Cleveland’s Best Christmas Linkfest!

Written By: DragonFly Capital

Charts/Markets/Business/Economy You Might Not See Otherwise

Unemployment rates fall in 45 states in Nov. USA Today

Weighing the Consequences of a Money Fund Overhaul NYT

U.S. judge approves settlement in BP class action suit Reuters

Regulators drop enforcement against Third Federal; dividend could be restored soon

EPA sets limits on boilers, cement plants The Columbus Dispatch

The Noose Tightens: Ex-SAC fund manager indicted in insider trading scheme Reuters

Revisiting Apple, NBC and Gay Marriage from James B. Stewart NYT

Cleveland Flair

The Orchestra performs its annual Christmas Concerts at Severance Saturday and Sunday.

The day after Christmas, The Trans-Siberian Orchestra presents A Lost Christmas Eve at the Q .

Also at the Q the following day, The Harlem Globetrotters show the Washington Generals how it is played yet again.

For a sample of Chinese culture check out Shen Yun at Playhouse Square on Saturday afternoon.

Still time for the Stan Hywet Hall & Gardens tours all next week as well

Or the Rockefeller Park Greenhouse Poinsettia Display downtown.

Dragonfly Facts

Dragonflies have two sets of wings with a notch in the front edge of each wing. The front wing pairs are smaller than the back pairs. They function independently, giving the dragonfly speed and height during flight

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The Republican Congressional Delegation’s Oddly Faulty Memory of 2004

House Republicans argue that voters handed their members a mandate as well, granting the party control of the House for another two years and with it the right to stick to their own views, even when they clash strongly with the president’s.

And many Republicans remember well when the tables were turned. After Mr. Bush’s re-election in 2004, Democrats eagerly thwarted his push for privatization of Social Security, hobbling Mr. Bush’s domestic agenda in the first year of his second term.

Events Recall a More Bipartisan Era, and Highlight Gridlock of Today, Michael D. Shear, New York Times, today.

Whoa.  Funny, but I too remember the weeks following the 2004 presidential election. Which immediately followed the 2004 presidential campaign.  Which I also remember; it wasn’t all that long ago.  

And I remember that during that campaign, Bush never mentioned his plan to privatize Social Security.  

Yes, that’s right.  Bush waited until immediately after the election to announce his intention to privatize Social Security–outraging not just Democrats but millions of Independents, some of whom had voted for him, and even some Republicans.  

The main focus of the 2004 presidential campaign was national security.  Privatization of Social Security was not an issue at all in 2004.  Not until after the campaign, that is, when Bush not only announced his plan but also then campaigned intensely for public support for it, to no avail.  The proposal quickly proved deeply unpopular.  And congressional Republicans began to run from it.  The Republicans, who controlled both houses of Congress, did not even put it up for a vote, in either house, if I recall correctly.

So if Republicans think they remember that the tables were turned–a metaphor that refers to actual similarity, or at least some semblance of it–they might consider seeing a neurologist.  Or maybe just reading news accounts from the period between Bush’s announcement of his proposal and the death of that proposal early in 2005.  They also can search for reports of any mention–any suggestion at all–by Bush during the campaign that he was planning to propose the privatization of Social Security.  I wish them luck.

As for their claim to a mandate because they retained control of the House, the speciousness of this assertion has already been documented and discussed in the mainstream media, largely because a Washington Post reporter (I wish I could recall his name, but I can’t) meticulously researched the campaign results, congressional district by congressional district, and then did something that modern Republicans don’t: math.  Republicans lost, albeit narrowly, the aggregate popular vote in House elections nationwide.  They retained control of the House only because of extreme gerrymandering last year in some states, most notably in Pennsylvania and Texas, but in other states as well.  

The word “mandate” in this context leaves room for debate about what percentage of victory in the popular vote constitutes one.  But a victory in the popular is a prerequisite to that debate.  The Republicans don’t have the prerequisite, nor do they claim to have it; they simply misuse the word “mandate”.  Like so many other words.  

But at least it’s not false for them to note that they did retain control of the House.  What is baldly false, though, is their characterization of late 2004 and early 2005 as tables turned.  Unless, of course, there’s such a thing as a retroactive mandate for a policy that wasn’t disclosed during a campaign and is announced as a surprise only afterward.  Immediately afterward.

Which, now that I think about it, probably is what happened in 2004.  no, the public isn’t clairvoyant.  But we did know during the campaign that a Republican president and a Republican-controlled Congress in the current era will always want to privatize Social Security, and will waste no time (literally, in that case) in trying to do that when they hold the White House and majorities in both congressional houses.  We just forgot that, to our near-detriment–a mistake that, I trust, we the public won’t make again, however much Republican candidates insist otherwise during the campaign.  Because the Dem candidates will remind the public, during the campaign, of what happened after the election of 2004.  And of the current congressional Republicans’ claim in that New York Times article that a clear election victory is not a mandate on issues that were at the express and constant heart of a national campaign, because, after all, the opposition party doesn’t recognize as a mandate a vital policy proposal made only after the election that retroactively turned out to be all about that vital policy issue after all.  I mean, who knew?  Well, the Republicans did.

And now we do too, and it will be a prominent factor in campaigns to come.  The sheer trickery;  the attempt, in 2004 and now, to utterly undermine the very concept of democracy.  The current congressional Republicans’ express equating, as Shear reports, of a policy issue clearly at the heart of a campaign with a policy not even mentioned during the campaign.  It’s of a piece with the Romney campaign’s modus operandi of incessant, outright misrepresentations of fact.  And also of a piece with state and federal Republican legislative and executive-branch officeholders’ policy of delegating to lobbying groups the actual writing of legislation, including during lame-duck periods, enacting policies never proposed and, in some instances, expressly rejected by the officeholders, pre-election.  (Think: Michigan, Dec. 2012.)

But there’s also a separate issue of the messenger’s’–Shear’s–curious acceptance of the false equivalence of Bush’s and Congress’s handling of the Social Security privatization issue in late 2004 and early 2005 and resolution of the tax and spending issues of the fiscal cliff.  Shear mentions that Obama’s current approval rating in this week’s polls is his highest since shortly after bin Laden was killed.  He doesn’t mention that Obama’s approval rating has been above 50% throughout the post-election period, including the period before the Newtown shooting rampage, when the cliff talks were the news story, daily.  And that Bush’s approval rating plummeted once he announced his Social Security privatization plan.  And that the juxtaposition of the drop in Bush’s approval rating and that announce was not coincidence; the polling on that issue was awful for him.

We all are, by now, used to the news media’s acquiescence in the Republicans’ false-equivalency game.  But, really, until I read this Times article, by a reporter whose reporting is normally of high quality, makes me wonder whether there’s just is no limit to even the reporter-as-mindless-stenographer-for-fear-of-appearing-to-be-anti-Republican mindset at even the very highest level of the mainstream media.

Angry Bear

SPY Trends and Influencers December 22, 2012

Written By: DragonFly Capital

Last week’s review of the macro market indicators suggested, heading into the last full week of the year, that there was still a bit of a cloud over the markets. Gold ($ GLD) was biased lower within the long term neutral trend, with Crude Oil ($ USO) looking steady with a bias to the downside on a move out of the range. The US Dollar Index ($ UUP) was biased to the downside if it were to break the tight range with US Treasuries ($ TLT) looking lower in the uptrend. The Shanghai Composite ($ SSEC) was looking strong in the downtrend with Emerging Markets ($ EEM) strong but perhaps ready for a rest. The Volatility Index ($ VIX) was showing no fear anytime soon keeping the bias higher for the Equity Index ETF’s $ SPY, $ IWM and $ QQQ. Their charts showed some caution if not a pullback coming with the QQQ biased lower and weakest.

The week played out with Gold selling off as seen in the charts but Crude Oil moving higher. The US Dollar and Treasuries also continued lower but both found a bottom and bounced to end the week. The Shanghai Composite consolidated the move higher from last Friday while Emerging Markets drifted up before giving it all back Friday. Volatility also drifted higher before a spike and pullback to end the week. The Equity Index ETF’s made a move higher before pulling back to end the week nearly flat. What does this mean for the coming week? Lets 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 higher in a rising channel with a pullback to the bottom of the channel to end the week. The Relative Strength Index (RSI) is bullish but also pulling back and the Moving Average Convergence Divergence indicator (MACD) is positive and fading on the daily timeframe. Also the move lower Friday happened on strong volume. The charts above take the dividend Friday into account. Moving out to the weekly chart shows it riding higher under the nearly 3 year trend line but still on track towards the Measured Move higher to 155.12. The RSI on this timeframe is rising and on the verge of moving into bullish territory with a MACD that is improving and about to cross to positive. These support more upside price movement. There is resistance higher at 144.44 and 147 before the Measured Move target. Support lower comes at 142 and 139.80 followed by 138 and 134.40. A move under 142 breaks the rising channel and turns the short term upside bias to downside. Continued Uptrend.

Heading into the last week of the year there is a positive tone in the price action of equities. That said Gold looks to continue lower while Crude Oil rises. The US Dollar Index seems content to move sideways with a downside bias while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are biased to the upside with risk of the Chinese market reversing. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves lower to end the week. 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 December 21, 2012

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Dragonfly Capital Views Performance Through December 2012 Expiry

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Would we still be the same country without our gun nuts?

At a dinner party on Friday evening, the Canadian hosts asked, light of 2012′s mass shootings, what conceivable purpose could be served by allowing Americans to own such large personal arsenals. Being a parent and a non-gun-owner it was tough for me to come up with a rational argument other than a weak “Well, it is in the Constitution”. Contemplating the question later, however, I wondered if we would still be the same nation without so many passionate gun owners. From a strictly rational point of view it is tough to justify a lot of things that Americans do. We spend a lot of time and energy watching professional football, which is injurious to the players and even more so to the spectators (who should be out exercising themselves or learning Mandarin!).

It is tempting to think that we could pick the best laws from various countries around the world and come up with some sort of optimized society, but perhaps it simply isn’t practical. The Japanese have a national character of craftsmanship. The French have a national character of enjoying rich food and wine. Maybe one aspect of our national character is that a lot of us need to be gun nuts.

Philip Greenspun’s Weblog

Eyes on the Organic Food Chain

Written By: DragonFly Capital

The natural and organic food space has been beaten up badly. Whole Foods Markets, $ WFM, The Fresh Market, $ TFM and Hain Celestial, $ HAIN, are all well off of their highs and frankly showing no reason to buy their stock. But their biggest supplier United Natural Foods, $ UNFI has many reasons to buy it. The weekly chart below is a good place to start. Notice the Andrew’s Pitchfork, bullishly pointing higher. The price is being pulled to the Median Line after a brief move below it. The

Median Lines show clearly the trend is higher. Notice where that turn back higher happened. It found support at the 50 week Simple Moving Average (SMA). But it was also a near exact 38.2% retracement of the last leg higher. The supporting indicator, the Relative Strength Index (RSI) is moving higher with gusto and near a break into bullish territory. Finally it also has positive news, as it is being added to the S&P SmallCap 600 Index after the close on Friday. How high will it go? Applying a Harmonic AB=CD creates a Potential Reversal Zone (PRZ) between 78.71 and 79.05 sometime in late August 2013. Not a bad long term pick for 2013. And if the stock does continue to rise can the stores themselves be far behind?

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How much will one part of ObamaCare cost? Results from a random controlled experiment

I attended a talk today at MIT by Amy Finkelstein, an economics professor who led a $ 20 million research study of a group of poor people in Oregon who were randomly assigned either to receive Medicaid or not (paper). Oregon had enough money to do for some of its poor able-bodied adults what ObamaCare will do for all poor able-bodied Americans: give them Medicaid (unlimited river of money as long as it is handed over to the world’s most expensive health care industry; I pointed out in my health care reform article that Americans could have a free house, free cars, free children, and free college education for those children if they cut their health care spending to what Mexicans spend). Oregon did not have enough money for everyone and therefore decided that the fairest way to allocate coverage was to let people apply and then give out coverage by lottery. It was an almost perfect random experiment, except that the program was limited to those who bothered to fill out the paperwork to apply (possibly sicker than average).

The study included actual checkups for thousands of participants, hence the enormous cost.

The conclusion was that Medicaid increased hospital use by about 30 percent, outpatient medical care by about 35 percent, and total spending by 25 percent. Finkelstein noted that advocates for expanding health insurance often predict that use of hospital emergency rooms will decrease when everyone is insured. That turned out not to be true in Oregon. The insured and uninsured used emergency departments at hospitals at roughly the same rate.

An unexpected result was the recipients of the Medicaid card reported themselves to be about 30 percent happier than before, a result equivalent to having doubled their income. As they did not measure all that much healthier this may be partially explained by a feeling of security that they won’t have to deal with the nightmare of being an uninsured individual in an American health care industry that exists to serve insurance companies, not individuals.

Finkelstein closed by noting that this result should not be too surprising. The introduction of Medicare in the 1960s resulted in an enormous increase in hospital usage and then a huge boom in hospital construction.

So if Americans as a whole behave the same as the survey group in Oregon, health care spending on approximately 20 million Americans should go up by 25 percent (Medicaid already consumes about half a trillion dollars every year, about the same as the GDP of Argentina, Belgium, or Norway). We may get some value for that money, though, as these people will be walking around with big grins.

[Note that the study proves Malcolm Gladwell  more or less dead wrong. In 2005 he wrote a New Yorker article about how health care was different than anything else people buy. Providing insurance would not increase demand. The “moral hazard” that applied to every other kind of insurance did not exist for health insurance. Related: see my analysis of Gladwell’s Outliers.]

Philip Greenspun’s Weblog

DVD Promo

Christmas is coming, so here’s a gift any trader will like: half price seminar DVD’s.

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Before the bowl games begin and as your preparations for 2013 get underway, these will help you.

Trade Like a Bandit!

Jeff White
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Research in Motion Earnings Trade Ideas

Written By: DragonFly Capital


RIMM, $ RIMM is building a bull flag under 14.40 resistance, a level that has been important in the past. the RSI has become overbought and the MACD is near a cross to negative. The short term is set up for more consolidation or a pull back. That said the trend is higher and all of the Simple Moving Averages (SMA) are in agreement. A move above that resistance has a measured Move higher to 16 and there is resistance higher at 17.45. Short interest is high at over 20%. Support below comes at 12.10 and 11 followed by 10.25 and 9.65. The reaction to the last 6 earnings reports has been a move of about 15.83% on average or $ 2.20 making for an expected range of 11.60 to 16.10. The at-the money December Straddles suggest a roughly similar $ 1.50 move by Expiry with Implied Volatility at 240% above the January at 100%.

Trade Idea 1: Buy the December 14 Straddle for $ 1.53.

Trade Idea 2: Buy the December 14/16 Call Spread for $ 0.50.

Trade Idea 3: Buy the December Monthly/December 28 Expiry 16 Call Calendar for $ 0.18.

Trade Idea 4: Buy the January Monthly 14/17.5 Call Spread for $ 1.00.

these trade ideas were given to subscribers just before 2:00pm.

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Turning a Digital SLR into a video camera: IDC System Zero

I have now spent nearly four years in possession of two of the world’s best video cameras: the Canon 5D Mark II and the Mark III. These have a 24x36mm sensor and I have a whole closet full of high performance lenses to stick front of them. Yet I have never become comfortable using either body as a video camera. The first problem is that the $ 3500 camera won’t autofocus while filming. You’re supposed to “follow focus” like a Hollywood cinematographer, but my 49-year-old eyes aren’t so good at perceiving sharp focus on the rear LCD. The second problem is that high quality video starts with high quality audio and I don’t think the on-camera microphone in the 5D Mark III is especially good. Even if it were, it is in the wrong place for a lot of subjects. I would want a Bluetooth microphone that I could clip onto a subject’s lapel and/or shotgun mic mounted farther away from the noise of the autofocus motor.

These photos show the 5D Mark III mounted inside an IDC System Zero. It seems to solve a lot of the problems described above. With the eyepiece over the rear LCD it becomes possible to evaluate focus more easily. With the big knurled knob it becomes easier to follow focus smoothly. With the big accessory cage it would be theoretically possible to plug in a shotgun microphone and run a cable down to the camera. Does it work? Maybe for a professional movie maker it would, especially if mounted on a tripod. I found the rig too difficult to hand-hold and also too cumbersome to mount and unmount. It would be perfect for a full-day video capture project but it doesn’t work for a parent interested in using one device for both still and moving images of a child.

My most-used video camera right now is the Sony NEX-6. The sensor is smaller than on the big Canon, though the dynamic range is better according to DxOMark. The high quality lenses that I ordered are out of stock so I’m using a $ 150 kit lens on this camera instead of the $ 2000 Canon L zoom that I might be using on the 5D Mark III. But the camera will autofocus while capturing video, the microphone seems pretty good, and flip-up LCD screen makes for an awesome 49-year-old parent camera (I would rather hold the camera at waist/child level and look down than stoop to waist/child level.)

Is anyone out there having good luck using a digital SLR such as the 5D Mark II/III as a video camera? If so, what accessories do you find essential? (And I guess it would be interesting to hear from folks who are having good luck with just the raw camera; I know that it can be done.)

Philip Greenspun’s Weblog

Top Trade Ideas for the Week of December 17, 2012: Bonus Idea

Written By: DragonFly Capital

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

Bank of America, Ticker: $ BAC

Bank of America, $ BAC, moved above the closely watch resistance at 10 and drove higher. Now consolidating at 10.50 in a bull flag it has a Relative Strength Index RSI that is bullish and running flat along the technically overbought level with a Moving Average Convergence Divergence indicator (MACD) that is positive, but might be stalling. The current level is also the Measured Move target from the September-October ascending triangle break. If it can break the flag higher there is a Measured Move higher to 11.20. Be careful as the Open Interest (OI) in the December Options shows the maximum at the 10 Strike Call and 9 Strike Put, making the maximum options pain level below 10. From a longer view the 3-box reversal Point and Figure chart (PnF) carries a price objective much higher at 20.

Trade Idea 1: Buy the stock on a move over 10.60 with a stop at 10.47.

Trade Idea 2: Buy the December 10.50 Calls (offered late Friday at 21 cents) on the same trigger.

Trade Idea 3: Buy the January 4 Expiry, 10.50 Strike Calls (34 cents) on the same trigger.

Trade Idea 4: Buy the December28/February 11 Call Calendars (28 cents) and continue to sell weekly 11 Strike Calls if the price does not rise.

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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. This week’s list contains the first five below to get you started early.

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