We made one stupid mistake (to buy the 500 DATA when earnings were announced but the CC hadn't started yet and the stock collapsed which looked exaggerated at first. We bought on the assumption that AH markets are often exaggerating. But not this time..
We could have been a little more aggressive, still mostly in cash, but we don't see a whole lot of obvious opportunities out there and there were considerable risks in the market the first two months.
Quite happy with the ELLI run from $60 to $82, and the little short after.
Shorting the VIX has also been good.
We should have bought more CTRP yesterday, but the stock went down on earnings and the CC
We're closing the short positions in the two Sept VIX futures at $20.45. There is probably more gains to be had with these, but we're sitting on a nice profit here and there are also considerable risks
The problem with squeezing more out of these Sept VIX futures is simply time. The VIX itself is under 14, which is below it's normal average already, so we would just have to wait until the Sept futures are nearer to expiry for them to come down, but all the while the VIX itself cannot go up. That was a risk we weren't prepared to make, hence we simply took profits.
The global semiconductor market is going to fall in 2016, compared with 2015, due to weakness in consumer equipment markets, according to market research firm Semico Research Corp. (Phoenix, Ariz.). Semico has developed a method of analysis that it calls its Inflection Point Indicator (IPI), and it seems that IPI says the semiconductor industry is destined to repeat the pattern of 2011-2012 "albeit at a muted level," according to Semico. In calling the negative growth Semico is in agreement on this with another market watcher, TrendForce (see Chip market set to shrink in 2016, says analyst ).
This is disappointing for two of our holdings, Micron (MU) and InvenSense (INVN), although one could argue that much of that has already been priced in, considering the steep declines in the share prices of both the past year.
Here are some interesting tidbits from an article on volatility (more specifically the inverse volatility ETF, XIV) which interest us as well, as we successfully shorted longer dated VIX futures here and are looking into other strategies involving ETFs
SPY change, VIX change, and contango separately explain 69.7%, 77.4%, and 0.03% of the variability in XIV gains, respectively.
A 0.5% decline in SPY corresponds to a 3.9% rise in VIX on average. In this scenario, contango would have to be 28.2% in order for expected XIV growth to become positive. In other words, even if contango is favorable, a moderate decline in the market virtually guarantees losses.
In fact, XIV declined on 267 of the 278 days (96.0%) when SPY lost at least 0.5%.
Another example: Even if contango is 10%, if SPY loses 0.25%, VIX rises 2.24% on average, and you can expect a 0.6% loss in XIV.
When SPY and VIX are flat, expected XIV growth is positive for contango > 3.73%.
The October 2015 rally lasted 35 days and rose 13% in that stretch. The February/March 2016 rally is so far a near perfect replica also gaining just over 13% in 36 days. My guess is that the comparisons between these two rallies will continue a while longer. That being the end of the big upwards moves for the market. Instead stocks will likely meander around in a trading range for a while.
Both Zacks (see previous entry) and USB are getting wet feet about the rising stock market:
"With the rally of the last few weeks and looking at our daily trend work, the SPX has reached its most overbought position since 2009!!" the analysts wrote in a note to clients Tuesday. "Together with significant non-confirmations in our medium-term momentum work, and trading in the time window of our late Q1/early Q2 top projection, we see the market vulnerable for a significant reversal this week, which we would see as the beginning of a tactical top building process and subsequent correction into deeper Q2." This is a reiteration of a call the two made last week, when they felt that the rally was too good to be true. While the forecast is not the UBS house view, the team does have a good track record, calling the coming downturn in stocks on December 5 and its eventually rebound on February 11.
Here is the simple reason why we're bullish on Jinko Solar, the market leader in...
It’s worth taking a minute to appreciate the sheer scale of what China is doing in solar right now. In 2015, the country added more than 15 gigawatts of new solar capacity, surpassing Germany as the world’s largest solar power market. China now has 43.2 gigawatts of solar capacity, compared with38.4 gigawatts in Germany and 27.8 in the United States. According to new projections, it seems that trend is going to continue. Under its 13th Five Year Plan, China will nearly triple solar capacity by 2020, adding 15 to 20 gigawatts of solar capacity each year for the next five years, according to Nur Bekri, director of the National Energy Administration. That will bring the country’s installed solar power to more than 140 gigawatts. To put that in context, world solar capacity topped 200 gigawatts last year and is expected to reach 321 gigawatts by the end of 2016.
Well, we might have to reconsider that, as we just got hand on a Credit Suisse report (see attachment to this post) that signals growing oversupply in the solar market. The report does see JKS as one of the better ones due to its low cost and integrated nature:
Stock calls – JASO & TSL most at risk, no one immune… but we still prefer JKS on a relative basis: We see JASO, TSL as most at risk in this environment. We prefer low cost manufacturers, like JKS, with a higher degree of vertical integration which helps keep internal production & external sourcing costs low, and established capacity outside China resulting in higher margin on shipments to the US, but recognize an increased risk of oversupply pressuring margins beyond consensus estimates (See Figures 3, and 4 inside). We lower 2016/17/18 earnings estimates for JKS/TSL/JASO as we model slightly lower than expected margins and lower JKS target price to $40 (from $42), and TSL’s target price to $14 (from $15).
Amongst our coverage we see lower risk to JKS (lowest cost manufacturer, less reliance on external wafer, highest non-China production compared to peers), and slightly higher risk for JASO and TSL
