Stocks Resting, PCLN Tops, GS Still Trekking

Stocks rest yesterday after 3.3% jump from Friday's lower open

The S&P 500 closed a mild 48 basis points lower after gaining 2.2% on Monday. Tokyo and London showed weakness overnight with 2.1% losses in Japan and the UK trading down 78 basis points currently. US futures are trading 30 bps higher pre-market after the ADP jobs data showed a greater than expected gain in jobs. As the week moves on and after the ISM non-manufacturing index is released today at 10:00 AM, all eyes will be on the US government jobs report released on Friday morning.

The Negotiator did quite well in the second quarter! A notable earnings report from Priceline (PCLN) was released last night crushing estimates with EPS of $3.09 versus the $2.65 expected and a strong top line coming in at $767 million versus $733 million expected. Guidance impressed the Street at $4.78-4.98 for Q3 trouncing the $4.18 analyst estimation. PCLN expects revenues to grow 29-34%. PCLN is the new economy, a low-cost, online product that greatly increases efficiencies in the booking and pricing of travel. Shares of PCLN are trading up 17.8% pre-market and bumping up against all-time highs at just under $274. Prior to the announcement PCLN traded 22 times trailing earnings and now sees revenue growth in the 30% range, now there's a good story!

Gold finding footing once again as commodities bounce

The recent spat of weakness in gold throughout July surprised many traders. The most logical conclusion I have read is that the sequential deceleration in inflation and inflation expectations has tempered the need for a hedge, one of the core investment arguments among gold bugs. Yet, the rallies in crude and copper, not to mention many agriculture commodities, may be showing a significant change in sentiment. While the short end of the Treasury curve points to very low inflationary and even deflationary expectations, the recent moves in commodity markets point to the opposite. Either way, it's looking as if I should have covered my gold short when my gut told me to around $114 in GLD. My position is very small so I more or less ignored it but that was probably a bit foolish.

Goldman Sachs (GS) still trying to push higher

Shares of GS have been stair-stepping higher since Thursday's large move to the upside that finally got me committed to the long after a few days of back and forth. The stock has yet to find convincing momentum and it is nearly impossible to be active in shares throughout the day. The open today will be around yesterday's high and maybe today is the day we see some extension. My average price is $149.73 and I will be moving my stops up to the bottom of the last couple days of consolidation around $151 to not turn this winner into a loser. My target remains $160.


Disclosure: Long SPY, GS. Short GLD.

Austerians Winning Deficits Battle, Equities Dropping

Austerity, restoring confidence or killing the patient?

The heightened talk of austerity measures throughout the world is certainly a motivating factor behind the selling in equity markets. The Keynesians are furious that governments are contracting fiscal stimulus too soon arguing that previous measures will be wasted if we pull the plug now. The economy is still on life support they argue and we have not overcome the deflationary forces at work. The worries of financial distress are exaggerated particularly in the United States where interest rates on our debt are at the low end of historical ranges.

The austerians believe government deficits are hurting confidence around the world and reigning in spending will solve these problems. Ultimately, they are more worried about the inflation story and continue to fret that bond vigilantes will attack at some point, drive up interest rates on our debt and we will be unable to fight back. Reducing deficits now they believe will spur investment by the private sector and get ahead of what are inevitably higher interest rates in the future.

While this is a highly complicated issue and I tend not to argue too definitively on either side of the coin, I do lean toward the Keynesian argument. I believe we have an excellent example in the Japanese story as best outlined by Professor Richard Koo. The fears of inflation and higher rates seem overblown as we are still mired in a deflationary storm. Yet, there is a point at which governments must cut spending and 5.9% GDP growth in Q4 2009 followed by 2.7% Q1 2010 growth do not necessarily indicate an economy in desperate need of more Keynesian medicine. Though the 9.3% domestic unemployment rate is not particularly encouraging.

Either way, this debate will be solved by others and I will focus on the effects on financial markets. Lowering deficits will adversely affect equity prices by lowering GDP. The $1.6 trillion budget deficit this year cannot be reduced without negatively affecting GDP at least in the short-term. Contractionary fiscal policy will likely force monetary policy to stay expansionary far longer than otherwise and ultimately this translates to furthered debasement of paper currencies and higher real asset prices.

Gold collapses for 2nd Monday in a row

So much for my post yesterday where I stated I did not see a reason to sell any of my position in NYSE:GLD. Gold rallied early in the day to within $3 of last Monday's all-time highs of $1,266. It based for 30 minutes and then rapidly collapsed $27. Once again, any weak hands in the metal were stopped out in the harsh down move. I have a decent entry price so I continue to hold through the volatility and will only be stopped if prices make a lower low which has yet to happen.

The two moves have definitely shown the perils of chasing new highs in gold. It is also interesting to note the possible impact of NYSE:GLD on the gold futures market. NYSE:GLD made new all-time highs yesterday by a few cents exciting many traders who were only following the ETF and not the futures market. This disconnect could have fueled the early selling as the new high buyers in the ETF dumped their positions at the first sign of weakness.

I expected NYSE:GLD to be a solid risk-aversion holding against equities but it has not yielded much protection in the last week. The long-term looks very promising with gold the only asset class continuing to trade just off all-time highs. If we see a breakdown in the short-term, I will blow out most of my position and return to just a feeler and wait. I expect new highs sooner or later but my timing could be off. For now, I wait.

When you're wrong, stop being wrong

One of the most important aspects of trading is recognizing when you are wrong. The best traders stay very stubborn to a point but then are willing to completely flip their thinking and admit their mistakes. I put together a very nice trade on the long side in early June catching a nice bounce off the $1,040 level.

After making the higher high in the market I began thinking the bottom could be in place. I tried a lot of longs over the last few days and wiped a lot of my gains in short order as the market sliced through buyers like a hot knife through butter. Today, I capitulated off the open and dumped nearly all my remaining long positions to be flat equities. So much for that. The $1,040 level is so closely watched by all technicians, it seems destined to break if only for a short time.


Disclosure: Long GLD.

US Knocked Out, Equities Trying at Higher Low

US World Cup hopes crushed in OT against Ghana

The US lost in overtime to Ghana, a solid squad that moves on to play Uruguay. US players were apparently, once again, not prepared to play when the stepped on the field and gave up another goal just 4 minutes into the game. This follows giving up a goal in the 3rd minute to England and one in the 12th minute against Slovenia. It is tough to win the World Cup when you step on the field flat-footed in 3 of your first 4 games.

The Ghanans dominated the first half after Clark foolishly lost the ball while trying to beat a guy in midfield leading Howard to be beat on a weak shot to the near post. US players, many from the MLS, were not prepared to play at the pace Ghana set for the game. Ghana closed quickly and never allowed the American side more than a touch on the ball before feeling pressure. Though, the second half was won by the US in my book. We created a number of chances and Dempsey smartly drew a tackle in the box yielding a penalty kick which Donovan expertly put away.

The overtime goal was equally disappointing. A wild clearance from the Ghana defense was terribly defended and the Ghana striker was given time after a bump in the back to rip a full volley into the back of the net. I must say I place some blame on the coaching, Bob Bradley must be held accountable. Conceding three very early goals shows that the team was not ready to play. His choices of players and substitutions in the Ghana match were questionable at best.

Overall, a disappointing match but I was happy to see us exit the group stage. The tie against England almost makes it all worth it. Donovan proved to be a world-class player scoring 3 out of our 4 goals. Good luck to the remaining teams and until 2014...

Equities whacked last week, now what to do?

China's weekend announcement to unpeg the renminbi from the dollar and allow a slow appreciation marked the top of the bounce off the 1,040 level in the S&P. The 8.5% bounce from early June lows quickly evaporated last week with a 4.8% pull-in. There seems to be plenty of fervent bulls and bears out there arguing both sides of the coin. Clearly, there was buying at the 1,040 level but another test of that area seems likely to lead to a breakdown. Equities finally found a bid on Friday to close off lows.

I have some longs and I will be looking to the long side early this week while trying to judge the action and gauge the strength of the buying. Frankly, at this point I do not know but I am leaning long after the higher high was made and now possibly a higher low could be formed. The VIX remains high at just under 30% offering continued volatility. Doctor copper is offering us some bullish clues breaking the downtrend since April last week and regaining the $3 handle. Natural gas is also finally seeing increased demand rebounding from sub-$4 prices of May trading up to $4.75 now.

Gold testing all-time highs

Gold futures are sitting just under all-time highs seemingly awaiting any news item to spark buying through the level. I continue to think aggressive buying will eventually pick up in the shiny metal and now is not the time to sell. For now I am holding NYSE:GLD and awaiting an expected move to $130.

Twist in financial reform, Democratic Senator Robert Byrd dies

A wrench has been thrown into passage of the financial reform bill with Robert Byrd passing away this morning at age 92. If Senator Scott Brown decides to vote against closing debate, Democrats may be unable to secure the needed 60 votes to move the bill to final passage. Barry Ritholtz has an excellent analysis of the bill ultimately giving the bill a C- grade with F's given to the bill's addressing of too big to fail, leverage limits, credit ratings agencies and corporate pay. I could not agree more on the leverage front, how can there be no basic limits on leverage?


Disclosure: Long SPY, GLD.

Donovan is Cluth, Gold Testing Nerves, Buying Equities

Donovan comes through for the US

I have to admit I have been a hater of Donovan for years now. I followed him early on in his career and found him to be an over-hyped, choke artist. Yet, times have changed and in the last few years his playing style has greatly matured and his composure on the ball has strongly developed. His brilliant top-shelf shot against Slovenia put us on the road to a tie and his extra time goal yesterday against Algeria was absolutely clutch. The US now takes on Ghana on Saturday at 2:30 PM in a very winnable game. Winning Saturday will put us against the winner of Uraguay and South Korea. We can definitely prevail in the next couple games especially if Donovan continues his star performance.

Gold stops out weak hands

My gold position is hanging on by a thread and my stop will be triggered if gold makes its first lower low since March. While I will have given back a good deal of profit I have no problem taking a small loss should my plan not pan out. Gold has dropped 2.9% off the all-time highs in a fairly harsh fall that has easily wiped out any weak hands. Being a trader with a short-term, momentum-based strategy, I am far from a strong hand yet the action yesterday was encouraging as gold bounced off the 20-day moving average for a strong close. Once again, I have my stop and no other action is required of me until it breaks down or moves out to new highs.

Goldman Sachs issued a report a few days ago stating that "if gold-ETF buying were to continue at its current pace for the remainder of the year, we would expect gold prices to rise to $1,400/toz by the end of 2010." Understanding the impact of NYSE:GLD on the gold market is important. I have noticed many 3:30 PM rallies in NYSE:GLD even while the gold futures market is closes at 1:30 PM. ETF buying has become a dominant feature in gold's movements.

S&P now 50% off short-term bounce at $1,075

I am looking at the $1,075 area in the S&P as a great place to be picking up longs for the next wave higher. Wall Street has forgotten about the Eurozone's debt woes as quickly as we started caring about them. It seems to me that the path of least resistance will be higher in the next couple weeks into earnings season beginning on July 11th with Alcoa. I am not as interested in being long market indexes but rather individual companies that have strong fundamentals and momentum behind not only their stock prices but their businesses.


Disclosure: Long GLD.

Gold to Go Parabolic (NYSE:GLD)

Gold is shaping up for a parabolic move into new all-time highs. US gold futures closed just under previous all-time intraday highs of $1,253.90 for the highest all-time closing price. I am locked and loaded long GLD with an average price of $119.38 and a stop at the $118.80 area. I expect this to be an excellent swing trade as momentum will likely increase dramatically when gold clears previous highs. I will be looking for at least $1,300 to start taking profits. When momentum kicks in, gold has a historical tendency to take off with the excitement.

BUT, gold is a widowmaker and makes quick work of those that chase. I learned a tough lesson in December 2009 suffering through a dramatic drop with too much size. I had worked into the position very early and had a great average price around of around $97. But I did not take profits quickly enough and underestimated the level of pain a pull-in would put me through. I sold a quarter of my position at $112 and got lucky to sell another quarter just near the top at $118.50 but I held almost half my position as gold dropped over $150 from highs. I learned to never underestimate how tough it is to watch a lot of P&L evaporate before your eyes. So, this time around, I'll try to be very quick to exit when the bid disappears. Let's hope I recognize when that happens and accept the missed profits of not selling at the top. Let the games begin.

Disclosure: Long GLD.

First Sellers Step Into Equities, Gold to Blast Off?

Stocks rallied early before paring gains to close flat on the day. Today was a great day of consolidation considering the entirety of the move off lows and through the 200-day moving average. The S&P is now 7.1% off lows and a milder 8.6% off highs. I sold the last of my NYSE:SPY feeler position around the close as today felt like the first bit of real selling entering the market. I sold it because I am expecting to be able to buy back stocks in the coming days on a pull-in and I wanted to lock in the gain.

I am currently long a large swing position in gold through NYSE:GLD. Just a hypothesis, I think the equity market may see a minor pull-in in the coming week that would reignite the bearish headlines and help gold overtake new all-time highs. Relative strength is one of the most proven aspects of technical analysis and gold's strength could not be any better. What better relative strength than one of the only assets classes or markets in the entire world trading at all-time highs (besides the Sri Lankan stock market)? While this would likely mean it is not a good time to be investing, I do see it as a great momentum play for the swing trader.

Apple (NASDAQ:AAPL) is a stock I just keep on telling myself to buy but I continue to shy away for some pathetic reason. I put out a note where I argued for a $300 price target last December before the iPad was released. Now we have the iPad and the iPhone 4. I am going to close my eyes and buy this stock on any weakness. The reason it is so difficult to enter this stock with a reasonable stop loss is because everyone else wants the same buy so it never materializes.

Disclosure: Long GLD.

Stocks Roar Higher, North Korea Not So Bad

Not the most exciting day of soccer today as Slovakia tied New Zealand 1-1 in the opening match and Portugal and Ivory Coast drew to a 0-0 tie. I must say I was impressed with North Korea's play in the 2:30 time slot against powerhouse and World Cup favorite, Brazil. North Korea held Brazil scoreless well into the second half until their goalkeeper committed the cardinal sin of being beat to the near post on a no-angle shot off the endline. Great vision and a brilliant through ball took Brazil up 2-0. But, North Korea kept on fighting and grabbed one with just minutes to go for a 2-1 finish. The two selfish shots in the final minutes from Jong Tae-Se's aggravated me; how can somebody living under a communist system be so selfish I ask? I'll admit I almost found myself rooting for North Korea, the massive underdog and global pariah. How can one not feel bad when North Korean players admit to seeing cell phones for the first time in their lives? Kim Jong Il will not even allow games to be televised in the country. Yet he will show highlights of the matches. I imagine the purposeful impression being something along the lines of "NK was the best team out there but was cheated out of victory by the capitalist pigs". But it's great to see them on the world stage and I hope this can help slowly erode the barriers of isolation.

So what does contagion mean again?? It appears that Wall Street's amazingly short attention span has already shifted away from Greece and the meltdown in Europe as headlines of debt fears have moved to the back pages. The Dow closed up 214 points solidly back above the closely watched 200-day moving average. I continue to stay long the SPY and will look at add on a pullback. Overall, I want to be long this market for the snapback trade but ultimately will look to only be long particular companies as I believe the greatest returns versus risks will come from individual security selection over diversified baskets (more on this in an upcoming post).

Gold rallied 1.0% along with equities throughout the day rising to the top end of the range within the recent base as the dollar index dropped 0.7%. I added aggressively at the lower end of this base in GLD against the $1,220 bottom side in gold futures. It looks like today was a particularly bullish sign for the shiny metal and clearing $1,240 should pave the wave to new all-time highs. A long-term weekly chart shows a high level consolidation just above previous highs. I would expect the next wave of buying to generate a very large move to the upside and I am positioning accordingly.

The creditor (China) versus debtor (US) nation debate is heating up as China responded to America's constant complaints about China's currency manipulation. The Foreign Ministry spokesman, Qin Gang, said last night: "We hope that American politicians and others concerned can seriously consider how to resolve the structural problems in their own financial system, instead of blaming others." Those is fightin' words if I ever heard 'em. Frankly, I agree with China though. I believe a slow appreciation of the renminbi is in the best interests of everyone but China is rightly concerned about allowing this happen too quickly and under the wrong circumstances. With the US running a $1.6 trillion budget deficit and China acting as our largest creditor I think we would be wise to keep this relationship diplomatic.

Disclosure: Long SPY, GLD, FXI.

Euro in Freefall, Volatility Picks Up

The euro is still in freefall hitting new lows of $1.2143 so far this evening. German Chancellor Angela Merkel announced today a ban of naked short-selling on the stocks of 10 major financial institutions and a ban of credit default swaps purchases on German government debt by speculators until March 31, 2011. This action is seemingly unneeded as the German DAX is up 0.8% year-to-date and yields on 10-year sovereign bonds are a mild 2.83%. Naked shorting of equities should be illegal to begin with; it's against regulations in the United States and many other markets. The CDS ban is on transactions by traders that do not own the underlying and therefore do not qualify as hedgers. Yet, most of the speculative CDS purchases occur in London and fall outside the jurisdiction of the German government so the ban is largely ineffective. (WSJ) The move seems very misguided and I do not see how it will help the situation in Europe, it may even cause a great deal of harm with many analysts seeing it as a sign of "desperation".

The credit card companies have been crushed in this market downturn so far. The so-called Durbin amendment, proposed by the Democratic Senator of Illinois, Richard Durbin, has investors concerned about the loss of revenue from capped debit card fees. The market's reaction seems vastly overdone with a Goldman Sachs report stating that "the financial impact of interchange legislation would be marginal for MA and V at 1-2% of earnings". Visa (V) closed down over 6% today after comments from CEO, Joe Saunders, were interpreted very negatively by the Street. Saunders believes "there may be some reduction in the volume in the short run" but does not "view the legislation as having much long-term risk for the largest U.S. debit processor" (Reuters). Visa and Mastercard have cascaded off highs 21.7% and 24.7% respectively, colossal under-performances relative to the market only 8.1% off recent highs.

The equity markets look fairly terrible with the bears solidly in control. The market closed on the lows of the day back at yesterday's lows even after the big late-day rally into positive territory seen yesterday had encouraged the bulls. The S&P futures are down another 10 handles after hours this evening. The VIX closed at 33.55% today, a strongly bearish signal as uncertainty about future prices grows. The markets have changed dramatically in short order and the bid has been removed from the market. I have some small long positions in a few US equities but I have been quickly losing on all positions. Gold has been my only successful trade as of late and I am adding on this pull-in the last couple days.

On tap tomorrow is the CPI report along with FOMC meeting minutes. Tokyo is down 1.6% already this evening looking rather dismal.


Disclosure: Long GLD.

Euro Slides to New Lows, Gold Basing

Traders on hopping on the euro slide! Following the significant weakness in the euro last week the Eurozone's currency hit new lows of $1.2233 last night. There seems to be no end to the pervasive doubts over the European Union's chances of success with its debt package. Overall pessimism about the fate of the monetary union reigns supreme. While I am definitely not considering an attempt at catching this falling knife, I do see a short-covering rally possibility as short positions in the currency reach record highs and sentiment is extremely bearish. Other notable news, the Shanghai Composite tumbled 5.1% last night as the prospect of central bank tightening pressures equity prices. While the PBOC's actions are likely correct for the long-term health of the country, equities will suffer.

Gold looks absolutely fabulous. After hitting new all-time highs last Wednesday of $1,249 gold took the rest of the week off consolidating recent gains. Currently trading at $1,228 gold looks primed for an explosion higher. My thoughts on a possible counter-trend move in the euro would lead to selling in the dollar helping to spur buying in gold. I am playing this move through NYSE:GLD, I have been long and will continue to be long; I see no reason to be a seller here. I also bought $125 June calls on GLD two weeks ago. I am considering adding to my call positions within this high-level base as volatility has calmed in the last few days lowering premiums.

Gold Makes New All-Time Highs, Euro Falling

Gold roared to new all-time highs today after the US equity market collapse last Thursday stimulated a panicked flight to quality and the European Union's debt aid package has investors feeling heightened worries of fiat currency debasement. The Eurozone's debt package is simply a way to paper over the problem: buy debt and print it away. Debasing the euro may be the best way to smooth out the pain over time by inflating rather than feel a rapid economic contraction if deflation takes hold. While this may or may not be the best course of action, it does have plenty of implications especially in currency and commodity markets. With the US engaged in extremely expansionary policies as well, the only safe haven is the shiny metal itself: gold.

There are some relatively worrisome happenings in the euro currency market for investors. The euro has been taking a beating throughout 2010 so far falling from a late-2009 high of over $1.50 to a current price of $1.2637. The debt aid package announced on Sunday night immediately had the expected and intended effect. The euro leapt and debt yields plummeted, most notably for the PIGS (Portugal, Italy, Greece & Spain). After hitting lows of $1.2518 last Thursday, Sunday night's announcement spurred a surge in the euro back to almost $1.31.

Yet, now after a couple days have passed the enthusiasm has quickly dwindled as demonstrated by the euro now trading back near the lows of the year. The EU specifically wanted the package to "shock and awe" investors but currency market participants are seemingly unimpressed. A lot of questions still remain such as how the special purpose vehicle (SPV) will be run, what will the rules be, how will countries be punished for missing payments, etc. I won't jump to any conclusions based on a couple days of price action but I'm wondering if the currency markets aren't reflecting a persistent doubt about the long-term success of this plan and the euro currency itself. Monetary unions have not had much success in the past and if a €750 billion package cannot soothe fears, I'm not sure anything will.

Disclosure: Long GLD.

Markets Slide Again, Gold Mounts Strong Reversal

Stocks recovered half of their losses after opening over 100 points lower. The Dow closed down 60 points (-0.55%) as the euro was pummeled across the pond. The euro slid 1.3% to $1.28 as riots across Greece spooked the markets. Three people died as the protests turned violent with tens of thousands taking to the streets to show their objections to the austerity measures in the Greek bailout package that includes wage cuts and 3-year salary freezes for public employees. Moody's placed Portugal under ratings review for a possible downgrade adding steam to the contagion engine of fear.

Gold mounted a stunning comeback after early selling hammered the metal through the previous breakout level. Gold hit $1,155 before reversing course and rallying over $21 back up to $1,176 by the New York equity close. I continue to look for upside in NYSE:GLD.

Markets Dive on Fears of Eurozone Contagion

After a full day of trading in a volatile stock market and several hours of CFA studying this evening, my brain power is quickly deteriorating but after today's bruising, I would be remiss not to have a post up.

The bears were chasing investors today as the Dow saw a high volume, 225-point (-2%) tumble after Europe was rocked overnight. London fell 2.6% and the Madrid Stock Exchange (IGBM) cascaded 5.5% after rumors swirled that Spain is rapidly crumbling and is also now looking for a bailout from the IMF. Spanish Prime Minister Jose Luis Rodriguez Zapatero dismissed these rumors as "complete madness" and the IMF denied these speculations but they did little to buoy concerns.

The primary worry relates to the size of Spain's economy relative to Greece and its implications for eurozone contagion. Spain has a population of 46 million and a GDP of $1.46 trillion versus Greece's population of 11 million and GDP of $331 billion. Spain is the 9th largest economy in the world currently suffering from a 20% unemployment rate (double Greece's rate) and a 54% ratio of debt-to-GDP (a ratio that doubled in the last year as Daryl G. Jones reports). Spain binged on the global real estate boom and now sits with a staggering private sector debt-to-GDP ratio of 178%. These problems are clearly not to be taken lightly and investors are selling as more downgrades and steeper borrowing costs seem likely for the PIIGS. Massive protests are planned in Greece tomorrow which could easily dominate headlines and add to the selling pressure.

The VIX spiked over 25% today before settling at 23.8% on the close. A VIX back over 20% signals increased volatility and indicates a possible topping pattern in equity markets. The flight to safety is on. The dollar jumped over 1% as the euro has fallen below $1.30 and Treasuries found plenty of buyers today with yields on the 10-year falling to 3.59% from 3.688%. Gold ended the day lower by about 1% after making new highs on the year. Luckily, I was smart enough to take some profits (via NYSE:GLD) in the $1,180s but I still have over half my position now back below the breakout area of $1,170. I would be surprised to see gold trade back below $1,150.

On the plus side, attempted terrorist, Faisal Shahzad, was caught at JFK airport just before his plane took off for Dubai today. He is charged with five felony charges and faces possible life in prison if convicted. Good work, FBI!

Greece Accepts Aid Package, GS Criminal Probe

The Dow gained 122 points yesterday (1.1%) as fears over eurozone contagion subsided. This morning news broke that Greece has now accepted the aid package and the euro has bounced off lows now trading at $1.333, 1.5% off lows. Advanced Q1 GDP numbers came in strong this morning reporting 3.2% annualized growth fueled by a 3.6% uptick in personal consumption. Goldman Sachs (NYSE:GS) is trading down over 5% pre-market at $152 as federal prosecutors consider brining criminal charges against the company, on top of the civil charges filed by the SEC two weeks ago.

Gold looks pretty good to run today. The last two days of consolidation at the resistance level have shown strength in the metal. I have my position in NYSE:GLD and I'll look to add through the $115 level. I added small this morning and will continue watching it throughout the day. I closed out my short in NYSE:PRU yesterday; boy, was I wrong on that one.

Fed's Interest Rate Policy Unchanged, S&P Downgrades Spain

Earnings season rolls on in the US but the sovereign debts of struggling European countries stole the headlines for another day. Early selling hit the market after Standard & Poor's followed up yesterday's downgrades of Greece and Portugal with a cut of Spain's debt rating by one step to AA. Yet another blow to the Eurozone. On the other side of the pond the Federal Reserve released its April FOMC policy statement today leaving rates unchanged and keeping the "exceptionally low levels of the federal funds rate for an extended period" language. The Fed is still concerned about deflationary pressures with "substantial resource slack continuing to restrain cost pressures".

Baidu (NASDAQ:BIDU) soared after hours with the release of its Q1 earnings report beating expectations with EPS of $2.10 handily outpacing the $1.50 estimate. BIDU is trading nearly 90 points higher clearing $700 per share and now up 72.8% year-to-date. Google's (NASDAQ:GOOG) exit from China is clearly seen as a boon to the company with Baidu's shares now trading 94 times earnings. The Bank of New York announced that it will change the ADR ratio from 1:1 to 10:1 which will bring the US dollar price down the $70 range.

Gold, that I trade through NYSE:GLD, was uneventful today just consolidating the recent move into the 1,170 resistance level. I'll look to add with a move through the highs of yesterday and today. Agnico-Eagle Mines (NYSE:AEM) broke out today through the $62 level gaining over 4% on the day. I bought a decent position this morning and sold most of it before today's close. I shorted some shares of Prudential Financial (NYSE:PRU) this morning based on the technical weakness yesterday. My stop is at $64 on the upside. Shares of Nike (NYSE:NKE) have had a couple days of weakness and I'm considering picking up some extra shares around the $76 area.


Disclosure: Long NKE, AEM, GLD. Short PRU.

Equities Dive as Greece Downgraded to Junk, Gold Surges

The stock market took a dive today dropping 213 points (1.9%) as Standard & Poor's downgraded the sovereign debt of Portugal two steps to A- and then soon followed with a cut of Greek debt to junk status at BB+. S&P warned that investors in Greece's government notes could recoup as little as 30% of their initial investment should Greece restructure its debt. The euro crashed to new lows on the year now trading at $1.316. The VIX, commonly referred to as the fear gauge, vaulted 30% to close at 22.81, now well off the lows of earlier this month at 15.23. Executives from Goldman Sachs spent the day on Capital Hill being grilled by Senators. I didn't hear much that was unexpected.

The downgrade of American International Group (NYSE:AIG) by Keefe, Bruyette & Woods that I highlighted this morning hit shares hard. AIG dropped 16% for the day taking out any short-term support level. AIG was a classic momo play and typically these plays collapse when the momentum stalls. There is very little fundamental justification for even the $37 price shares are trading at after today's fall.

Gold had a strong day today gaining 1.25% fueling a 1.68% jump in GLD (NYSE:GLD). I doubled my initial position early this morning and then doubled it again in the early afternoon. Yet, I sold 1/3 into the NYSE close because the electronic futures market failed to hold new highs when the GLD ETF was closing for trade at 4:00PM. While GLD looks excellent on a chart closing above prior resistance levels, I took some caution given the lack of confirmation from the futures market. Below are the charts highlighting my thought process. I am looking for a move to new highs in this market and now have a solid cost basis to hold for a move.

There was a great documentary released in early March titled "Quants: The Alchemists of Wall Street". Even with its strangely morose overtones it is well worth watching if you are curious about financialization of our economy. This short film hits on the several decade wave of securitization that we have seen from our banking system and the recent rise of high frequency trading.

Optimism Continues Around the World, CAT Guides Up

Asian markets and European markets generally traded higher overnight across the board. Positive results from a US bellweather, Caterpillar (CAT) are boosting futures this morning in New York. CAT reported EPS of $0.50 (ex a charge for the healthcare plan) versus expectations of $0.39. Revenues were lighter than expected but upside guidance impressed the Street with CAT forecasting FY10 EPS of $2.50-3.25 versus $2.69 consensus. It's a big week of fundamental concerns. Goldman CEO, Lloyd Blankfein, will spend his morning tomorrow testifying before the Senate Permanent Subcommittee on Investigations about GS's conduct during the subprime boom. I doubt he'll have too many friends on his side throughout the grilling. The FOMC releases its interest rate decision Wednesday, once again the focus is likely to fall on the language Bernanke and his cohorts adopt in the statement.

On a side note, really Joe Biden? Our highly successful prognosticating Vice President was quoted as saying: "Even some in the White House said 'Hey, don't get ahead of yourself.' Well I'm here to tell you some time in the next couple of months we're going to be creating between 250,000 jobs a month and 500,000 jobs a month." (CNBC) I refer you to my post in December entitled "Our Ugly Jobs Picture" where I highlighted our month-to-month employment situation. In the last 10 years, should you look at just the months of gains in jobs you come out with 178,900 job additions on average. These months of gains were at the height of the tech boom and throughout the leveraged real estate boom. I hope he is right but I do not see where these jobs will be created, especially in the next couple months.

I have a small position in GLD again after taking a break from it for a few months after it cracked in December. The world's favorite metal broke out of its consolidation pattern to the upside earlier this month and has since retested the top side of the channel. Friday's powerful move higher has confirmed my long bias and I will look to add shares of GLD through $114 for a swing back to highs and potentially higher.

I still have shares of Nike (NKE) long, looks great above $78.50. I have a small position in AEM, looking to add through $62. Picking up some shares of POT for a longer-term swing, more on that trade later this week and note earnings are on Thursday.


Disclosure: Long NKE, GLD, AEM.

Forget GS, Keep Rallying!

The market was helped today after March new home sales data showed the largest jump in 47 years, a 27% surge. The data release launched equities to new highs for the ongoing rally. Don't get too excited though, the sales numbers are bouncing off the record lows in February. The market left behind Microsoft (MSFT) and Amazon (AMZN) which lost 1.3% and 4.3%, respectively, after their disappointing earnings reports. Goldman Sachs (GS) was also weak losing 1% on day. It didn't matter though, the Dow gained 70 points for the day and closed at new highs. So much for GS marking the top! It's clearly being thought of as an isolated incident even though investors suffer from a complete lack of knowledge as to how deeply systemic the GS practices were and still are.

Definitely check out Barry Ritholtz's "Ten Things You Don’t Know (or were misinformed by the Media) About the GS Case" on The Big Picture. He argues that the case against GS is not weak, it is not a one-time incident, the SEC director is a "bad ass" and GS will lose or settle.

My chart of the six primary strategies of high frequency trading was published over on Zero Hedge, one of the largest market-related blogs out there. It's getting a good amount of attention and plenty of comments.

My buy on gold (GLD) yesterday turned out pretty well today. The $114 level will be my area to add into the position. I also picked up a small position in Agnico-Eagle Mines (AEM). The $62 level will serve as a nice technical buy trigger and with earnings on April 30th, AEM has the possibility of jumping into the report. Q3 2009 was a brutal report so we'll see if the fundamentals have improved next Friday. Nike (NKE) took the day off, just holding it.

Gold Still Not Ready

The shiny yellow metal continues to base above previous all-time highs of 1,028. The consolidation looks healthy and controlled within the confines of a descending channel roughly $75 wide. I have long been interested in gold and have actively traded it with a long bias for months. Lately, trading has clearly not been as profitable as the sell-off in late December has led to months of back-and-forth action with no clear direction. My size has been light and I've dabbled here and there but no trend trade has materialized yet. I don't think there is much of a trade until gold clears $1,125 on the upside. At that point I will put on some longs and see if the long-term uptrend is taken up again.

The catalysts for gold to trade higher just haven't been sustained. Early last year gold offered the safety play while later fears of inflation cropped up everywhere. A weak dollar in later 2009 offered strong negative correlations for a while. But, the data have yet to support the high inflation thesis as the Fed is still battling deflationary pressures. Gold has effectively decoupled with the dollar and has been consolidating while the dollar has mounted a strong rally off lows. It is strong and looking good, just awaiting a catalyst.

Disclosure: No relevant positions.

Gold Rearing Up to Run

After being up 50 points yesterday, the market trickled off into the close to close up just 2 points in the Dow. The only notable action came from Apple ($AAPL) which reversed after a strong 3-day, 13-point move into $210 per share. Shares fell into negative territory in the early afternoon before rebounding to close near breakeven.

Gold ($GLD) is back on the move and I'm liking the long prospects more and more. After 3 months of consolidation action above previous all-time highs, gold looks ready to continue its run.

Ford ($F) outsold its chief American rival, General Motors ($GM), for the first time in over a decade with a 43% jump in February sales numbers to 137,644. This represents a YOY market share increase of 3% now up to 17% of the market.

Market Does a Whole Lot of Nothing

The Dow gained 40 points (0.39%) in an uneventful session. Stocks closed at nearly the exact same prices at which they opened the day making it an unenjoyable day for active traders hoping for extended moves.

The International Monetary Fund caused some stir in the gold market late in the day by announcing the open market sale of 191.3 tons of gold, equivalent to about $6.2 billion worth of gold at current prices. The IMF had previously announced the planned selling of 400 tons of the shiny metal. Several months have now passed with central banks around the world having first pick for bulk orders but only about half of the gold has been sold. Most notably, India's central bank bought 200 tons at $1,040 an ounce. It will be interesting to see how much of this sale is priced into the market. The IMF said "it would stagger the sales in order not to affect the markets too much". We'll see.

I just got my CFA books today and the panic is already starting to set in. I've only got 3 1/2 months to get through about 2,000 pages of material. Man, the mental anxiety this test causes is pretty amazing. I thought I already graduated college. Ha! Apparently that didn't matter.