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Will We Hold It Wednesday – Euro $1.24 Edition

If it wasn't for bad news, Europe would have no news at all.

The funniest thing about watching Europe implode in a sea of incompetence is that we're actually no different over here – it's just not our time yet.  That doesn't stop the punditocracy from pontificating on all the ills of the European Union, as if America will be immune to California as their economy ($361Bn in debt) slips into the ocean

Actually Greece is not the disaster du jour in Europe this morning – it's Spain (who were downgraded yesterday), whose junk-rated 10-year notes are now costing them 6.65% – back to pre-LTRO levels already, after just 90 days of being "cured."  Italy is right behind them, only able to sell 90% of the bonds they auctioned off and even those went for 5.66% on the 5-year notes and 6.03% on the 10-years.  

Meanwhile, German yields hit record lows at 1.318% so how, exactly, does it benefit Germany to "fix" this situation when the fix would be for Germany to go back to paying 3% while Spain and Italy go back to paying 4%?  It's not like Spain or Italy will ever be able to pay back the money anyway so all we're really doing is costing Germany money to PRETEND things are fixed – again.  When will this madness end?  

Extending and pretending is exactly what is being planned as the European Commission is prepared to as European Union finance ministers to give Spain an additional year to meet the budget deficit target of 3%, according to a report in the online edition of El Pais this morning. The newspaper said it had obtained a rough draft of the copy of the economic strategy for the euro zone set to be delivered by the Commission on Wednesday. Media reports said it will issue specific recommendations for each of the 27 countries. El Pais said the EC wants to give Spain until 2014 to reach the budget deficit target of 3%, in light of its economic problems, but will also include draft recommendations on pensions, the financial system, taxes and labor reforms.  

SPY DAILYThank goodness – that will fix everything, I'm sure!  

Meanwhile, on the US side, we're getting worry fatigue and we're ready to rally – as was made clear by yesterday's bullish action which took us over our weak bounce levels, which actually held up for the day.  Now we'll get a proper test this morning as we had a nice sell-off in the Futures but we flipped bullish on oil (/CL) already in the Futures as it tested the $89 line and, of course, we closed yesterday out bullish as our weak bounce levels held up which means the weakness in the Futures is hopefully just a flush – to clear out the weak hands ahead of a proper bounce

Why be bullish?  Well, aside from the technicals per our 5% Rule, there's also the Stock Market Theory of relativity which states – if the World went completely to Hell and everything was destroyed in a storm of fire and brimstone – there would be a market for brimstone futures a day later (see "Christmas Time in Hell" for perspective).  

Investors will trade and some will buy and some will sell in any market – once it settles down.  It's only the uncertainty they don't like and, at this point – we're pretty certain Europe is completely screwed so not much is going to surprise us to the downside.  When the market was high, back on April 23rd (when I was being told I was "too bearish") I said: "Something is bound to happen – all we need to do is choose the form of the Destructor," which is a reference to the attack of the Marshmallow Man in Ghostbusters because SOMETHING was going to destroy Manhattan – it didn't matter what – it was simply inevitable.   

Well, now we're down from overbought to oversold levels and SOMETHING is bound to rally the markets and it doesn't really matter what it is – we're just primed for it.  We could go lower – the S&P's 200 dma is down at 1,283, which is 3.6% down from here – but it's a healthy-looking bottom down here and we know how to buy stocks for 15-20% off and that's WAY below what we believe to be solid support – Christmastime in Hell!!!  

IWM WEEKLYThis is not a BUYBUYBUY premise – just making a case for some bottom-fishing from our cash position.  As I pointed out to Members over the weekend, if we're sitting on generally all cash and we sell a few calls that tie up 10% of our portfolio and obligate us to buy stocks 20% below the current price – it's not worth not doing because – even if the market falls 20% or even 40% – we'll still have 90% cash and be much better off than those who were invested and THEN it will certainly be time to go shopping.  On the other hand, if the markets do bounce here – at least we got a few good sales in before the VIX dropped.  

As David Fry notes on his IWM chart, we're into a trading range now and it's lots of fun for us day-traders as we take advantage of the silly moves up and down each day but it's only fun if we have lots of cash on the side.  In my 10:43 Alert to Members yesterday, I warned: "On the whole, this is not a rally I'd chase until we see our levels taken" and this morning I'll say the same thing about seeing our levels broken – we're simply stuck in a range now, bouncing up and down based on the latest rumor out of Europe.  Yesterday there was a rumor of an announcement at 11 that gave us the day's highs but, by 11:15 I noted:  

Oh no, 11 comes and goes and no QE/Bailout from Europe and we're selling again!  Is this market a joke?  Are there really actual human beings who trade like this –in and out based on half-assed rumors like the audience in a Bugs Bunny cartoon?  

By 11:54 we had flipped back to bullish, as I observed: "Of course everyone is acting like we just had a huge sell-off, which we did, but we're still up nicely for the day…"  That allowed us to make a quick play on oil but, other than that, we had little interest in messing around and we didn't touch our 4 short-term portfolios all day (still bullish).  Our lows do have to hold or we'll be forced to get more bullish but EDZ's ($17.23) still make great hedges, as do SQQQs ($51.80) although TZA is a bit more fun at $20.61 as you can do more interesting combos like:  

  • TZA July $19/24 bull call spreads at $1.50, selling $18 puts for $1.05 for net .45 on the $5 spread that's $1.60 in the money to start.  

So a hedge like that returns 1,111% at $24 on a 3x ultra that's currently $20.61 so a move to $24 would be up $3.39 or 16.5% which would require 1/3 the drop on the Russell (roughly), or about 5.4%.  In other words, should the Russell drop 5.4%, this trade returns 1,111% – that makes it pretty good protection!  Even better, if the Russell should flatline and TZA remains at $20.61, you would get back $1.61, which is still a 257% profit on cash.  

The only way you lose more than the .45 "insurance" premium is if TZA falls below $18 at which point the ETF is put to you.  Since $18 is $2.61 below the current price, we need a 12.6% rise in TZA (4.2% on the Russell) – all the way back to 812 before you end up being assigned TZA at net $18.45.  Let's say TZA drops all the way down to $17 (the all-time low), that's down 7.8% on your hedge but ONLY if the Russell is up 4.2% so, if we balance our hedge properly – there's nothing to fear as our bullish stocks will more than make up for the loss on the hedge and the hedge (now a long-term ownership of TZA) will still be very likely useful to hold at Russell 812.  

Since we make 1,011% profit on the hedge on a 5.4% drop in the Russell we only need to spend about 1/10th of what we think we might lose to be very well-hedged.  So, if we have $100,000 worth of bullish positions that would lose $10,000 on a 10% drop in the Russell – we only need to set up a $1,000 hedge to completely cover a 10% drop and that would return $11,110 if TZA is over $24 at July expirations.  

To do that we buy 20 of the spreads for net $900 and we risk owning 2,000 TZA at net $18.45 so, at $17, we would lose $2,900 (assuming we did not stop out of the short puts and took a 100% loss on the bull call spread – neither of which are good practices).  Even so, our bullish $100,000 would have made about $6,000 (as we're past the 4.2% that takes us to $18) so we're still ahead – we only sacrificed some of our upside to the hedge.  

That's why the chart above shows such a stunning outperformance by portfolios using hedges – the trick is to learn to use them correctly and that's something we'll be concentrating on as we launch the new Income Portfolio next week.  

Meanwhile, a little hedging goes a long way to protecting our bullish entries.  As I pointed out at the outset of our Twice in a Lifetime List, which we'll update in chat today, the initial position was the SQQQ July $55/70 bull call spread at $2.50 (now $2.30 but we took 20% profits and ran at the bottom last week and will re-enter IF our levels break) and THEN we sold ourselves some puts!  

At the time, we weren't sure $61 would hold on the Qs (2,800 on the Nas) and now we've raised the bar to 2,850 ($62 on the Qs) as we CAUTIOUSLY do a little bottom-fishing.  We still need to be careful out there but I've said it over and over for the past few weeks:  

If you're not going to buy when we're low – when will you buy?  


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  1. Burrben

    These morning always remind me of this scene from Lord of the Rings, if you replace Theoden with Phil…
     
    Arise riders of Theoden!
    http://www.youtube.com/watch?v=sdnqZcmWk8U
    (good part starts at 1:00)

  2. morxlntway

    isn't gandalf's horse named Shadowfax?

  3. angelcur

    PHIL AGREED: if the wheels on't fall off this morning… stocks will probably open near their worst levels for the day and will slowly grind higher for the rest of the session…FLUSH ON PLEASE 

  4. exec

    Phil,

     
    I agree with your statement that it's not our time yet….but we are going down the exact same path.
     
    It all goes back to the same ol same ol…….what the government giveth….the government can't taketh away…….and the slim ball politicians will give away everything and anything to get reelected until the take the Country to fiscal abyss. 
     
    We may not be there yet…..but we're well on our way….. and as the Bernanke told congress……We're closer to total destruction than you think.

  5. stjeanluc

  6. Burrben

    Morx – Correct
     
    Oil – Well I didn't think I should *short* off the 89.50 line….got me there. Oil – 1 Burr – 0

  7. Pharmboy

  8. stjeanluc

    Economic numbers:

    Switzerland KOF Leading Indicator / 0.81 (0.40 expected)
    Euro-Zone Consumer Confidence / -19.3 (-19.3 expected)
    Euro-Zone Business Climate Indicator / -0.77 (-0.67 expected)

    At 10:00 AM EST we have the US Pending Home Sales

  9. jabobeast

    TLT 125…wow

  10. Burrben

    Dollar – BOOM – 82.84

  11. jabobeast

    With Cramer slamming FB so much doesn't it make it seem more attractive?  ;-)

  12. newt

    Income Portfolio: Thanks for those 5 ideas yesterday. Did you set a stop on them or are they something that we would be happy to own at those strikes?

  13. Phil

    Theoden/Burr – Oh come on, that's not a patch on Braveheart.

    Dollar over 82.85 is very bearish – keep that in mind today.  Very good hedge above and the SQQQ bull call spread is still cheap and doesn't move much, which is good for a hedge you're not sure you want!  

    I hope (not a valid investing strategy) that this is a flush because it would be very annoying to re-test the month's lows again but it's also a long way down and we have support levels way before there.  

    So we flip more bearish if we blow those 2.5% and 5% lines on the Big Chart or if we fail 3 of 5 of our weak bounce levels of 12,540, 1,319, 2,840, 7,560 and 765 so about 40-50 points leeway on the Dow and NYSE would make them most likely to fail this morning so we'll watch them closely and then it will be a race to see who fails next.  

    At the moment (9:24) all of yesterday's gains are wiped out in the Futures so my intention is to punch the button at the open as soon as I get a price on these UPSIDE plays:  

    TNA June $48/52 bull call spread at $2, selling $42 puts for $1.20

    TQQQ June $45 calls at $2.30, selling CMG weekly $425 calls for $1.60.  

    DIA June $128 calls at .35

    If we can't hold our levels, there's no point to the above but they will be lots of fun if we move higher!  

    Also, don't forget Dollar 82.85 – over that line is bearish but I think it will hold.  

  14. Canuck

    TLT – is this an all time high for TLT??

  15. stjeanluc

  16. stjeanluc

    TLT / Canuck – It's at least a 3 year high! it was at 124.03 last October and didn't make it past 14 in the fall of 2008.

  17. jthoma

    Pharmboy- nice move on CRM today

  18. stjeanluc

    We might be a tad too bullish in this one!

  19. jromeha

    Phil – do we want to roll the Sept 110s today?

  20. Phil

    Not our time, Exec.  Not our time?  Not our time you say….

    TLT $125..42 – that's panic.  VIX 22.86 – a little worried but not panic. 

    Oil (/CL) $88.85 still a good bull play over the $89 line only.  USO June $59 calls at .60 lost 1/2 their value from yesterday are a good play for stimulus rumors later today and should be a slow burn for a stop at .40 otherwise.  

    FB is up .11 – miracle!  

    Wow, we already lost everything but the RUT (765) – if this isn't a bottom, we'll be on our way back to the month lows most likely but that's only 100 points down in the Dow and we'll be back to looking for 1,300 to hold up on the S&P.  

    82.89!   Not good.  Euro $1.241, Pound $1.556, 78.90 Yen to the Dollar and EUR/CHF $1.208 means the SNB is having a lot of trouble holding $1.24 and may run out of money, giving us a major break-down in the Euro later so NOT A GOOD TIME FOR THE BULL BETS!!!

  21. stjeanluc

  22. Phil

    I still like the bull bets, by the way, let's just say not a good time for too many bull bets but the bull side looks like much more fun this morning.  

  23. stjeanluc

  24. stjeanluc

    The next line for oil is S3 at 87.75! That's another $0.75 from here but the momentum is certainly there. They might try to make a stand at 88.50 and 88 in between!

  25. Pharmboy

    FFIV – July 90s are still a good way to play a breakdown.  I have a few, that are up only slightly.  3.5% rule, per Opts methods.

  26. Phil

    Cramer and CNBC in general pushing the idea that the US will be next to fall.  Nice scare tactics that make me feel like they're forcing a bottom here.  

    FB/Jabob – Yep, Cramer not liking them almost overrides my entire dislike of them.  

    Income trades/Newt – Those are not official Income Portfolio trades – just ones I would have bought had we started yesterday and no, there would not be a stop as we're expecting a 10-20% drop worst case so we're certainly not running on a 1% drop or even a 5% drop so early in the trades.  

    TLT/Canuck – I think this is the all-time high.  

    $88.50 oil.  82.90 Dollar.  $1,537 gold.  

    TLT/$5KP, Jrom – No as TLT is super-volatile, more likely I'd like to DD at .72 for a .90 average on 10.  as they were over $1 yesterday so a small bounce and we're 1/2 out even with a much lower basis.  Let's make that the official play in the $5KP and $25KP for our TLT Sept $110 puts (DD at .72). 

  27. Phil

    RUT does not want to give up 765 – good sign!  All we often need is one hold-out on these major levels to get a bounce.  

  28. jerconn

    PHil – USO June 59 calls at .60?  Not seeing that…

  29. Phil

    Big miss in Pending Home Sales – hopefully it will give us a low:

    Apr. Pending Home Sales:-5.5% to 95.5 vs. +0.5% expected; +4.1% prior.

    Dow volume is a joke at 14M at 10 – this is nothing like capitulation.

    JACK making new highs, WMT making new highs – strangeness…

  30. Phil

    USO/Jerconn – I have no idea what that was.  June $34 calls are .53 now, I think those are what I was looking at.  Oil now $88.31 and no inventory until tomorrow.    

     

  31. dclark41

    Anyone fill on the TLT DD at .72?  Price jumped (.78-.86) even though TLT keeps rising.

  32. angelcur

    PHIL SNB EURO WHY THEY DON"T GIVE IT UP? COZ that would destroy that special US middle class wealth destruction machine….german bund record low yield too…that tells you big money doesnt think germany is doing much more to bail out europe.

  33. dclark41

    angel:
    Do you think it possible that GERMANY wants out of the EU? Perhaps the pain of their exit will be a lot less (in their minds) than the pain of bailing out the other members?

  34. stjeanluc

    Spain is really now facing a credibility problem:

    http://ftalphaville.ft.com/blog/2012/05/30/1022271/spain-bankia-and-the-credibility-problem/

    I am sure that Rajoy is now glad he won the last elections!

     

    So, let’s say that Spain, perhaps, has a credibility problem with investors just now.

    We talked about the first kind of “credibility problem” a couple of weeks ago, and agreed with John Dizard that the idea of sovereign credibility in the financial markets is a spurious one, at least for countries in which citizens get to have some kind of say on fiscal policy.

    Today we’re looking not at the more overarching credibility, in the sense of austerity and/or growth (delete as preferred) — but a more immediate credibility problem around what Spain’s going to do about Bankia, and its banks’ bad debt more broadly.

    The 'credibility Laffer curve' - Michael Pettis

  35. 53787

    Good morning all !
    Phil – any action to take on the Twice in a Lifetime group?

  36. Phil

    TLT $125.75.

    TLT/DC – They are just messing with you, you have to be patient.  

    SNB/Angel – At some point, they run out of money.  

    Germany/DC – That's a good point.  As I noted above, what is Germany's motivation to go into debt so they can increase their borrowing costs relative to the rest of the EU?  Seems like a bad idea from a math perspective.  At some point, it's not worth it just to support a trade surplus.  

    Speaking of Europe – heading down about 2% now!   CAC failing 3,000 would be very bad.  

    Dollar still in danger zone at 82.875

  37. stjeanluc

    Richard Koos proposals for Europe:

    http://ftalphaville.ft.com/blog/2012/05/30/1022281/richard-koos-prescription-for-greece-and-germany/

     

    Koo says that Germany and the wider eurozone don’t fully understand balance sheet recessions, so there is also a risk that joint eurobonds would, under the scenario he outlines above, be used to implement more austerity measures on Greece and the other peripherals.

    Which would kind of defeat the purpose of the recessionary countries being able to use eurobonds as a way of increasing their borrowing to stimulate their economies — and actually make things worse.

    But he is not really optimistic:

    As I have noted previously, my visit to Germany in April attracted a great deal of local attention, with major newspapers like the Frankfurter Allgemeine Zeitung devoting substantial coverage to the theory of balance sheet recessions. But further efforts are needed to convince senior German officials, who remain almost completely ignorant of the concept

  38. dclark41

    Phil:
    Can the EU survive without Germany?

  39. Phil

    TWIL Update:  

     

    Twice in a Lifetime List: 

    OK, let's see how the TWIL list is doing with the VIX at 23.  Keep in mind these are scale-ins as things could get much worst and our hedge was the SQQQ July $55/70 bull call spread at $2.50.  If 20 were purchased for $5,000, you are covered against a hell of a drop!  That goes against a few of these that you REALLY want to own, even if the stock drops another 40%. 

    Remember – it's always about getting fresh horses.  If you're up 20%, look for something that isn't!  

    • AA (original entry $8.50) 2014 $8 puts can be sold for $1.50, now $1.48
    • ABX ($35.91) 2014 $30 puts can be sold for $4.50, now $3.70
    • ALU ($1.45) 2014 $2 puts can be sold for $1, now .95 
    • BAC ($6.97) 2014 $7 puts can be sold for $1.75, $1.69 
    • BTU ($25) 2014 $20 puts can be sold for $4.10 – WOW!, now $7 – WOW!!  
    • CCJ ($19.37) 2014 $17 puts can be sold for $3.30, still $3.30 
    • CHK ($13.83) 2014 $13 puts can be sold for $5, now $4 
    • CSCO ($16.70) 2014 $15 puts can be sold for $2.05, now $2.18 
    • FTR ($3.20) 2014 $3.50 puts can be sold for $1.30, now $1.10
    • GLW 2014 $15 puts at $3.90, now $3.95
    • GNW ($5.02) 2014 $5 puts at $1.75, now $1.65
    • HMY ($8.88) 2014 $8 puts can be sold for $1.40, now $1.30 
    • HOV ($1.83) 2014 $2 puts can be sold for $1, now .95
    • HPQ ($22.04) 2014 $23 puts can be sold for $5, now $4.80 (were $6.66 last week when I said "WOW!") 
    • MT ($14.30) 2014 $15 puts can be sold for $5, now $4.65
    • JPM ($34.59) 2014 $30 puts can be sold for $5, now $5.60 
    • OIH ($35.90) 2014 $30 puts can be sold for $4, now $3.60 
    • SVU ($5.15) 2014 $5 puts can be sold for $1.85, now $1.90 
    • WFR ($2.05) 204 $3 puts can be sold for $1.40, now $1.70
    • X ($22.25) 2014 $20 puts can be sold for $5.10, now $5.35 

     

    Some are getting away, some got better – this may be our last chance to get our 2nd chance plays at great prices and, clearly, the hedges work well.  

  40. angelcur

    syriza moving back up in poll… i think the upcoming earnings season is going to be pretty bad dollar moving up too rapidly now…  global economy slowdown really picked up steam last 6 weeks  don't worry though..we have until the reports start coming out to worry about it…haha

  41. stjeanluc

    Just about every commodity is below its 2012 low now or getting really close… Oil itself is at a low now and it's looking more like we'll get to $88 soon.

    But copper is there, gold is close, gasoline is within 5 cents. Nat gas was rebounding, but is now going down again. Even ag products like cocoa, coffee, OJ and sugar are weak.

    Amazing what a strong dollar can do!

  42. rainman

    Phil / USO — Can you recheck that USO call? I don't think you meant the $59's and I can't surmise which one you were looking at.

  43. rainman

    Nevermind.

  44. stjeanluc

    I guess if we change the country's name, our debt will belong to someone else. That seems to be Romney's plan:

    http://2012.talkingpointsmemo.com/2012/05/mitt-romney-iphone-app-misspelled.php

  45. jabobeast

    Phil—BTU 25s are at 7 not the 20s ;-)

  46. jabobeast

    This weak Euro can't be good for PCLN, right?

  47. Phil

    BUT/TWIL – Ah, the 2014 $20 puts are "just" $4.35, not $7 although I'm not adverse to selling the $25 puts for $7 (net $18 entry vs net $15.65 entry selling the $20 puts).  

  48. Phil

    AMZN tanking.  

    Qs holding $62 so far.  AAPL $568 not really playing along with the sell-off.  

  49. rainman

    DBA starting to look attractive but I'd wait for a obvious bottom.

  50. Burrben

    Phil / AXP time for DD?
     
    -AXP Jan14 45 put   +AXP Jan14 45/55 Bull CS for net $3.15.   AXP is trading at 55.53.  But the spread is now trading at net $1.75mid.
    I only have 10 contracts, and it looks like AXP is doing okay even with all this chop.  I think I should DD, just wanted a 2nd opinion.  

  51. rainman

    RIG has a nice 4 year triangle squeezy thingy going on and closing in on it's 8 year low again. 7.23% dividend!  I'd again wait for the upside break.

  52. Burrben

    FCX – Time for a DD?
     
    Okay this one I don't understand.  Sold FCX Aug 26put net $0.45.  FCX is trading at 32.46, $6.46 higher than the put.  BUT the sold put is now trading at 0.77, showing a 66% "loss".  I only sold 10 puts, and I'd like to DD.  Again, just you're thoughts.  Seems like the trade is on track, ignoring PnL.

  53. jerconn

    rainman/USO – Phil meant the June 35's, for .60 at the time, probably .50 now…

  54. Canuck

    TQQQ – Jun $50's were below 0.90 Friday, hit 1.50 yesterday and are back below 0.90 again.

  55. jerconn

    Phil – AMZN has been in a $210 – $218 range for several days now…it's a nice rinse-wash-repeat candidate…just about every day for the last week it has tanked and re-surfaced…

  56. stjeanluc

    I didn't think that we would see this that quickly, but oil has hit S3 and they are trying to hold it… The next line would be $87 – a daily Fib line!

  57. lionel

    Oil rebound on S3
    I am going long Oil
    This farce has to stop at some stage.
    I supposed since we will tread water until June 17th and without any impetus from the CBs, our IB friends are just pushing the markets around to create some transactions.
    at 1.24 I am long Euro as well (2 month ATM options)
    My bet is that we snap back up very fast and with just two weeks to go Phil's TWIL list looks really good

  58. stjeanluc

    On a daily chart, you could see some support for oil around $88.50, but that's gone now. The next long term support area is around $85 or so! 

  59. stjeanluc

    You are brave Lionel, looks like oil has not support now… I would not play it long until it crosses over S3 decisively, not putzing around like it does now. 

  60. stjeanluc

    I guess stereotypes are hard to shake:

    Euro_Survey

  61. lionel

    Not brave Stjeanluc.
    I am just hoping a remake of what happened a few minutes after Phil call of a bottom
    Oli snapped back up 80c in less than a minute
    It is enough for me

  62. zeroxzero

    Stj:  You have misunderstood.  I believe Romney is pitching the use of domestic intelligence to find out who or what is behind the decline of the American economy and put it to rights.

  63. stjeanluc

    Well we did bounce nicely off S3 – good job Lionel… 

  64. Canuck

    IF we were to retest the lows of last July/August, how high could TLT go?

  65. stjeanluc

    Lol Zero…

  66. lionel

    Good job to your lines and to Phil s call.
    I am just the executioner…I leave the well deserved honors to both of you and keep the cash…:)

  67. Burrben

    Good read : Grinding it out on my leather a**….
    http://embracethetrend.com/post/23667712704/leatherass
    (lots of good trading psych in the main page too)

  68. stjeanluc

    TLT / Canuck – There has to be a limit on how high TLT can go and that's driven by the interest rates. As it is, at 1.7%, people are basically paying us to take their money when you factor in inflation. There would have to be a European implosion before we see rates much lower I am guessing.

    Of course, an implosion is not out of the question, but you would think that the ECB would take measures before we get there.

  69. stjeanluc

    Looks like Mr Stick has been around a lot lately:

    http://www.bespokeinvest.com/thinkbig/2012/5/29/going-to-need-another-last-hour-bailout.html

    The chart below shows the S&P 500 on an intraday basis over the last six trading days going back to last Monday (5/21).  We have also shaded the last trading hour of the day in gray.  Looking at the chart, it is hard not to notice the recent pattern of late day market strength.  Since last Monday, the S&P 500 has been up in the last hour of the trading day five out of six times for an average last hour change of 23 basis points.  The fact that investors are willing to buy into the close and take on overnight risk is gutsy, but as the market is showing us today, gutsy is not always the right call.  All bulls can hope for now is another last hour bailout.

  70. stjeanluc

    Speaking of lines, it's interesting that oil was bouncing off S3 while /ES was doing the same off S2. These algos are well behaved!

  71. jthoma

    dollar on an absolute tear- a mansion in a ghetto!

  72. zeroxzero

    Google has certainly not been a hot name in the markets this year.  What are the chances, would you think, that this could change markedly?  Anyone?  http://www.businessweek.com/articles/2012-05-22/its-official-google-is-now-a-hardware-company

  73. nicha

    Burr – thanks for the TWIL snapshot. Its a great help at work.

  74. rustle123

    oil is getting very oversold on the charts.  Dipping my toe in on the long side now through puts and some UCO.

  75. rustle123

    meant writing naked puts on UCO out of the money

  76. lionel

    Stjeanluc/ I would say the algos are not only well behaved, they are the only one trading.
    This push and pull tricks are not working much anymore (low VIX, no volume)
    They have herded the sheeple into bonds and they will collect all the returns with equity.
    CBs will protect their banks and their economies all across the globe.
    Some act fast, some act late but they all act at some point.
    The only uncertainties are FX rates. And no one knows really which CB will have to print more than the Fed…
    Let see if S3 act as a support now and it could be another chance to go long on oil

  77. Phil

    At the open: Dow -0.82% to 12478. S&P -0.84% to 1321. Nasdaq -0.96% to 2843.

    Treasurys: 30-year +1.1%. 10-yr +0.54%. 5-yr +0.23%.

    Commodities: Crude -2.09% to $88.86. Gold -0.46% to $1543.85.

    Currencies: Euro -0.62% vs. dollar. Yen -0.57%. Pound +0.46%.

    10:00 AM On the hour: Dow -1%. 10-yr +0.61%. Euro -0.67% vs. dollar. Crude -2.47% to $88.52. Gold -0.8% to $1538.65.

    11:00 AM On the hour: Dow -1.27%. 10-yr +0.67%. Euro -0.87% vs. dollar. Crude -3.51% to $87.58. Gold -0.53% to $1542.85.

    Market Preview: Markets are whipsawing on the stormy sea that is the eurozone debt crisis (IIIIII), with most of Europe now lower along with U.S. stock futures. The S&P benchmark is -0.7%, while 10-year Treasury yields hit a fresh low. RIM is -10.95% following its profit warning yesterday, although Monsanto is +2.3% after raisingits FY 2012 guidance. Later: Pending Home Sales, Lots of Fed speak

    1:00 PM Fed's Dudley: 'Job polarization and rising inequality'

    1:20 PM Fed's Fisher: 'Federal Reserve Operations and Economic Update'

    4:30 PM Fed's Rosengren speaks at Worcester Regional Research Center. 

    MBA Mortgage Applications: -1.3% vs. +3.8% last week.

    Apr. Pending Home Sales: -5.5% to 95.5 vs. +0.5% expected; +4.1% prior.

    ICSC Retail Store Sales: -0.5% W/W, vs. -1.7% last week.+2.9% Y/Y, vs. +3.8% last week. The European worries are "clearly" making US consumers more pessimistic..

    Redbook Chain Store Sales: +3.2% Y/Y vs. +2.7% prior week. 

    Consumers running out of money:  Visa (Vreports that U.S. payment volume was down 3% Y/Y in April, with negative growth in debit payments dragging down the total. Cross border volume growth rose 13%.

    The 10-year Treasury yield hits a record low of 1.67%, off 7 basis points for the day. The 30-year is off 7 bps to 2.78%. The much-hated TLT is close to overtaking SPY for the 2nd consecutive year.

    It's a new session low for the euro, -0.86% to $1.2392. Every tick down sets a new 2-year low for the currency vs. the dollar. A bit of perspective: The currency first officially traded in January 1999 at about $1.18. It spent the next 22 months sinking, hitting an all-time low of $0.8230 in October 2000. There remains an ocean of room between here and there.

    The amazing thing to us is why hasn't the euro gone to 90, Mark Mobius tells Bloomberg TV. Patience. New levels are being taken out all over as Europe slides to session lows (taking the S&P with it). The Stoxx 50, -2.1%, is at a new YTD low. The euro sees a $1.23 handle, off about 1000 pips just this month. Good news for consumers: Oil -3.3% to $87.78.

    The ECB still has a bit of a monetarist bent, so hope for easier policy may lie in the latest money supply figures which show a 0.5% fall in the M3 measure, the biggest drop since January 2009.

    Amid the excitement of its potential "banking union," the European Commission also releases its assessments of EU countries' economic performance and its targeted recommendations for member states. The EC warns new French President Francois Hollande about overspending and says Spain's plans "lack sufficient ambition."

    "So the EC wants the ECB to bypass the EFSF and use the ESM to recap the EU banks," writes Peter Tchir, declaring National Acronym Day in Europe. The goal of having the ESM up and running early this summer looks lost, he says, but don't underestimate the power of the rescue fund should it be launched, and launched with a banking license. (earlier

    That took about 90 minutes by our count. Germany reiterates its opposition to letting the permanent rescue facility (the ESM) directly fund troubled eurozone banks. Both the broad European stock index and the euro have retraced their big gains on the earlier bank recap news.

    Spain is more likely to ditch the euro than Greece, writes Matthew Lynn – it's too big too rescue, has no "political hang-ups" about its relationship with the EU, and there's a massive Spanish-speaking world for it to grow into. Spain also has a "real" economy, he says, with a solid industrial base and successful export industries. A good read. 

    Spanish finmin Luis De Guindos said earlier that the country will pay for Bankia's EUR19B ($23.6B) rescue with money raisedthrough bond sales, although a possible "banking union" might change matters. De Guindos also says Spain's banks will be asked to make provisions of €84B to cover potential real-estate losses.

    Latest Greek poll: Syriza 30%, New Democracy 26.5%. European shares are diving again, Stoxx 50 -1.2% after poking into the green just minutes ago. Somebody's buying or selling on this?

    Remember when China was going to come in and buy up the EU sovereign and rescue fund debt no one else wanted? Naturally, China has no interest in such, but does continue to purchase real things, this time electricity transmission assets in Brazil from Spain's struggling-at-home ACS.

    Sensible regulatory scrutiny or trade protectionism? The EU is reportedly gathering evidence proving Chinese IT/telecom equipment giants Huawei and ZTE (ZTCOY.PK) have benefited from government subsidies, and plans to take action (ed: Chinese solar vendors can probably sympathize). The companies (Huaweiespecially) have been taking share from Euro telecom equipment vendors such as ALUERIC, and NOK thanks to aggressive pricing and a win-at-all-costs attitude

    While the headlines talk about Beijing's resistance to fiscal stimulus, the government approves a proposal allowing significantly greater bond issuance by the Railway Ministry. Investment in railways has plunged this year as the system is plagued with high debt and losses amidst corruption, overbuilding, and other boondoggles.

    Short-covering of copper by Chinese firms may actually be driving the world price lower as the country's largest producer isexporting the metal to LME warehouses to cover its shorts. The move makes sense as the sluggish economy has dragged the price of copper lower in China than at the LME.

    The price of gold has broken a 40-month uptrend, writes Peter Brandt, who reckons a close below $1,500 could signal another $250 move down in the metal. On the other hand, a close above $1,585 could indicate support will hold for the time being. The yellow metal today, -0.6% to $1,541.oz. 

    Gold's status as a safe haven looks shaky as the metal tumbles below $1,550, hit by demand for U.S. Treasurys and the rising dollar. It's also hitting miners' capex plans, as investors demand spending discipline and returns of capital rather than ambitious growth plans. “It is difficult to emphasize enough how much the world has changed for the miners in the last 18 months."

    Crude oil will fall below $80 in June, with tropical storms and hurricanes the only potential catalysts that could send prices higher, ValuEngine.com's Richard Suttmeier says. If he's right, $79 crude would not only mark a seven-month low but also complete a 30% plunge from February's $110 top.

    Iraq's oil ministry awarded only one exploration block in a dismal start to a two-day auction of oil and gas acreage, as international oil companies failed to submit bids. Kuwait Energy as operator, bidding alongside Turkey's TPAO and the UAE's Dragon Oil, submitted the only winning bid for Block 9, believed to hold potential oil reserves.

    Chesapeake Energy (CHKwill meet with many of its major lenders later this week, Reuters reports, as the company scrambles to raise cash to close a $9B-$10B funding shortfall. It's unclear whether the meeting is special or regularly scheduled, but the company is expected to talk about its plans and liquidity needs. CHK -1.2%premarket.

    Bloomberg discusses Chesapeake (CHK -3%) as a potential takeover target due to its currently depressed valuation. CHK’s equity and net debt are valued at $9.19 for each barrel of oil equivalent, Bloomberg calculates, lowest among U.S. oil and gas explorers with market caps greater than $5B. 

    Monsanto (MON) raises its FY12 EPS guidance to $3.73-3.78/share from $3.49-3.54 and vs. consensus of $3.56. The company sees Q3 EPS at $1.57-1.62 vs. consensus of $1.29. CEO Hugh Grant says the strong performance is about true demand from higher planted acres, and not, as possibly thought, just due to an early planting season. Shares +3% premarket. (PR)

    About time someone else realized this:  With shares at multi-decade lows, Nomura is making a contrarian call on Frontier Communications (FTR). The firm thinks the telco's massive wireline subscriber losses, which are heavily tied to assets purchased from Verizon, could soon narrow. It also notes Frontier's low multiples and heavy short interest (23.2% of the float was shorted as of May 15), and sees EPS revisions and multiple expansion driving shares higher.

    The price of polysilicon, the chief ingredient used to make silicon solar cells, continues to tumble: Digitimes claims it has dropped to $20-$22/kg – below the $25/kg level believed to represent the variable cost of Western producers, and also low enough to generate losses for AU Optronics (AUO) and other Taiwanese producers. U.S.-based MEMC (WFR) has had a very rough time, and China's LDK and YGE haven't been faring much better.

    Cisco (CSCO) forecasts that IP traffic will grow at a CAGR of 29% in the next 4 years to 1.3 zettabytes, or the equivalent of 38M DVDs per hour. By comparison, IP traffic from 1984-2012 was a mere 1.2 zettabytes. The bottom line: demand for any Internet-related equipment produced by Cisco and others should continue to grow.

  78. Phil


    More on Cisco's 
    IP traffic forecast: While the 29% growth rate forecast by the company (revenue growth is lower due to price declines) represents a slowdown from prior years,Cisco expects mobile traffic to grow 18x from 2011 to 2016 – a positive for vendors with strong mobile networking exposure. Also: Cisco sees over half of all 2016 traffic coming from Wi-Fi networks, and expects the number of global Internet users, boosted by smartphone adoption, to reach 3.4B (up from 1.9B in 2010).

    Research In Motion (RIMM-9.9% thanks to the FQ1 warningincluded in its "business update." Virtually no analyst is willing to express a positive opinion on the company, and most are skeptical a buyer offering a significant premium will emerge. Baird considers it unlikely Microsoft or Facebook would have any interest, while Stene Agee believes a deal at or below current levels might be all RIM receives. Bernstein thinks the BB10 launch "will most likely turn into a disaster."

    It's not just Facebook's (FB +1.5%ad revenue growththat's slowing down: Henry Blodget notes the company's Payments growth, which surged last year after Facebook required a 30% cut on all virtual goods sales, fell Q/Q in Q1, and thinks analyst forecasts for ~75% growth in 2012 could prove optimistic. Especially since top Payments customer Zynga (ZNGA -2%) is witnessing slowing growth. Facebook is hoping its App Center will help boost Payments revenue.

    Dollar 82.99 not helping at all.  Euro $1.2390, Pound $1.5523.  

  79. rainman

    stj / S3 — And /DX hitting resistance at 83.

  80. japarikh

    Phil,

    What’s the best vehicle for a bullish play on oil thru the summer if I don’t trade futures? OIH?

  81. stjeanluc

    Printing / Lionel – I might go long IP soon… make sure we don't run out of paper!

    Good points on the volume – I pointed out yesterday with the big chart that we had only about 2/3 the usual volume! That has to be just about what the algos trade every day. The other 1/3 are the suckers trying to be smarter than the machines and they weren't around yesterday or today for that matter.

  82. Phil

    AXP/Burr – See news, V just reported lower charges, that's what's driving lows and about 10 days ago, AXP, MA and V were the 3 stocks I wanted to keep as shorts off the Long Put List along with GOOG.  I certainly don't see AXP as such a bargain at $55.68 that I'd want to DD on it at this price but, in the context of your spread if it's just $1.75 and you do intend to stick it out long-term, then it's a good spot for it.  

    RIG/Rain – I prefer spreading the risk with OIH while it's so cheap.  

    FCX/Burr – Higher VIX drives up put prices overall and the movement of the stock down drives up the internal VIX of the stock as well so a double-whammy raising the cost of the long puts but, as you note, still "on track".  

    USO/Jerconn – It was the June $34 calls, now .45 after bottoming out at .44 (stop was .40 but a DD there is OK too).  

    TQQQ/Canuck – Fun!  

    AMZN/Jerconn – Trending down still.  

    Oil struggling to take back $88. 

    Stereotyping/StJ – Wow, those Germans have great PR people!

    11:39 AM Europe closes sharply lower as the dusting off of a plan to have the ESM directly recapitalize EU banks produces only a 30 minute rally. Stoxx 50 -2.2%, Germany -1.8%, France -2.2%, Italy-1.7%, Spain -2.6%, U.K. -1.7%. Euro -0.9% to $1.2392.

     "If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side … in a hundred years, that money will have produced nothing. In a thousand years … worthless," writes David Einhorn, taking aim at Warren Buffett's bear case on gold (after being the subject of an ugly attack by the Oracle's partner).

  83. stjeanluc

    And Lionel, based on the latest figures, the Fed is now running behind in the printing department – Europe and China have already passed them. And Japan is in a different league.

  84. jthoma

    rainman- if it is not resistance things are going to get ugly and we might finally see some panic.

  85. stjeanluc

    German PR / Phil – Especially considering the figures I posted yesterday that showed that they worked just about the least amount of hours in Europe… I guess now that authority and credibility rests on the best PR!

  86. stjeanluc

    TLT at $126…. Wow! 

  87. lionel

    Then it must be the Fed's turn to start a new greenback edition…time to short the USD maybe?

  88. stjeanluc

    Let's borrow another $15 Tn at 1.65%. I am sure that this time we could think of ways to spend that money other than start wars and give it to the top 1%.

  89. stjeanluc

    Maybe Lionel, the Fed is rally running behind…

  90. Phil

    TLT/Canuck – I think $135 is tops but that would be silly.  

    Good article Burr – many similarities between trading and poker both take a lot of practice to get good.  

    GOOG/ZZ – I think they have a way better chance of monetizing their brand-awareness than FB.  

    Bullish oil/Japar – Aside from our many, many, CHK plays, how about SU Jan $24/29 bull call spread at $2.70, selling the $24 puts for $2.10 for net .60 on the $5 spread that's $3.70 in the money to start so almost 15% down before you have any major trouble on this spread.

    Below $80/Burr – That would be nice. 

    Another $15Tn/StJ – Don't count on it!  

  91. jthoma

    kind of an FU less day without Jabo- maybe he booked a ticket on PCLN and took a vacation!

  92. lionel

    jthoma/ very funny

  93. rainman

    Phil / OIH — Good point. Thanks.
     
    lionel / USD — Phil's pick for a Greece exit was to go long USD. I'd wait until they announce QE3.

  94. stjeanluc

    TLT / Phil – What would be the rate at $135? 1.5%… That does seem silly but what's the rate on the German 10-year now?

  95. terrapin22

    FTR – maybe it is finally at a bottom here.  "With shares at multi-decade lows, Nomura is making a contrarian call on Frontier Communications (FTR). The firm thinks the telco's massive wireline subscriber losses, which are heavily tied to assets purchased from Verizon, could soon narrow. It also notes Frontier's low multiples and heavy short interest (23.2% of the float was shorted as of May 15), and sees EPS revisions and multiple expansion driving shares higher."

  96. stjeanluc

    Actually, the German 10-year was at 1.36% so in a big panic there would be plenty of possible upside in TLT. 

  97. jthoma

    lionel- if we go to Vegas- Jabo is in charge of entertainment- we will not however let him handle any PR for us or deal with authorities!!!!

  98. lionel

    Thanks rainman
    I agree if you think Greece could exit. I would bet long USD.
    But I see little probability of Greece leaving and technically EUR/USD is just below a major support 1.252 and moving really slowly downward.
    A lot of bets are short Euro.
    So I prefer to play the upside – less for the direction and more because it seems a bit overstretched.

  99. japarikh

    Phil,
      I have both an SU and a CHK play. I understand that SU does well when oil prices are over $100 and CHK is a long-term play. How about something to take advantage of a move from say $80 to $100 in the short term?

  100. stjeanluc

    MSFT has sold over 67 million Xbox 360 and 19 million Kinect:

    http://www.computerandvideogames.com/349716/xbox-360-sales-hit-67-million-kinect-on-19-million/

    One million here, one million there and before you know it, you've got some real money!

    The thing is that more than 50% of users now spend more time streaming video than playing. Amazon just released an app to view Amazon Prime on the Xbox. They have taken a big step to rule the family rooms… Apple is going to come up with something really big for their TV. And not too expensive as you can get an Xbox for about $200 now!

  101. angelcur

    when xlf fails turn to aapl
      german 2y  just hit ze  zero…ZERO YTD!

  102. japarikh

    Phil,
      I was looking at the OIH Oct 35/42 BCS for $3 selling the Oct $35 put for $2.5. What do you think?

  103. zeroxzero

    Lies, damned lies and statistics.  The case for smoking: "Death-by-smoking statistics are sobering. Six million people die each year from tobacco-related diseases, a figure expected to hit eight millions by 2030. One in two long-term smokers will die – half in middle age."   Sounds like pretty good odds on immortality to me!!! [http://www.aljazeera.com/indepth/features/2012/05/201253072620499553.html]

  104. jthoma

    wonder how unwinding his tradeis going for Jamie today? He may be having an FU day- lol!

  105. angelcur

    when xlf fails turn to aapl  german 2y ld just hit zero…. ZERO…  yld!!
     
    http://www.bloomberg.com/news/2012-05-29/greek-exit-from-euro-seen-exposing-deposit-guaranty-flaws.html

  106. rainman

    Barry Ritholtz quote, re, Facebook:
    The ongoing decline in Facebook stock is little more than a reassessment of the private market's valuation — now recognized as somewhere between wildly optimistic and clinically insane.

  107. angelcur

    MAGICAL SLOPPY BUYER pouring everything its got into AAPL

  108. samz3700

    IWM smacked off support at 77.88 yesterday – chart is looking ugly if we finish at these levels.
    What happened to JRW – sorry if I missed the post on him – but i have been too busy at work to follow posts too closely.
    Hope he is ok

  109. sparky123

    At least aapl isn't charging interest to keep their money, and they're not risking getting paid back in some worthless currency.

  110. Burrben

    Damn, missed that CL bounce off 87.50.  It's like a spring board!

  111. zeroxzero

    This little Euro meltdown is converting AAPL to a synthetic global currency.  Nice.

  112. Burrben

    Yodi / ECA –  Looking at selling any AUG calls yet?  My June's and July's 22's are both up 46% and 32%. 

  113. rpme

    Phil, anybody, thoughts on WMT. I had sold the Jan55p after tracking, crunching numbers, etc…sold when the NYT article about Mexico, at a small profit, and have been perplexed watching them go up?

  114. stjeanluc

    Looks like the server took another hit for a while!

  115. stjeanluc

    What next for gold…

    http://www.thereformedbroker.com/2012/05/30/gold-on-the-ropes/

  116. nicha

    Yup, server down for 10 mins.

  117. zeroxzero

    YMI a bright spot in an otherwise bloody day. Thanks, Pharm!   My FXE hedge, which served admirably last week, is doing little for me today against the tide of equity selling.  Better than nothing, but cold comfort overall.  Let's hope they stick this puppy.  T

  118. Phil

    We went down for a bit, still seems to be overly aggressive RSS readers.  

    Dollar skirting along the 83 line.  

    TLT/StJ – Yes, around 1.5% at that price – just a completely unsustainable price (one would think but look at Germany (1.269) and Japan (0.85) now).  

    Japan Government Bond 10Y

    $80 to $100/Jpar – I think they'll both move just fine on that news.  If you already have those two, you have such a vested interest in oil moving back up that you should be more worried about what happens if it DOESN'T come back.  Also, with oil at $87, you're not playing from $80 to $100, you're playing from $87.50 to $100 so you have 33% less of a move than  you thought you did – again, too many eggs in one basket for me.  If oil does go down to $80 and you don't want to DD on CHK and SU, then you can put money in a bounce play instead – meanwhile, just a USO call, like the one above if you feel the pressing need to gamble.  

    OIH/Japar – I like that.  Just keep in mind we still may have a major crash and OIH 

    One in two/ZZ – Interesting statistic.  

    AAPL/Angel – Encouraging at $573.  Qs holding $62 as well – we're not dead yet….

    JRW/Samz – Recovering last I heard.  

    WMT/Rpme – Not cheap at this price.   I'd just stay away for now. 

    Gold/StJ – Big problem if they can't hold $1,500.  

  119. stjeanluc

    I guess it's time for our afternoon melt-up then…

  120. Phil

    FAS Money – No change

    IWM Money – Missing but no change. 

    $5KP – Just the DD on TLT at .72

    $25KP – Gosh is it June already?  

    • DMND – Let's buy back the $25 calls at .30
    • BBY – Gonna take a big turn-around to not have to roll those
    • FAS – How ridiculous are those July $72 puts at $6.55?  Tempting to sell more. 
    • CHK – Fine and dandy
    • TNA – Tempting to buy more
    • TLT – Did the DD at .72

    Yep, I'm still bullish….  I'm never sure until I see what I think of each position but I'm very bullish from this level short-term. 

  121. terrapin22

    Phil / dollar – do u see dollar going back up to 89 level last seen in June 2010?  S&P bottomed out at around 1020 then.  I will def need some more hedges if that's where we are going…..dollar also peaked at similar level in late '08- early '09.  

  122. Jbur

    Leatherass/Burrben-- Really good article.

  123. stjeanluc

    Ooops, looks like I did forget the IWM Money screenshot! Must be the excitement from this morning.

  124. jromeha

    I think oil is going to 86.90 today, maybe even below 86, yall are playing with fire!

  125. Phil

    Wow, 70% in Vegas!   I may have to go shopping…

  126. stjeanluc

    Speaking of melt-up, gold is up some $35 since it hit S1 this morning…

  127. Peter D

    Howdy short strangle players,
    It's so tempting to sell more as VIX is going up.  The only thing that holds me back is the memory of the flash crash day in 2010.  We were cruising at -2% to -3%, then a big drop.  So I just checked my positions to see if they would survive a 10% drop and yes, they would survive a 15% drop this week, so I'm sitting still for now.  Not trying to alarm people, just some practice to cover our black swan events if you had short puts.

  128. Phil

    Dollar/Terra – That would be a nighmare but very possible if Euro destablizes further.   They Euro was down to $119 in June of 2010 and we're certainly in worse shape now and that's another 4% down from here so there's 87 on the Dollar right there – just for re-testing those lows.    The S&P was 1,050 at the time and oil was low $70s and gold was $1,2000 so we are still a LONG way from realizing the worst case!  

  129. Pharmboy

    Wouldn't touch vegas with …  San Diego coastline is where the deals can be had…..ocean next door, and the road to everywhere (I-5 to N. Cali or S. to Mexico).   Ole ole ole…..

  130. diamond

    The Facebook Fallacy – Technology Review

  131. lionel

    Oh it must be this time of the afternoon, when all are morning worries are chased away and markets go up with no news at all….it is magical

  132. Phil

    11:39 AM Europe closes sharply lower as the dusting off of a plan to have the ESM directly recapitalize EU banks produces only a 30 minute rally. Stoxx 50 -2.2%, Germany -1.8%, France -2.2%, Italy-1.7%, Spain -2.6%, U.K. -1.7%. Euro -0.9% to $1.2392.

    12:00 PM On the hour: Dow -1.15%. 10-yr +0.74%. Euro -0.76% vs. dollar. Crude -3.16% to $87.89. Gold +0.64% to $1560.95.

    1:00 PM On the hour: Dow -1.31%. 10-yr +0.78%. Euro -0.88% vs. dollar. Crude -3.23% to $87.83. Gold +0.98% to $1566.15.

    2:00 PM On the hour: Dow -1.06%. 10-yr +0.73%. Euro -0.94% vs. dollar. Crude -3.08% to $87.97. Gold +1.25% to $1570.45.

    "Buy American," writes Doug Kass, expecting a major asset-allocation shift from abroad and into U.S. equities. The sharp difference in growth emerging now between American and Europe will likely remain in place for the rest of the decade, he argues. The flight to safety driving down Treasury yields will only benefit consumers, corporations, and the government.

    One more from Einhorn: Greenlight remains (unprofitably) short the yen,  but notes a catalyst for maybe making this trade work. Over the next year, 5 of 9 BOJ governors will be replaced, including the Chairman. Noting one nominee has already been rejected as too hawkish, Einhorn sees the slots being filled by a new guard ready to aggressively take action against deflation. 

    On the eve of the Irish referendum on the EU fiscal compact, a report showing unemployment remaining at 14.3% gives a bit more juice to opponents who dub it "the austerity treaty." Polls, however, continue to show a large majority (60%) favoring the treaty (they have no choice, a "no" vote immediately turns Ireland into Greece).

    Mercedes (DDAIF.PKlays off 10% of its workers in Brazil after bad loans contributed to a devastating slowdown in the domestic auto market. Automobile inventory in Brazil has hit its highest level since 2008

    The energy sector (XLE -3%) is suffering the day's biggest losses, weighed by tumbling crude oil futures which fell to seven-month lows as the dollar surges vs. the euro. Among the biggest decliners:KWK -8.3%DNR -7%. Drilling equipment makers: RDC -6.8%NE-5.2%NBR -4.7%. Dow components: CVX -2.5%XOM -2.2%.

    St. Joe (JOE -6.4%) dives amidst renewed flogging by David Einhorn, who says the company continues to carry property on its books at inflated values. Recognizing the marks will reveal the company was unable to make any money during the historic housing boom. If it couldn't do it then, when will it?

    Facebook's (FB +0.4%) first day of options trading was an active one, and (in-line with the selloff seen in Facebook's shares) bearish positions managed to outweigh bullish ones. 202,938 Facebook put contracts were purchased yesterday, compared with 162,582 call contracts. Implied volatility for the contracts stood at 63.50 – higher than that of all but 7 S&P 500 companies.

    Don't expect businesses to upgrade to Windows 8, says Microsoft (MSFT) watcher Paul Thurrott: the OS, whose new featuresare almost entirely aimed at consumers, and Microsoft's decision to completely overhaul the Windows desktop UI won't go over well with corporate buyers. Microsoft's decision is a "calculated risk" made with the goal of catching up to Apple (AAPL) in the consumer realm, but it risks antagonizing a market that accounts for a huge and growingshare of its profits.

    In spite of rumors to the contrary, Google's (GOOGNexus Tablet will feature a quad-core Nvidia (NVDA) Tegra 3 processor, according to benchmarks turned up by Rightware. The benchmarks also suggest the device will feature Android 4.1, which could be the version number for Jelly Bean. For the sake of its mobile ad business, Google badly needs the Nexus Tablet to be a success

    As Apple (AAPL +0.2%) outperforms a bit in the wake of Tim Cook's D10 talk (III), David Einhorn continues to predict the company will eventually sport a $1T market cap (previous). Einhorn doesn't see extensive hedge fund ownership of Apple as a problem, given hedge funds only hold 5% of outstanding shares, and thinks critics are overlooking how Apple's software/services ecosystem both amounts to a switching cost, and encourages the purchase of additional Apple gear.

    Three lunchtime reads:
    1) Investors may be stoking the volatility they fear
    2) Using the wrong risk measure
    3) Berkshire Hathaway's General Motors test drive

  133. rainman

    Phil / 70% — I wonder if the City Center condos skew that statistic 8)  An acquaintance of mine bought a 3 bedroom house there for 110k a year or two ago.

  134. rainman

    Phil / 70% — I wonder if the City Center condos skew that statistic 8)  An acquaintance of mine bought a 3 bedroom house there for 110k a year or two ago.

  135. diamond

    Clever …
     
    Google Celebrates Facebook With Stock Price Doodle

  136. Pharmboy

    Crude may be falling…but prices at the pump still are sky high in So. Cal.

  137. rainman

    diamond / Google — I wonder what happened to thier "Don't be evil" motto.

  138. Pharmboy

    YMI/zero….a staple in my portfolio.  ZLCS is also bouncing up.

    Vertex retaking most of the losses from yesterday.  Buying back those short puts sold…..

  139. Pharmboy

    From BullBear52X…tell me this looks good, plz.

  140. angelcur

    ZERO RE GERMANY LEAVING: depends on how you define better…i know that sounds clintonian, but im serious…if they have to keep bailing out the rest of europe then definitely…if rest of europe could somehow gets its act together then no. i should also throw in german banks have to get their act together too, because that is why they are in a predicament
     ake cant bounce

  141. Phil

    If this trend doesn't break – oil will keep going down:  

    Stock Price Graphs.

    Futures Price Graphs.

    Oil is a huge drag on the Dow and the S&P.  Just today, XOM is costing 15 Dow points and CVX is costing 20, that's about 25% of the Dow's drop on two stocks and figure the S&P is similarly affected.  Transports oddly go down when oil goes down – it's stupid but consistent for years now as the logic is low demand for oil means less Transport activity but generally it's the consumers that are much more flexible than historically thought and they are the swing users (flights are still full, rail traffic is up, trucking going well unless you are YRCW). 

    City Center/Rain – That's where I'm going shopping.  The houses are crazy cheap but there's gotta be 2,000 units in CC you can make low-ball offers on and it's not going to die.  Mandarin Oriental residences have fallen from $1,600/ft to $600 and I bet you can do better if you're patient and Veer and Vdara they can't give away for $400 yet clearly you can't possibly build for that price.  Even if it takes 10 years to come back – having a nice apartment that's not a time-share right on the strip – that will likely never happen again (almost certainly not since CC was such a financial disaster for MGM & Partnerts).  I'm actually thinking of looking into putting together a block and slicing them up as time-shares or rentals.  This is exactly the kind of thing I want to do with the BBBW Project – hopefully we'll have time to talk more about it this weekend.  

    LOL Diamond: 

    Sorry Pharm, I can't tell you that looks good…

  142. angelcur

    one thing to think about is how turned around  austrailia is going to be by the unraveling  scheme in china..what is going to put the big hurt on them aussie dollar is looking poorly

  143. lionel

    Dow volume pathetic at 66.5M (half daily average)
    Mr Stick?

  144. stjeanluc

    So many fires Angel, so little time!

  145. zeroxzero

    Holy Cr*p, I walk away for an hour or two and AAPL turns into its own country with an outperforming currency. I didn't think anything could turn my screen green today, amazing.

  146. stjeanluc

    Germany / Angel – Don't you think that it would be an issue for Germany if they left the euro that their currency would be super strong. They would lose a ready made market that they benefited from for the last 10 years! 

    And BTW, their banking system would indeed probably take a big hit, but so would all the banks in Europe and the ones in the US holding all these CDS as I doubt that they would pull another Greece exemption!

  147. l4real

    Pharm
     
    Turn the chart upside down and imagine it's a Rorschach test! Looks good right?

  148. Pharmboy

    AAPL ain't helping that SQQQ July 55/70 spread….but I like it!  The spread that is.  I think AAPL has some headwinds to face…

  149. Pharmboy

    lol – l4….I think XLF is going to go down…esp when is see this graph, different company, same effect (from Tim Knight at Slope)…

  150. jromeha

    Phil, do you like LNG here? I was looking at a long-term NG play.
    My bestfriend is a real estate agent in Vegas in case anyone is interested in properties out there. THere are less deals out there than there were, but  are still deals to be had..Especially if you have a perspective like Phil's. If anyone wants to check some places if/when they're out in Vegas email me at elias.halvorson@yahoo.com and Ill put you in touch… 

  151. yodi

    Burrben
    Sorry been out for a while wasted all morning at Immigration what a stupid bunch.
    ECA I do not hold any Jun c any more. I rolled to Jul at the time 5/10 for 1.30 now down to .40 still all beef I would not pay for premium! Aug to early to roll specially not on any down days. But if you play monthlies you do not want to jump that far out.
    You need to be patient and let the tree grow. Never sell calls on a day like today. my 2 cents

  152. Burrben

    Oil –  Any play's here?  I'm a little scared to go long off 87.50 since /DX is at 83.09.  Advice?  Anyone playing?

  153. Phil

    Not complicated today.  Weak bounce levels mixed but nothing to be bullish about with:  12,540, 1,319, 2,840, 7,560 and 765 so the RUT is right on the line and AAPL has the Nas over but just barely.  This is the end of the month and we MIGHT get a stick but a bit late to expect it now – however – taking back the S&P with the Nas and the RUT would actually be kind of bullish – leaving the Dow and the NYSE with 100-point moves to make up.  

    So, if you want to play a move up in the Dow I still like those $128 calls, now .30 because a pop in oil is good for 25-50 points and 12,400 is a good, bouncy floor so far and we do have 12 days to make 400 Dow points – that's not like something that can't happen with even a tiny improvement over the weekend.  

    LNG/Jrom – I don't like them in general.  It's very speculative based on our natural gas remaining cheaper than other people's natural gas long enough for them to recoup Billions of dollars they have to lay out many years into the future.  COP is a much better way to play the space or, of course, CHK who actually produce the gas that LNG hopes to become the middle-man/distributor of.  I will want to talk to your friend when I get out there, would have to be late summer or fall as I won't have time when I go with the kids.  

    Oil/Burr – I'd stay away, as we said right from the get-go this morning, strong Dollar is bad for everything.  

    Dollar flying at 83.15, Euro $1.2369 with $1.19 looking closer and closer.  $1.5478 on the Pound and 79.07 Yen to the Dollar means the BOJ is doing a little Yentervention on top of everything else with the Nikkei Futures (/NKD) crashing back to 8,500. 

    This is getting bad – if no one steps up soon to prop up the EU, we may begin to snowball downhill.  

  154. rainman

    Fresh Market (TFM:$55.515,0$6.655,013.62%) shares jump 14% on outlook
    (11:56 AM ET) SAN FRANCISCO (MarketWatch) — Fresh Marketshares popped 14% to $55.95 late Wednesday morning after the high-end grocer raised its fiscal 2012 targets. Fresh Market (TFM:$55.515,0$6.655,013.62%) said comparable store sales will grow 4.5% to 6.5%, while earnings will be $1.28 to $1.34 a share. The grocer said operating margins will expand 20 to 40 basis points. During the quarter ended April 29, Fresh Market (TFM:$55.515,0$6.655,013.62%) said comparable store sales rose 8.2% as consumers continue to gravitate toward foods sold by Fresh Market (TFM:$55.515,0$6.655,013.62%) and Whole Foods Market (WFM:$89.40,00$0.05,000.06%) . Sales at Fresh Market (TFM:$55.515,0$6.655,013.62%) and Whole Foods have been growing at a faster clip than traditional supermarket chains like Safewayand Supervalu. Based in Greensboro, N.C., Fresh Market (TFM:$55.515,0$6.655,013.62%) runs 116 stores in 21 states. Its stock is up 35% over the last 12 months.

  155. rainman

    Looks like the stick flushed.

  156. angelcur

    look at appl rocket..you see how critical it is to the overall markets health..now you know why einhorn thinks its going to a trillion dollar mc

  157. angelcur

     this market is so manipulated…and the manipulators will make the eventual decline even worse.

  158. Pharmboy

    here here angel….yes it will….and of coarse, now TOS is slow so I cannot execute my orders….

  159. zeroxzero

    Germany better think fast.

  160. Phil

    Nas is our leader by being down "just" 1%.  AAPL up 1.25% so maybe 0.25% is thanks to AAPL, which is testing $580 into the close.  AAPL popping back over $600 can really get us going – we just need Europe to stop dying for a day or two…

    CAC did hold 3,000 – that's going to be key tomorrow.  

    I'm kind of liking a bull play on /NKD off 8,500 with tight stops below.  

  161. yshenhar

    Look at CHK go in this red day – is it the takeover talk?

  162. angelcur

     feels like every penny out of fb goes directly into aapl…aapl could put in another short-term top when fb bottoms

  163. Canuck

    Stick – looks like today's stick is being reserved for the Devils/Kings opening game.

  164. Phil

    GDP is 8:30 tomorrow so we boom or doom off that number.  Consensus is just for 1.9% growth and I don't think anyone thinks we'll make 2.1% so anything higher than 2% will give us a boost.  This is the 2nd estimate – we scored 2.2% on the first estimate last month (27th) and that was way in the low end of our range.  

    [Chart]

    We also have ADP tomorrow but that's not a big deal.  Pianalto Speaks at 8:30 and we also get Corporate Profits, which were 11.7% on March 29th for Q4 and I think those are very important but not many people follow it.  

    Chicago PMI is 9:45 tomorrow along with Consumer Comfort and then we get Nat gas at 10:30 and oil at 11 and there's Farm Prices at 3pm so lots of US data should trump EU nonsense tomorrow and we'd better hope it's good, rather than adding to the misery.  

    Don't forget – tomorrow is last day of the month.  A nice 2% pop could make the month not too bad (Dow was 13,200 on April 30th so down 800 for the month, S&P was 1,400 so down 85 – 6%).  

  165. Phil

    Well  that was a crap finish!  

    Nothing to do now but wait for the data.  

  166. stjeanluc

    I guess we won't have to worry about clogging the pipes with Netflix:

    http://www.engadget.com/2012/05/30/verizon-doubles-fios-speeds-to-300mbps/

    Image

    Verizon's IP network traffic jam apparently wasn't that much of an issue, since it just kicked up the speeds for FiOS service by a notch… or ten. Unless you're a spendthrift sticking to the base 15Mbps plan, download speeds have more than doubled across the board — including to an eye-watering 300Mbps if you opt for the costliest plan. Upload speeds aren't advancing quite so quickly, although those who spring for the two highest tiers will see their upload speeds crack 65Mbps. The fiber speed-up is being attributed to a flood of Internet video and cloud backups, both of which get downright reasonable at 300Mbps; Verizon figures that both a 2-hour HD movie download and a 10GB backup will finish in 22 minutes or less. Whether or not pricing will have changed will have to wait until the speed upgrades take effect in June. Somehow, we can't imagine a drop anytime soon in the $200 monthly outlay for the top tier.

    That is some insane speed – I remember when I was thrilled to move my LAN from 10 Mbps to 100 Mbps. Sure you can go to Gbit now, but in an office! These guys are talking about 300 Mbps over the Net. Talk about virtual office.

  167. Pharmboy

    Now, is the Euro ready to burst…???

  168. Phil

    At the close: Dow -1.21% to 12429. S&P -1.36% to 1314. Nasdaq -1.17% to 2837.

    Treasurys: 30-year +1.44%. 10-yr +0.75%. 5-yr +0.37%.

    Commodities: Crude -3.48% to $87.6. Gold +1.01% to $1566.65.

    Currencies: Euro -1.08% vs. dollar. Yen -0.5%. Pound +1.06%.

    Market recap: Stock losses wiped out the previous session's gains on growing worries over rising bond yields in Spain and Italy and continued fears over Greece's possible eurozone exit. The euro dipped below $1.24, pushing the dollar higher and pressuring oil prices below $88. Yields on 10-year Treasurys hit a record low 1.62%. NYSE decliners topped advancers nearly four to one.

    Only 90 days ago warning of "currency wars" and intervening to weaken their currencies, emerging nations are now moving to prop them up even as growth concerns begin to overtake inflation worries. "Policymakers have to try and strike a very careful balance," says Standard Chartered's Callum Henderson.

    A "hyperbolic" sell-off is coming in Spanish debt if the ECB doesn't intervene soon, says RBS credit chief Andrew Roberts. "The Rajoy (administration) will do anything to avoid the slow agony of Greece," says the LSE's Luis Garicano, adding Spain may be tempted by Argentina, which recovered quickly after axing the dollar peg. (earlier on why Spain will exit first

    The VIX (VXX +6.2%) posts its biggest jump in a month, butisn't anywhere near the sort of level associated with real fear in the market. The index currently resides around 23, but spent most of 2011's late summer and fall north of 30. We may need an S&P drop of 30-35 points in a day for the VIX to crack 30, says Michael Palmer.

    While April's surprising 5.5% decline in pending home sales is nothing to celebrate, MKM Partners finds it consistent with its view of a choppy early-stage housing recovery, and isn't overly concerned that a recovery is at risk. The firm sticks with its call to buy homebuilder stocks (XHB -3.7%) such as Toll Brothers (TOL -5.8%) and Pulte (PHM -4.1%) on dips.

    CoreLogic reports 66K completed foreclosures in the U.S. in April vs. 78K in the year-ago month; ~1.4M homes, or 3.4% of homes with a mortgage, were in the U.S. foreclosure inventory vs. 1.5M, or 3.5%, a year ago. Non-judicial markets such as Nevada, Arizona and California completed 2.5x as many foreclosures over the past year as judicial foreclosure states.

    Chesapeake (CHK -0.2%) says it wants to sell 57,000 net acres of leaseholds and producing wells in the Woodbine Sand play in east Texas, illustrating the cash-strapped company's efforts to cut its massive debt. The Woodbine parcel contains nine operated and producing wells and one non-operated well, CHK says. 

    ExxonMobil (XOM -2.2%) is studying the possibility ofexporting natural gas from the U.S. Gulf Coast and Canada, CEO Rex Tillerson says. Dismissing critics who contend exports would raise the price of domestic natural gas, Tillerson says nat gas exports will create jobs, increase tax revenues and help the U.S. trade balance.

    Shareholder proposals requiring greater disclosure on the risk and impact of hydraulic fracturing practices are voted down by wide margins at ExxonMobil (XOM) and Chevron (CVX). At XOM, 70% of shareholders reject the risk report vs. 72% disapproval of a similar measure last year; the CVX measure attracts even less support than a year ago.

    Monsanto (MON +2.8%) rides above today's sagging market after it raised fiscal guidance for FQ3 and FY2012, citing sales boosted by a strong seed selling season in the Americas, and said strong growth would continue in 2013. It's the agricultural giant'ssixth straight positive earnings surprise. Shares are upgraded to Buy at Canaccord with a new price target of $89, up from $81.

    Shares of Whirlpool (WHR +4.0%) move up after the U.S. International Trade Administration rules that rivals Samsung and LG dumped washing machines in the U.S. at prices below fair value. The Commerce Department plans to tag duties on imports of washing machines as a temporary response to the practice

    MagicJack VocalTec (CALL -9.8%) plummets following aWSJ column that takes a critical look at the company's strategy of financing stock buybacks by selling put options – a tactic often used by companies in the Dot.com bubble era, but rarely today. The put sales generated $1.6M in profits for magicJack in Q1 (20% of its total), when its shares were rallying, but stands to backfire with the recent decline in the company's stock price. 

    How do you say RIMM in Finnish?  On a rough day for Euro tech stocks, Nokia (NOK -6.6%) is falling harder than most, and is closing in on the month's lows. Adowngrade to Sell from MKM Partners, which now has a $2 PT on the company, is contributing to the decline.

    Google's (GOOG) much-discussed display glasses will hopefully arrive next year, Sergey Brin tells California's Lieutenant Governor. Google's ability to stream location-specific ads to the devices could make them a gold mine if they're ever adopted on a large scale. Yesterday, in response to a question about Google's efforts, Tim Cook (AAPLsuggested wearable computing is an interesting concept, but added "the book hasn't been written" on whether consumers will embrace it. (also)

    It took long enough, but new iPad (AAPL) models featuring 3G connectivity have finally been cleared for sale in China. No 4G connectivity exists, since Chinese carriers haven't yet received government clearance to offer 4G services, and might not receive it for some time still. Wi-Fi only models were cleared in late March. Thus, Apple's 3x Y/Y increase in Chinese sales in the March quarter happened largely without any benefit from the new iPad. 

  169. Pharmboy

    My 10 yr T-bill is almost at target …. 1.5%…can she do it?

  170. pstas

    Pharm- I will hand it to you- you called it long ago. Never would have believed it. Nuts.

  171. stjeanluc

    Good news, the Russell held! Other than that, back to square one… And still not much volume.

  172. Pharmboy

    pstas….the crazy thing is, the SPY is still above 1300….so, what will break it?  Money is flowing here from the EU, so that helps some, but….when will she blow…???

  173. stjeanluc

    Speaking of treasuries – look at TBT today. Closed at 15.83, down 4.5%. They are going to have to reset that sucker soon.

  174. stjeanluc

    25KP / Phil – I was looking at the roll for the BBY puts and it's surprising how little more premium there is going forward. The Jun 25 Puts are around $6.00, but the July ones are actually cheaper at 5.57 (mark price, the bid/ask spread is big) and then moving all the way to Jan 13, the same 25 Puts are only $6.90. Looks like the front month IV is way up at 91% for these puts while the Jan IV is only around 40%. Quite dramatic, no? It's almost like earning times.

  175. stjeanluc

    It does look like money is moving into the US markets:

    http://www.bespokeinvest.com/thinkbig/2012/5/30/us-vs-the-rest-of-the-world.html

     

    While the United States has been a miserable equity market if you have been long in recent weeks, it has been a walk in the park compared to the performance of the rest of the world (ROW).  The chart below shows the relative strength of the S&P 500 relative to the MSCI World (Ex US) index.  When the line is rising, it indicates that US stocks are outperforming their global peers and vice versa when the line is declining.

    From late 2001 through the end of 2008, international stocks outperformed US stocks, and by the end of the decade, they had become all the rage while US stocks were largely ignored.  Ironically, just as the international over domestics trade was at its most popular point, US equities had already started to bottom out and began to outperform once again.  Looking at the recent relationship between US and foreign stocks, the S&P 500 is now in the lead and at its strongest point on a relative basis since October 2004.  USA! USA!

  176. Cap

    What an ugly day.

    Hope everyone is doing ok, and doing less.

  177. Burrben

    5 Reasons to buy JPM.  Pretty good article.  JPM is on the TWIL list, and the current price of the puts is $5+, over Phil's recc price.  (and she makes a dig on fb that I like)
    http://www.marketwatch.com/story/5-reasons-to-buy-jpmorgan-chase-2012-05-30?dist=afterbell%3Flink%3DMW-FB

  178. nicha

    Burr/JPM – all points Phil has been making.

  179. Burrben

    Seriously cool.  $40 for a pair of adjustable glasses.  Meant for the developing world, but could also be for low income senior's at home.  I wonder if there is a business in here somewhere…maybe get a NGO to fund distribution down here in Nica?
    http://www.gizmag.com/eyejusters-adjustable-glasses-developing-world/22734/

  180. Pharmboy

    JPM….there are things on the books, that are not on the books, we all don't understand.  I would not go near them, but that is just me.  Yes, banks are needed, but when they can do shady things with their trading groups and all the off balance sheet crap… well, makes one want to bring back the Glass Seagall Act, no?

  181. zeroxzero

       Jonathan Livingston Seagall?

  182. zeroxzero

    It's hard to believe that the EU won't be forced to change its strategy for recovery at some point. 
    "With banks impaired, private demand damaged, government demand contracting and external demand weak, the fragile economies are likely to have smaller output and higher unemployment two or three years hence than now. The reward for pain today is pain tomorrow."    "The Riddle of German Self-Interest",  http://www.ft.com/intl/cms/s/0/4fe89d8c-a8df-11e1-b085-00144feabdc0.html#axzz1w6P2DcAa 

  183. jerconn

    Pharm – "makes one want to take back Glass-Steagall" – for the life of me I can't understand why they haven't done that already.  For sixty years since Glass Steagall was in effect, things stood, within less than ten years after it was repealed, everything crashed – why can't they see that and do something about it?  In my opinion, if the Dems want to do something significant this term, take back Glass Steagall.  Or maybe that would be tantamount to admitting that it was a mistake to repeal back in Slick Willy's days, maybe that's the problem…  

  184. lionel

    Zero/
    This article is very UK centric. The Eurozone will save itself first before thinking of saving Europe (including the UK)
    The real political struggle is between Germany/France/Italy/Spain vs Spain regions. The UK banks are exposed to Spain but cant do much about it as they are not part of the Eurozone. They are just very vocal about it by bidding up CDS and selling their holding of Euro sovereign debt. Italy will end up paying 19bp extra on 6bn Euro vs last month auction.That represents $13m a year of extra interest expense….Yawn-yawn.
    Portugal/Ireland/Greece are just rehearsals. Major Euro banks are ready for an exit or a default.And the three together have the combined economy size of Turkey! Anyone with a swap idea…?
    Germany wants to promote its successful and proven integration model (Merkel is a living example) and that means the end of budget autonomy for Spain regions. No more credit tab with the Spanish Federation and no more shady banking via their regional Caixa. And that is not negotiable. Hopefully Merkel will get her way and the Eurozone problems will be addressed swiftly with all the goodies the FT has been dreaming about: Eurobonds, Euro funds, and freshly minted Euros.
    Surrender your credit card first and the Eurozone will fix your debt problems.
    http://www.newsday.com/news/nation/draghi-calls-for-centralized-banking-control-1.3752167

  185. kinkistyle

    New York Plans to Ban Sale of Big Sizes of Sugary Drinks

     
    Or maybe Bloomberg just wants a better price to accumulate KO and PEP stock.

  186. 1020

    Good (early) Morning!

  187. Phil

    Good morning!

    Big Chart still indicating a constructive floor although it doesn't feel like it.  Don't forget we're supposed to adjust our lines vs the Dollar and the Dollar is up 6.4% in May.  This is a BIG factor because it means ALL stocks should be 6.4% cheaper when you buy them with Dollars so look 2 2.5% lines higher and THAT's where we've recovered to – back to our April highs in a Dollar-neutral market.  

    Will the Dollar go up forever and keep shoving the indexes lower?  Probably not and, if the Euro ever comes back and the Dollar falls – we will see a spectacular rally and all the bears will whine about how unfair it is ect. but I'll tell you right now it's a very simple and natural thing for us to have a sudden 2.5-5% pop on any can-kicking resolution from Europe and/or stimulus from the Fed.  

    It's very impressive that we've made any progress at all since the 21st as the Dollar has moved 2.4% since then (81-83) and that also means gold is holding up pretty well and gasoline is a huge rip-off as well as, of course TLT is up to 126.16 because the Dollars the notes are priced in are rising and that's part of your net gains in TBills too.  

    Back in the last Euro panic in 2010, when the Euro dropped to $1.19, the Dollar topped out at $88.71 but it was a spike high (that lasted May – July) and 83 was the consolidated top so we may get another blow-off top in the Dollar if there is no concrete action to "fix" the Euro and that can still drive stocks and commodities much lower which is why Cashy and Cautious remains a good strategy – especially when our CASH is gaining 6.4% a month in buying power!  

    Dollar at 82.90 this morning, Eur $1.2412 (still pathetic), Pound $1.551, 78.80 Yen and EUR/CHF is way up at 1.2015 which is stronger for the Franc as the Euro is simply too weak for them to sustain their peg.  It's possible they have run out of money on the last day of the month.  1.2035 was a good spot to go short but we had a spike all the way up to 1.2070 last week so a very dangerous trade to play with. 

    Oil is $88.06, gold $1,568, silver is $28.075, copper $3.39, nat gas $2.38 and gasoline $2.76.  $88.06 x 1.064 = $93.69 for oil and that's just a bit below the 200 dma (which does not adjust for currency fluctuations) at $96.50 and $92.50 was very bouncy in December and was our next target for oil so figure they have $1 more to fall, which they did yesterday ($87.27) and, if the Dollar tops out here, this could form a base for oil.  

    Oh, and /NKD at 8,550 for a very nice $250 per contract!

    Last day of the month could be a crazy one with lots of data:  

    Thursday's economic calendar:

    Chain Store Sales

    7:30 Challenger Job-Cut Report

    8:15 ADP Jobs Report

    8:30 Initial Jobless Claims

    8:30 GDP Q1

    8:30 Fed's Pianalto: Monetary Policy and Economic Outlook

    8:30 Corporate Profits

    9:45 Chicago PMI

    10:30 EIA Natural Gas Inventory

    11:00 EIA Petroleum Inventories

    3:00 PM USDA Ag. Prices

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet 

    1:13 AM Asian markets are broadly down and are on track for the biggest monthly drop in over three years. Japan -1.3% to 8522. Hong Kong -1.0% to 18511. China -0.5% to 2374. India -1.0% to 16155

    6:00 AM Overseas: Japan -1.1%. Hong Kong -0.3%. China -0.5%. India -0.3%. London +0.9%. Paris +0.8%. Frankfurt +0.6%

    6:23 AM EU stocks are higher after falling heavily yesterday due to the Spanish panic, although the increases lack conviction. Euro STOXX 50 +0.7%, London +0.9%, Paris +0.6%, Frankfurt +0.6%, Madrid +0.7%, Milan +0.9%. Euro +0.3%. 10-year bond yields: Spain -14 bps to 6.52%, Italy -10 bps to 5.83

    6:36 AM U.S. stock futures point up with economic releases on jobless claims and GDP on tap. S&P +0.4%, Dow +0.4%.

    Eurozone inflation falls to 2.4% Y/Y in May from 2.6% in April vs. 2.5% consensus. It's the lowest rate since February 2011 but still above the ECB's target of almost 2%. The bank is due to meet next Thursday for its June interest rate decision. (PR)

    Swiss Q1 GDP comes in at +0.7% Q/Q and +2% Y/Y vs. +0.0% Q/Q and +0.7% Y/y expected and +0.5% Q/Q and +2% Y/Y. (via)

    India's Jan.-March GDP comes in much worse than expected, +5.3% Y/Y vs. expectations of +6.1% and 6.1% growth last quarter. Rupee weakens to 56.46 against the dollar; Indian stocks fall further, now -1.3%. (official release) (previously)

    India's rupee falls to a record low of 56.410 against the dollar ahead of a government report expected to show GDP expanded 6.1% last quarter, matching the previous quarter's growth but still the slowest pace since 2009. The RBI is seeking a return to "trend growth" of 7-7.5%, but in the meantime the rupee may be vulnerable to dropping faster than other emerging-market currencies.

    French consumer spending +0.6% M/M in April vs -2.6% in March and consensus of +0.3%. Could Francois Hollande's pledge to focus on growth rather than just austerity have boosted confidence un petit peut?

    Germany remains a sea of relative economic tranquility amid the surrounding eurozone chaos as unemployment remains unchanged in May at 2.87M after rising in April. The jobless rate falls to a two-decade low of 6.7% from 7%.

    Japan's factory output grew a weaker-than-expected 0.2% in April from the month before. Analysts had expected +0.5%. The slowdown stemmed from reduced demand for electronics goods, especially in China. The government expects output to fall in May, before rebounding in June.

    Chinese stocks will keep rising, with the benchmark Shanghai Composite Index poised to add 15% by year-end as slowing inflation gives the government room to loosen monetary policy and allows for bank lending to pick up, according to Beijing Gao Hua Securities Co, Goldman Sachs' China partner.

    The Asymmetric Recovery (Economix)

    My bad: Roger Ailes, head of Fox News, made up a story about his victimization by the New York Times. (Quote and Comment) Really — that was, in fact, my bad.

  188. 1020

    jerconn – A little background on the repeal of Glass-Steagall:
     
    The Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999) or the Citigroup Relief Act[1] is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. The legislation was signed into law by President Bill Clinton
     
    What do ya know!  "GLB" was a posse of REPUBLICANS!!!
     
    :)

  189. 1020

    I could not have said it better!
     
    http://www.youtube.com/watch?v=Vee0ohX-VbU&feature=related
     
    :)

  190. Phil

    BBY/StJ – Yes, very annoying.  With BBY at $19 and the puts at $25 and $6, we can just take our $5,000+ loss and roll it to 20 short Dec $20 puts ($3.10) and stop trying to go for the win.  

    Money moving in/StJ – That's true but it's also causing demand for the Dollar and that is, in turn, keeping the markets low (in Dollar term – to Europeans, we're rallying!).  

    Glasses/Burr – I think those things are great.  Huge benefit in 3rd World countries.  

    EU/ZZ – Every day they don't take action I am more and more dumbfounded.  

    Glass-Steagall/Jerconn – Do you seriously believe Clinton repealed Glass-Steagall?  He relaxed one provision (affiliation restrictions) of it which, unfortunately, led to the dismantling of the rest under Bush.  Citibank had already gotten a waiver to join Smith Barney and it was the Federal Reserve that allowed JPM to join with Banker's Trust to underwrite RBMS in 1987, well before Clinton signed off on repealing that provision (which had already been voted 98-2 in the Senate so a veto would have been completely pointless anyway) and, if you remember at the time, it was "essential" to maintain American competitiveness that we allow our Banks to turn into IBanks or the Japanese/Europeans would destroy us – that was the story at the time.  Turns out we all destroyed ourselves! 

    No more Big Gulps?  That''s sad Kinki…

    And this 1020:

  191. jomptien

    jercon, Glass Steagall will not be brought back due to to much WS $ given to Congress. Otherwise for the good of the country (patriots all) they would have done it.

  192. Phil

    Classic Carlin from Reagan days really proves that we never learn:  

  193. 1020

    Phil/Carlin   A classic. The man was a visionary.
     
    How right he was/is to this very day……

  194. 1020

    Phil/Two knobs on the radio….. LOL!!!
     
    That was as funny and sad a Carlin clip I've heard since playing my first bit of Carlin vinyl in the seventies…..
     
    Carlin, Cheech/Chong (Big Bamboo) and Mad Magazine.
     
    Funny how my Italian Mom knew all the swear words while learning english….. :)

  195. 1020

    Funny how I'm listening to that Carlin clip on the Reagan years, I look over my shoulder and see Gingrich on Morning Joe…..

  196. angelcur

    i wonder what GS means chinese stocks will" continue to rise"..they are on their ass y/y down 20%..

  197. jerconn

    PHil and 1020 – I'm writing this after the next day's PSW article is out already, so don't know if anyone will read it, but first of all I'm agnostic on Dems and Repubs, since I live overseas and it doesn't concern me that much – but it does amaze me the inability of the Dems to accept any responsibility and to always find a way to shuck it of on Bush…I've never seen anything quite like it…the main force behind repealing Glass Steagall was Bob Rubin, who was Slick Willy's former se'y of the treasury, so there is no way you can pin this on the Repubs, even tho they may have gone along with it…try to be a little real, guys… 

  198. 1020

    jerconn – In your comments, you only pointed out the dems. Both parties had their fingerprints on this one….
     
    Watch the George Carlin comments from Phil @ 7:16am.
     
    That pretty much sums up how Phil and I feel about politics in America – At this point, I'll take the best of two evils (Obama) 

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