuel prices on food prices.

The Financials such as Citigroup (C) and Bank of America (BAC) were all good plays with decent volume and volatility which allowed great entry and exit positions. Fake sizes and Pushers were also very evident on many Big Cap stocks which provided unique opportunities and at the same time increased the risk factor today. EMC Corporation (EMC) was a very good long early in the day with a good bid size near the open. The stock pretty much went up the entire day.  Nabors Industries Ltd. (NBR) had a pretty big level for its volume at $40.00 which allowed big short positions to be taken and for those with lower share sizes, scalping between the ranges throughout the lunch and afternoon session. Honeywell International, Inc. (HON) was another good candidate today which broke key levels and allowed some great punches (Hitting the Ask Side) and hold positions to be taken.  Overall the market was not clear on a direction and will be analyzing the numbers coming out this week to determine the direction of the economy. Expect similar market activity during the next two days.

Yahoo had some interesting developments today as Billionaire investor Carl Icahn (who owns significant shares of Yahoo) is attempting a proxy slate to change the Yahoo board of Directors. This is definitely a key development as it might lead to a potential Yahoo acquisition depending on who Ichan brings on board. Rumors are running around of Microsoft’s covert backing of Ichan and an attempt to acquire Yahoo through proxy means (i.e via the shareholders).  The proxy slate is to be announced tomorrow which should give us a good idea on the players behind the scenes. The decisions of two other key shareholders namely Gordon Crawford who has a history of influencing Yahoo’s board, and Bill Miller (their combined holdings total to a 23% stake in Yahoo!) will play a major role in the future shake up of Yahoo and whether Microsoft will be coming in again.

From a business point of view it is important to ask whether this deal is a solid proposition to both companies. Yahoo which had been in dire straits since last year clearly needs to redefine itself and its core business (something which it has failed to do for a long time). It’s competitor Google knows its core business which is search and has ensured its entire focus on search and search related products. Yahoo on the other hand views itself as a Web Portal rather than a search engine but has yet to define itself on what exactly it needs to focus on and what are its core areas of revenue generation. The DNA of the company is also very different from Google (which is a more chaotic business model) and does not motivate innovation which is a key element of web businesses. The same problem also exists in Microsoft’s DNA (i.e innovation) and it is one of the reasons why it is simply unable to compete with Google on the Internet domain. Microsoft if anything needs this deal badly so it can seek to have a presence in cyberspace which is increasingly being viewed as the next evolution for software (i.e Cloud computing etc.). Just like IBM was killed by Apple and Microsoft in the late 80’s the process of creative destruction seems to be re-occurring once again and MIcrosoft knows it needs to have a greater presence in cyberspace to ensure its future survival and dominance over the Software and IT market. I will be keeping a close eye on this deal and it should be interesting to see what efforts Microsoft undertakes in order to pose a serious challenge to Google’s dominance over the Internet…

-Danial Jameel (www.daytraderlog.com)

 

May 12 NYSE: Stocks continue sideway slide amid economic numbers, HPQ – When Wall Street punishes acquisitions…

Monday saw a small rally in the market with S&P pushing back up to the 1,400 level and recovering some of its losses on Friday. The DOW was up 1.02% (12,876) while the S&P Futures closed at 1,403 (up 1.10%). The Market is expected to continue its sideway movements as economic numbers come out this week. Investors and traders alike will be looking at these numbers in order to determine the shape of the economy and market direction. Stocks rallied today due to the decline in Oil prices to around $124.23 at the NYX (New York Merchantile Exchange) as it eased some Inflation fears.

Major moves included Bank Of America (BAC) in early morning where the stock continued to rally throughout the day. Some decent size and volumes along the way helped taking easy positions for quick profits as well. American International Group Inc. (AIG) was another stock which allowed good short positions around 10am and the stock pretty much tanked the rest of the day. It closed at $38.37 with $41.15 being the high of the day at around 9:45am. Good short positions with decent size were available at around 10:00am -10:05am.

The most significant move was ofcourse Hewlett-Packard (HPQ) at around 3pm where the stock litreally crashed in a matter of minutes with big market orders. Wall Street apparently did not like the logisitics of the new acquisition of  Electronic Data Systems Corp (EDS) which is HPQ’s biggest acquisition after Compaq. Unfortunately I wasn’t able to capitalize on this move despite being a second away from punching short at $28.25. Fear and Greed are the two dominant emotions which run the market and in this case my fear prevented me from getting into this insane tank. With hindsight ofcourse one can argue of the lack of courage on my part but in these moments it is hard to determine the direction of a stock. My advice for those who love taking crazy risks is to take fewer shares in order to protect their losses. Two good moves that I did participate in were Alcoa (AA) at $40.00 during the pre-noon session and later near the close with Citigroup (C). There was a big seller who showed up at the $23.50 with around 350,000 shares. This allowed for big positions to be taken as the seller tried to chase down the stock to get filled (Good exits were at the $23.37-$23.38 range in front of a 120,000 bid at $23.36).

As for Tomorrow, eyes are going to be on the Retail sales number which is expected to increase by 0.2% and ofcourse earnings from WalMart (WMT) the largest US retailer. The Market is expecting good news from Walmart and we might expect a short rally if numbers look good. This week will continue to be volatile as the market analyzes the upcoming numbers on the economy.

Question and Comments are most welcome. Cheers

-Danial Jameel (www.daytraderlog.com)

 

Updates to be back daily on Monday!

I will be out of the city till Sunday. Daily updates will be be back on Monday 12th of May. Cheers…

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)