The huge breakout for eBay above 59 
Earlier this year, on rumblings of a Paypal spin-off, eBay (EBAY) briefly traded just above $59/share. It has since fallen back into the middle part of a wide trading range between 50 and 59.
Back in December of 2004, as stocks were recovering from the dot com crash, eBay also traded briefly above $59 before getting crushed in January of 2005.
Back in March of this year, SunTrust’s Robert Peck did an analysis of a potential spin-off and put a price target of $65 on eBay shares.
This morning, on definitive news of a 2015 Paypal spin-off, eBay trades again up to this $59 line pre-market.
Its a big big level with price memory spanning 10 years. Around this level, there’s congestion and resistance but above it, there’s open field and room to run.
Trade it and set stops accordingly. Zoom Permalink

The huge breakout for eBay above 59 

Earlier this year, on rumblings of a Paypal spin-off, eBay (EBAY) briefly traded just above $59/share. It has since fallen back into the middle part of a wide trading range between 50 and 59.

Back in December of 2004, as stocks were recovering from the dot com crash, eBay also traded briefly above $59 before getting crushed in January of 2005.

Back in March of this year, SunTrust’s Robert Peck did an analysis of a potential spin-off and put a price target of $65 on eBay shares.

This morning, on definitive news of a 2015 Paypal spin-off, eBay trades again up to this $59 line pre-market.

Its a big big level with price memory spanning 10 years. Around this level, there’s congestion and resistance but above it, there’s open field and room to run.

Trade it and set stops accordingly.

Brands chase Apple’s bending iPhone meme hoping to go viral

Remember when the lights went out at the Super Bowl a couple years ago and Oreos’ brilliant "You can still dunk in the dark" tweet went viral?

Well, now every advertiser in the world tracks breaking news and tries to capture lightning in a bottle.

Above, you will find a a number of attempts, with varying degrees of success, originally collected by and posted to Tumblr by First Memes.

Emerging markets are now lower year-to-date
Emerging market stocks, as measured by the iShares Emerging Markets ETF (EEM) are now lower on the year after trading up by as much as 10% for the year as of the close on September 5.
EEM has fallen 10% since the September 5 from a closing high of 45.85 to the current spot price of 41.56.
The low close for 2014 was 37.11 on February 3 so there’s still a lot of room  below current levels before making a YTD low. 
There’s a number of hindsight attributions we can make to rationalize the drop from ISIS and Middle East unrest to the uprisings in Hong Kong to projected slowing global growth.
Nevertheless, if you are invested, what matters most is price which has weakened precipitously for almost a month now. 
For the record, my tendency is to buy these types of ETFs for a longer term hold only when they get crushed. EEM is on its way, but I would still like to see more bedlam, panic and, perhaps, a test of the YTD low before entering. Zoom Permalink

Emerging markets are now lower year-to-date

Emerging market stocks, as measured by the iShares Emerging Markets ETF (EEM) are now lower on the year after trading up by as much as 10% for the year as of the close on September 5.

EEM has fallen 10% since the September 5 from a closing high of 45.85 to the current spot price of 41.56.

The low close for 2014 was 37.11 on February 3 so there’s still a lot of room  below current levels before making a YTD low. 

There’s a number of hindsight attributions we can make to rationalize the drop from ISIS and Middle East unrest to the uprisings in Hong Kong to projected slowing global growth.

Nevertheless, if you are invested, what matters most is price which has weakened precipitously for almost a month now. 

For the record, my tendency is to buy these types of ETFs for a longer term hold only when they get crushed. EEM is on its way, but I would still like to see more bedlam, panic and, perhaps, a test of the YTD low before entering.

Is the Russell 2000 officially in a downtrend?
This just in from MKM Partners Chief Market Technician, Jonathan Krinsky.
The 200 day moving average of the Russell 2000 is sloping lower for the first time since 2012. Krinsky writes,

While there was a lot of talk about the “Death Cross” on the IWM the last few days, in our view the much more important issue is the SLOPE of the 200 DMA. Over the last 3 days, that has begun to turn DOWN. IWM has not had a down-sloping 200 DMA since December 2012. So if looking for a reason why this “dip” might be different, that would be one sign.


Zoom Permalink

Is the Russell 2000 officially in a downtrend?

This just in from MKM Partners Chief Market Technician, Jonathan Krinsky.

The 200 day moving average of the Russell 2000 is sloping lower for the first time since 2012. Krinsky writes,

While there was a lot of talk about the “Death Cross” on the IWM the last few days, in our view the much more important issue is the SLOPE of the 200 DMA. Over the last 3 days, that has begun to turn DOWN. IWM has not had a down-sloping 200 DMA since December 2012. So if looking for a reason why this “dip” might be different, that would be one sign.

The single most disturbing chart about income inequality
Pavlina Tcherneva posted this graphic on Twitter a while back. It definitively presents a trend that is incredibly disturbing to all Americans.
Since 1949, the disparity in income growth during economic expansions has shifted incredulously.
During the 50’s, income was growing 3 to 4 times faster for the bottom 90% than the top 10% of earners. Since then, the trend has consistently shifted and, by the 1980s, income growth was accelerating much faster for the top 10% than the bottom 90%.
In the most recent period measured, 2009-2012, income growth during economic expansions reached more than 100% for the top 10% while actually shrinking by over 10% for the bottom 10% of earners.
Societally, this disparity reversal cannot continue without social unrest. It can probably get worse but at some point the pitch forks will come out. Zoom Permalink

The single most disturbing chart about income inequality

Pavlina Tcherneva posted this graphic on Twitter a while back. It definitively presents a trend that is incredibly disturbing to all Americans.

Since 1949, the disparity in income growth during economic expansions has shifted incredulously.

During the 50’s, income was growing 3 to 4 times faster for the bottom 90% than the top 10% of earners. Since then, the trend has consistently shifted and, by the 1980s, income growth was accelerating much faster for the top 10% than the bottom 90%.

In the most recent period measured, 2009-2012, income growth during economic expansions reached more than 100% for the top 10% while actually shrinking by over 10% for the bottom 10% of earners.

Societally, this disparity reversal cannot continue without social unrest. It can probably get worse but at some point the pitch forks will come out.

Of Trends, Yields, and Metals

This is a reblog of Mark Dow’s Tumblr Post. Mark is a hedge fund manager and economist. You can find his excellent Tumblr here and follow him on Twitter here

markdow:

Markets are hard. One of the main reasons they’re hard is because it’s in our nature to overthink. We’re tempted to think deep thought is our value added, how we justify our fees. It’s also how we impress clients.

But market reality is usually far simpler. Investors chase returns. We fall for stories. We’re masters of belated overreaction. And we have a hard time sticking to a game plan in the face of the huge emotional swings that come with managing other peoples’ money. For these reasons (inter alia), trends tend to be more powerful and go much further than would seem reasonable.

It took me years to curb my impulse to fight trends. The temptation to engage in counter trend trades can be overwhelming, especially if performance is lagging and/or a trend is new or not well established. But it’s rarely worth it. It’s especially not worth fighting something that looks like it might be a new trend.

I don’t know for sure if the rise in short-end Treasury yields or the breakdown in metals constitutes a new trend. All I know is the odds are massively against you if you try and go against it.

Below is a graph of the 2 year Treasury yield. Note that unlike the long end where all the Fed buying has been taking place, the front end has been creeping higher since the Taper Tantrum of May 2013.

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The 5 year Treasury yield shows a more interesting pattern: it looks like it just broke higher after a long period of consolidation. Yes, if in the short term we get more risk aversion this yield would likely tread water or pull back. But this chart tells us that the odds favor higher yields. And soon. I’m not one who fears a pernicious rise in inflation as the cycle strengthens, and I also think many market participants have mentally anchored on equilibrium levels for both policy rates and Treasury yields that are too high. But, all this notwithstanding, this is still a train I wouldn’t dare stand in front of.

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The 5 year Treasury real yield tells an even more powerful story. It shot up in the Taper Tantrum and when sideways until a few weeks ago. It tells us yields are going up, and not because of inflation fears.

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Then we have the metals. When we see a sustained fall in metal prices, most people think “weak global growth”. We systematically read too much about economic fundamentals into commodity price moves. Again, we overthink. The market has made this mistake time and time again. Instead, my first thought is financial liquidation/deleveraging, because financial operators have come to dominate commercial hedgers over the past 15 years.

Specifically these days, I think about Chinese financial liquidation. We know there was a boom in China. We know there was a boom in commodities. And we know Chinese entities were stockpiling commodities and in many cases pledging them as collateral. They are now unwinding. They are not alone, but they’re the most salient example.

My fundamental view is that commodities got overhyped and over loved over the 2004-2011 period and we’re going through a long period of mean reversion. Initially, the hype was based on emerging market economies plugging into the grid and consultants convincing slower money that it was its own asset class and a great diversifier. The second phase of the ramp came from misunderstanding QE.

Now, however, we’re in the down cycle. We saw the first leg of the great commodity unwind and the second one may be upon us. The first shakeout was mostly tourist dollars getting shaken out of the gold tree. Many of the investors who bought gold as protection against QE-induced inflation were forced out over 2011-2013, as it became clear they got it wrong. The second phase, will come as higher real rates drive the wooden stake the rest of the way through, shaking out the long term money, the asset allocators and the true believers. And based on the charts above, if this is not happening now, it is likely to happen very soon.

The charts below, to my mind, confirm what the charts above were suggesting. I know short term positioning is more supportive of metals, and sentiment is more bearish than bullish, but look at the charts below. If an experienced market participant were to flip these charts upside down and imagine they were stocks, I’d be hard pressed to think they wouldn’t want to do some two-fisted buying. Whatever the short term may bring, you do NOT want to step in front of the break down train.

Here’s copper:

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Gold doesn’t look any better:

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And silver looks to be the worst of the bunch, have arguably already broken down:

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Again, there’s a chance that this is a big head fake and not a new trend. But managing money is about pressing your bets when the odds are in your favor—either the odds of being right or the odds of an asymmetric payoff, or, in a dream sequence, both. And right now—whatever the ultimate outcome—being long bonds and long metals doesn’t meet that criterion. Simple money management only gives you two choices here: be short, or get the hell out of the way.

The extraordinary rise of the US military industrial complex

As of last night, the US military has begun bombing ISIS in Syria. They’ve already been bombing ISIS targets in Iraq for weeks without effectively dislocating the enemy and so the horrible game escalates.

We’ve been bombing this part of the world, on and off, for 25 years going back to Iraq’s invasion of Kuwait in 1990 and the US military response at the request of the Kuwaitis.

Its no wonder the military industrial companies have performed well since the early 1990’s.

Let’s take a long-term look at a few of these plays and chart their trajectories:

Lockheed Martin Corporation (LMT)

Since the beginning of 1990, Lockheed has gone from $11 to $177/share. This is a 1600% increase not counting dividends which currently have a 3.2% yield.

General Dynamics (GD)

Since the beginning of 1990, General Dynamics has gone from $5 to $126/share. This is a 2500% increase not counting dividends which currently have a 2.1% yield.

Northrop Grumman (NOC)

Since the beginning of 1990, Northrop has risen from $7 to $129/share. This is a 1800% increase not counting dividends which currently have a 2.3% yield.

Zooming in on Defense Stocks

So its no surprise, I guess, that the big defense names really took off after 1990. The US is a war machine that needs missiles and bombers and with another conflict just beginning, it seems like this will not change soon. 

So how do the stocks look right here right now?

Last week, Yahoo Finance Contributor, JC Parets analyzed the iShares US Aerospace & Defense ETF (ITA) and provided a mixed take based on multiple time frames.

Here’s one of JC’s charts from that post that shows the industry consolidating in a fairly well defined range after a huge run:

For more tactical traders, JC writes:

I want to see more time around these levels and let ITA prove that it can break out of this range. That would signal that the longer-term chart is ready to take the next step to new highs and continue its uptrend.

So in the shorter term, these stocks might need more time, but, If the long-term stock performance of the US military industrial complex is any indication, war makes a great investment.

Photo Credit: Alexander Muse

To Alibaba or Not To Alibaba

This post is a reblog from Om Malik’s Tumblr

om:

“I think one has to be careful, and there are still some great companies around. One of them [Alibaba] just  became public last week. That’s a fabulous company. If Alibaba and others do as well as people project them to do, they’re probably reasonably valued. We’re always looking for bargains. There are opportunities in the liquid space, no question about that.” Julian Robertson, Tiger Management

“Have you ever used Alibaba’s services? Do you really understand the company? I doubt it, because Alibaba is a Chinese company. Most of us here in the US don’t speak Chinese, or have a reason to use Alibaba’s services. But for some reason we all seem willing to buy into the “Chinese eBay,” or the “Chinese Facebook,” as if throwing those successful public companies’ reputation over Alibaba’s frame somehow equates to quality. What bankers and analysts will tell you is they’ve run the numbers that Alibaba has given them, and they are fantastic. Then again, so are the numbers on Chinese GDP growth – and most well informed people I’ve spoken to say those numbers are unreliable. (Oh, and by the way, if you think the $81 billion China just injected into its own economywas a shrug, I guess you should buy Alibaba without concern).” John Battelle, Federated Media, Industry Standard, Web 2.0 Summit & long time writer, blogger.

Herbalife gets bludgeoned into the close

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What the heck is going on with Herbalife?

While it traded lower all day, the last 30 minutes of trading saw shares slide precipitously and it looks like the stock might close below 40 for the first time since July 2013.

There’s no clear-cut news yet but check back on this post and it will be updated if and when we here something solid.

There are rumors floating around that Carl Icahn is selling his HLF stock but these are not confirmed in any way.

UPDATE 1: HLF closed just above 40 at 40.21, down 10.31% on the day.

Update 2: Charlie Gasparino just tweeted that Carl Icahn has not sold his HLF stake. Here’s the tweet: 

"well that’s that @Carl_C_Icahn has not sold $Hlf stake nor has he sold a share no option position either —sources close to the matter”