Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Cloud Surfing

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A pilot friend of mine defines “cloud surfing” as flying just above the clouds – i.e. skimming the upper-side like a boat on the water.  Once again, that appears to be the action in the overall markets as well.

When last I posted (March 3rd), the 15 month ichimoku charts were all above their support zones.  The 3-ish week pullback we had from the Feb 18 high only served to bring price down to support; none of the indexes broke down through.  Since then, as you all know, the only direction has been north- and we have broken out above the clouds again.  Of interest for me is the Dow’s and S&P’s long-term overhead resistance.  NASDAQ crushed its LT resistance back in October 2010, but currently seems to be struggling (a tiny bit) with its upper cloud boundary:







Just for fun, I also took a look at a few symbols that have been on Slope as of late: Latin America, Japan and the 20-year Treasury:

ILF: I started watching this one after Tim mentioned it as a short (truthfully, the Sofia Vergara photos were what caught my attention).  In any case, yesterday my oscillator warned “buy/cover” and was confirmed with a break out today:


Gratuitous Sofia photo:


EWJ: Obvious short a few weeks ago…  I’m still holding, as I sadly do not think they are on top of anything yet.  I would cover with a break of resistance.


TLT: Oscillator signalled “buy” around Valentine’s Day, but I’m waiting for a conformational break through the upper cloud boundary – which looks darn close:


Market Neutral : Short TRGL, Long IMO

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Hey fellow Slopers,

Below is a market neutral trade I e-mailed to members of the market neutral trade notification list Wednesday night. I plan to place this trade Thursday. First, a quick, final reminder about the Short Screen message boards contest: today is the last day to enter to win an iPad 2 for posting a comment about a stock. Details here. On to today's market neutral set-up.

Toreador Resources Corp. (TRGL) is an oil & gas E&P based in France. I shorted TRGL as part of a market neutral trade (paired with a different long position) last July, when it was trading below $6 per share. I got stopped out for a loss a week later, when the stock was just above $7. As you can see from the chart below, TRGL went on quite a run from there, though it has since pulled back from its high earlier this year.

As of its closing price Wednesday, TRGL was trading at 12.29x its trailing twelve month sales.

Short Screen shows an Altman Z"-Score of 1.03 for TRGL (recall that Z"-Scores below 1.1 indicate financial distress, according to the model).

Audit Integrity rates TRGL as having "aggressive" Accounting & Governance Risk (AGR®), placing it in the 15th percentile (i.e., it has higher accounting & governance risk than 85% of the 8,000 companies Audit Integrity rates).

I plan on using a trailing stop here, in the event TRGL shares again buck the company's seemingly weak fundamentals and go on another run.

Imperial Oil, Ltd (IMO), an Exxon Mobil subsidiary in Canada, isn't a pure-play E&P: like its parent company, in addition to its exploration & production ("upstream") operations, it has downstream and chemical operations as well. Still, as with its parent, the bulk of IMO's earnings come from its upstream operations: 71% of IMO's earnings came from upstream operations in 2010.

As of its closing price Wednesday, IMO was trading at 1.8x its trailing twelve month sales.

Short Screen shows an Altman Z-Score of 5.24 for IMO (recall that Z-Scores of 3 and above indicate financial strength). A quick note about why Short Screen shows a Z-Score for IMO, and not a Z"-Score, as it does for TRGL: Short Screen uses Standard Industrial Classification (SIC) codes to class to categorize a company as manufacturing or non-manufacturing. Companies in SIC codes 2000-3990 are considered manufacturing companies. Although only a minority of IMO's earnings come from its refining business (part of its "downstream" operations), the company's SIC code is 2911 (Petroleum Refining).

Audit Integrity rates IMO as having "average" Accounting & Governance Risk (AGR®), placing it in the 40th percentile (i.e., it has higher accounting & governance risk than 60% of the 8,000 companies Audit Integrity rates).

I plan on using a trailing stop on IMO as well.

Getting Cramered – What a Downer! (by Goatmug)

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Have you ever been in on a really hot fad like owning OP shorts, parachute pants, or even a wearer of those cool yellow Lance Armstrong wrist bracelets when you are shocked to learn that the biggest loser or dork is wearing them too?  Suddenly the trinket or item isn't so cool huh?  Remember that feeling, cause that is how I felt when I saw this video from Business Insider featuring one of the most famous investors that have a knack for making terrible calls at the worst of times.  (Bear Stearns anyone?).

Jim basically says that silver is hot and the demand for silver is insane and his comments are a real downer.

I would agree with Jim as I noticed this week that the markup over spot for Silver American Eagles at one of the lowest mark up dealers (that I've bought a lot from) is now at $3.60 per ounce over spot!  This actually changed from just one week ago when they were  at $2.60 over spot.  (mind you I'm talking purchases of more than 500 ounces at a time for this price).    I thought it odd on their website because they said they would not sell Silver Eagles because they felt that the mark up was too high.  I guess they felt the pressure.  So, if there is this kind of pressure to buy at any price, we know that we should probably be looking for an exit.  These kind of manias can go on longer than we think, but this is a BIG WARNING that people are buying at any cost. 

So, we have warning #1 – we see dealers marking up the cost to buy AND there is still a crazy demand (say bubble with me).

As I mentioned earlier today in the post about Fed Governor's comments about inflation, copper is looking sick and it will take down the rest of the commodities complex with it.  Silver and gold will not be immune to a copper crash.  Please review the post on inflation and Bullard's comments at MINISTRY OF DISINFORMATION – BULLARD SPEAKS.

Jim Cramer is actively commenting and favorable on a position in physical silver.  This should cause you to call your precious metal dealer and arrange for UPS delivery to them right now.

There may be room to run on silver, but most of all, it seems to be getting a bit crowded.  BE CAREFUL!