Wednesday, November 27, 2013

Jeff Rubin: Triple Digit Oil & Higher Price at the Pump Here To Stay?

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Discover Financial Services (NYSE: DFS)

Discover Financial Services, a bank holding company, provides direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover card-branded credit cards to individuals and small businesses on the Discover Network. This segment also provides other consumer banking products and services, including private student loans, personal loans, home loans, and prepaid cards; and other consumer lending and deposit products, such as certificates of deposit, money market accounts, online savings accounts, and individual retirement account certificates of deposit. The Payment Services segment operates PULSE, an automated teller machine, debit, and electronic funds transfer network; and Diners Club, a global payments network, as well as a network partners business, which includes credit, debit, and prepaid cards issued on the Discover Network by third parties.
To review Discover's stock, please take a look at the 1-year chart of DFS (Discover Financial Services) below with my added notations:
1-year chart of DFS (Discover Financial Services) Over the last 8 months DFS has consistently moved higher. Since June though, the stock has formed an apparent trendline of support (blue). Always remember that any (2) points can start a trendline, but it's the 3rd test and beyond that confirm its importance. DFS' trendline seems to be important now that it has been tested a 3rd time back in October.

The Tale of the Tape: DFS has created a trendline of support over the last 5 months. A long position could be entered on a pullback to that trendline, which is approaching $50, with a stop placed below that level. A short position could be entered if DFS were to break the trend line support.
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Hitch a Ride on a Platinum Supply Crunch

Can you name a commodity that’s currently in a supply deficit? In other words, production and scrap material can’t keep up with demand?

How about two? If you find that difficult to answer, it’s because there aren’t very many.

When you do find one, you might be on to a good investment — after all, if demand persists for that commodity, there’s only one way for the price to go.

At the end of 2012, the platinum market was in a supply deficit of 375,000 ounces. Much of it was chalked up to the sharp decline in output from South Africa, where about 750,000 ounces didn’t make it out of the ground due to legal and illegal strikes, safety stoppages, and mine closures(more)

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Natural Gas Keeps Testing Key Resistance

One of my favorite things about technical analysis has to be the whole principle of polarity. This study of supply and demand is the beginning of all of my analysis. When prices keep bumping up against a specific price, we know that with each test, there are less and less sellers. Eventually, when sellers dry up (after enough tests), the buyers take over control at that level and prices shoot up. The same thing can be said about support. The more times support is tested, we know there are less and less buyers down there. This is simply due to the fact that at some point, anyone willing to buy at that level has already made their purchase. So when the buyers dry up (after enough tests), sellers take control and prices fall hard.
Today, let’s focus on the key resistance in Natural Gas. Again, the more times a level is tested, the higher the likelihood that it breaks. Why? Because with each test, in this case about $3.87, there are technically less and less sellers willing to sell at that level? Why? Because more and more sellers willing to sell up here have already sold.
Here is a daily chart of Natural Gas showing this to be the 4th attempt to get above this key resistance level since July:
11-26-13 ng
Something else that I think is worth pointing out is the significance of this level. The sellers have consistently been defending the 50% retracement of the April to August decline. Regardless of whether you’re using absolute highs and lows (red), or closing prices (blue), the range of this resistance is about the same. To me this is a monster level.
The bad news for the natural gas bulls is that prices have shot up hard as we currently approach this price. This makes it much more difficult to break through, and quite frankly a breakout would be less reliable. The good news however, is that this is test #4. But more importantly we have a nice little shakeout, or false breakdown, early in November that could be that catalyst to take prices through this resistance.
If and when these levels are taken out, the polarity mentioned above starts coming into play. If we get through, we know the sellers have dried up and the buyers are now in control. Therefore, any future retests of this level should be met with buyers.
Either way, I think this action in Natural Gas is extremely constructive. And for now, I’d rather err on the long side. I don’t have a position yet, and as of right now I’m not sure where the entry point is. But this is something definitely worth watching. Perhaps a retest of the 200 day moving average could be the first entry? Maybe a few closes in the 3.90′s could be confirmation. Or possibly the breakout and retest of support. I’m staying very open-minded with this one and really just taking it one day at a time…
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The Bull Market Doesn't Care That You Think it "Should" Correct

Unless Santa Claus comes to town in an atypically bearish mood, 2013 is going to end the way it began: with a bunch professional money managers calling for a 10% correction. As early as last January mainstream media started complaining about the overdue nature of a market pullback.

Even as overall market complacency has moved higher the hand-wringing among professional investors grows.  Goldman Sach’s (GS) David Kostin nicely captured the prevailing mood last week when he made a bullish call for 2014 but only with a the caveat of a very specific-sounding 67% chance the S&P 500 (^GSPC) will sell off 10% or more in 2014.

In the attached clip Mark Luschini of Janney all but defies those who would offer a divergent view given the facts at hand.  “We’ve gone more than two years without so much as a 10% correction which is a fairly rare phenomenon,” Luschini argues. Stocks are up 30% year-to-date with barely a hiccup along the way.

The market moving higher isn’t a sell thesis. If it were stocks would have at least corrected at some point in the last two and a half years.  Those who have been stubbornly waiting for a pullback have missed a 165% rally from the March 2009 lows. It’s a high price to pay for being patient. 

It’s been about 550 trading days since August of 2011 when stocks finished their last pullback. That’s an usually long stretch by historical measures less than half as long as bull runs from 1990 - 1997 and 2003 - 2007.

Of course the 2007 run ended in catastrophe, but 1997 was a fairly run of the mill crisis in the run-up to the great NASDAQ bubble top of 5,048 made on March 10th 2000. For whatever it may be worth that once unassailable peak is about 25% higher from current levels. (more)
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Peter Schiff - Another Bubble Set to Burst

Peter Schiff is saying that the U.S. Government is giving out misleading information about the economy to paint a rosy picture. According the government, the economy is doing well, yet the third quarter GDP grew only 1.7%, which after the government revises the numbers, as they always do, the growth will be closer to zero.

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