Here we go again!
Another big push pre-markets attempting to engineer a new high. As with most up days, yesterday's low-volume fiasco had us punching 2,120 at the open, followed by a whole day of institutions selling to all the people Cramer and Co. could manage to chase into the market, following their promise of pots of gold at the end of the rainbow.
Cramer looks a bit like a Leprechaun, who are famous for tricking people with false promises of easy money as well. We don't promise easy money here at Phistockworld, we teach people "How to Get Rich Slowly," using sound investment strategies and we DISCOURAGE the kind of hot money chasing that is the hallmark of CNBC and the rest of the MSM's advice. We are currently VERY CONCERNED with the level of froth we're seeing in the markets and we've moved our Member Portfolios mainly to CASH!!! for the duration of earnings season (the rest of May).
Maybe we're missing a rally but, if so, there are still plenty of things that we can buy with our cash for very low prices. Aside from stocks that tanked on earnings like CMG, TWTR, GOOG, WYNN, etc… There are still so many bargains in the commodity sector and, if this is a real rally and the economy is really heating up – don't you think at some point we might need some raw materials?
As you can see from the chart on the right, lumber has gotten 22% cheaper this quarter but Lumber Liquidators, who buy lots of lumber, has gone down 60% since February. Sure, they have a scandal and all that but still – don't you think getting lumber for 22% less this Q might be a long-term benefit to them? We already have a position on LL in our Long-Term Portfolio and it's about flat so far and still a good entry as a new trade. We'll go over it today in our FREE Live Trading Webinar at 1pm, EST.
Last week, in our Live Webinar, we discussed our FXI short as it topped out around $52.50. We took a put option (June $50 puts) on FXI, which closed at $1.07 yesterday and this morning we finally got some action as the Shanghai Composite took a 4% dive this morning on it's first day back trading since Wednesday.
China’s stocks fell this morning amid concerns that recent gains were excessive relative to the outlook for economic growth (duh!). Phone companies, the best performers over the past month, led the declines and the index finished at the day's low – a strong indication that the selling isn't done, they simply ran out of time…
Already the fake rally (which we're shorting, of course) in the Futures is falling apart and the S&P futures are down to 2,104, so we can now set a stop over 2,105 and switch to shorting oil (/CL), which has popped to $60.45, which is ridiculous as NOWHERE is there any evidence of increasing demand and only minor evidence of supply pulling back.
With oil (and gasoline) up 30% in less than 60 days, it's no wonder that the Economic Confidence Index is falling off a cliff, dropping from -3 to -9 in the largest drop since oil peaked out over $100 last July. $60 oil feels like $100 oil after you've briefly enjoyed $45 oil and gas back around $1.50.
According to Gallup, Americans' confidence in the economy does appear responsive to the latest reports on U.S. economic activity, and this Friday's report on job creation and unemployment could help determine where confidence heads in the coming weeks. Unless the economic news continues to be bad, Americans may soon forget about the weak first quarter GDP and rising gas prices, which, the EIA projects, will stabilize during the summer.
Even in the midst of last week's negative economic news, there were bright spots, including the federal government's reporting increases in consumer spending and a 15-year low in jobless claims. But last week, the bad news appeared to carry more weight in Americans' evaluations than the good news.
As we know, in the markets, bad news has been good news as it tends to bring the Fed back to the table but that Infinite Free Money fantasy may one day come to an end and God help the bulls when it does!
