Alcoa Kicks if Off

Dear Readers,

The market rallied again today - sort of. It closed up after a gap open higher; however, nearly the entire day was quite slow and choppy. The reason for the rally was…the market was open. OK seriously, it was because Alcoa’s earnings were better than expected. The following is from Karl Denninger who digs into the AA report.

An interesting, mostly-positive earnings report - with a few unexplained quirks…..

Let’s dig in a bit and see what we got (the aftermarket loved it!)

Strong points include the fact that the bottom line was a beat; top-line questionable - everyone is claiming “beat” but I had the same number on my screen as they reported, so take your pick - if it’s a beat, it’s not a big one (and might not be one at all.)

Cost-cutting and improved prices for aluminum products are the story here. Here’s the top-line reality: Revenues were $4.6 billion .vs. $4.2, up 9.52% sequentially. Good, right?

Weeeeeellll… aluminum prices went from $1,667 per ton to $1,972, an 18.3% increase.

Now we got a wee problem. This rather strongly implies that the actual shipped volume was down sequentially. Does it prove this? No, as we don’t have product mix shifts in the report, but this sure as hell suggests a decrease in shipped tonnage sequentially, not just year/over/year, and is a big fat flashing yellow light that I bet you don’t see talked about.

What makes no sense here is this statement in the release:

Due to low inventories at distributors and rising shipments, regional premiums are improving and global aluminum consumption is expected to increase 11 percent in the second half of 2009.

I don’t believe it, to be blunt. You don’t have a 9% increase in gross sales on an 18% increase in prices and tell me that shipments are rising, unless you’re somehow magically making product appear at customers for which you’re not being paid. The internals of the report and the breakdown don’t help me come up with a reconciliation either.

Something doesn’t add up.

Oh wait! Here it is! Right at the bottom of the report (missed it first pass; thanks to the guy who emailed me!): 1,230,000 metric tons shipped this quarter, 1,288,000 metric tons last quarter.

BINGO!

SHIPMENTS WERE IN FACT DOWN SEQUENTIALLY!

The conference call says they’re looking for a 4% rise in demand in China and 6% worldwide, but a 15-20% decline in automotive sales for the full year 2009 and 30-35% decrease in heavy trucks (indeed, there was a report out this afternoon on Class 8 truck sales - horrifyingly bad doesn’t even begin to describe it.) But wait! The release also says:global aluminum consumption is expected to increase 11 percent in the second half of 2009.

Uh…. those numbers don’t add up either. What am I missing here guys and dolls?

The rest of the report seems to make sense - the only other area of trouble I see is in engineered products, which is Alcoa’s highest-margin business and is in serious trouble, down 15% sequentially. That’s mostly aerospace - read “airplanes.” Not exactly a growth industry at present……

I’m disturbed, however, by the apparent discrepancy in claimed numbers in two different places and the consolidated result statement saying that in fact shipments didn’t increase, they fell.

That is hardly the picture of “improving demand” claimed to be experienced in the reported quarter and forecast - especially when that forecast is for an increase that would simply reverse the 3rd quarter tonnage decline implied by pricing and revenues (that is, take us back to second quarter tonnage-shipped levels.)

Finally, there’s the matter of P/E. Assuming we could get to a normalized 12 month leading expectation of 70 cents in fully-diluted earnings by the middle of 2010 (and I believe that’s damn aggressive) you’re paying 21x on those earnings 12 months out - too darn rich for me for an industrial concern on any reasonable set of forward expectations.

I liked AA in the $5s in March, but I wouldn’t go anywhere near it at $15 today.

Sorry, no $ale.

Disclosure: No position; I sold out of my spring long at what was obviously early, but if I still had it, I’d be selling into this strength.

Trade well and follow the trend, not the so-called “experts.”

Go to www.PitNoise.com for a trial run.

___________________________________________________________________________________

Notes from the Pit…for 10-09-09

ATTEMPTED DIRECTION: BUYER or SELLER

1) Rotation Buyer

2) Range Extension Buyer

3) Public went home as a… Neither

4) Buying-Selling Tails Buyer

5) Open in Bull or Bear Range Neither

ATTEMPTED DIRECTION: Higher =Yes Lower = Neutral=

Comments: The attempted direction was bullish but with a neutral structure.

ATTEMPTED PERFORMANCE:

1) Today’s NYSE Volume compared to prior day & 10-day average.

Today (1.274 billion) Higher =XX Lower = Unchanged =

10-day Ave: (1.278 billion) Higher = Lower = Unchanged =XX

2) Value Area: Higher =XX OL/Higher= OL/Lower =

Lower = Inside= Outside =

3) VA Width: Wider = Narrower = Unchanged=XX

COMMENTS: The VA was higher but unchanged again with lame volume for another advancing day. Advancers vs. decliners were 3-1. Attempted performance was bullish but slowing.

POTENTIAL RESULTS: No reports will be released Friday. Thursday’s auction & volume were terrible again at higher levels. Due to another balancing day we should expect a breakout auction in either direction.

Support = 1055.00, 1042.30, 1038.50

Resistance = 1076.00, 1083.00, 1100.0

Institutional support = none

Institutional resistance = none

Please use the pivot calculator in the “shared folder” for all of today’s pivots

__________________________________________________________________________________

Results from Virtual Trading Room

Electronic (ES) mini-SP 500

1) FT buy @ 12:11pm at 1063.25 = +.25 (1 lot)

2) Engf buy @ 2:17pm at 1063.50 = +1.00 & +1.00 (2 lot)

3) Algorithm positions (7)

4) ”Reading the Tape” positions (1) …combined Secret’s, Algo, & “Reading the Tape” total…-1.25

___________________________________________________________________________________

Today’s Value Areas:

Use These Value Areas

for Trading on FRI

ES 1065.25 / 1059.75

YM 9763 / 9721

NQ 1726.50 / 1715.50

___________________________________________________________________________________

Today’s Trading Tip:

The more I talk to new traders, the more I realize exactly what they need to do to become successful: practice, practice, and practice some more!

___________________________________________________________________________________

To read the Value Area Help Guide, please copy and paste this into your address bar:

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Secrets of Traders

The Chicago Board of Trading Building

141 W Jackson Blvd. Chicago, IL 60604

888-755-3846

312-235-2572

info@secretsoftraders.com

In an effort to comply with all applicable rules and regulations please be so kind and read the disclaimer below:

IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results.

DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site.

Source: Secrets Of Trader

JOBS DATA

Dear Traders,

Last Friday the Bureau of Labor Statistics (BLS) released the August Employment Report.

Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.

The official unemployment rate is 9.7% and rising. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6 of the BLS report.

It reflects how unemployment feels to the average guy on the street. U-6 is now 16.8%. Both U-6 and U-3 (the so called “official” unemployment number) are poised to rise further although most likely at a slower pace than earlier this year.

Given this “exciting” news, stocks rose into the close.

Trade well and follow the trend, not the so-called “experts.” Go to www.PitNoise.com for a trial.

Go to www.PitNoise.com for a trial.

————————————————————————
Notes from the Pit…for 9-08-09

ATTEMPTED DIRECTION: BUYER or SELLER
1) Rotation Buyer
2) Range Extension Buyer
3) Public went home as a… Buyer
4) Buying-Selling Tails Buyer
5) Open in Bull or Bear Range Buyer

ATTEMPTED DIRECTION: Higher =Yes Lower = Neutral=

Comments: The attempted direction was bullish.

ATTEMPTED PERFORMANCE:
1) Today’s NYSE Volume compared to prior day & 10-day average - expected.
Today (1.154 billion) Higher = Lower =XX Unchanged =
10-day Ave: (1.381 billion) Higher = Lower =XX Unchanged =

2) Value Area: Higher =XX OL/Higher= OL/Lower =
Lower = Inside= Outside =

3) VA Width: Wider =XX Narrower = Unchanged=

COMMENTS: The VA was higher & wider but with less volume again. Advancers led decliners by 7-1. Attempted performance was bullish.

POTENTIAL RESULTS: No reports are scheduled to be released Tuesday; however, a few Treasury auctions will be released during the day. The biggest of the lot is the 3-YR Note auction at 12pm Central. Given Friday’s double distribution up day, we should expect a higher auction Tuesday.

Support = 1016.00, 1008.50, 1001.30
Resistance = 1028.00, 1033.20, 1038.50
Institutional support = none
Institutional resistance = 1028.40

Please use the pivot calculator in the “shared folder” for all of today’s pivots

————————————————————————
Results from Virtual Trading Room
————————————————————————
Electronic (ES) mini-SP 500

1) OTF buy @ 1pm at 1013.00 = b/e (1 lot)

2) Algorithm positions (6)

3) “Reading the Tape” positions (2) …combined Secret’s, Algo, & “Reading the Tape” total…-0.75

———————————————————————–
Today’s Value Areas:

Use These Value Areas
for Trading on TUE

ES 1015.00 / 1004.50

YM 9,430 / 9,352

NQ 1620.50 / 1597.50

————————————————————————

Today’s Trading Tip:
Decide what type of trader you are, and then focus only on that type of trading!
————————————————————————
To read the Value Area Help Guide, please copy and paste this into your address bar:
http://www.secretsoftraders.com/ValueAreaHelpGuide.htm

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Secrets of Traders
The Chicago Board of Trading Building
141 W Jackson Blvd. Chicago, IL 60604
888-755-3846
312-235-2572
info@secretsoftraders.com

In an effort to comply with all applicable rules and regulations please be so kind and read the disclaimer below:

IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results.

DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site.
To unsubscribe or change subscriber options visit:

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Sources:

Secrets of Traders, LLC
141 W Jackson Blvd
Chicago, IL 60604
United States
(312) 235-2572

Great Week.

According to Bloomberg and my own data, volume has been very low lately. I have written about it often.

MarketWatch says “With end-of-summer vacations in full swing, (the) U.S. stock market face a sluggish week capped by a potential burst of activity when the government releases its August jobs report.

“‘Light volumes have made for choppy trading in recent days, with benchmark indexes flip-flopping throughout the course of the day. Activity has clustered on a few financial stocks…That trend is likely to continue into the first week of September, despite a slate of key economic data, as more investors head to the beach.”

Whether the anticipated pick-up in volume drives stocks up or down in the coming weeks is currently irrelevant; we can address that in the future.

Today I want to mention that this past week, as well as the prior week, was low volume trades and “choppy trading” has not negatively affected Secrets of Traders. We are currently enjoying a 13-day winning streak with only 2 losing days for the month. To be sure, there were slow/rough trading days (the 1st week of August), but in total we have weathered the low volume/volatility vacuum very well. Our upgraded algorithm program and the new “Reading the Tape” trades are paying massive dividends.

This past week was stellar - we enjoyed a great week! Although Monday was slow and the Virtual Trading Room (VTR) only netted a scant +1.25 gain, the balance of the week was extraordinary given the aforementioned volume/volatility vacuum. The VTR closed out the week with a +91.50 point gain, which is a gross value of $4,575.00.

Although the volume has been low in the S&P pit in addition to the overall NYSE volume, we are still getting great clues from our PitNoise service. The VTR was in a short trade Friday afternoon that had stalled and the room was preparing to cover the trade at break even. Before that happened, however, Paul from PitNoise.com called out institutional selling near 12:45pm EST.

At this time Paul called out “Goldman is 20 AT 4.50.” That’s all we needed to hear - we held the short. This meant that the Goldman Sachs broker was selling 20 big S&P contracts at 1024.50. Although this is a fairly small order for GS, we don’t know if they have another 20, and another 50, and another 100 to sell…so we held our short. Just seconds later Paul called out “Solomon is 10 AT 30.” What’s happening is another institutional firm is willing to sell but this time at the LOWER offer, which is great if you’re already short. The call is fast, but the word AT is the clue; it means they are selling. Seconds after that the market dropped swiftly, thus giving us another profit.

Putting it all together, www.PitNoise.com helped us make money in addition to our specific strategies and we love it when it all comes together. Go to this website for a super inexpensive month long trial.

Trade well and follow the trend, not the so-called “experts.”

————————————————————————
Notes from the Pit…for 8-31-09

ATTEMPTED DIRECTION: BUYER or SELLER
1) Rotation Seller
2) Range Extension Seller
3) Public went home as a… Neither
4) Buying-Selling Tails Seller
5) Open in Bull or Bear Range Seller

ATTEMPTED DIRECTION: Higher = Lower =Yes Neutral=

Comments: The attempted direction was bearish after a higher auction - expected. The profile after the large selling tail was truncated - or “balanced.”

ATTEMPTED PERFORMANCE:
1) Today’s NYSE Volume compared to prior day & 10-day average - expected.
Today (1.391 billion) Higher =XX Lower = Unchanged =
10-day Ave: (1.279 billion) Higher =XX Lower = Unchanged =

2) Value Area: Higher = OL/Higher=XX OL/Lower =
Lower = Inside= Outside =

3) VA Width: Wider = Narrower =XX Unchanged=

COMMENTS: The VA was OL/higher but narrower with better volume. Advancers led decliners by 2-1. Attempted performance was bullish but does not confirm the clearly bearish attempted direction.

POTENTIAL RESULTS: The Chicago PMI will be released 15-min after the open.
The market is still within its larger balance area of 1037.00/1015.00 after being slammed back under 1037.00 early Friday morning. Unless the PMI data is unexpected, we will probably stay in this “balancing” range.

Support = 1015.00, 1007.00, 998.50
Resistance = 1033.30 & 1038.00
Institutional support = none
Institutional resistance = none

Please use the pivot calculator in the “shared folder” for all of today’s pivots

————————————————————————
Results from Virtual Trading Room
————————————————————————
Electronic (ES) mini-SP 500

1) 80% sell @ 9:40am at 1030.00 = +.50 (1 lot)

2) Algorithm positions (15)

3) “Reading the Tape” positions (20) …combined Secret’s, Algo, & “Reading the Tape” total…+29.25

———————————————————————–
Today’s Value Areas:

Use These Value Areas
for Trading on MON

ES 1032.50 / 1025.50

YM 9,572 / 9,514

NQ 1656.50 / 1636.50
————————————————————————

Today’s Trading Tip:
Don’t get caught up in worrying about the fundamentals, just trade the technicals!

————————————————————————
To read the Value Area Help Guide, please copy and paste this into your address bar:
http://www.secretsoftraders.com/ValueAreaHelpGuide.htm

To read about how I became a trader, please copy and paste this into your address bar:
http://www.secretsoftraders.com/who-is-larry-levin.shtml

To view my recent trading statements, please copy and paste this into your address bar:
http://www.secretsoftraders.com/secretRoomLogin.asp

To read about my intensive Training Programs, please copy and paste this into your address bar:
http://www.secretsoftraders.com/mentorship-programs.shtml

Secrets of Traders
The Chicago Board of Trading Building
141 W Jackson Blvd. Chicago, IL 60604
888-755-3846
312-235-2572
info@secretsoftraders.com

In an effort to comply with all applicable rules and regulations please be so kind and read the disclaimer below:

IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results.

DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site.

Source:

Secrets of Traders, LLC
141 W Jackson Blvd
Chicago, IL 60604
United States
(312) 235-2572

Economic Analysis 29.06.2009

Government manipulation in the market. Bingo. Perhaps this is why the NYSE values on their website keep coming up as 0.00 or N/A. The government is in the market big time. ; it has become little more than a smoke & mirrors game.

Go to your average news site, like google, and you'll see the kind of spin I'm talking about - things are worse, but they're not as bad as was expected - sign of recovery! Everything is a sign of recovery. 10% jobless - yes, but fewer people got axed this month!

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