As we all know, the stock market had an incredible September but we are bumping up against some really strong resistance at 1150 on the SPX. Even the good PMI and Confidence data on Thursday wasn't enough to hold the SPX up over 1150 after the initial pop to about 1157. We have been hanging around up here trying to get a close over 1150 for over a week and now as you can see in the chart we are about to get a cross down on the MACD if we don't get over it in the next day or two. 

Citi (C) had a nice 4.6% pop on Friday with strong volume to close at 4.09, which is the first close over 4 we have seen in some time. Because of this move I stopped out of my short Dec 4 calls and now am just naked long Dec 3 calls with this nice move up. If you listen to the financial media everyone is so negative on the banks quarter saying things like, " trading revenues are going to be terrible because there has been no volume" and so on and so forth but have they not been paying attention to the fact that we had a 100 handle rally in the S&P in September and as I saw someone say on the twitter stream - if you didn't make money in September, you need a life coach. I think that expectations are so low for the banks that they should be able to beat and Citi reports October 18th. My synthetic Citi position that I have been adjusting here and there is up about 15% at this point and I think has much more to go.

LULU had a nice breakout on Tuesday with some nice volume and this one has a huge short interest so I decided to pick up, what I consider a lotto ticket, just 2 Oct 50 calls at an average 33 cents. It has backed of a little bit after that strong move up so we'll see what happens next week. Hoping for a strong move over 46.50 because then I think we could see 50+ pretty quickly.

I am also stalking a short bonds position via the TBT. In the chart you can see the possibility of a cup and handle forming so I will keep a close watch on what happens next week.

On a side not I wanted to mention that I am reading Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street and it's quite interesting if you haven't already read it.

Spare Time Trades

I had a little spare time to trade the last two days which is rare during the school semester. I found myself to be a little trigger shy so I stayed small to see if I could get back into a groove. I only had time for one trade yesterday and one today both in Apple (AAPL) calls because the stock has been a beast. I only made out with lunch money in both of them because my timing was off but I am ok with that. Here is the trade confirmations.

AAPL has been a monster the last couple weeks. If I have time in the morning and the futures are strong I will look to enter the Oct 300 calls again for a trade because the stock has been making big moves right out of the gate at the open and really wants higher.



Good Video by gtotoy

Floored Movie

FLOORED

A world that’s more riot than profession, the trading floors of Chicago are a place where gambling your family’s mortgage is all in a day’s work. Now, when markets are unhinged, FLOORED offers a unique window to this lesser-known world of finance. Traders may not have degrees, but they’ve got guts, and penchant for excess. But like many aspects of our economy, technology is changing their business, and these eccentric pit denizens aren’t the type to take kindly to new tricks. Computerized trading may take the emotion out of the job, but it may also take these old-timers out- they are dinosaurs in a young man’s game. At a time when millions have lost fortunes in the fickle stock market and fear abounds about the faltering financial system, FLOORED is a gripping, honest look behind the curtain of the trading floor that few have ever seen. 
I just watched this film via amazon video on demand and give it two thumbs up. It's only about an hour and fifteen minutes long and very well done. I recommend everyone check it out.  

Portfolio Update

Citi (C) chart looks good, above all the major moving averages after popping back above the 50 dma today. Nice rising 10 and 20 day moving average as well as a strong reading on the stochastics. Financials have been strong since the Basel III accord was released and didn't have the kind of teeth that was expected and of the large banks Citi is the best value. I still think that before the end of the year the government will sell out the rest of its stake in the company and when that news is disseminated we will see Citi at $5+ in short order, which is why I am playing it through December calls.

Jamba Juice (JMBA) has finally got some life back into it over the last two weeks and its nicely above a rising 10 and 20 day moving average and a flat 50 day. Unfortunately, it is still stuck under the 200 day, and outside of this past Monday, has seen abysmal volume. If the market strength continues and JMBA gets through $2.50, I think we will see a nice run back to the highs and beyond because this one is worth far more than its current market value. James White is doing a fabulous job turning around this company and the nice steady improvement quarter after quarter is proof of that.

Fortress International Group (FIGI) is the investment that I am most excited about. This company's fundamentals are simply exploding and they are signing new contracts one after the other, building the backlog very nicley. If your not in this one already, take a half hour and listen to the investor call from Wednesday at the Rodman and Renshaw conference and do a little research, you will be shocked that this one isn't shooting through the moon.

Stocks Vs. Bonds Since March Low *Updated and Corrected

 

With all the talk of a bond bubble lately I decided to make up a quick chart to look at the performance of the S&P 500 and the TLT since the March 2009 bottom in the stock market. This is only a relationship you can compare in the relative short term and the chart above is two years from September 2008 to yesterday. I used the S&P 500 on the blue line for stocks and the TLT on the red as a proxy for bonds.You can clearly see the March low in the S&P and the relative top in bonds a few months prior. The S&P has come about 64% off the lows while bonds are a mere 11% off the highs from when the financial crisis was at its worst and "the world was ending". I will say no more and allow you to draw your own conclusions about what is to come.

Stop The Doom and Gloom

Above is the ASA Temporary Staffing Index from January 2007 to August 2010 and as you can see it has been trending strong since its low in January of 2009. Below is the weekly continuing jobless claims data between the same time period. I decided to throw that in here just so you can see the big picture instead of concentrating too much on the week to week noise.

Now here is a GDP growth chart. Two weeks ago revised Q2 GDP was revised down to 1.6% from I believe 2.4%. I can't sugarcoat the downward revision, but what I will say is that we came off a Q4 2009 rate of 5% and a Q1 2010 rate of 3.7% and if you understand simple math you know that as your base number gets larger, the growth percentage tends to come in.  

This is the better way to look at quarterly GDP data

Personal Income and Spending still trending higher minus the short term noise.

Also check out Todd Sullivan's favorite leading indicator, rail car traffic. I could go on and on with chart after chart and they all show the same big picture, just felt like posting a few because I am tired of hearing all the double dippers doom and gloom. Make it a great Labor Day Weekend!!!

Portfolio Update

Today I took advantage of the substantial two day rally we have had to sell a few December 4 calls in Citi so that now my Citi position is 1/2 long December 3/4 call spread and 1/2 naked long December 3 calls. I decided to leave 1/2 my call position naked so that if the small chance that the jobs number is good tomorrow I will be able to take advantage of it and if not I will have a small delta hedge.

Jamba Juice (jmba)

On the last conference call a mysterious legal payment came up and there was chatter about the details of that payment. I happened to find the information below today and thought I would share. I don't know much about law so this maybe it or it may not be it, I just simply thought I would share and maybe someone who knows more about it can shed some light.

FOODIE PARTNERS v. JAMBA JUICE COMPANY

CIVIL ACTION NO. 2:06-CV-12

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS, MARSHALL DIVISION

October 30, 2007, Decided

October 30, 2007, Filed

CORE TERMS: station, liquid, customer service, refrigerated, juice, patent, beverage, guard, specification, breath, pan, conduit, refrigeration, customer, distance, embodiment, space, consumer, barrier, finishing, invention, shallow, service station, reporting, parties agreed, ingredient, connected, drip, rinse, temperature





COUNSEL: [*1] James W Knowles, Mediator, Pro se, Wilson Sheehy Knowles Robertson & Cornelius, Tyler, TX.



For Foodie Partners, a Texas Partnership, Plaintiff: Diane K Lettelleir, LEAD ATTORNEY, Winstead Sechrest & Minick, Dallas, TX; Earl Glenn Thames, Jr, LEAD ATTORNEY, James Matthew Rowan, Potter Minton, Tyler, TX; Brandon Duane Gleason, Michael P Adams, Winstead Sechrest & Minick - Austin, Austin, TX; William P Ramey, III, Winstead Sechrest & Minick - The Woodlands, The Woodlands, TX.



For Jamba Juice Company, a California Corporation, Defendant: Robert D Becker, LEAD ATTORNEY, Greg Travis Warder, Michelle Gillette, Pamela S Merkadeau, Manatt Phelps & Phillips LLP, Palo Alto, CA; Samuel Franklin Baxter, LEAD ATTORNEY, McKool Smith - Marshall, Marshall, TX; James Matthew Rowan, Potter Minton, Tyler, TX.



For Jamba Juice Company, a California Corporation, Counter Claimant: Samuel Franklin Baxter, LEAD ATTORNEY, McKool Smith - Marshall, Marshall, TX; Michelle Gillette, Pamela S Merkadeau, Manatt Phelps & Phillips LLP, Palo Alto, CA.



For Foodie Partners, a Texas Partnership, Counter Defendant: Diane K Lettelleir, LEAD ATTORNEY, Winstead Sechrest & Minick, Dallas, TX.



JUDGES: JOHN D. LOVE, UNITED STATES MAGISTRATE [*2] JUDGE.



OPINION BY: JOHN D. LOVE



OPINION



MEMORANDUM OPINION AND ORDER

The Court now issues this claim construction opinion construing the terms in U.S. Patent No. 5,950,448 (hereinafter "the '448 patent"). Plaintiff Foodie Partners (hereinafter "Foodie") asserts that Defendant Jamba Juice Company has infringed, actively induced others to infringe, and contributorily infringed claims 2, 3, 4, and 5 of the '448 patent. 1





- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

1 Although Foodie initially asserted infringement of claim 1 of the '448 patent as well, Foodie agreed to drop claim 1 prior to the Markman hearing, and it is no longer at issue in the case.



- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

THE '448 PATENT

The '448 patent is entitled "System, Method and Apparatus For Dispensing and Combining Refrigerated Source Liquids," and deals with a system and apparatus for combining and dispensing liquids, ice and flavoring additives to create slush-type beverages.



APPLICABLE LAW

"It is a 'bedrock principle' of patent law that 'the claims of a patent define the invention to which the patentee is entitled the right to exclude." Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc) (quoting Innova/Pure Water Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004)). In [*3] claim construction, courts examine the patent's intrinsic evidence to define the patented invention's scope. See id.; C.R. Bard, Inc. v. U.S. Surgical Corp.

Enhanced Coverage LinkingU.S. Surgical Corp. -Search using:

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, 388 F.3d 858, 861 (Fed. Cir. 2004); Bell Atl. Network Servs., Inc. v. Covad Communications Group, Inc., 262 F.3d 1258, 1267 (Fed. Cir. 2001). This intrinsic evidence includes the claims themselves, the specification, and the prosecution history. See Phillips, 415 F.3d at 1314; C.R. Bard, Inc., 388 F.3d at 861. Courts give claim terms their ordinary and accustomed meaning as understood by one of ordinary skill in the art at the time of the invention in the context of the entire patent. Phillips, 415 F.3d at 1312-13; Alloc, Inc. v. Int'l Trade Comm'n, 342 F.3d 1361, 1368 (Fed. Cir. 2003).



The claims themselves provide substantial guidance in determining the meaning of particular claim terms. Phillips, 415 F.3d at 1314. First, a term's context in the asserted claim can be very instructive. Id. Other asserted or unasserted claims can also aid in determining the claim's meaning because claim terms are typically used consistently throughout the patent. Id. Differences among the claim terms can also assist in understanding a term's meaning. [*4] Id. For example, when a dependent claim adds a limitation to an independent claim, it is presumed that the independent claim does not include the limitation. Id. at 1314-15.



Claims "must be read in view of the specification, of which they are a part." Id. (quoting Markman v. Westview Instruments, Inc., 52 F.3d 967, 978 (Fed. Cir. 1995)). "[T]he specification 'is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.'" Id. (quoting Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)); Teleflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1325 (Fed. Cir. 2002). This is true because a patentee may define his own terms, give a claim term a different meaning than the term would otherwise possess, or disclaim or disavow the claim scope. Phillips, 415 F.3d at 1316. In these situations, the inventor's lexicography governs. Id. Also, the specification may resolve ambiguous claim terms "where the ordinary and accustomed meaning of the words used in the claims lack sufficient clarity to permit the scope of the claim to be ascertained from the words alone." Teleflex, Inc., 299 F.3d at 1325. [*5] But, "although the specification may aid the court in interpreting the meaning of disputed claim language, particular embodiments and examples appearing in the specification will not generally be read into the claims." Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 1187 (Fed. Cir. 1998); see also Phillips, 415 F.3d at 1323. The prosecution history is another tool to supply the proper context for claim construction because a patent applicant may also define a term in prosecuting the patent. Home Diagnostics, Inc., v. Lifescan, Inc., 381 F.3d 1352, 1356 (Fed. Cir. 2004) ("As in the case of the specification, a patent applicant may define a term in prosecuting a patent.").



Although extrinsic evidence can be useful, it is "less significant than the intrinsic record in determining 'the legally operative meaning of claim language.'" Phillips, 415 F.3d at 1317 (quoting C.R. Bard, Inc., 388 F.3d at 862). Technical dictionaries and treatises may help a court understand the underlying technology and the manner in which one skilled in the art might use claim terms, but technical dictionaries and treatises may provide definitions that are too broad or may not be indicative of how the [*6] term is used in the patent. Id. at 1318. Similarly, expert testimony may aid a court in understanding the underlying technology and determining the particular meaning of a term in the pertinent field, but an expert's conclusory, unsupported assertions as to a term's definition is entirely unhelpful to a court. Id. Generally, extrinsic evidence is "less reliable than the patent and its prosecution history in determining how to read claim terms." Id.



Finally, it is important to remember that although the specification often describes very specific embodiments of the invention, the Federal Circuit has cautioned against confining the claims to those embodiments. See Phillips, 415 F.3d at 1323. The roles of the specification are to "teach and enable those of skill in the art how to make and use the invention and to provide a best mode for doing so. One of the best ways to teach a person of ordinary skill how to make and use the invention is to provide an example of how to practice the invention in a particular case." Id. "'[T]he claims of the patent, not its specifications, measure the invention.'" Innova/Pure Water, Inc. v. Safari Water Filtration Systems, Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004) [*7] (citation omitted). "Accordingly, particular embodiments appearing in the written description will not be used to limit claim language that has broader effect. And, even where a patent describes only a single embodiment, claims will not be interpreted 'restrictively unless the patentee has demonstrated a clear intention to limit the claim scope 'using words or expressions of manifest exclusion or restriction.'" Id. at 1117 (citations omitted).



The Court begins, as it must, with the words of the claim. See Teleflex, 299 F.3d at 1324; see also CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366 (Fed. Cir. 2002) ("The terms used in the claims bear a presumption that they mean what they say and have the ordinary meaning that would be attributed to those words by persons skilled in the relevant art.").



TERMS TO BE CONSTRUED

The terms at issue are: "a remotely located refrigeration unit," "refrigerated source liquid conduit line," "a customer service station," "a product finishing station," "a portion control mechanism," "consumer service station beverage tapping mechanism," "beverage flow reporting device," "beverage flow measurement device," "refrigerated source liquid," "a cold pan," [*8] "a drip pan," "a breath guard," and "integrated or detached drain board."



Agreed Terms



At the Markman hearing held on August 21, 2007, the parties agreed on the construction of the following terms: "portion control mechanism," "beverage flow reporting device," 2 "beverage flow measurement device," and "integrated or detached drain board." The parties agreed that the definition of "integrated or detached drain board" should be "a surface that is joined with the rinse sink, but can be separate from the rinse sink." See Transcript of Markman Hearing at 62-63, Foodie Partners v. Jamba Juice Co., Civ. No. 2:06-cv-12 (E.D. Tex. 2007). Both parties agreed that the definition of "beverage flow reporting device" should be "a mechanism or computer-based system which collects and reports beverage flow data." See Transcript of Markman Hearing at 49. The parties also agreed that the definition of "beverage flow measurement device" should be "a mechanism or computer-based system for ascertaining a quantity of flow of at least one source liquid." See Transcript of Markman Hearing at 49-50. Finally, the parties agreed that "portion control mechanism" means "a mechanism for controlling the amount of [*9] source liquid dispensed according to preset volume or time metered constraints." See Transcript of Markman Hearing at 42-43.

Had a crazy week and I haven't been able to update anything. First things first, on Thursday I sold the September 4 strike puts in Citi that I purchased to hedge my long position for a 23% gain. That sounds good but it was just a small hedge (1/3 of my long position). Also crude oil hit my target range, hitting a low of $70.76 on Wednesday and closing at $75.59 on Friday. That is a nice move that I unfortunately can't say I caught because I was so busy that I wasn't able to be at my screens to even know it happened. So my idea was right on and I waited patiently for over a week and then missed it.

Weekend Charts

AAP Broke to new highs on Friday

ACL Riding Channel

CTXS Holding up well - Chart looks nice

LVS continues upward

TA Closing in on 200 sma on a good run

as you can see the last time resulted in nice jump

AKAM Hell of a day friday in a down tape

BIDU Rides Higher

Nice buy right here at the rising trendline

CRM Monster day Friday

EBAY Strong week-Keep an eye out

CMG Looking Good

RBCN Could set up again

GMCR

Jim Gobetz - Smart Guy Who I Have Much Respect For

Very good show from Friday, if you dont want to listen to the whole thing do yourself a favor and skip to 27:45 and listen to Jim's piece on "What we need to do to survive as an economic power". Make it a good weekend.

Small change to the portfolio today, with the markets on shaky ground at the moment I decided to add some September puts in Citi (C) for a short term hedge of my long position via December calls. The hedge is just 1/3 of my long position. Citi hit the rising trend line on the chart that I posted yesterday and held but it didn't bounce, so I will make a decision on whether or not to add to my long next week. I still have not entered a long oil position even though it continues to become more and more attractive everyday, but with market weakness and U.S. Dollar strength I think it could continue a little lower still. Here are a couple charts.

C

USO

So today was a pretty nasty day in the equity markets unless you came into the day short, with the S&P 500 ending the day down 18.53 points and the Dow down 144 points. In the overnight session the S&P futures looked good on positive economic data out of Germany until about 8:30 ETD when weekly initial jobless claims hit the wire rising by 16,000 from 484,000 to 500,000. Consensus was a decline of 4,000, and and a quick swoosh sell off of about 10 handles in the eminis followed. Lets pause here for a bit, the chart below shows the initial jobless claims on a weekly basis going back to April of '08 and as you can see their steady decline stalled out going into this year and with the 500,000 reading this morning brings us back to last November levels which is not a good sign for the economic recovery. While it can be said that jobs lag recoveries, it would be nice to see some growth.

However when I see charts like this one from the Bureau of Labor Statistics it makes me question whats going on.

In the above chart, the red line is employment and the blue line is labor demand, as you can see there is a large gap there. This tells me that folks that are unemployed are a little too comfortable being that way and in some cases are probably getting paid more via unemployment benefits than they would if they went out and got a job. This has to stop before the jobless claims will start declining again in my opinion. To get back on track here, we then had the Philadelphia Fed Survey out at 10:00 ETD which was also ugly coming in at -7.7. The survey was worse that expected and shows a continued decline as you can see below.

All in all, I am still bullish on the economic recovery albeit on shaky ground at the moment until we see companies start spending some of their cash hoards on hiring and value creation. Steve Place wrote an excellent article on this today that's worth a read so I wont go into that. I didn't make any moves in my portfolio today although it was difficult not to put on a long oil position with crude being down so low, but I still think we could test the $70-$72 level and that's where I will step in. I am watching that very closely and I'm also looking to add to my Citi position around the $3.70 level which is at a short term rising trend line.

08/18/2010

This is my first blog post and I dont have a whole lot to share today because I didnt do much. I was hoping to get a bigger selloff in crude oil this morning closer to the $72 level on the front month /CL contract, to get into an October 34/37 call spread in USO, but it didnt quite get there so I didn't get in unfortunatly, and crude closed the day around $75.53 after getting as low as $74.19 so I missed a nice move.

I still may get into that trade in the coming days because oil is just too cheap and if Israel decides to take out this new Iranian nuclear facility before the Russians deliver the payload of uranium, we could see crude at $100 pretty quick. I also wanted to point out a great post by John Lee at chartsgonewild.com on the Hindsight Bias. Very interesting and worth the read.