F - stagnating as the economy weakens

With the market open, Ford (F) reacted to its Q3 earnings, the numbers certainly weren't terrible, but they were again indicative of the weakening economy. Ford stock closed 8% higher into the low $11s. Near term trend is bullish, especially with the close above the important 200 day MA @ 10.72


F, daily

Summary

Ford was a bright spot in a relatively muted market today. With earnings coming in broadly in line, the stock surged, no doubt part of the surge was a result of a short-stop cascade higher.

Ford 'Earns 1.63bn in Q3' story

Ford - key statistics

It should be noted, Ford has a remarkably low (forward) PE of just 7-8. Relative to the main market it is undervalued by at least 50%. Yet, such low PEs don't often mean 'its a bargain'. Miles driven by Americans are starting to look weak again, not least with gasoline prices pretty much set to stay over $4

The transportation index has indeed been weak since the start of the year, and the decline in Ford has been very much reflective of the weak tranny.
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From a price perspective, Ford looks set to climb for a few more days, the $12 level is a very old support level. Considering the main indexes, and broader economy, I don't believe Ford can hold over $12.

So, Ford is still very much profitable, but its in a sector that is especially vulnerable to any future consumer downturn. It will be one to keep an eye on in the days ahead, especially if it gets stuck around $11.75/12.00

TZA - battling higher

With the weekly trends on the main indexes continuing to trend lower, the 3x short ETFs are starting to shine. Direxion's 3x 'small cap bear' (TZA) is approaching the next key level.


TZA, daily

IWM, weekly

Summary

The near term trend for TZA is most certainly higher. Bears should be seeking a daily close in the 17s, and a test of the August high of $20. That is 25% higher though.- and thus requires IWM to decline by around 8% in the coming days to the 75 level.

Frankly, 8% does seem a bit much, even if the market gets spooked by the resulting carnage of Hurricane Sandy.

Yet, the market indexes are weak, and as I stated over the weekend, the lower bollinger would be a very natural target in the current wave lower.

*IWM @ 75, would roughly equate to sp'1325, and dow 12500, to be hit within the next 6 trading days (assuming we open Wednesday Oct'31).

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As with all the leveraged ETFs, decay is a real problem across multiple weeks (sometimes even days), and stops (even loose ones) are usually a very good thing!

TVIX, UVXY - baby bull flags, ready to surge

With the weekly index charts now showing a confirmed down trend since the QE3 spike highs, the VIX is continuing to creep higher. Finally, after many months of nightmarish decay, the two big 2x (bullish) VIX instruments of TVIX and UVXY have broken the down trend..and are now presenting baby bull flags.


TVIX, daily

UVXY, daily

VIX, weekly

Summary

With the VIX closing the week +4.5%, the time of the leveraged VIX instruments is seemingly back again.

Both *TVIX and UVXY are now sporting very clear little bull flags. I'm not going to give any price targets for either, but suffice to say, both could easily jump 30/40% if the VIX can snap higher into the mid 20s.

Near term trend for the VIX is upward, next week looks set for further index downside, and a VIX >20.

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*I'm still expecting TVIX to see a reverse split 'sometime soon', probably on the order of a 1 for 20 ratio
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