by phil - March 14th, 2016 8:27 am
That's what time tomorrow the Bank of Japan will have their press conference to announce their rate decision as well as, potentially, any new stimulus measures. Our own Fed will go 12 hours later (2pm) with Yellen speaking at 2:30 and, in case the markets are going completely off the rails by Friday, we have Dudley speaking at 9am, Rosengren speaking at 11am and Bullard speaking at 3pm because we'd hate to have a bad options expiration day, right?
Over the weekend, we already had a dramatic drop-off in Chinese Industrial Ouput at 5.4%, down 0.7% (11.4%) from last month and Retail Sales were down from 10.7% to 10.2%, also missing expectations of 11% (according to leading Economorons) by a wide margin. China is having a National People's Congress meeting this weekend but no major stimulus announcements are expected.
Over in Japan, there's a question as to the scale and timing of a very good report on Machinery Orders (+15%), with accusations the data is not even possible and is simply being used to manipulate the BOJ meeting. Things are, indeed, getting stranger and stranger. You might think that's unlikely but Australia JUST got caught falsifying their employment data to make the economy look better. As I said last week re. Japan, Abe is heading for a no-confidence vote so anything is possible when politicos try to hold onto their power.
If you want to know what's REALLY going on in China, you have to leave the planet, literally, and get a view from space. Fortunately, there's an app for that as SpaceKnow has a China Satellite Manufacturing Index based on analysis of thousands of photos taken from commercial satellites with an algorithm that compares photos of more than 6,000 industrial sites across China and assigns values for visual changes over time that indicate activity, such as visible inventory or new construction. The index comes from 2.2 billion individual satellite observations over 500,000 square kilometers spanning 14 years – now that's BIG DATA!
As you can see from the chart, the results are double-plus ungood with REAL activity down about 3% in the past 24 months – that's no growth at all vs the 14% GDP growth claimed by the Chinese Government, which makes it…
by phil - March 11th, 2016 8:15 am
Have you been reading us all week?
If you've been reading us longer than that, you know we LOVE Natural Gas at these low levels. Well, not so low anymore as Natural Gas Futures (/NG) have jumped 0.20 for the week, which pays $2,000 PER CONTRACT and not only did we feature it on Monday's post but I discussed it in studio with Jill Malandrino at Voice of America on Monday afternoon – my trading gift to the World!
Remember, at Philstockworld, we are FUNDAMENTAL investors who use Options and Futures to both leverage and hedge our positions but beneath all of our trades are sound fundamental principles which guide our selections. Our premise on Natural Gas was, to me, so obvious, that we made it our trade of the year for 2016 and, as I said in Monday's post:
Keep in mind the Natural Gas ETF (UNG) is our Trade of the Year and it's very rare that you are still able to play our trades of the year this deep into the first quarter but you can still make the following trade:
That puts you into the $8,000 spread for a net of $1,300 in cash, so the potential upside is $8,700. Your obligation, should UNG be below $5 (now $5.90 with Nat gas at
by phil - March 10th, 2016 8:15 am
What's really going on in the EU is what's going on all over the World but, so far, only the UK has woken up from the stupor induced by the shock of the Financial Crisis, which was caused by out of control Banksters, to realize that their economy is being drained for the benefit of the same Banksters that caused the crisis in the first place.
Unfortunately for Great Britain, the Fox (news) is guarding the henhouse as their Central Bank is now run by 13-year Goldman Sachs veteran Mark Carney, whose previous posts were in South Africa and Russia as those countries went through massive upheaval (end of Apartheid and collapse of the Soviet Union). He left that high-paying job in 2004 to go work for Canada's Finance Ministry, working his way up with lightning speed to become it's Governor and then Governor of the Bank of England.
Both Carney and fellow GS alumni, Mario Draghi are saying it will be a catastrophe for the UK to leave the European Union but the UK has been around for well over 1,000 years and it's been in the EU for 23 years and they didn't even use the Euro until 10 years ago – so the people there have a slightly different perspective on things. The UK simply wants to opt out of policies of economic madness that, as you can see from the above chart is being fueled by a cadre of ex-Goldman employees who now run most of the national banks of Europe – including the ECB itself. Don't worry, they don't own Yellen - but they don't need to – they own everyone else, including the Bankster they ran for President in the last election:
That's $13Tn, in case you are keeping score. $13Tn that the US (on your behalf) has borrowed in order to make sure the banking industry stays profitable. Now, the banks would like you to believe that their solvency was at issue but the FDIC insurance covers $250,000 per account and $13Tn would have covered 52M $250,000 accounts so it would have been TRILLIONS cheaper to let the bad banks fail.
by phil - March 9th, 2016 8:22 am
Fool me once, shame on you.
Fool us every time there's a Fed meeting – then we're just idiots who will believe anything just because it's printed in the Wall Street Journal. That's right, Jon Hilsenrath, the Fed Whisperer, was at it again yesterday with his 3:18 prediction that the Fed will leave rates on hold next week to which we say: "Duh!" I've been on record all year that the Fed will have no more than two (2) hikes in 2016 and likely 0.25 each and not likely for the first one until June – now can I get a job where I only have to write one column per month?
Market expectations for rate increases have shifted down since the Fed met in December (aligning with PhilStockWorld's projection). Traders in futures markets see an average fed-funds rate of 0.6% in December and 0.9% at the end of 2017, well below the Fed’s median projections of 1.375% at the end of 2016 and 2.375% at the end of 2017. The Fed’s rate projections could recede as officials delay raising rates.
You can see the little bump in the S&P, right when that article came out at 3:18 but it didn't last because everyone was getting out and we still have 10-year notes to sell this afternoon so we don't want investors being too complacent about equities or they won't hand the Government their money to hold for 10 years at, LOL, 1.62% interest. By the way, anyone who feels the urge to spend $20Bn on today's auction – just send the money over to PSW and we'll pay you 2.5% interest only for 10 years, no problem!
There is something very interesting going on in these auctions. If you follow that link, you'll see that we currently have $24.8Bn in outstanding 10-years (for this cycle) and we're only rolling $20Bn over because that awful Obama has cut our deficit once again and we don't need to borrow money (when will the madness end?). That then forces $4.8Bn to find somewhere else to go and that's why there's such a high demand for notes – even at these incredibly low rates – like Richard Gere, they've got nowhere else to…
by phil - March 8th, 2016 8:26 am
It's always something.
I told you yesterday in "S&P 2,000 and Bust" that we would get rejected at the 2,000 line on the S&P 500 (/ES Futures) and, because we were not greedy and were just looking for quick profits – we had two chances to make $500 per contract in yesterday's trading. Our non-headline trade ideas (all delivered to you, pre-market, in the morning post) did well as well including:
- S&P Futures (/ES) short at 2,000, out at 1,990 – up $500 per contract (twice)
- Dow Futures (/YM) short at 17,000, out at 16,950 - up $250 per contract
- Nasdaq Futures (/NQ) short at 4,350, out at 4,775 - up $1,500 per contract
- Russell Futures (/TF) short at 1,080, out at 1,085 - down $500 per contract
- Nikkei Futures (/NKD) short at 17,200, out at 16,700 - up $2,500 per contract
- Natural Gas Futures (/NQ) long at $1.62, out at $1.72 - up $1,000 per contract
The Russell was just weird and certainly you can't win them all but hopefully our Trade of the Year on Natural Gas (detailed yesterday as well) is finally getting back on track after yesterday's big move. As I said, I've been banging the table on that one for some time but it's possible that UNG moved simply because we were talking about it and not just because we had perfect timing – that's why it's good to pick up side money on the Futures while you wait for your longer-term plays to develop.
Anyway, it's not that we went bearish, per se, it's just that the markets went up too far, too fast – so we called an audible and hedged our longs. Our Long-Term Portfolio has gained 24% already this year as that one (our biggest) is all bullish and even our Options Opportunity Portfolio, which had been suffering from a mistake we made last quarter going bullish too early, has now nicely recovered and is up 19% since it's 8/8/15 start date – not bad for 7 months but still 15% behind schedule, though we have lots…
by phil - March 7th, 2016 8:19 am
What a month we've had!
We're still only about halfway back to where we were in the summer but, WOW!, quite the effort has gone into rescuing this market from certain DOOM!!! at our 1,850 predicted floor. I would have been a lot happier seeing some healthy consolidation down there before we raced back to check out the 22-week moving average, which just so happens to be sitting right on that 2,000 mark but the 200-day moving average is at 2,023 – so no excuse for getting rejected here, other than psychological.
If you expect your technicals to work (the 200 dma), then you don't want to see psychologicals having a great effect or it means your technicals are BS (they all are) and you have no idea what the market is going to do. As you can see from our Big Chart, all of our indexes are well above their 50 dmas and looking to challenge their 200 dmas, let by the Dow and S&P, who only need to cover 1% to hit their goals.
We're waiting on the ECB to announce a new stimulus package and this isn't one of those times where Draghi is likely to get away with his usual "all talk, no action" statements as, just this morning, German Factory Orders slipped another 0.1% (was -0.2% last month) and that's not going to get us back to the critical 10,000 line on the DAX (now 9,727) which is still 10% below the critical 11,000 line (Must Hold) which is still miles below the 12,500 high they hit just 12 months ago.
So, to recap, the German Stock Exchange is still down 22% from it's highs last year and the Nikkei is still down 20% but the S&P is down 5% and we're expecting a rally if the rest of the World is still technically bearish? Come on people – get realistic! If you want to be an effective short-term trader, you have to learn to have realistic expectations of how much an index, and the stocks within the index, should move given different data inputs.
Speaking of data, if you want to see something scary, check out Deutsche…
by phil - March 4th, 2016 8:29 am
We're waiting on the Non-Farm Payroll Report.
Yesterday, we got the happy talk we expected from Minneapolis Fed Governor Kaplan and, he did such a good job goosing the markets at 11:30 yesterday, that he's speaking again today at 10:45. Of course he'll say the same thing but will the markets react the same way? That depends on the jobs report and how FAKE this low-volume rally we've been having really is.
As you can see from Dave Fry's SPY chart, volume yesterday was a pathetic 94.8M and the spikes of volume on the way down were most of the up day's trading. On the whole, we opened the year on Jan 4th at 200.49 and dropped to a low of 181.09 (down 9.6%) intraday on Feb 11th and now, March 4th, we're back to 199.78 which is just over a 10% gain from the low (199.19).
According to our 5% Rule™, after a 10% run we expect a 2% pullback as we retest the highs and a bit of consolidation. Today's NFP report will either pop us over that top or, more likely, give us that 2% drop test we've been looking for. We shorted the Russell yesterday at 1,065 and after a very small drop, that trade failed but then, in our Live Member Chat Room, we shorted it again at 1,070 an hour later (10:44) and the 2nd time was a charm as it dropped back to 1,066 and we took a $350 profit off the table at 1,066.50 an hour later.
This morning, ahead of the NFP report, it's a bit too dangerous to bet the Futures so we're just waiting to see what happens for now. We headed downhill after last month's NFP report but, as I mentioned the following Thursday (2/11), a lot of that has to do with scaring people into buying bonds each month – so people won't notice that no one actually wants to buy notes that pay 2% interest, let alone 0%!
Nonetheless, in our Live Trading Webinar that week, we called a long on Nikkei (/NKD) futures at 15,700 and this morning they hit 17,050 for a gain of 1,350…
by phil - March 3rd, 2016 8:17 am
We didn't like yesterday's Beige Book from the Fed, which we went over live at 2pm during our Weekly Webinar and we made a few buck shorting the Russell but it then reversed overnight and I sent out a note to our Members (and on Twitter) this morning saying:
Flatlining, more or less in Europe after Asia was up 1% and our futures are flatter than flat and even oil is flat at $34.73 and /NKD skimming along at 16,900 so we'll just have to see what happens today but I stand by my interpretation of the BBook (bad) so, if we slip below these levels, we can short the laggards (4th or 5th to cross below with tight stops if any go back over the line):
Dow (/YM) 16,850, S&P (/ES) 1,980, Nasdaq (/NQ) 4,325, Russell (/TF) 1,065 and Nikkei (/NKD) 16,900
All are just over the line so 3 going under signals bear and then either of the 2 that haven't fallen are fair game. The same logic can be used to go bullish but I've seen nothing so far to make me lean that way – including the Dollar back to 98.15, down about 0.5% and not helping much. Oil is still a short below $35 (now $34.70 on /CL) and /NG testing $1.65 again means I like /NGK6 long again at $1.78 (as long as $1.65 holds on /NG).
No change so far so, if you are a Report Member or above and getting this daily pre-market Email (8:35)…
by phil - March 2nd, 2016 7:51 am
Here we are again.
Back on Jan 11th, we pegged 1,050 on the Russell as the most critical line in the markets and failing that turned us bearish and turning bearish made us a ton of money last month. That was also a Beige Book week and we were concerned about upcoming reports for the week which were: "Retail Sales, PPI, Industrial Production, Empire State Manufacturing, Consumer Sentiment and Business Inventories." Sound Familiar? Yep, it's the same stuff that was lousy this week but it has less impact now because we already had our shock.
On Thursday, Jan 14th, although we predicted DOOM!, we also predicted the Dow would bottom around 16,000 (off by 250) and that we'd bounce back to 16,700, which was pretty much the right price as we analyzed and evaluated each Dow component. In that post, I laid out the game plan we would follow for the next 6 weeks, which led us to a $200,000+ gain (33%) in our two main tracking portfolios.
We flipped bullish right at the bottom and now we're back to being uncertain at Russell 1,050, S&P 1,978, Dow 16,865 and Nasdaq 4,335 vs 1,046, 1,922, 16,346 and 4,271 back on 1/11. So clearly, all the other indexes have recovered much stronger than the Russell so either we see the Russell begin to catch up or, once again, it will become a drag that likely signals an overall pullback.
Today's big data point will be Oil Inventories at 10:30 but expectations are already low after the API showed a 9Mb build last night. Any net under 5Mb will be bullish for oil (now $33.75) but $35 has been a good shorting line for us so far (/CL). This afternoon we get a look at the Fed's Beige Book and it's hard to imagine that won't be depressing after our PMI and ISM numbers (auto sales were light too) and, this morning there was a 4.8% drop in Mortgage Applications – also a bad sign.
We will be doing a Live Trading Webinar for our Members at 1pm so we'll be live when the Beige Book is released at 2pm so get ready for some fun
by phil - March 1st, 2016 8:14 am
Relax, it's only $106Bn but still, a nice boost from the PBOC this morning as the dropped reserve requirements by another 0.5%, freeing up 700Bn Yuan of reserves. China's economy is (supposedly) half the size of ours so that''s like dropping a $200Bn stimulus on our economy – similar to what Bush did back in the day - it was good for a couple of months and then – CRASH!!! The stimulus shot covered up even weaker than usual PMI numbers (49, down from 49.4 and below 50 is contracting), the worst since Jan, 2009. Crash indeed.
The services gauge slipped to 52.7 in Feb, from 53.5 in Jan. Measures of new orders, selling prices, employment, backlogs and inventories were below the 50 dividing line between improving and worsening conditions. On the official manufacturing measure, the new orders, employment and purchasing quantity components slipped. A separate manufacturing reading from Caixin Media and Markit Economics fell to 48 in Feb, from 48.4 in Jan.
"Early signs suggest stimulus has yet to gain significant traction, pointing to the need for continued and expanded policy support," Bloomberg News economists Tom Orlik and Fielding Chen"In the near term, that likely means the announcement of a larger fiscal deficit target at the National People’s Congress on Saturday, plus stealth moves to guide lending rates lower."
Before the stimulus was announced this morning, the Shanghai Composite was down 4.6% but the MORE FREE MONEY announcement got us back over the critical 2,700 mark to close positive at 2,733. So yay, I guess – all is ??well?? in China once again and we can get back to worrying about the rest of the World, which is also popping on this "great" news out of China.
Japan had their first successful sale of 10-year NEGATIVE 0.06% bonds this morning. Investors paid 101.25 Yen in order to get 100 Yen back in two years and 2.2 TRILLION Yen were sold this morning ($19.5Bn) with 3.2 times more bids than there were bonds available.