Yesterday's action convinced me that it was locked in below 17.50 until options expiration. This is the first real rally on volume that we've seem in a while. I don't think this is a short squeeze - the short position here isn't that big. Either someone has run the numbers and figured out the earnings implications of yesterday's sales announcement or some major investment bank (GS?)has given its big clients advance notice of a major upgrade. Meanwhile, GM languished on tepid volume, which suggests that those of us who saw the recent rally as a pump by investment banks to ease their own exit from the stock were probably right.(Ford has traded almost 50 million shares at this point, while GM is flat on 9.7 million shares - a clear sign that someone is selling the latter.)
Elsewhere, Bleecher, you said it's the $17.50 calls in particular, bleecher, that the MMs will try to push out-of-the-money. i agree with that.
Your timing is very good whenever i've checked. Do you still think somebody trying to "dip buy" should wait until Monday?
JB, Shaggy's mom
I agree, noRevs.
Crain's Dustin Walsh says auto suppliers are starting to hire--
"Seventy-seven percent of respondents to the Original Equipment Suppliers Association's November Automotive Supplier Barometer survey said they were adding corporate and technical staff, while 66 percent said they were adding hourly production personnel.
However, supplier efforts to streamline productivity during the downturn mean plants need fewer workers for the same output"
More in the article.
JB, Shaggy's mom
(continued from prior posts, this is my last in this set)
F does not have to go down just because the market does.
4. F OFTEN DECOUPLES. Modest drops in the market in particular might not hurt F much, as F has been "de-coupling" from the market more so than before. (Huge drops are a different story.)
YOU CAN HEAR THIS IN THE BOARD POSTS. Every day that somebody complains about F going sideways or dipping when the market does not is another day that adds to the de-coupling. Every day that somebody notes how astounding the rise in F was, given the market stood still, is still another day that adds to the decoupling.
TAKING TURNS. Decoupling is good, not bad. The market is more crash-resistant the more good stocks or good sectors stay decoupled. The good ones take turns going up, instead of always moving up in lock-step.
When coupling rises, it is a sign of cheaper (lazier?) stockpicking. If more funds are indexing to the market, and more investors start picking those funds, then the degree of coupling marketwide rises.
INDEXING. The downside of indexing and the over-coupling it brings is that too few make the better effort, too few repeatedly re-value stocks and sectors and reallocate across their portfolio, thus adding to portfolios those sectors and stocks whose changes in fundamentals, actual and expected, are not yet in their price, the case with F. (This keeps going back to the need to compare actual prices with some target valuation that is smart, not simplistic, based on multiple things, multiple analysts, which the median price target across Yahoo's star analysts does nicely.)
When the market rises too much, indexed and tightly coupled, the undeserving and over-valued rise alongside the deserving and under-valued. More of the market then deserves to go down. Due to tight coupling, the whole shebang will go down, taking the good down and not jut the bad.
That too-tight-coupling describes Mar 2009 through the flash crash. Shorting more often becomes reasonable and more often succeeds. Maybe now is different-- I see more "taking turns" across sectors and stocks.
SUMMARY-- F has a lot of price appreciation left in it long-term. Yes, the whole market could still go down, but the market could also resolve "bad charts" by going sideways as F has done.
Investors can help by staying away from lazy funds that index marketwide or short marketwide. Is saving 1% on year on fees worth contributing to a machine-made down, 20% marketwide in one day?
Indexing pushes correlations, couplings between good and bad stocks, good and bad sectors, too high. Robot machines then trade the "correlation matrix" like children entranced by the Pied Piper??
F's decoupling can stop it from going down as much as the market does, as long as any marketwide dip is not too bad. Though machine trading has been out of control at times, the human programmers can alter what the machines do, too. If they won't, the new circuit breakers (set up after the flash crash) can kick in.
The new circuit breakers are to stop ridiculuous "feedback loops" in what the tarading "mini-me" machines do when reponding to each other. Sadly, the new breakers maybe wait for extravagances to get way too extreme before kicking in and may turn off any stock's machine-made mess for too few minutes. (SIDE NOTE: De-regulation still lives--great if all players in the market were both geniuses and angels all the time, but they are not. Dummies and Devils also both still play the market.)
There may be a "junior flash crash" again before regulators feel motivated to tighten circuit breakersfurther. But, we should not see again what we saw in May.
JB, Shaggy's mom
(Continuing my thoughts for bleecher & the rest here.)
Newbies, some of us have talked before about machines doing a lot of the trading. Machines lack eyes, so can't trade by looking at charts and SEC forms. Instead, their owners buy numbers and feed them in, such as analyst price targets. The machines then calculate more numbers, such as MAs and RSIs and comparisons of prices and targets, than use the results to rank stocks and sectors and markets.
Why rank? The people and their "Mini me" machines want to buy the best and short the worst, go into what's hot and leave what's cooled off.
Machines are programmed by humans. Powerful "mini-me" machines are set up to mimic their parent humans as to style and strategy and beliefs and values ("kill or be killed" vs "live and let live", poker-playing vs bridge-playing, RSIs vs MAs, crude enterprise value vs. analyst price targets, etc).
The machines differ, though, by trading hundreds or thousand of stocks in the time their parent human would do 10-20. That means, if there is a mistake in their set-up that cannot accurately or morally accomodate a new situation, the machine-made mess far exceeds what the human-made mess would have been, far faster. Think flash crash here.
Circuit breakers can be imposed by law or policy. When the mood is deregulation, they will not be required until AFTER some big mess happens. New breaker rules had to be added after the flash crash, even though many had warned earlier that fast-trading machines could and eventually would make such a freak show.
3. THREE VIEWS BY CHARTISTS. The views out there since Christmas vary. Some are overly chart-oriented, failing to study changes in fundamentals and project them forward. Also some may focus too much on just one number, a chart's RSI.
RSI EXTREMISTS. This view rigidly says that RSIs are too high marketwide, end of story.
Stocks and indices are, in this view, automatically labelled over-bought whenever they pass a magic cut-off, say 70 or 80, signalling to believing humans and their mini-me machines that the market HAS to come down. Will they try to turn their projection into a "self-fulfilling prophecy" by "spreading the fear"? (AFTER protecting themselves by hedging or shorting or going to cash, of course??!!)
RSI MODERATES. Other chartists, more realistic, say there are TWO ways to make the RSIs come down, not one. Yes, a big market drop does the job, BUT so does going sideways in a smallish trading range for long enough (as F often does between run-ups).
A third set, also more realistic, says that RSI can stay "over-bought" a VERY long time (especially if fundamentals are going up??). This set says.. SOOO... DON'T rely too much on RSIs that can never go higher than 100!
Chart indicators that don't have an upper limit should be watched, they say. As long as MAs, which have no artificial upper boundary, keep rising, they will trump overbought RSIs in the charts. (That's true while P&F charts staying in Xs, I think. Noise/ random blippiness is filtered out by both MAs and P&Fs, leaving signal/ trend behind. Both are delayed a bit, MAs especially, so you have to learn to anticpate when those are due to change direction, watching short-term trends that feed the longer term ones and, for fundamentals, "leading indicators".)
This set believes a market drop could force RSIs down eventually, yes. But, LATER, not now.
JB, Shaggy's mom
Agreed, bleecher. (SIDE NOTE: I was wrong on options expiration before--it's next week not this week.)
1. PRICE. $20 by June is achievable at a minimum. Maybe $23-$24 could happen, more in line with what John Murphy/BAC/ML has projected, IF the market co-operates. But, as you note, the market can distort things.
2. BIG MARKET DROP. A too huge market drop, such as seen with the May flash crash, easily could pull ALL down. It would take time to reverse all that. (Flash crash volatility wiped out standing limit orders and stop losses, many huge, thus setting up extra-wide trading ranges that lasted all summer and part of fall.)
Have been reading the chartists, as machines trade by numbers summarizing charts.
#3 and #4 follow, with views going against a marektwide drop, follow.
JB, Shaggy's mom
In that case, just short everything into earnings. AA went from $10 to $16+ in four months. An earnings beat with some cautious comments about raw material prices weren't enough to take it higher for the moment.
You weren't off, bleecher. $17.50 WAS round number resistance as of yesterday on the P&F charts at stockcharts.com, which are pretty robust. By pushing though that older resistance, those buying proved themselves stronger and more eager than those selling.
Resistance is now at $18.50. The P&F does not show volume for individual days, but you can set it to show volume by runs (a run is a column of X's going up or O's going down). This last run upward started at $11.50. It is the highest volume run of ANY in the default P&F chart, which goes back to 2004.
Your ideas about GM are interesting. It's BAT order book looked thin, close to being gappy today. Ford's was fine, highly liquid. I wish I had something that showed the whole order book as maybe BATS is not typical.
JB, Shaggy's mom