Nov 23: Let's not forget that Santa Claus rally

As markets tap -- alright, hit -- the brakes in today's pre-market (v/v the NY behemoth) trade, consider this a public service: check the calendar; it's late November; tryptophan, Black Friday, Starbucks Egg Nog lattes (ick, I know...!), suddenly crowded airports, and of course, "All I Want for Christmas Is You" cruelly playing on perpetual repeat all suggest one fact: Santa Claus rally season is here!

Yes, this is that special time of year when markets become positively biased towards the upside. Volumes dry up, investors become even more delusional than ever, and markets tend to tip-toe higher, .4% here, .1% there. It's a suboptimal time to be aggressively short; options bets on volatility (e.g. long straddles) can also go awry.

And so, with the /ES contract down 13 in overnight trade, testing anew the support channel reached during last week's sell-off, now might be an opportune time to don those contrarian thinking caps and crack open a can of cranberry relish.

Here's the /ES:



Additionally, let's quickly consider the technical picture on the 180-day of BRCM. Here's a position where the chart supports a robust (S&R levels are tested repeatedly) and elegant (limited S&R areas define much of the price action) technical analysis picture.



As the reader can herself see, price is currently nestled against an upward sloping price channel, suggesting a potential near-term pull-back, and not inconsistent with the slumping morning futures trade. Over the time frame of one to three weeks, however, the chart strongly suggests further price appreciation, at the very least to the top-most price channel, i.e. the $45-46 level.

To summarize in brief, then, it's not every NYSE issue whose trade maps such a robust and elegant, v/v technicals, chart. I might have to print this one and mount it on my wall and gaze lovingly at it. Alright, maybe not the last part.

The $400 that slipped away

A warning to all those crazies for whom the phrases "overbooked flight", "looking for volunteers", and "alternate routing via Spokane, El Paso and Halifax" might spontaneously release a flood of endorphins: the airlines don't always play fair.

Case in point: a few days ago I found myself awaiting the boarding of an overbooked flight, and the experience ended with a distinctly disappointing outcome -- though not for the reasons a casual reader might expect. To illustrate the event and provide a valuable take-away, indulge, fair reader, into the (privileged and confidential -- no, not really) communique that I dispatched to the senior tranches of United management (no, actually just to outsourced henchmen on the subcontinent):

**

To Whom It May Concern:

I am disappointed with a recent experience of volunteering my seat on an overbooked flight. The experience occurred yesterday, November **, 2010, at San Francisco airport and concerned UA ***, SFO-IAD.

While waiting at the gate for boarding to commence, I learned from a gate agent that UA *** was overbooked, and I asked for my name to be added to the list of potential volunteers. In conversation with another agent, I learned that I was at the top of the list. Then, as boarding commenced, the agents indicated that they*d need my seat and those of several other volunteers. The agents proceeded to process some of the other volunteers, off-loading them from UA *** and re-booking them on subsequent flights. Finally, as boarding was finishing, an agent indicated that my seat would not be needed after all, and that I could board UA ***.

My disappointment stems from the fact that I don't believe gate agents followed the proper order in processing volunteers. The belief is based on the information from one of the agents that I was at the top of the list of volunteers and, furthermore, on the improbability that all the volunteers processed before me held 1K or Global Service status.

In closing, I hesitate with submitting this claim, as the issue is not particularly serious. Furthermore, one of the agents was apologetic about the turn of events and personally escorted me to the aircraft to ensure that I found space in the overhead bins for my carry-on luggage. Yet, I have chosen to write after all because I felt let down by the whole experience, and the experience might highlight an area in which United could better manage its relations with its frequent fliers.

Regards,

**

What is, in brief, a salient take-away from this experience? For one, the utility of being a "nice guy" does have its limits. On the one hand, maintaining a sociable and unhurried demeanor is surely appropriate when interacting with stressed agents contorting to dispatch an overbooked aircraft without sacrificing punctuality. And not only is such sentiment socially appropriate, it is also economically efficient, as it increases the chances of karma returning once the agents process volunteers' re-booking and issue compensation. But on the other hand, being too detached and amicable can invite fulfillment of the aphorism: "Nice guys finish last."

Indeed, that's exactly what happened to me. Despite being at the head of the volunteer list (and of this I'm certain), I did not push for priority processing; instead, I gave the agents some space, watching as they processed several other volunteers. Then, when they unexpectedly found themselves with an extra seat, I was the odd man out. Going forward, the savvy traveller (er, the selfish crazy!) would do well to tweak his relationship strategy with gate agents to avoid the risk becoming a push-over.

Nov 18: Markets poised for advance

As for markets prepare for an advance from the short-term oversold level that has resulted from the last fortnight's shedding of risk, I'd like to briefly point out a firm with a strong story: Textron.

The maker of Cessna aircraft and Bell helicopters has received a boost to its business from Chinese lifting of restrictions on civilian aircraft. (For instance, see "China to open airspace to civilian aircraft", FT, 11/15). Yet, the stock has barely registered any upside from this news, and furthermore, closed yesterday at a quite attractive price level v/v technical analysis considerations. The chart follows:

Nov 16: A sharp reversal

Markets contracted sharply in today's trade, with some securities coming into significant support areas. Contrarian bulls are whetting their appetites. But the broad outlook is more uncertain than bullish, as evidenced by, for instance, /ES.

In brief, /ES exhibited an unambiguous break through the price channel support of the post-summer rally. Such a movement portends further value deterioration in the weeks ahead, although not necessarily immediately. Indeed, the index looks oversold at the moment, and challenging 1225 is not out of the question, perhaps in a head-and-shoulders pattern, which is a classic topping formation. Here's the latest chart:



In the realm of individual securities, MRK and BIDU are two of many that standout. The drug maker is plowing quickly into what promises to be significant support; let's keep it on our radar screens as a potentially strong contrarian buy, should price hit the top line of the downward-sloping price channel. As the price channel is sloping in the same direction as price movement, the touch would be a "kiss of death", which has higher probability of repelling the movement.



The Chinese tech firm BIDU, meanwhile, is pulling back from a particularly strong advance in recent weeks. Indeed, while many leading stocks and whole market sectors have been stuck in the mud over the past few years, BIDU continues to advance in seemingly unstoppable fashion. A two-year chart of the security speaks volumes. But, to refer again to the 180-day panorama reproduced below, the current $103.5 support does not seem particularly durable. Additionally, the sharpness of today's 5% markdown -- a definite distribution day, in IBD parlance -- does not bode well for BIDU bulls over the upcoming weeks.



To end on some broad-market summary statistics, here is their representation: S&P500, 1178, down 1.6%. DJIA, 11024, down 1.6%. NASDAQ, 2470, down 1.8%.

In recent travels, a notable coincidence

On Friday, November 12, an American Airlines B737-800 took off from Washington's Reagan airport bound for DFW, experienced a cargo hold fire indication while climbing through FL260 (i.e. 26000 feet) some 60 nautical miles west of Dulles airport, and performed a diversion to Dulles, landing safely 26 minutes after wheels-up. The flight departed DCA at 8:43am.

And with apologies about the self-centeredness of this post, here is its meat: I, too, departed Washington at 8:43a on Friday, November 12, albeit from Dulles airport, aboard a United B757-200 bound for Los Angeles. Incidentally, I was listening to Channel 9, the live feed of air traffic control communications; however, I heard nothing about the AA diversion, possibly as I may have tuned to a music channel soon after take-off.

The bottom line: it's a small world. And I might do well to occasionally consider that transcontinental transportation, while very, very safe, is nonetheless inherently risky.

Nov 11: Veterans' Day trade

With apologies to the discerning reader about the vague, content-less title of this post, I shall proceed into just as disjointed a data dump of some of the day's action.

First, a DJIA component had a veritable repeat of May 6th's Flash Crash in the final minutes of today's trade. Here are the smouldering remains:



I haven't yet seen any headline explaining the precipitous decline. [Addendum: Poor headline earnings numbers were the catalysts. The conf. call, which could either fortify the bears or spur on the bulls, is presently ongoing, as of 4:45p EST]. And vertiginous it certainly was: the $35.15 nadir marked a near-instant erasing of all gains since October 25. Put another way, the volatility of the last hour (i.e. the size of the hour's bar on a candlestick chart) exceeds that of any hour-long period in the past 180 sessions.

Second, take a look at XOM, no mere minnow given its status as largest market cap firm (per my possibly imperfect recollection) in the modest marketplace that is Wall Street. Dizzying, seemingly irrational, propelled by ask-questions-later fast fingers: the Exxon chart bears resemblance to that of DIS. Yet the direction is opposite. And how interesting that the curiously anthropomorphic psychology of markets can create a bipolar-eque bifurcation of emotion in two sister-stocks of the Dow Jones Industrial Average! (Granted, the time frame of the respective moves is dissimilar.) The chart follows:



I cannot omit the most important anomaly of today's trade: CSCO. A DJIA component too, the networking maker plunged 16 percent on a cut in its sales forecast; the chart follows:



As for the broad market, /ES printed 1211.5 at high noon in Anchorage, which corresponded to settlement of the S&P500 at approximately 1214, a change of -0.4%. The DJIA ended at 11283 (down 0.7%) -- and weighed down by CSCO and DIS -- while the NASDAQ closed at 2556 (down 0.9%).

Nov 10: An ascetic no more

After too long a hiatus, I have carefully recommenced formal re-engagement with that unforgiving but exhilarating world of relative value; I've entered a trade. The above chart depicts the security along with the analysis. And though the price channel is hardly rocket science -- indeed, it is remarkably simple -- the casual reader must bear in mind that uncovering such an elegant opportunity as this requires searching through countless charts. Further buttressing my decision to risk a long-side trade is that, at the approximate end-point of the above chart, /ES was approaching a test of the pivotal 1200 level from above, the first test of this level since breaking through last week. And, needless to say, the virgin test is usually repelled.

With regards to the above chart, violation of approximately $66.3 would trigger a stop, while $67.9 or $68.3 would make sound profitable-exit points.

Incidentally, this morning's strong sell-off in Boeing shares -- and this is news only to those readers on the planet Mars -- is chiefly caused by an emergency evacuation of a 787 test aircraft (ZA002) yesterday after eruption of a small on-board, in-flight fire.

United Express operation at DCA is less reliable?

Disclaimer: This post shall dive rather unabashedly into speculation and extrapolation from anecdotal evidence. In addition, the author harbours personal displeasure towards the "Express creep" into what until recently was an all-mainline United Airlines operation at DCA, the reasons being at least three-fold: 1) compromised service offerings of the regional operators v/v mainline service, e.g. a lack of live air traffic control audio (Channel 9), or any other audio options for that matter; reduced overhead bin space; reduced offerings in the forward cabin; 2) a perception of diminished reliability, as regionals operate with thinner scheduling buffers and reduced availability of spare (i.e. potential substitute) aircraft; and 3) a perception that reduced crew hiring requirements and comparatively Lilliputian pay negatively affect safety.

**

In checking the status of today's DCA-ORD flights on united.com, your fearlessly inquisitive author discovered a 55 minute departure delay on today's UA 7670, the scheduled 6am operation on DCA-ORD (which used to be UA 601 with mainline service...). In seeking to understand the operational implications, consider the following four facts: 1) yesterday evening's sole United Express (UAX) operation into DCA, UA 7669 (ORD-DCA, scheduled 7:05p-9:55p), was cancelled; 2) the aircraft operating UA 7669 makes a RON (remains overnight) at DCA and operates UA 7670 the following morning; 3) Shuttle America, operator of the UAX service at DCA (and owned by parent company Chautauqua Airlines), ferried an Embraer E70 aircraft this morning from CMH (Columbus, OH), which arrived at DCA at 6:08am and, by logical argument, must have provided the aircraft for this morning's delayed UA 7670; and 4) upon arriving at DCA on UA 600 earlier this week (at approximately 9am), I noticed that UA 7670 was cancelled (the E70 was still parked at a gate adjacent to that which my B757 would occupy), while the morning's mainline service to ORD all seemed to operate.

With apologies about the non- reader friendly format of the extended argumentation above, that is to say, about the decided lack of conventional punctuation, some closing points: 1) The above evidence is, admittedly, anecdotal and non-rigorous, particularly in regards to point 4, where I didn't even provide the superficial context that I at least afford to consideration of today's flight in points 1-3; 2) Cancelled flights and empty aircraft ferries are a normal occurrence in this industry; 3) That UA / UAX would ferry an E70 on CMH-DCA, instead of simply cancelling DCA-ORD and revenue-flying the aircraft on CMH-ORD, hints at concern about minimizing passenger disruption, which is laudable.

That said, the complexities of reliable United-branded operations on DCA-ORD and v/v would be minimized with all-mainline operation. To say nothing of my objections to outsourced "Express" operations a priori.

So go out, loyal constituents, and write the Customer Relations department at your preferred airline, demanding maximization of mainline service and minimization of the ironically-labeled "Express" variety! Don't pay any heed to how deceptively attractive the little bundle of aluminum, scrubbed all nice and clean, might look!

Scatter-brained, high-flying story-telling

Dear foolish readers, er, reader: (for you could be consuming something worth your time)

What follows is a true story, in the full spirit of the word 'true.' It not only truly happened, but the chronicle was truly written but minutes after the event, taking the form of an email that was instantly dispatched from the wireless device it was crafted upon, just as the wireless device encountered (naturally enough) a wireless signal, upon its carrier's reaching the terra firma of a runway at Chicago's O'Hare International Airport. I risk a lawsuit -- just as I had with the previous post; what lengths I go for my readership of no one! -- with what follows, as it was intended as privileged communication to the message's original recipient, not for posting upon every iPhone from Dakar to Dolny Slask, every LCD from Virgin America's seat-back variety to, well, the point is made.

Date: Unification day (no, not October 3, but the First of this month, when CO and UA, having said "I do," giddily stole away into the Red Carpet -clad Presidential Club suite for, well, I might have some youngin' readers here. No, of course I don't, who am I kidding.) Airbus even celebrated with a full-page advert in the Financial Times: (apologies for the poor readability; blame the iPhone camera)



Place: the District

Time: early afternoon

The deets --

**

Man oh man, today's airport arrival experience was among my most dramatic ever! Read on; I write from aboard UA 621, presently some 24 minutes into the DCA-ORD sector.

I arrived in Rosslyn at 1:30p as expected, and I was descending the long elevator shaft for the Metro moments thereafter, in possession of Peugeot road bike, Samsonite roll-aboard, and Briggs and Riley backpack. (The bike would serve as my get-away vehicle upon returning to DCA a few mornings later, thereby beating the gridlock automobile traffic on the roads and bridges into central DC.) And then the fun started.

Sure enough, the blue line departed just as I arrived on the platform via elevator, and the next would come only after the obligatory and interminable (and unacceptable) midday wait. The next DCA-bound subway rolled into Rosslyn around 1:50p.

Once on the Metro platform at DCA, a sprint to the elevator proceeded, followed by discovery of a new route to my usual Peugeot lock-up spot, adjacent to the US Airways hangar. I kissed the maddog (my term of endearment for the fine wheels) good-bye, and continued to run (and sweat - yes, it's unpleasant but true!) into the terminal and up to the terminus of a shockingly lengthy queue for priority security screening. The time was 2:15p. My scheduled departure time was 2:35p; hence, doors would close in ten minutes. The wait to get to the ID checker appeared to be a good 15 minutes. That would not do.

Eschewing all semblance of elegance, I got the attention of a non-TSA line attendant and pressed my case, underscoring that my qualifications for the premium lane were not only elite status, but F-class (achieved through upgrade) to boot. :) And it worked! I was escorted about two-thirds of the way forward, and I furthermore "pardoned" my way past another 10% of the line. My wait thereby reduced to three or four minutes, I was through the checkpoint by 2:21. What good fortune!

I decided to double my bet. I could have easily walked to the gate - I was in possession of a luxurious quantity of 4 whole minutes, after all! - but decided to hit the restroom and change into some fresh clothing. Bear in mind that, at this time (and pardon the directness), sweat was beading down my neck, and I was feeling positively disgusting. No sooner than I'd entered the restroom, I heard "final boarding call, United 621!". But it was only 2:22, and I was determined to take full advantage of my remaining 180 seconds.

I finished my sartorial task most expeditiously and emerged into the male-female-combined world at 2:23p. I was at Gate 31 while my phone still displayed 2:23 (it would tick to 2:24 a few seconds later). The door to the jetbridge was open, the jetbridge was still attached to the New Colours A319, but there were no agents in sight! Finally, just over a minute later, after waiting patiently (what else could I do?!), I saw the jetbridge begin to detach. And an agent made an appearance. "Excuse me," in said. No response, not even a turn of the agent's head or eyeballs, despite being about two feet away from me. "Excuse me," I tried again, and still no acknowledgement. I could already see the angry email to United's Customer Relations that I would subsequently compose. But then, unexpectedly, a helpful query: "oh, are you on this flight?" Why, yes. Why else would I be standing at the jetway? I show my boarding pass and the demeanor improves further. I'm invited down the jetway in no time.

Now firmly ensconced within the aluminum skeleton of the jetliner, one further adventure awaited that momentous half-hour. I saw someone occupying my 2D. And I was told to gate-check my Samsonite. I do not admit this with pride, but the seasoned traveller within suddenly made a full-on appearance. I stubbornly began checking all the overhead bins in F, and finding only meager space for my backpack and maddogging helmet, proceeded to investigate bins in the forward part of Economy Plus. I was determined, even though the gate agent was already in the process of writing out a gate-check tag and affixing it to my bag, and suddenly - yes, some elusive space! Again with some dissatisfaction, I admit to having forcefully and clumsily rearranged the contents of that overhead bin and then expertly shoving my over-sized Samsonite into the created space. And I then took 1D, without so much as an evil-eye to the occupant of *MY* 2D! :)

Fondly from flight, now 0:56 past wheels up, and above western Ohio, (though, obviously, my note will be dispatched only upon making contact with one of ORD's fine runways)

**

Awaiting a barrage of criticism from non-existent readership, pertaining to all the explicit and tacit haughtiness that, it might be imagined, oozed forth from me...

Post script: For the sake of posterity, here's what the blurry text in the Airbus advert above really says: Read Ad Astra It's the Best Read Ad Astra (et cetera). Ok, here's what it really says:

Congratulations to everyone at Continental and United on the merger creating the new United, a truly world-class global airline. Your partners at Airbus, the world's leading aircraft manufacturer, wish you all the best. October 1, 2010 was a big day for the world of aviation, and for everyone that wants to fly.

07/10: Big-picture musings

I will not commence this post with a renewed vows of frequent and substantive posting. I'll let the following (true) statistic speak of the volume of readers that have been begging, badgering, and downright being belligerent about the dearth of content: Google currently owes me less than the typical price of a cup o' Joe in advertising fees for the past few months. Hopefully that statement is sufficiently vague to dodge those highly-paid Silicon Valley lawyers, who are just itching to sue the latest dirt-poor blogger for untold damages at having revealed their precise remuneration from Google Adwords. Based on my earnings, I can't even afford the Metro fare to the courtroom, to say nothing of needing to hitchhike my way back.

Those pleasantries aside, I have navigated a transition into new professional endeavors over the past few weeks, and the upheaval having passed, I trust that there's at least somewhat of a chance for sustained value generation on these pages over the weeks ahead. And the impetus for the vagueness is an omnipotent, oddly mysterious, 'just because', its being one of the few perks (ok, the only one) of being Founder, Chairman and CEO of Ad Astra Publishing and Pontificating, NLC (like an LLC, but better, with no liability whatsoever!) And yes, dear reader, the way this writing is flowing, I too identify this post as being at risk of speedy revision.

In just-breaking news, markets have not stood still since I last scratched the virtual chalkboard that is this blog. September spawned a sustained and, so far, unbroken move towards the upside, with the broad-market /ES contract now looking over-extended, though not necessarily without potential for one last pop, before the inescapable tendency towards mean-reversion says hello. In any event, 1175 looms as important forthcoming horizontal resistance, as do 1200 and 1210 further up the chart.

A 180d/4h /ES chart follows. From here on, such notation will convey the following: first, the time period of the chart (here, 180 days); second, the time period of each bar (here, 4 hours). /ES is, of course, a 24/5 contract (meaning that it trades for approximately 120 hours per week); hence, a 180-day chart of /ES will contain far more data that, say, a 180-d depiction of SPY, its corresponding exchange-traded fund, which trades for but 32.5 hours per half-fortnight. And I trust, reader, that you'll somehow forgive the quality of this late hour's missive, and return for more dreary punishment tomorrow. Yes, I did say tomorrow.

08/07: Markets quieter, no longer fiercely trending

Markets put in a quieter session today, in comparison to the post- July 4th fireworks of this week's first two trading days. /ES futures, after closing yesterday at 1056, quite near the session high, today opened higher, declined modestly through the meat of the session (a peak to trough decline of 13.75 points, or about 1.3%, from 1067.75 to 1054), and rallied impressively into the close, settling at 3:00p just two ticks shy of the intra-day high. Sentiment was boosted with a bullish unemployment claims report released at 7:30a CST. Here's the day's chart:



As already mentioned, markets rallied into the close, which marks a stark departure from markets' habitual PM weakness of the last several weeks. Of course, late-day sell-offs are hallmarks of bearish markets, and afternoon buying, particularly into new highs (which /ES futures today proceeded to set shortly after the 3p CST closing bell), augers well for further gains over the near term. Further bolstering bulls was a decline in Treasuries; /ZN futures declined to below two-seek support of 122'05.

(Editorial aside: To follow-up yesterday's brief commentary regarding the spelling of the plural of Treasury, referring to the bond, today's Financial Times records the spelling of the instruments as 'Treasuries,' which aligns more with my intuitive sense of correctness than the WSJ's reliance on 'Treasurys.' Hence, going forward, I'll stick with the FT's example.)

The bears retain at least two important arguments in their arsenal, the past three sessions' price action notwithstanding. Most importantly, volume failed to climb into above-average territory; today's NASDAQ volume clocked in at 2.06 billion, below the 20SMA of 2.24B and firmly below the volume levels of three particularly active sessions of the recent past: 6/25, 6/29, and 7/1, each of which had volume in excess of 2.65B. (I don't include NYSE volume readings here, as I am finding conflicting values of the metric from various sources; also, I am concerned about the metric's continued reliability, as more trading shifts off the NYSE and onto alternate exchanges.)

Furthermore, /ES futures continue to remain in a 2.5-month, downward sloping price channel; the upper line of the price channel is presently at approximately 1100, which /ES futures would have to top in order to firmly enter more bullish territory. In the region of /ES = 1100 also lurks the all-important 200SMA. Caveat emptor.

07/07: A one-way day, markets shoot higher

Days like today are rather frustrating for traders with a predilection for contrarian strategies, of which I am one. Here's the whole story, in a single chart:



Relentlessly, indefatigably, most remarkably, markets climbed higher, higher and higher still, with /ES advancing 40. Only twice during that dizzying rally did the instrument stray more than 5 points from its hitherto-notched intra-day peak, once by 5.5 points and another time by 5.75 points. Thus, a trailing stop on a long ES position with a mere 6 points of "leash," entered at the pre-market nadir, would have captured the whole 40 point rally. Remarkable!

By the closing bell, the S&P-500 had advanced 32 points, or 3.1%; the DJIA bulked up by 275 points, or 2.8%; and the NASDAQ added 66 points, or 3.1%.

The rally may yet be all smoke-and-mirrors, however, which is why I've refrained from taking any long positions into the overnight hours. Today's rocket-ship was not fueled by above average volume (see below), there was no particular news that might have provided a durable impetus for buying, and other measures of risk aversion, e.g. Treasurys, as measured by /ZN futures, remain elevated. That said, there are certainly plenty of other risk metrics showing marked improvement over the past two sessions, including /CL (crude futures; up), EUR/USD (up, and rising since a nadir on 6/6), and even to some extent /HG (copper futures; somewhat firmer).

(As an aside, I've noticed that the WSJ refers to the plural of Treasury, when referring to the financial instrument, as Treasurys. Could it really be so? Until I hear otherwise, I'll be employing the convention, as I've done in the above paragraph.)

Here's how the day's volume stacks up, quite literally, against the past 180 days, first on the NYSE, second on the NASDAQ. Apologies for failing to slap on a 30EMA, or similar.


*


I am most curious what tomorrow's markets will bring! /ES = 1100? Or /ES = 1000?