Some Home Builders are Putting up Flagpoles

Written By: DragonFly Capital

The homebuilder stocks have been working higher for about a year. Many are of the view that they have run their course and are ready to to pullback. Where Beazer Homes, $ BZH and DR Horton, $ DHI appear to fit that bill, the weekly charts of two others Lennar, $ LEN, and Toll Brothers, $ TOL, are exhibiting classic bull flags. Take a look.

Lennar, $ LEN

The chart for Lennar, $ LEN, above, shows the tight consolidation between 29.50 and 32, in the blue box. What makes it interesting is that the volume is decreasing as it consolidates and the Relative Strength Index (RSI) is running flat in bullish territory with a Moving Average Convergence Divergence indicator (MACD) that is also flat. These add up to the bull flag, where buying and selling pressure are exhausting each other. A Measured Move higher takes it to 38 on a break above 32. The chart for Toll Brothers, $ TOL, below has the same signs. Consolidation of price in a tight range between 28.50 and 31.20 with declining volume but a RSI and MACD that are running flat. The Measured Move higher in this name takes it to 37.40. If you have missed the rally in the homebuilders your opportunity may be coming up very quickly. Keep these two names on your watchlist for an entry on the breaks of the flags.

Toll Brothers, $ TOL

Dragonfly Capital

Individualism vs. Collectivism: Thanks For the Ammunition, Ann

Ann Romney said in an interview airing
Wednesday that her husband has no plans to release additional tax returns,
saying “it’ll just give them more ammunition” and insisting that “there’s
nothing we’re hiding.”
“We have been very transparent
to what’s legally required of us. But the more we release, the more we get
attacked, the more we get questioned, the more we get pushed. And so we have
done what’s legally required and there’s going to be no more, there’s going to
be no more tax releases given,” she said in the interview by NBC News. “And
there’s a reason for that, and that’s because of how, what happens as soon as
we release anything.”
Romney is releasing two years of
his tax returns. Democrats have said what’s he hiding and demanded he make
public the last 10 years or more.
Ann Romney also defended
Romney’s character and said the “only reason we don’t disclose more is we’ll
just become a bigger target.”
“Mitt’s financial disclosures
when he was governor are huge if people want to really look and see any
question they have,” she said. “The other thing they have to understand is that
Mitt is as honest — his integrity is just golden. We pay our taxes, we are
absolutely — beyond paying our taxes we also give 10 percent of our income to
charity.”
She also said that the couple
has had a blind trust since 2002 before Romney was governor and that they don’t
know what’s in it.
“There’s nothing we’re hiding,”
she said, later adding: “I’ll be curious to see what’s in there too.”
            — Ann Romney: No more tax returns, Tomer
Ovadia, Politico, today
An article published recently by James B. Stewart in the New
York Times titled In Superrich, Clues to What Might Be in Romney’s Returns, overlooked because it was published on
Saturday, the day on which Romney made his Ryan announcement, explains that
2008 and 2009 were banner tax-break years for a large number of very wealthy
people whose main or entire source of income comes from stock dividends and the
sale of securities. 
The occasion for the article was the IRS’s release last week
of “data from the 400
individual income tax returns reporting the highest adjusted gross income,
writes Stewart. “This elite ultrarich group,” he says, “earned on average $ 202
million in 2009, the latest year available. 
And buried in the data is the startling disclosure that six of the 400
paid no federal income tax.”
Which suggestions
the likelihood that the Romneys paid no, or almost no, income taxes for 2008
and 2009. 
It does
not take a math genius or a tax expert to recognize this.  That’s good, because I am neither.  But I am good enough in math (if barely) to know
that 2006, the last year of Romney’s term as governor, ended before 2008 began. 
And,
thanks to the Romney tax-returns controversy, I know that in 2009 the
Department of Justice entered into an agreement with UBS, Switzerland’s largest
bank, and other Swiss banks, in which the banks agreed to disclose to the U.S.
government the identities of American holders of Swiss bank accounts, and that approximately
34,000 Americans took advantage of an amnesty program that the IRS and Justice
Department offered, by which voluntary payment of back taxes and interest and
penalties would remove criminal liability and public disclosure. 
And I
have followed the Romney tax story closely enough during the last few months to
know that the Romneys’ 2010 tax returns revealed a bank account with UBS,
apparently opened in 2003, was closed sometime during that year and had $ 3
million in it when it was closed.  And
that, according to news reports, Romney did not disclose this account on his
Massachusetts financial-disclosure forms—although, unless my math ability (such
as it is) fails me, 2003 ended before early 2007, when Romney’s term as
governor ended. 
And that,
also according to news reports, the 2010 returns show that the Romneys have a
shell corporation in the tax haven of Bermuda into which they apparently were
funneling income from overseas Bain investments, and that one day before Romney
was sworn in as governor, the corporation’s shares were transferred to Ann
Romney, and the corporation was not disclosed on Romney’s Massachusetts
financial-disclosure forms.
So, yes,
Ann, you’re hiding something.  You’re
hiding whatever it is that would give your opponent ammunition, whatever it is
that would make your husband a bigger target. 
And that ammunition is that, whether or not you and he failed to
disclose that Swiss account and any other Swiss accounts you held that were
closed before 2010 until a gun was held to your heads in 2009, you and he
employed tax loopholes and special tax rates that your husband and (even more
so) his running mate plan to expand so as to eliminate the very need for
offshore tax shelters.  They plan to make
this country an overt tax shelter for the wealthy and, especially, for the very wealthy—that is, for people like
you and your husband. They have made that central to their policy plans, while
desperately trying to deflect scrutiny of those proposals. 
Stewart
writes in his article, “Tax experts I consulted said these results
almost certainly reflected aggressive use of tax-loss carry-forwards from 2008,
since the stock market bottomed in March 2009 and rallied strongly during the
rest of the year.”  Expressly under Paul
Ryan’s plan, there will be no income tax at all on capital gains and on
dividends.  Every year will be 2008 and 2009 for the Romneys!  Except, of course, for the need for aggressive
use of tax-loss carry-forwards, and the like; no more need for that sort of
thing.
A lot of eyebrows were raised on Sunday when Ryan,
sitting next to Romney in an interview, told Bob Schieffer that he wants to end
the tax breaks that apply only to the wealthy. 
That’s nice, but of no effect.  A seminal
part of his tax-and-budget plan, passed this year by the House, is the elimination
of all income taxes on capital gains
and dividends.  And although this would
mean that many very wealthy people will pay no income taxes or estate taxes,
and many other very wealthy people would pay income taxes at a single-digit
rate, the elimination of these taxes would apply as well to the non-wealthy who
have a capital gain or receive stock dividends, however small.  And so—voila!—Ryan’s statement, made with
such earnestness, does not apply to the issue of taxes on capital gains and
dividends.  Nor, for that matter, to
estate taxes, which his plan entirely eliminates; some non-wealthy people leave
small estates, after all.  And semantics
is the name of their game, the objective of which is the enabling of ever more
vast accumulations of wealth, utterly unfettered by tax obligations.  Pure and simple.
My big fear about the all-Medicare-all-the-time campaign
that began last weekend with Romney’s Ryan announcement is that it allows
Romney and Ryan to claim the mantle of straight talkers about what they warn is
a Medicare-caused fiscal calamity that awaits. 
They have yet to explain why, if they fear such a calamity, they propose
to reduce federal revenue by trillions of dollars, through their
tax-elimination-on-the-wealthy plan.  And
when they stress, as they do again and again, that their
destroy-Medicare-in-order-to-save-it plan will not end the current program for
its current or relatively-imminent recipients (those who are 55 or older), maybe
they’ll deign to reveal what programs will be eliminated in order to pay for
Medicare for current recipients and baby boomers andand—the
trillions-of-dollars tax cuts for the wealthy.
My suggestion: Hurricane disaster relief for the southern
Atlantic and Gulf Coast states, which will vote for this ticket en force, and crop insurance and drought
disaster relief for the plains states, which will vote for them and their
budget plan in almost as large percentages. 
In 2005, Ryan now-famously advised his audience when he addressed
an Ayn Rand fan club that they should make no mistake: current politics is a
clash between “individualism” and “collectivism.”  And indeed it is.
Now, let’s ensure that the public knows the
specifics.  


Angry Bear

Free Webinar Tuesday,August 21 at 5pm: John Locke will be going over July M3 and Bearish Butterfly strategies

SMB’s Options Tribe is an online community of options traders dedicated to sharing successful options trading ideas with all of our members worldwide. Each week the community will meet online for the primary purpose of watching live presentations made by veteran options traders and experts in the world of options trading. Next Week, John Locke will be going over July M3 and Bearish Butterfly strategies.

Register for this FREE Webinar: Here

Seth Freudberg

Director, SMB Options Training Program

The SMB Options Training Program is a twelve month program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: sfreudberg@smbcap.com.

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SMB Capital – Day Trading Blog

SPY Trends and Influencers August 11, 2012

Written By: DragonFly Capital

Last week’s review of the macro market indicators saw heading into the dog days of August that the markets were looking better. Gold ($ GLD) and Crude Oil ($ USO) were poised to consolidate with a bias for an upside move on a break. The US Dollar Index ($ UUP) and Treasuries ($ TLT) seemed content to move continue to pullback in their uptrends. The Shanghai Composite ($ SSEC) really looked ugly but might have a reprieve for a few days and Emerging Markets ($ EEM) were poised to move higher. Volatility ($ VIX) looked to remain low and possibly make new lows setting the stage for the Equity Index ETF’s $ SPY, $ IWM and $ QQQ, to continue to run higher. The inter-market view with the lower bias for Treasuries and the US Dollar, and higher bias for Crude Oil also supported more upside for Equities.

The week played out with Gold and Crude Oil moving to the upside stronger in Gold. The US Dollar and Treasuries seem to have found a bottom and consolidated. The Shanghai Composite took that reprieve and moved higher joining Emerging Markets to the upside. Volatility consolidated before making a new 5 month low. The Equity Index ETF’s all rose and then consolidated with the favorable backdrop. What does this mean for the coming week? Let’s look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

SPY Daily, $ SPY

SPY Weekly, $ SPY

The SPY continued to move higher slowly, ending the week with a strong candle. The Relative Strength Index (RSI) on the daily chart shows a new high with a trend higher in bullish territory and the moving Average Convergence Divergence indicator (MACD) is positive and continuing to grow. Signs point higher on this time frame. The weekly view shows a strong trend off of the June lows with a rising, bullish and supportive RSI and a MACD that has trended higher and turned to positive. This looks very positive. There is resistance higher at 141.48 and 142.28 followed by a Measured Move higher to 153.60. Support lower comes into play at 137.90 and 135 followed by 134.12 and 131.46. Continued Uptrend.

Heading into the new week it looks like more of the same. Gold and Crude Oil are better to the upside with Oil stronger and Gold having a chance of consolidation. The US Dollar looks to continue to pullback int he uptrend with Treasuries possibly moving higher in the short run, within a pullback. The Shanghai Composite and Emerging Markets are poised to continue higher, at least in the short run for the Chinese market. Volatility looks ready to test the lows of 2005 through 2007. This creates a very positive backdrop for the Equity Index ETF’s. The charts of the SPY and QQQ agree with the inter-market view, while the IWM looks like the best of the three to consolidate the recent gains. Use this information as you prepare for the coming week and trade’m well.

Join the Premium Users and you can view the Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview August 10, 2012

Dragonfly Capital

Efficiency in the health care market

A friend of a friend runs a small HMO for a university (students, faculty, staff). Part of his job is negotiating with vendors for procedures and hospital care. “[A local academic-affiliated hospital] charges $ 2800 for a colonoscopy. I got a deal with a colonoscopy center, though, for $ 900. Same doctors. Same procedure. Same anesthesia.” Was there anything else that affects the price? “On top of these charges, the centers encourage patients to ask for Propofol as an anesthetic. That’s the Michael Jackson drug. It doesn’t work any better, but it has to be administered by an anesthesiologist and the centers and hospitals are able to tack on another $ 1000 in charges. Insurance companies will pay for it so the providers try to convince patients that it is better so they will ask for it. We tell them that we won’t pay for it!”

Philip Greenspun’s Weblog

Market Recap (6 Charts) – Bulls Hold the Fort

Market bulls finished off a constructive week as the S&P 500 finished near the highs of the week, registering a 0.2% gain for the S&P 500 while the NASDAQ added 0.1%.  Both indexes gapped down to start the morning but the buy the dip mentality is strong currently.  While markets did not advance much on the week, the key was not to give back a large portion of the substantial rally last Friday.  Note that during the ascending channel in the S&P 500 since early June, each rally has been met with significant selling shortly after to almost always immediately take the index to the lower end of its channel.  That has not happened this time around, which could mark a change in composure.   Instead of selling off 50-66% of the previous run, the S&P 500 has begun to create a “bull flag” which is considered a positive technical development.  In fact, the S&P 500 – aside from a brief visit Monday – stayed above last week’s highs all week!  Of course, in this market, anything can change in a dime but this has to be considered a week the bulls held the fort.

 

The NASDAQ, while not in a similar channel as the S&P 500, broke through to a new high on Monday and also held in steady all week.

 

While there was not much action in the indexes there was a large rotation happening under the surface of the market as pro-cyclical groups saw a lot of buying.  Key sectors are semiconductors, oil, and industrials.  You can see in the charts below all have a similar bull flag formation mentioned above.

 

However, one area that should be running with the above sectors but is not are the transports.

 

This feeds into the suspicion of “why” the market is rallying.  Is the market doing what it is supposed to do traditionally and forecasting a better economic condition 3-6 months down the road?  Or is all this a grand psychological experiment based on the Pavlovian response to expected central bank action in the U.S., Europe, and even China.

The market continues to brush aside almost all bad news as a “bad news = good news as it means more intervention” attitude has returned to markets.   A bevy of reports from China Thursday and Friday were disappointing but the immediate reaction was that this slowdown will force the government’s hand, hence the bad news should be bought.   Friday we learned export growth grew only 1% versus a year ago level, while bank loan growth was at a 10 month low.  The latter figure is very important as China uses its banks to ‘stimulate’ or ‘slow down’ its economy.

Last, please keep in mind the U.S. GDP growth rate of 1.5-2.5% is very much tied to a very expensive bill.  That is the massive federal deficits being run the past 4 years.  The latest is yet another >$ 1 Trillion deficit headed our way – with a few months to go, the country is already at $ 974 Billion.  Of course this is adding to money in people’s pocketbooks and boosting corporate profits, but at a cost for the future.

The U.S. federal budget deficit increased $ 70 billion in July and is on track to top $ 1 trillion for the fourth straight year.  The deficit for the first 10 months of the 2012 budget year, which ends Sept. 30, totaled $ 974 billion, the Treasury Department said Friday. That’s 11.5 percent less than the $ 1.1 trillion gap in the same period last year.

A slightly better economy has boosted income tax receipts, which have increased 6 percent so far this year. Corporate income tax receipts rose nearly 30 percent compared to a year ago. Spending has dipped 0.3 percent.

Certainly there are no free lunches – keep these figures in mind when we hear the comments about why the economy is growing – it is being subsidized by a tremendous amount.

Original post: Market Recap (6 Charts) – Bulls Hold the Fort




Stock Trading To Go

London Olympics spends $10,000 on each security guard’s uniform

http://www.guardian.co.uk/business/2012/jul/19/olympic-games-g4s-bill is sort of a fun article if you do some arithmetic on what the British are spending on one facet of security at the London Olympics. There were supposed to be 10,000 guards and the cost of their uniforms was 65 million pounds or roughly $ 10,200 per guard. In the best tradition of an ossified bureaucratic moribund society, more money is allocated to management (125 million pounds) than labor (83 million pounds). Overall, had things worked out as planned/hoped, the British would have spent $ 446 million (enough to have financed 15 Googles) to have 10,000 minimally trained security guards work for the 17-day event. That works out to $ 44,600 per guard or $ 2,623 per guard per day. As it happens, though, the contractor wasn’t able to supply the 10,000 guards, many of them could not speak English, and many were unable to stay awake during their minimal training. So the cost per actual guard may be closer to $ 100,000.

[The guards themselves don’t receive this $ 100,000, of course.  They receive roughly $ 13.30 per hour, according to this article.]

Philip Greenspun’s Weblog

Publishers can’t make money with iOS apps; publishers can’t make money with ads either

Technology Review, the MIT alumni magazine, has two recent articles that should depress publishers everywhere:

Don’t let your kids grow up to work in the publishing industry!

Philip Greenspun’s Weblog

Top Trade Ideas for the Week of August 13, 2012: Bonus Idea

Written By: DragonFly Capital

Here is your Bonus Idea with links to the full Top Ten:

JP Morgan, Ticker: $ JPM

JP Morgan, $ JPM, is forming a bull flag at resistance at 37.25 with a Relative Strength Index (RSI) that is trying to move into bullish territory and a Moving Average Convergence Divergence indicator (MACD) that is positive. Both support further upside. The series of higher highs and higher lows is also a positive and the 3-box reversal Point and Figure chart (PnF) carries a price objective of 76. There is resistance higher at 37.87 and then a gap to fill to 40.20 with resistance higher at 43.45. Support is found below at 36.50 and 34.50 followed by 33.10, 32.20 and 30.60.

Trade Idea 1: Buy the stock on a break over 37.25 with a 70 cent trailing stop.

Trade Idea 2: Buy the September 38 Calls (offered at 75 cents late Friday) on a break over 37.25.

Trade Idea 3: Sell the September 33 Puts (23 cents) on a break over 37.25.

Trade Idea 4: Buy the September 33/38 bullish Risk Reversal (52 cents).

Trade Idea 5: Buy the October 38/41 Call Spreads selling the October 33 Put (27 cents).

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If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which, heading into the new week look like more of the same. Gold and Crude Oil are better to the upside with Oil stronger and Gold having a chance of consolidation. The US Dollar looks to continue to pullback in the uptrend with Treasuries possibly moving higher in the short run, within a pullback. The Shanghai Composite and Emerging Markets are poised to continue higher, at least in the short run for the Chinese market. Volatility looks ready to test the lows of 2005 through 2007. This creates a very positive backdrop for the Equity Index ETF’s. The charts of the SPY and QQQ agree with the inter-market view, while the IWM looks like the best of the three to consolidate the recent gains. Use this information as you prepare for the coming week and trade’m well.

Dragonfly Capital

Niall Ferguson: China has a lot of room to grow

In this interview with Niall Ferguson, he says that China is more like mid-1970s South Korea (i.e., poised for a lot more growth) than it is like late-1980s Japan.

[Coincidentally, right now I’m reading Empire: The Rise and Demise of the British World Order and the Lessons for Global Power by the same author.]

Philip Greenspun’s Weblog