Sunday Rock Blog: Inertia Creeps

MIND THE FEAR

Sunday Rock Blog: Punch You In The Eye (NES remake)

USO vs Oil

We all know that the commodity ETFs tend to vastly underperform the commodities they are supposed to mimic. Wall Street games them as they roll contracts, the fund managers take their fees and not much is left for the ETF investor. UNG is famously the worst of all in this regard but USO is pretty horrid as well. Take a look at US ovewr the past three years:


When an ETF consistently performs so poorly compared with the commodity (see light crude chart below) one wonders why any one bothers to invest in it at all. There were over 150 million shares traded last week. Sure, there are probably tons of shorts in USO who hedge with crude futures but not everyone can be short. The shorts have to borrow from somewhere. This all begs the question, why do these "investment" instruments exist and who would want to own them? Is it all just short term investors who only care about the day to day performance and don't care about weekly under-performance as is clearly evident in these charts?


Disclosure: No position in these.

Sunday Rock Blog: Growling Old Man and the Grumbling Old Woman

Saturday Rock Blog: Psycho Killer

This week in idiotic headlines: "Gold Loses Safe-Haven Appeal"

Saturday Rock Blog: Shine On You Crazy Diamond

Disclosure: I have no position in LULU but it looks pretty bullish.

Saturday Rock Blog: Do It Again IWM

Saturday Rock Blog: Meatstick > Auld Lang Syne

Happy 2011 all! I hope you all had as much fun reigning in the new year as I did (I was at this incredible show at Madison Square Gardens, NYC). I'll get back to posting charts soon.

Saturday Rock Blog: Wonderful Christmas Time

Saturday Rock Blog: Red Shoes

SP500 Cup and Handle

@CHICAGOSTOCK

Fed's overworked printing presses break down

"An official familiar with the situation told CNBC that 1.1 billion of new $100 bills have been printed, but they are unusable because of a creasing problem in which paper folds over during production, revealing a blank unlinked portion of the bill face.

A second person familiar with the situation said that at the height of the problem, as many as 30 percent of the bills rolling off the printing press included the flaw, leading to the production shut down.

The total face value of the unusable bills, $110 billion, represents more than ten percent of the entire supply of US currency on the planet, which a government source said is $930 billion in banknotes. For now, the unusable bills are stored in the vaults in "cash packs" of four bundles of 4,000 each, with each pack containing 16,000 bills.

Officials don't know exactly what caused the problem. "There is something drastically wrong here," a person familiar with the situation said. "The frustration level is off the charts."" -source

Well at least they've recognized that there's a problem. The first step to any addition is to admit that you have a problem right?

JA Solar (JASO) looks better than ever

As you know, I've been a fan of JA Solar since they did their IPO in 2007 but my opinion of the stock has varied with he times and the charts. I've kept a close eye on JASO ever since it broke out of its two year range in September, nearly doubling in price over two months. Since that peak JASO has sold off with the sector after a sharp decline in crude bringing JASO back to the breakout point for a perfect buying opportunity. Volume was strong on the initial breakout so I'd expect it to follow through (upward) from here. One word of caution on this chart, the stochastics look bearish and the CCI is giving a sell signal.

I'm no value investor by any stretch of the imagination but with a PE of under 7 and a PEG of 0.34 (five year expected) JASO looks like the cheapest growth stock on the planet. They just signed a massive five year 10GW polysilicon supply deal which is roughly equal to the annual total global production of solar cells. They certainly don't seem to be in any kind of trouble and are planning ahead for the long run, why such a low valuation? Since solar is really a call option on future energy prices, we have to check out crude:

Crude rallied to a new two year high at the close Friday, no issues there. You can draw your own conclusions about this situation. Other issues I like in the solar space are FSLR and the TAN etf.

Disclosure: I am long JASO calls.

Saturday Rock Blog: Change is Hard

IWM (Russell 2000): Bullish

Saturday Rock Blog: Baby on Board

Looks like the jig is up, the dollar has reversed its medium term trend to resume the long term trend. Here's FXE (Euro ETF), a three year weekly:

11/22/10 Natural Gas Market Update

Since the bullish gap breakout September of last year, natural gas rallied off its lows of $2.409 targeting and completing a 50% retracement from the selloff of $9.60 to make a high of $6.108 January of 2010. As this high was made, natural gas slowly moved lower and formed a channel that it’s been within for the year of 2010. In October natural gas made a low of $3.255 before finding support and pushing higher. This low came within testing the lows of May of 2009 at $3.155. By holding and pushing higher the market has put in a low that is trying to create a potential inverted head and shoulders formation. The past three weeks has been a consolidation of that push higher and this has created a bull flag as the December contract goes into expiration on November 24. Market bulls will want to see a continuation of that push off the lows with short covering going into expiration to try and test and break out of the downward channel or as January becomes front month the difference in price puts it above the channel to gap and go higher. Upside resistance to be met up to the June highs of $5.196 and then January highs of $6.108. Getting above and holding $6.108 gives the bulls an inverted h/s target of $9.807 (6.108-2.409=3.699, 3.699+6.108=9.807). This also retraces 100% of the move from $9.600 August 2008 to $2.409 September 2009.



As of Friday, November 19, 2010:
December 2012 $10C Open Interest = 2,713
December 2013 $10C Open Interest = 2,790



RISK DISCLOSURE: PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS IS SUBSTANTIAL AND SUCH INVESTING IS NOT SUITABLE FOR ALL INVESTORS. AN INVESTOR COULD LOSE MORE THAN THE INITIAL INVESTMENT.

Stewart Solaka

Twitter: @CHICAGOSTOCK
EMAIL: CHICAGOSTOCK

Saturday Rock Blog: I'm Alright/Caddyshack

Failed Breakouts Galore

Netflix (NTFX) six month daily:

Russell 2000 (IWM) six month daily:

US Oil ETF (USO) six month daily:

Euro ETF (FXE) six month daily:

I think there's more downside to come and failed breakouts often lead to sharp corrections. A week ago everyone on the planet was wild eyed bullish, investors may be re-thinking fed induced purchases.

Disclosure: I do not have any positions in the above equities but I am short some stocks and am long the US dollar against the Aussie dollar.