Regulatory Uncertainty Hampering Active ETF Product Development

November 25th, 2010

Interest in the Active ETF space from fund companies is not lacking. There are now in excess of 25 companies who have filings with the SEC to launch actively-managed ETFs in the US. And these are not just small shops looking to experiment in a new space, these are big financial players like BlackRock iShares, JP Morgan, State Street, John Hancock and T. Rowe Price who have shown their clear interest by applying for exemptive relief to launch Active ETFs. However, what is turning many of these potential players off is the cloud of regulatory uncertainty that has been hanging over the Active ETF space. The SEC launched its investigation into derivative usage in Active ETFs back in March 2010, and has since made no clear comments on its final stance regarding actively-managed ETFs. The potential for adverse regulatory action is keeping many issuers on the sidelines and even those who have already filed applications with the SEC to think twice.

Patrick Daugherty, Partner at Foley & Lardner, was involved in launching the very first actively-managed ETF in the US back in 2008 from Bear Stearns and deals extensively with the SEC. He chatted with ActiveETFs | InFocus in August and had this to say about the SEC, “Right now, the agency is paralyzed when it comes to new product development. We are not sure why this is so. We think there is some reluctance to allow additional new products because of the recent unprecedented turmoil in the markets”.

Daugherty’s comments are easily confirmed just by looking at how long it has been taking applicants to receive exemptive relief for Active ETFs. As a recent article from the Financial Times highlights, Van Eck was finally granted an exemption to launch two planned actively-managed ETFs on November 3rd. Van Eck had first applied for exemptive relief in November, 2008 – a full 2 year wait. As one can imagine, such delays create havoc in product development plans and timelines. William Belden, Managing Director at Guggenheim which also has another two actively-managed bond ETFs under filing, spoke with InvestmentNews about the delays, saying “This does absolutely have an impact on what we would otherwise be doing [in terms of product development]”. Tom Lydon, President of Global Trends Investments added that, “A lot of people are frustrated because it’s holding up product development”.

On the surface, it appears that the SEC’s primary concerns lie with derivative usage. In its March statement, the SEC had explicitly stated that exemptive relief applications for Active ETFs that utilize derivatives will not be approved until the investigation is completed. John McGuire, a Partner at Morgan Lewis, spoke to the FT and said that, “The SEC is telling people if they want to have their exemptive order any time soon, they have to be explicit about not using derivatives”. As a result, over the past 6 months, numerous issuers – including State Street, Van Eck and JP Morgan – with active applications have amended their filings to explicitly state that their funds will not be utilizing derivatives.

However, as Scott Burns, Director of ETF Research at Morningstar mentions to FT, while most equity funds can do without utilizing derivatives, fixed-income funds and more alternative strategies often need to use derivatives as a core part of their investment strategy, even if only for hedging purposes. As a result, firms launching these types of funds may continue to wait it out and limit any investment of time and money into the space until the SEC provides more regulatory clarity on its stance.

ETF

Holiday Squeeze on the Dollar, Gold & Stocks

November 24th, 2010

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me .

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

Get My Free Trading Guide Book and My Free Trading Ideas Here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Holiday Squeeze on the Dollar, Gold & Stocks




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

Holiday Squeeze on the Dollar, Gold & Stocks

November 24th, 2010

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me .

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

Get My Free Trading Guide Book and My Free Trading Ideas Here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Holiday Squeeze on the Dollar, Gold & Stocks




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

On the Destructive Part of Capitalism

November 24th, 2010

When we are in a thoughtful mood, we try to get out of it as soon as possible. Nothing like thoughts to trouble a man’s sleep.

But sometimes a thought gets a grip on us and we can’t get rid of it until we’ve meditated, prayed, and drunk a whole bottle of Bordeaux.

Thus it was that we were puzzling over the strange events of the last few years. Why was Ireland so desperate to save its banks? Why did the US rush to keep Fannie and Freddie out of juvenile detention? Why put at risk the entire world financial system in order to try to get US employment down from 9% to 6%?

People have a deep-seated fear of capitalism, we conclude. They will do almost anything to avoid it. Capitalism works by “creative destruction.” They’re happy with the creative part. But they can’t bear the destruction. Ireland’s biggest banks go broke? No way! America’s leading housing lender in Chapter 7? We can’t let that happen!

They imagine that the “destructive” part of capitalism is a kind of disease or mechanical breakdown. If must be something that can be fixed, they conclude. And so they look for the cure…the fix…the solution.

They must realize that adding paper money to a society that is already saturated in debt is a rather far-fetched solution. But what else can they do? They tried the elixirs and the home cures. Monetary stimulus didn’t work. They tried fiscal stimulus, too. And even after the biggest stimulus of all time what have they got? Nearly 10% unemployment, falling house prices, little or no real (non-government) growth, falling incomes, and consumer price increases that are the lowest ever (if you take the figures at face value).

What do they have left but “unconventional” methods. And so what if they don’t really make any sense. You gotta do something, right?

The simpleminded morons.

“Corporate profits are the highest on record,” says the latest news. Some investors take this as good news. But if profits are already the highest on record…how likely is it that they will go higher?

The high margins probably result from the weakness in labor costs. Businesses were startled by the downturn of ’07-’09. They cut costs (employees) quickly. So far, they’ve been reluctant to hire people back. That leaves the poor ex-employee without a job, but it also leaves the business with a decent bottom line.

But after you’ve cut expenses, what do you do next? If you’re going to add to your profits you have to count on growth in revenue. So, where are these extra sales coming from?

Most likely, sales growth will be very slow…and profits will inevitably decline from these all-time highs. Falling profit margins will be another reason to get rid of stocks, so stock prices (and p/e ratios) will probably fall.

Bill Bonner
for The Daily Reckoning

On the Destructive Part of Capitalism originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
On the Destructive Part of Capitalism




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Important Relationship Between U.S. Dollar And Gold Signals Trend Change

November 24th, 2010

In a recent article, I wrote about important trend changes in the dollar and gold.

An important inverse inter-market relationship is continuing between the US dollar and gold. They have both broken trendlines simultaneously and are threatening a counter trend move. Other than yesterday’s spike on a conflict in Korea, the dollar and gold have moved inversely and one appears to be bottoming while gold threatens to make a topping pattern.

Most traders use trendlines to determine when a trend changes, but many forget to follow that important line after the break has occurred. Smart traders have been monitoring the extended trendline on the dollar and gold this past week. It will be used to determine if this trend reversal is confirmed or if there is a chance of a technical failure. A failure occurs when price reverses back below the line. This creates an exhaustion point. It is crucial to monitor for these patterns. A failure did not occur in the dollar, as it has bounced higher on geopolitical fears in Korea, rising rates in China, and eurozone bailout concerns. This trend may continue higher, which may limit gold’s upside targets.

An extended line reverses its role of either support or resistance. In the case of the dollar, the downtrend line acted as resistance or a “ceiling” on the price. Last Tuesday, it was broken to the upside. After Tuesday, the US dollar has found support at the 50-day moving average and its new support, the extended trendline. It’s important to know that traders have monitored this technical level closely and the extended trendline has proven to hold support. This signifies the dollar may have much further to run. This could also signify pressure on precious metals in relation to the US dollar as a trend has been broken and a break of October lows could confirm a potential head-and-shoulders top.

Read more here:
Important Relationship Between U.S. Dollar And Gold Signals Trend Change

Commodities

Profiting from Information Overload

November 24th, 2010

Throughout most of history, human beings could expect to grow old and die in a world very much like the one into which they were born. Change was slow, by modern standards. People lived as hunter-gatherers for hundreds of thousands of years, before agricultural technology took root and changed society about 10,000 years ago.

Then, only 200 years ago, the industrial revolution radically remade society yet again.

In the late 20th century, the electronic computer started a new revolution, which is still ongoing. Today, culture is still playing “catch up” with the radical democratization of information and opinion that new, computer-enabled media and ubiquitous network connectivity is creating. Yet modern nanotechnology, in its various forms, promises to usher in a new technological growth phase mere decades after the information technology revolution began.

In each case, the amount of time between one fundamental technological shift and the next has grown shorter. The result, from an economic standpoint, is that each new “technology growth phase” accelerates wealth creation, and improves the quality of life for everyone by reducing costs and solving problems.

To give an example of how technology keeps things cheap, the price of oil has been slowly rising over the last few months. However, what would the price of oil be today if we were still using the same technology that struck black gold at Spindletop in 1901? The short answer is that oil would be far more expensive, if any was available at all anymore. The story of the last 100 years would be very different without the inexpensive energy that fueled it.

Another example: what would the price of food be today without the Green Revolution? At one time, more than 90% of the US population was involved in agriculture in one way or another. Today, it is around 2%. In past times, an extended economic downturn like the current one meant hunger for many. Today, the problem of the poor is too many calories. If it were not for transformational innovation in food production, many of us wouldn’t be able to secure enough daily calories to survive.

For many people, however, it starts to become difficult to process accelerating technological change. Even for those of us that track technology, it is impossible to monitor everything. Nanotech-enabled life extension technology, for example, is going to shape the future economy and culture in ways we cannot even begin to imagine.

Since most people do not immediately recognize the importance or implications of transformational technologies, those that do gain an advantage. As investors, this creates unique opportunities for us to profit.

It is for this reason that I like to update you periodically on the latest advances announced in science journals. I will mention a couple here…

Stem Cells Will Pump You Up

For an older person, it takes longer to recover from a strenuous workout or a muscle injury than for a younger one. Muscle mass declines with age as well. As our understanding of cellular biology improves, we anticipate new treatments targeting tissues like muscles to restore them to a more youthful state.

Researchers at the University of Colorado at Boulder recently demonstrated that young stem cells transplanted into the leg muscles of mice prevented age-related atrophy and repaired injury. The stem cells not only repaired the injury, but doubled muscle mass as well. Even two years later, the now-old mice retained higher levels of muscle mass. According to Bradley Olwin, a co-author of the study, “the transplanted stem cells are permanently altered and reduce the aging of the transplanted muscle, maintaining strength and mass.”

When transplanted into healthy tissue, however, there was no measurable change in muscle growth. The stem cell grafts only appear to create new growth in muscles that are damaged by injury. The researchers are working to understand what mechanism signals the stem cells to grow in hopes of developing drugs to mimic their behavior. Such technology could be applied to degenerative muscle diseases. It could also find an application in halting or reversing the muscular atrophy that accompanies aging.

Quantum Computing Leaping Forward

Practical, commercialized quantum computers would represent a disruptive transformation of the computing industry. Instead of encoding information on relatively large blocks of material, quantum computers could store information on single electrons or atoms, called qubits. Such machines would be incredibly powerful and solve problems that are impossible for current computers. Manufacturing computers with individual parts made of such tiny bits of matter is difficult with current technology, though. Many qubits can be missing, or faulty.

According to a study published in Physical Review Letters quantum computers can be made to function even if they have a large number of malfunctioning components. In this paper, the international scientists published a discovery of a way to correct for these errors by using an error correcting system that mimics how humans correct for faulty data.

According to the lead author, Dr, Sean Barrett, “Just as you can often tell what a word says when there are a few missing letters, or you can get the gist of a conversation on a badly-connected phone line, we used this idea in our design for a quantum computer.”

This paper, however, is theoretical in nature, so engineers will need to build quantum computers with enough tiny particle-sized qubits to demonstrate this concept’s utility. In the meantime, Burnaby, Canada-based D-Wave claims to have built large-scale supercooled quantum computers containing hundreds of qubits.

D-Wave has worked with Google in the past to perform quantum-enabled pattern recognition. Google has demonstrated that this technology can spot individual objects, like cars, in tens of thousands of pictures. Recently, D-Wave submitted a proposal to Google and the Jet Propulsion Laboratory to develop a quantum computing facility based on its technology.

Finally, IBM is jumping into the fray with renewed vigor. Recent quantum computing discoveries in academia suggest the possibility of building quantum computers using more conventional, common methods used in semiconductor manufacturing. This has piqued IBM’s interest, and it has raised the stakes by enlarging its research in the field. It has put together a large group to embark on a five-year mission to explore the possibilities, seek out new technologies, and profit from going where no one has gone before.

Ad lucrum per scientia (toward wealth through science).

Ray Blanco
for The Daily Reckoning

Profiting from Information Overload originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Profiting from Information Overload




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Buy Gold: It’s the Only Way to Combat Government Spending

November 24th, 2010

I tried to tell my boss that my unexplained absence was because I was so Completely Freaked Out (CFO) that I didn’t know what to do all weekend except hide like a little crybaby coward in the Big, Beautiful Mogambo Bunker (BBMB) waiting for the inevitable collapse of the entire world order because of the massive over-creation of money by the foul Federal Reserve, where I whimpered and cried in fear because We’re Freaking Doomed (WFD) and there is nothing – repeat, nothing! – that can be done.

Naturally, I lost track of time, and so my absence is completely understandable and not my fault, but is, instead, the fault of the foul, filthy Federal Reserve creating so much money, for so long, that the US economy has been turned into a bloated, cancerous, twisted, bloated, government-centric grotesquerie that has almost destroyed us.

I didn’t tell her that through the mist of my bitter tears, though, I still managed to get a good laugh from the quixotic earnestness of Erskine Bowles and Alan Simpson, chairmen of some idiotic National Commission on Fiscal Responsibility and Reform trying to craft a plan to reduce government spending in an effort to reduce the national debt.

Of course, before you can reduce the debt, you have to stop it from getting bigger, which is a Long, Long Way From Here (LLWFH) as even former Senator Alan Simpson says, “for every buck we spend we’re borrowing 39 cents.”

At first I laughed with my usual merriment at such foolishness, although somewhat childishly hopeful and enthusiastic about the new commission while managing to overlook the fact that it is just another outrage of central planning to redistribute incomes that is doomed to failure.

Suddenly, I also saw it as a ray of hope! Quickly, I proposed to my boss that instead of her just firing me like she wants to – and like I deserve – I organize a Company Commission on Responsibility and Reform to address my poor job performance, my incompetence and staggering net losses due to my apparent natural stupidity.

She rudely vetoed my terrific plan, just like she always vetoes my Terrific Mogambo Plans (TMP) ever since that time long ago, in one of our first power-struggles after she came waltzing into the job opening that should have been mine to fill, when I casually asked her if she was buying gold, silver and oil as a defense against the horrifying inflation in prices that will result from the Federal Reserve creating so much new money.

She acted surprised at the question, but admitted, smiling to be nice, “No.” Boy, you should have seen that pleasant smile disappear from her stupid face as I was instantly on the attack, telling her that that meant she was stupid, as anybody with any brains at all knows that they should be buying gold, silver and oil with frantic abandon in response to the foul Federal Reserve acting so treacherously!

Ergo, I went on, I didn’t think that it was appropriate that I take orders from somebody more stupid than I, and if she wanted me to listen to any of her “boss” crap, she had better get some gold, silver and oil soon so that she would demonstrate enough smarts that I would value her opinion enough to even listen to it.

I am not going to dwell on her reply or the brouhaha about how “cleaning the executive washroom” mysteriously appeared on my Job Description, but I will note for the record that her reaction is partly responsible for my now being totally AGAINST the National Commission on Fiscal Responsibility and Reform, as I always figured I would be.

So, I go back to mirthlessly laugh – Hahaha! – at their arrogance, their conceit and their up-to-now total ignorance of the decades-long growing problems, caused by the Federal Reserve creating the money that made the problems financially possible, that underscore their glaring incompetence.

As for the economy, a dollar not spent by the government is a dollar not received by somebody, which reduces national income dollar-for-dollar, which is Highly, Highly Significant (HHS) now that state, local and government spending constitutes slightly more than half – half! – of all spending in the Whole Freaking Country (WFC), meaning that government spending IS the freaking economy! Government spending is the economy!!

And this is Just The Beginning (JTB) of the misery, because this horrific fact is made worse by that whole ordinary Multiplier Effect of the velocity of money, compounding the economic misery of each of those missing dollars as it no longer bounces hand to hand through the economy with everyone making a little profit and governments taking a little bite at each exchange, nibbling, nibbling, nibbling at it until it disappears totally.

And let’s not forget that every dollar is now the basis of a whole universe of derivatives, leveraging each of those dollars 10-to-1, 20-to-1, sometimes 40-to-1 – and more! – meaning that the total impact is some huge, unfathomable, terrifying multiple of this!!!

And now these weenies think that they are going to reduce the debt? Hahaha! If Simpson, Bowles and the rest of National Commission on Fiscal Responsibility and Reform weenies had a clue about economics, they would note the use of the rare triple exclamation point at the end of the previous paragraph and correctly deduce that the only intelligent thing to do is to buy gold, silver and oil, which is not only the only the smart thing to do, but the easy thing, too! Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

Buy Gold: It’s the Only Way to Combat Government Spending originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Buy Gold: It’s the Only Way to Combat Government Spending




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

BP Gives a Lesson in Dual Timeframe EMA Key Levels to Watch

November 24th, 2010

What is the current chart picture of BP shares, after the bad press from the oil spill has died down?

It turns out they’re compressed between two timeframes of key EMAs, which gives us an excellent chance to take a look at this concept and watch what happens with the eventual resolution of these boundaries.

Let’s first start with the Daily Chart then move up:

What I like to do is show real-world examples of concepts of how to use technical analysis tools or strategies.

In this case, we’re talking about EMAs for key price levels to watch – either as zones to put on new positions within the context of a trend, or take off positions either on a test of a higher EMA or on a trendline breakdown.

On all my charts, I use the 20 and 50 period EMAs (exponential moving averages) as that’s what I’ve found that work for me, and it’s what a lot of traders use so it serves as a good reference level.

I also use the standard 200 day SMA.

EMAs work to ‘contain’ price on pullbacks to them during trending periods – but not so much during flat or range-periods.

Compare the price action – and EMA ‘effectiveness’ from April down to July, and then from October to present – noting the ‘failure’ period during the consolidation from July to October’s breakout.  That alone is a good lesson.

But now, price is compressed between these two levels and competing for a breakout one way or the other.

As both key moving averages are converging (the 200d falling while the 20 and 50d are rising), price is going to have to break through one of them, which could create a trend continuity play to the upside above the $43 or especially $45 level… or a trend reversal play on a breakdown under $40.

For short-term and swing traders, those should be your key levels to watch, both from a moving average perspective (boundaries) and from prior price levels ($44 in November and $40 in October).

If that’s the structure on the Daily Chart, what exists one step higher on the weekly chart?

Glad you asked!  It’s a strangely similar compression.

I put arrows back on the chart history to show all the times the EMAs were ‘effective’ in providing low-risk entries into established trends (and the two times in May ‘09 and May ‘10 when price broke the 50 EMA sharply, signaling a REVERSAL in trend).

Take time to study those opportunities and how they played out.

Bringing us to the present, we have a similar EMA compression and price is trapped right in the middle of it – this time between the rising 20 EMA and falling 50 EMA respectively.

The key levels to watch here are similar to the daily levels, with the 50 EMA being overhead resistance at $43.38 and the 20w EMA being floor support at $40.92.

Compare that with the 200d SMA at $43.58 and the 50d EMA at $41.04.

What’s going to happen?  Who knows.  As a trader, you’re not supposed to know the absolute future to be able to profit from it.

You study the chart, assess the structure, define the probabilities, and then if you feel an opportunity presents itself, position into the price action that triggers an entry (or exit in the case of a stop-loss).

That’d be a bullish price break above resistance at the $44 or even $45 area… and a bearish price break under the $41 or $40 level.

This is in-line with the Mark Douglas (Trading in the Zone) style of logic where you find levels that price must inflect, as price cannot stay between these levels forever.

Usually, a key breakout from an important level leads to a tradable short-term price swing in the direction of the breakout, with the stop placed just under the breakout in the event the set-up fails and devolves into a frustrating  trap.

Keep watching these levels and take time to refresh simple trading tactics with EMAs.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
BP Gives a Lesson in Dual Timeframe EMA Key Levels to Watch

Uncategorized

Discernable Trends in Uranium Despite Market Volatility

November 24th, 2010

Snap…Crackle…Boom!

We aren’t talking about Rice Krispies, dear investor; we’re talking about the sound effects of global macroeconomic trends. During the last few days, Ireland’s credit-worthiness snapped, after which the floor underneath the sovereign bond markets seemed to crackle. And lastly, North Korea’s deadly target practice on the South Korean island of Yeonpyeong caused a “Boom!” heard ’round the world.

Not surprisingly, the stock markets around the world are also crackling a bit, but not as much as one might expect. It’s true that the Dow tumbled 142 points yesterday and 25 points the day before that. But it’s also true that this two-day selloff arrived just after last Thursday’s 174-point rally and just before this morning’s 134-point advance. In other words, there’s a lot of volatility, but no discernible trend.

Nevertheless, a handful of discernible trends continue to unfold, notwithstanding the frightening headlines about explosive geopolitical tensions and implosive sovereign debt markets. The uranium price, for example, continues its dogged advance, even while most other commodities are succumbing to a “correctional phase.”

Uranium Price vs. Gold and Commodity Prices

As such, one of the most fascinating headlines coming out of Asia this morning had nothing to do with the Koreas of North and South; it had to do with China’s voracious appetite for uranium.

As Bloomberg news reports, “Cameco Corp., the world’s second-largest uranium producer, agreed to supply the fuel to China Guangdong Nuclear Power Holding Co. through 2025 to meet rising demand in the world’s fastest-growing nuclear market. Cameco plans to sell 29 million pounds of uranium… That’s equivalent to about 13,000 metric tons.

“China and India are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies,” Bloomberg continues. “Chinese uranium demand may rise to 20,000 tons annually by 2020, more than a third of the 50,572 tons mined globally last year, according to the World Nuclear Association…[Guangdong Nuclear], the country’s largest reactor operator after China National Nuclear Corp. is building about 17 gigawatts of reactors, and by 2020, expects to have more than 50 gigawatts in operation, according to Cameco.”

This long-term contract between Guangdong and Cameco should come as no great surprise to constant readers of The Daily Reckoning…or even to occasional readers of The Wall Street Journal. The November 9, 2010 edition of The Daily Reckoning, “Uranium – Our ‘Trade of the Decade’ Heats Up!” reiterated the (very) bullish case for this radioactive energy source.

On the same day, The Wall Street Journal ran the following headline: “Traders Go Nuclear on China Uranium Reports.” In the story that followed, the Journal noted, “Forecasts of stronger uranium demand in China have spurred bullish nuclear-sector options trading to its highest pitch all year… USEC (USU) options, for example, were seeing robust interest. Volume in the company’s bullish contracts hit its highest point in 14 months…”

Whether or not such short-term bets pay off, long-term bullish bets on uranium and uranium stocks are becoming more compelling by the moment. A global “uranium rush” is already underway, but very few investors seem to notice or care.

“According to the International Atomic Energy Agency, world demand for uranium was 135.8 million pounds in 2009,” observes Matt Badiali, our colleague over at the S&A Resource Report. “That will likely rise to 201.1 million pounds by 2020. To meet that demand, we’d need to almost double the amount of uranium mined worldwide in just 10 years.

“That’s a tall order,” Badiali continues. “So nuclear power companies and uranium miners alike are jostling for control of existing supply. The Russian state-owned nuclear group, Rosatom, recently bought 17% of Canadian uranium miner Uranium One. The deal gives Rosatom the right to purchase up to 20% of Uranium One’s global uranium production. In a similar move to grab future production, Korea Electric Power (KEPCO) agreed to buy 20% of junior uranium company Denison Mines’ production…

“Also, China National Nuclear Corporation, which oversees China’s nuclear industry, recently announced an agreement with French uranium miner AREVA to buy 440 million pounds of uranium over the next 10 years for $3.5 billion. That’s $79.55 per pound…a 34% premium to the current price of uranium.

“Nuclear power companies can afford to pay those kinds of premiums to lock in fuel supplies,” Badiali winds up, “because the cost of fuel makes up less than 4% of the cost to generate electricity. That means power companies are not all that ‘price sensitive.’ It won’t make much difference to them if they pay $60 a pound or $150.”

These dynamics should intrigue forward-looking investors. As the uranium land-grab continues – and an increasing percentage of the world’s uranium supply is “spoken for” – the uranium price should continue its upward trajectory.

Eric Fry
for The Daily Reckoning

Discernable Trends in Uranium Despite Market Volatility originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Discernable Trends in Uranium Despite Market Volatility




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, OPTIONS, Uncategorized

FINAL 10 hours for $2,000 reward!

November 24th, 2010

Martin D. Weiss, Ph.D.

You have only 10 hours left!

My Three Urgent Questions video goes offline at 11:59 PM tonight, and when it does, your $2,000 reward for watching disappears as well!

There will be no extensions or transcripts. This is absolutely your last chance to view this blockbuster presentation.

If the safety of your money and the profitability of your investments are important to you, turn up your computer speakers and click this link now.

Good luck and God bless!

Martin

Read more here:
FINAL 10 hours for $2,000 reward!

Commodities, ETF, Mutual Fund, Uncategorized

FINAL 10 hours for $100 reward!

November 24th, 2010

Martin D. Weiss, Ph.D.

You have only 10 hours left!

My Three Urgent Questions video goes offline at 11:59 PM tonight, and when it does, your $100 reward for watching disappears as well!

There will be no extensions or transcripts. This is absolutely your last chance to view this blockbuster presentation.

If the safety of your money and the profitability of your investments are important to you, turn up your computer speakers and click this link now.

Good luck and God bless!

Martin

Read more here:
FINAL 10 hours for $100 reward!

Commodities, ETF, Mutual Fund, Uncategorized

FINAL 10 hours for $900 reward!

November 24th, 2010

Martin D. Weiss, Ph.D.

You have only 10 hours left!

My Three Urgent Questions video goes offline at 11:59 PM tonight, and when it does, your $900 reward for watching disappears as well!

There will be no extensions or transcripts. This is absolutely your last chance to view this blockbuster presentation.

If the safety of your money and the profitability of your investments are important to you, turn up your computer speakers and click this link now.

Good luck and God bless!

Martin

Read more here:
FINAL 10 hours for $900 reward!

Commodities, ETF, Mutual Fund, Uncategorized

Financial Problems – Thy Name is Debt!

November 24th, 2010

Is our “Crash Alert” flag still flying?

It is?

Good. Just checking.

Don’t breathe too hard. Don’t touch anything. We’re on tiptoes… So many things could bring this stock market crashing down. We can go around the world and point at them. China. Ireland. America itself…

And, oh yes, North Korea is firing rockets at South Korea….

Yesterday, the Dow lost 142 points. Gold rose $19.

Over time, the tensions, contradictions and pressures build up. You try to fix one thing with a little central planning…but the thing doesn’t cooperate. So you try to fix something else. And then another thing goes phlooey and you have to fix that.

One day you’re trying to keep Ireland afloat in the North Atlantic. The next day you’re worrying about an explosion in the Middle Kingdom. And then, wouldn’t you know it, a problem flares up right at home.

Financial problems – thy name is debt!

What’s the matter in China? Too much debt in the LGFVs – Local Government Funding Vehicles. A municipality thinks it will be a better place if it had a new mall. So it makes a deal. It helps borrow the money. It helps with the plans. The pols feel like big shots. Money changes hands…some of it legit, a lot of it under the table.

What’s not to like?

Well, do that a few thousand times all over China and pretty soon you have a lot of debt based on projects that never really made any sense in the first place. And where is the debt? In the banks, probably. Who knows what’s in the banks? But they’re the same banks that are funding the most reckless, breakneck speed capital investment program of all time.

Americans consume. The Chinese build. They’re building roads, bridges, towns, railroads, rail links, railheads – everything you can think of. Of course, some of this is necessary. Some of it is productive. But how much? How many local governments are making wise, productive investment decisions?

The Chinese are now spending almost half of their GDP on fixed investments – you know, the kind of stuff that has concrete and steel in it. One out of every two dollars goes to building something more or less permanent.

But how many of those decisions are going to pay off? How much of that investment is going to pay for itself? How much of the debt is going bad?

Darned if we know. No one knows. But Dear Readers are advised to be somewhere else when all this blows up.

It will. We’re sure of it. You can’t make that many capital investment decisions without making a lot of bad ones. You can’t grow that fast without some pretty severe growing pains.

And that’s just China. What about the Emerald Isle? Their problem is debt too. But it’s not LGFV. It’s MBL – mortgage backed lending. Europe’s big banks lent to Irish banks so the Irish banks could lend to Irish homeowners. Trouble is, the Irish homes are now not worth what the Irish homeowners paid for them. So, the micks and paddies have a lot of debt that is never going to be repaid.

Who will take the losses? Normally, it’s a simple question with a simple answer: the people who made the bad investments. But not now.

The news yesterday was that it would take $114 billion to keep Ireland open for business. And Spanish bond yields were hitting new records – investors are afraid they might be the next to go.

European authorities – including the Irish themselves – are afraid that if they let the chips fall where they may…many of them will fall on their own heads. They’re afraid of “contagion” – that is, they’re afraid that if the Irish get sick, they might get sick too. If Irish debt is allowed to collapse, in other words, so will their own bad debt. And who knows where that will lead?

We don’t. But we want to find out. Because we don’t see any better way to get rid of it than just letting it collapse. And so what? A few banks go bust. A few large investors jump off bridges. Heck, there are plenty of bridges in Europe. What’s the trouble?

Bill Bonner
for The Daily Reckoning

Financial Problems – Thy Name is Debt! originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Financial Problems – Thy Name is Debt!




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

McMoran Exploration Co. (NYSE:MMR) — Still Bullish on Drilling in Shallow Waters

November 24th, 2010

McMoran Exploration Co. (NYSE:MMR) performs on- and offshore exploration, development, and production of oil and natural gas in areas like the Gulf Coast and the Gulf of Mexico. Today, Byron King, Agora Financial’s editor of Energy & Scarcity Investor, has the company on his mind due to a recent and significant uptick in its share price.

What’s behind the move? To answer this question we look to King’s most recent message to readers:

“Despite the vagaries of offshore drilling in the U.S., McMoran Exploration Co. (NYSE:MMR) has moved from the $10-range last August, to about $16.50 per share this week.

“If you’ve been following my recommendation, you know that I like McMoran because it focuses on drilling deep wells, but in shallow waters of the Gulf of Mexico (GOM). Thus it can use the far cheaper jack-up rigs, versus the more expensive deepwater drill ships. McMoran is aiming for many of the same kinds of deep targets in the vast Wilcox trend, as we see in the deepwater development. That is, the water may be shallow; but there’s much the same, significant hydrocarbon potential deep down.

“Theoretically, it’s easier to get permits to drill in shallow water — even for deep drilling targets. I say ‘theoretically,’ because I’m still not convinced that the current management of the Department of Interior (DOI) is serious about supporting domestic energy production from the GOM.

“Despite my qualms about the DOI, I’m still bullish on McMoran. When things finally resolve in the GOM, McMoran will be among the strong players, moving quickly to exploit its opportunities. You may as well skate to where that particular puck is headed.”

King remains somewhat pessimistic about how the supposedly “lifted” deepwater drilling ban situation will develop under the DOI’s supervision in the near future. He explains that looking at the resumes of the DOI’s management shows that the team doesn’t appear well-versed in offshore energy development, and is primarily experienced only as regulators and investigators.

Byron King‘s keeping close tabs on the economic and political environment that are driving the future of gulf drilling. You can benefit from his thorough homework with specific investment recommendations by visiting the Agora Financial reports page and subscribing to the Energy & Scarcity Investor.

Best,

Rocky Vega,
The Daily Reckoning

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]

McMoran Exploration Co. (NYSE:MMR) — Still Bullish on Drilling in Shallow Waters originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
McMoran Exploration Co. (NYSE:MMR) — Still Bullish on Drilling in Shallow Waters




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Divided FOMC Lowers Growth Forecasts

November 24th, 2010

The dollar bulls really are having their way with the currencies, which is so weird given the fact that just two weeks ago, the negativity toward the dollar was running at a level I had not seen before… And then it turned on a dime… Here’s the skinny on this as I see it…

The negativity grew so strong toward the dollar that it simply reached an oversold level…short term that is… So, traders began to look around and noticed that the short-term profits they could book were tremendous… Then the excuse came along to buy back dollars and take those profits, and it came in the form of Irish debt problems… No… These problems in Ireland weren’t new to the markets… Remember the PIIGS, or GIIPS as I changed the name to? Well, one of those “I’s” belonged to Ireland… But, the media jumped all over the Ireland problems and the next thing we know, is it is December 2009 all over again… But this time Ireland replaces Greece…

Eventually, we’ll get back to the underlying weak dollar trend, but until then, currency owners, of which I am one, have to deal with the dollar bulls prancing and dancing in the streets, and being obnoxious to the point that you simply begin to ignore them!

The reason I say that eventually we’ll get back to the underlying weak dollar trend, is that there has been no fundamental change in the deficit picture, that put the dollar in the weak trend in 2002…

Yesterday I told you that it was strange that gold was weaker, given the geopolitical stuff going on in North and South Korea? Well, it didn’t take the US markets very long to realize that gold should be moving higher on news like that, and the shiny metal quickly erased its losses and moved higher on the day… Strange day, though… Gold was up $10, and Silver down 30-cents… Strange days indeed…

Gold is edging higher again this morning, and this time silver is coming along…

The overstuffed US data cupboard was able to loosen a belt notch, like most of us will have to do tomorrow… Some data printed in the US thus relieving the data cupboard of its overstuffing this week.

US Existing Home Sales for October took a turn for the worse, falling 2.2%, and putting a real damper on the previous month’s originally posted 10% rise… Overall resale activity remains depressed and this month’s pace of sales represents the third lowest in the series since records for total sales (both single and multiple-unit home types) began in 1999.

Third quarter GDP saw its second reading revised upward from 2% to 2.5%… I grow more skeptical of these GDP numbers all the time, folks… It took me a while, years ago, to figure out why I was always suspicious of the CPI data… And eventually I’ll find the skeleton in the closet here that proves these numbers are all trumped up! It could very well be an exercise in inventory building that pushes GDP like this… The news wires say that “increased consumer spending” pushed GDP higher… Hmmm… 23% unemployed… 43 million on food stamps… And we’re spending like crazy? I don’t buy it!

The PCE (Personal Consumption) data was stronger than expected, and that’s where I guess the government gets the idea that consumer spending was stronger…

Of course, let’s all keep in mind, that these numbers printing today are being compared to numbers a year ago, when we were mired in recession…

And then we had the FOMC meeting minutes… Federal Reserve officials downgraded their assessment of the US economy at their last meeting three weeks ago as they debated the benefits and costs of quantitative easing to support the recovery. Minutes of the Fed’s latest policy-setting meeting on November 2-3, showed that officials expect the economy to grow at a moderate pace next year, which is a nice way of saying that they lowered their growth forecasts, with unemployment staying disappointingly high and inflation uncomfortably low… And what I found interesting was that votes were divided… At least someone at the FOMC was thinking straight!

Well… The data prints in the US yesterday weren’t the only ones for the markets to view… Canada had two very interesting data prints… First, Canadian CPI rose a greater-than-expected 0.4% in the month… and Canadian retail sales rose 0.6% in September following an upwardly revised 0.7% (previously reported as 0.5%) increase in August. These are two very important pieces of data to the Bank of Canada, for the recent trend in economic data has been one of weaker/softer prints… The Bank of Canada (BOC) was ready a couple of months ago to raise interest rates again, but had to put that rate hike on the back burner with the softer data that was printing… But now, the BOC is back to square one, and if the data continues to be stronger, then we could see the BOC come back to the rate hike table.

The Canadian dollar/loonie (CAD) is stronger this morning on those data prints, and it’s the first good run the loonie has seen in the past week.

One of the people “in charge” – who normally says things that I agree with – Angela Merkel, Germany’s Chancellor, really threw a cat amongst the pigeons for the euro (EUR), yesterday… Merkel decided to tell an audience that “the euro is in [an] exceptionally serious situation”… Now… Germany was the main force for the creation of the European Union and the euro… So to hear Germany’s Chancellor say something like that, scared the bejeebers out of euro holders, and the single unit currency got taken to the woodshed… And has remained there through the overnight and morning sessions.

It does look like the European Union (EU) and the IMF will give Ireland an 85 billion-euro aid package, or “bailout” if you prefer to call it what it is! Now, back in late spring of this year, when Greece was finally given an aid package, the rally in the euro was ON! We’ll have to wait-n-see if the euro can generate a rally on this Irish news… It will be difficult to do the next three days, given that the volumes on US trading desks are thin today and Friday, with markets closing early, and totally closed here in the US tomorrow…

There is news like the strong manufacturing for the Eurozone that we talked about yesterday, and today’s news that German Gross Domestic Product expanded 0.7% in the third quarter compared with the second quarter. The government’s council of economic advisers said GDP is on track to expand 3.7% this year, the highest rate since 1991… And there is further news this morning that German Business Climate, as measured by the think tank IFO, beat expectations and posted a very strong number… Could be springboards for a euro rally… But only if the markets are interested in fundamentals and data.

The Aussie dollar (AUD) is bucking the trend of US dollar strength this morning, showing resiliency in its ability to gain with all this US dollar strength. The Aussie dollar’s fuel is coming from the thoughts that Ireland will get a bailout, which, if it happens, could get global growth back on track… So, traders that aren’t afraid of the big bad wolf (US dollar) are being courageous and going out on a limb here… And I commend them for that!

I was reading a story online last night that really struck a nerve with me, and made me sit up and say, “Now that makes sense”! The story was about how, after corporations here in the US cut back on their labor forces, they went out and figured out how to continue making profits without those employees… The government calls this “productivity”… You know that I call this nothing more than each person having to work harder and longer… But, apparently, it is more than that, and with these corporations booking profits, with wider margins, they have little incentive whatsoever to hire back those employees that were cut in the past two years.

Then there was this… OK… Maybe I didn’t explain myself very well yesterday… When I was talking about the new TSA pat-down procedures, I NEVER said that I approved of them! I said that I’ve been patted down for three years, now, through every security checkpoint, so it didn’t bother me… I didn’t say it was OK for anyone else! Geez Louise, the things that people believe they read into what I say! I simply tried to point out that this was something that happens every time in life… We go too far one way, try to correct that, and go too far the other way…

To recap… The dollar continues to pile on versus the euro and the euro alternatives, while the Aussie dollar and loonie attempt to stage rallies versus the dollar. Gold rallied $10 yesterday, and is inching up this morning. The FOMC meeting minutes were interesting in that the Fed Heads stated that they believe economic growth will be moderate next year, with high unemployment remaining a problem. German GDP and IFO surprised to the upside this morning, but the euro’s short-term movement is in the hands of those giving Ireland a bailout.

Chuck Butler
for The Daily Reckoning

Divided FOMC Lowers Growth Forecasts originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Divided FOMC Lowers Growth Forecasts




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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