What a run we are having!
Of course we are thrilled because we flipped bullish last week, when it was still out of fashion and now we are following along the Trade Bot Omega-3 rally pattern that I pointed out in last Friday’s post:
Close enough, right? Of course we don’t base our decisions on pattern matching (which can give you many false positives) but when we feel the fundamentals are the same AND the market movement looks the same, then we get pretty interested in watching how that pattern is playing out! so today should be a flat day and we most likely flatline into expirations, which would be good as we still need to form a base but the question remains – do we have enough good news and data to take us back to the top of our range at 10,700 (1,140 on S&P)?
See Friday’s post for how this patten plays out for the next few weeks. The TradBots are clearly in control of the market and the volume is back to anemic as confused retail bulls are now confused retail bears as the MSM scrambles to figure out how to tell you they were right. Our friendbuddypal Jim Cramer was so wrong in his call last week that he had a little temper tantrum about it saying:
I am calling this a bad rally. This market has now become more depressing than Ethan Frome. Even the good days are now bad days. It’s almost as if the whole market is caught between 1st base and 2nd base. So we get an endless rotating short squeeze in oil, in the banks, in tech, in discretionary…. But once the shorts are done getting picked off, we’ve got no more reason to run. It is a rally that stops that a blast of future selling comes in. It is a rally that stops the moment the buyers just walk away. We used to have fundamentally based rallies – that’s not how this market works. This market is stupid. And it is hated for a very good reason. The market seems rapacious, arbitrary, capricious and downright ridiculous. It is a tale told by an idiot, full of sound and fury, signifying nothing.
Wow, Jim, I’m touched that you would use my old literary references from January in your broadcast but we’re done with Shakespeare now and moving on so please stick with the plan, please – you already strayed from our path and got burned last week so just embrace the chart of the future and be done with it. This market is moving on fundamentals, not momentum and there are limits to how far you can follow your trends before they run into real-world buy and sell signals. Of course the bots are in control while we’re in the range but there are more fundamentals between the high and low end of our range than are dreamt of in your philosophy.
I already said to Members at 7:42 this morning:
Huge turn in the futuers since Europe opened. They are up a point but copper is 2.95 so I’m worried it’s all window dressing now.
Of course we have Unemeployment at 8:30 and that can send us up or down anyway. PPI was deflationary (-0.2%) but only because of oil, ex-energy it was 0.2% so if CPI is not better (higher) than -0.2% it means they still can’t pass prices through to contumers and that’s no good. At 10 am we get Leading Economic Incicators (0.4% expected) and the Philly Fed (20 expected) so lots of market movers this morning!
I guess we could have been more aggressive and shorted the futures on this silly run because it’s 8:30 now and Jobless Claims were up to 472,000, which is 22,000 (5%) more than expected and the CPI was right at -0.2% but the core was only up 0.1% so margins are still being squeezed in corporate America. Even worse for the evil Capitalists, Proletariat wages rose 0.5% in May and hours increased 0.3% giving us a 2.1% increase in Real Average Weekly Earnings since October of last year! How was I able to title this article "Productivity and Prices are Peaking" and send it out in a newsletter BEFORE the data hit? Because we pay attention!!! Data shouldn’t take you by surprise, this is all trends we’ve been following for months.
Still, it was a huge surprise to the futures markets, with the Dow dropping over 50 points in minutes, pretty much in-line with the other indexes. Copper dove, oil dove and gold shot up like a rocket ($1,245) so we’ll be shorting that again with GLL ($38) this morning as that’s always a fun play – maybe we’ll sell some puts… Also not shocking is our bullish BP bets paying off but now we have to worry about a market pullback, especially if Leading Indicators or the Philly Fed disappoint us (and the jobs numbers suggest they will).
The Shanghai came back from their holiday and did nothing this morning, finishing down 0.4% despite the US markets running up 6% in the past 5 days. The Hang Seng added a lethargic 0.4% and the Nikkei dropped 0.7% as they couldn’t get the Yen over 91.5 to the Dollar last night and even that was fake, Fake, FAKE as our currency trade that never fails (almost) won again and the Yen climbed back to 90.97 to the dollar on our Jobs news. 0.53 is A LOT for a currency move but you wouldn’t know it these days the way the Pound and the Euro keep hopping up and down that much every couple of hours. Right now, they are both up so it’s the dollar that’s down and THAT will initially support both commodities and US equities as speculators speculate that we have no choice but to crank up the printing presses to avert economic catastrophe.
Europe was having a good old time this morning until they saw our jobs numbers and that threw a wet blanket on their party but still up over 0.3% across the board. On day’s like this we like to watch copper, now $2.935, as under $3 means there’s no real faith in a global recovery. Keep in mind that Europe is being led higher by BPs recovery as that is rallying the sector that it leads – without that boost, the EU markets would be negative already.
EU is being pressured to publish a stress test for their banks, most of this pressure comes from hyenas who want to know why they can attack, of course and I hope the EU resists the urge to light the fire for a new financial witch hunt. Speaking of witchcraft – It seems the cauldron is boiling in the Natural Gas pits as futures spreads on the $5.11 contracts widen to 43.3 cents. This makes rolling over contracts prohibitive at the same time as inventories are approaching record storage levels. Nat gas traders have been desperately trying to hang on until hurricane season and a cyclone warning in the Gulf last week got gas over $5 for the first time in almost 2 years but they need a major event that halts production for at least a week to even put a dent in inventories. Meanwhile, traders MUST bite the bullet and roll their contracts over because, even if they take delivery, there’s nowhere to put the stuff. The Burning Man festival doesn’t begin until September and there aren’t enough gas grills in America to do much to the supply over the summer so let’s be on the look-out for a fund or two folding their positions in the near future.
It’s going to be an interesting day, the futures pump crew has been knocking themselves out to erase the 8:30 drop and give us a pretty open so it’s all up to the 10 am data. We will certainly be taking some speculative puts into a morning rally as 6% is a big one-week move with no pullback and 7.5% is the most we see before profit-taking ensues.
Be careful out there!