Month: May 2009

HXD, May 14 Also RFN and HSD

Hamilton

These are like the 3 musketeers, they are fighting the young ladies on the TV  , CNBC, BNN etc. programs that tell us what to expect next, always up. Nothing like a little lipstick etc. to get the guys in a buying mood, never mind that should the prompter shut down, that would be the end of that. Call me a male chauvinistic pig , if you wish,  but there is a good reason why they called my treasury operation Ham’s Harem. Lets just  go for the adage that it takes a thief to catch one. These three are all double down bear products: the HDX on Toronto, the HSD on the S&P ( but in C$ terms) and RFN . I am partial to HXD, simple because that one came out as a mutual fund long before the other ETF’s. As usual I was too early and could not wait for my $18 prediction to buy, I own it four dollars higher. On second thought it would seem to me that RFN is the best in terms of  bang for your buck, Here are the charts.

HXD May 14

HSD May 14

RFN May 14

The top one is the TSE, the middle one the S&P in C$ terms and the bottom one the S&P Financials in US $$$ terms. Price wise the bottom one wins hands down, but it is also the narrowest. It can easily go from 10 to 30 in no time. Because in Cnadawe are always going from one extreme to another ,I would still favor ( favour,  is how I spell this but my computer keeps telling me that I am wrong) the HXD. The real question is, is the rally done or are we at the midpoint.  I am hoping that Patricia Lovitt- Reed, Amanda, Lisa, Linda , Francis etc. etc. will let me know tomorrow. My guess, looking at RY , MFC etc. is that we are done for the moment. That may still mean that we are at a mid-point ( as with Ford) but must keep an open mind in case this thing is all ready in a stall, with ice on the wings. The upside trajectory, shown by the charts, may or may not actually happen, but initially I suspect this is the direction it will go

DRYS , May 12 Dry Ships Inc. Interesting stock.

Hamilton

This is a very interesting stock, in a way the embodiment of the , so often referenced Baltic Index, even it has nothing to do with it. Dry , no doubt , refers to the type of (bulk/container) goods carried, not to whether or not alcohol is served on board. The stock is interesting for the simple reason that it dropped from $130 or so to just under $3, where it would have been a screaming buy under the “always buy anything < $3, at least, for the first time”. This one may provide an encore soon. Here is the big chart;

DRYS May 12 3

For all intents and purposes this is an A-B-C correction, the only remaining question is, is there going to be another low or is this all “base building”. Here is a little more detail, both arithmetic and log scale.

DRYS May 12

DRYS May 12 2

At yesterday’s low of $6.66 , yes you are reading this right, this may just be a very good buy. Unfortunately as I do not presently have the outstanding services of a large research department at my disposal , I would suggest you speak to your broker first as I know nothing about the company. Shipping, which activity almost took down Bank of America in the late 60-ties , early 70-ties is a capital intensive business and consequently has very dramatic ups and downs, regardless of under what flag business is conducted. As far as the economy is concerned, it has to be the canary in the coalmine par excellence.  You are on your own, but think of the potential!

CBS May 10, exit option!

Hamilton

CBS May 10 2

Here is CBS, first discussed on Feb. 22 for the purchase of a call option. Here is the text then. It was written  where the two red arrows are in the chart.

Cbs May 10

If you had bought the June $5 option and held it to this point, it is now time to sell. RSI, MACD, 200-day MA, and the wave count all suggest that this is it for the time being. With less than a month to go to expiry the option should be worth about $3 .40 bid, $3.70 ask, for a gain of more than 8X.  The $7.50 strike , June is $1.05 / $1.15. If an earlier expiration date was chosen, with a $5 strike  there would have been a smaller gain. Lets just call it 30%.

MGM May 10 , hope springs eternal, forget the fundamentals!

Hamilton

MGM is a very good example of why you should ignore fundamentals most of the time (by the way EW does that , all the time). We looked at the stock on Feb.6, when it was about $5, wondering where it might go and never looked at it again. This is gambling after all. Well from a high of about $103 it hit a low of $1.81 in March (like everything else), clearly a real bear market. In the meantime capacity in Las Vegas is going to increase by 16.000 rooms or about 12% (mostly Citi Centre, a joint venture between MGM and Dubai World – wondering how your petro-dollars are recycled?). The house take is down by 17%, the number of visitors has fallen about 9% and the average room rate fell by 32% The only shining light here is that gambling is not entirely discretionary, for a good number of participants it is an obsession if not an outright addiction and consequently demand is inelastic relative to income. If you have doubts about this go visit Casino Rama and observe for your self the sad circumstances of the clientele. Sodom and Gomorrah certainly come to mind.  Here is the big picture.

MGM May 10

This could be a full cycle (5-waves from the lows) so it is conceivable that it would go bankrupt some day (there are 31mln shares sold short) but that is still a little down the road , if it happens. The lesson here is that you should completely ignore all fundamental evidence and almost as a matter of principal , like a Pavlov dog if you wish, always buy a stock below , say $3. Here is the detail.

MGM May 10 2

Not quite as good as C , F , CBS, MAL and no doubt many others but there is strong support for this “hold your nose and buy” approach. It worked for Bre-X , NT, Asea Brown Boveri, Ahold. This is the hope factor at work, just do not stick around too long. GM is a definite maybe, maybe not!