FRI. NOV. 21- Stock Prices Can Actually Be Rational

$233,000 to $3,612. Do those numbers mean anything to anyone? Again, $233,000 to $3,612. Ready? This is the BCI rate (CAPE index). In English, this is the rate which one has to pay to use a dry bulk ship per day. This data is taken directly from the website of Dryships, a leading dry bulk shipper (DRYS):
http://www.dryships.com/index.cfm?get=report

So, really, think about this: let’s say you had a bunch of electronics from China you had to ship in dry bulk crates. You can now lease a vessel for $3,667 per day, down from $233,000 a mere five months ago. There are two major points to be taken. First, this incredibly low rate of rental cannot last for a sustained period of time. It is cheaper to simply let the sailors have a good vacation than to operate the ship. Furthermore, if this is the type of commercial activity that is occurring, it could portend horrible things for the world’s populations. Entities must be able to ship goods efficiently or how else will stores stock their goods? The second point is related to day trading: many many people think that things are overdone. And maybe they are in the immediate-term. However, when someone looks at DRYS and sees its stock price down 97% from its high with the average analyst still estimating almost $13/share in earnings for next year, they question the valuation. But, lookit, the rate they are garnering per day per ship is down 98% from five months ago so why shouldn’t the stock be down 97%? So, when one sees these prices and doubts any possibility of things getting worse much less acting incredulous at the computer monitor, they shouldn’t. Not that it will or won’t get worse…we are just saying it is possible. Thus, for day traders, don’t think…just act. Prices are what prices are what prices are and stocks will do what stocks will do what stocks will do. So, just be prepared for anything at anytime and do not overthink anything…particularly on what promises to be a wild wild day.

Markets in Asia stage a reversal overnight; after trading down 2%-3%, most Asian exchanges closed up 3%. The trend extended into Europe as well with prices a bit higher. Futures are stronger in the U.S. too. With it being an options expiration day today, the trend tends to assert itself early in particular. Look for some immediate selling into the rally this morning (S&P’s up 30 should come in at least 10 by some point within the open). However, if the selling isn’t overly intense, it is likely going to be a rather extraordinary A-B-A2 upside day. If the selling is intense, it will be massive with the Dow 7000 level in danger.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-


Good-

DELL – beat earnings

CRM- beat earnings

GPS- good earnings

HLX- closed near low; after close yesterday, company claimed there are no corporate developments

GS, AMZN, BIDU- all tried to rally yesterday, but failed late…yet they showed strength so they may be among the first to bounce in any market strength

HNZ- good earnings

CLNE, KMP – on “Mad Money” last night

CI- reaffirmed guidance

Bad-

ADSK- terrible warning

FL- bad earnings

PFG- closed near low; looking to short thru 9.25

CENX- closed near low; looking to short thru 4.35

STP- closed on absolute low

POT- closed near low

FWLT- closed near low

MEE, JRCC- closed near low

HIG, CI- closed on brand new low

RIMM- closed near low

XOM, NOV, HES, CAM, SUN, PDE- oils/drillers closed near lows

LBTYK- closed on low

SBAC- broke to another low

LINE- among the small energy LLC’s that were belted yesterday

SCHN, STLD, NUE, X- among other steels which sank to new lows

NOC- among the defense names closing at lows

DD- stunning. Was in a narrow range for literally years and has now fallen 50% in weeks. When/if market bounces, should be among first to bounce

EL- among clothing retailers closing near their lows

CE- closed near a multi-year low and warned after hours
CSIQ- atrocious earnings

JPM- filed mixed securities shelf




Earnings:

FRI NOV 21 BEFORE

ANN CSIQ HNZ

SJM




Good luck today.