by Phil Davis - July 3rd, 2014 7:36 am
Happy Birthday America!
The markets are closed tomorrow and today is a half day but the trend is certainly our friend on the S&P as we haven't been below the 200 day moving average since December of 2011 (except a couple of very brief dips). Though the average volume is about 30% lower than it was back then – it's still an impressive feat.
Of course, if 10% of the market was manipulated before and the manipulators haven't left (they certainly haven't) – even if the level of manipulation remained the same, 30% of the 90% that wasn't manipulated (retail investors) did leave (possibly BECAUSE of the manipulation) and that means now manipulators control 10% of the remaining 70%, a 42% increase in manipulation! Of course we know it's much worse than that because now the Central Banksters perform their own brand of market manipulation. As noted by Salient Partners in a great article about PBOC Manipulation:
The explicit purpose of recent monetary policy is: to paper over anemic real economic growth with financial asset inflation. It’s a brilliant political solution to the political problem of low growth in the West, because our political stability does not depend on robust real economic growth. So long as we avoid outright negative growth (and even that’s okay so long as it can be explained away by “the weather” or some such rationale) and prop up the financial asset values that in turn support a levered system, we can very slowly grow or inflate our way out of debt. Or not. The debt can hang out there … forever, essentially … so long as there’s no exogenous shock. A low-growth zombie financial system where credit is treated as a government utility is a perfectly stable outcome in the West.
So China has indeed learned the most valuable lesson of Capitalism – that money is a meaningless contstruct that can be freely manipulated to fit whatever narrative the Government wishes to spin and that debt is not to be feared, but embraced, especially by our Corporate Masters – because our National Debt becomes their Private Profits!
by Phil Davis - April 6th, 2012 8:45 am
NOW things are getting interesting!
Who wants a market that goes up and up and up – where's the sport? Even the Nasdaq finally blew it's 15-week winning streak and that helped us decide to stay pretty bearish going into yesterday's close. This morning we went over the news and the week's data to position ourselves for the Futures and my conclusion to Members in our special 4:03 am Alert was:
Next week we get the BBook, PPI and CPI but the focus will be on earnings and AA is not likely to get us off to a good start so I simply don't see anything in particular to be bullish about at the moment.
The point I had been making (with many charts and graphs) was that it didn't matter if we added even 250,000 jobs – it still isn't enough to begin to fill in the hole in any meaningful way and, even more important, the QUALITY of jobs we have been adding is TERRIBLE!
It doesn't matter if you give everyone a job if they are only minimum wage jobs. We need our consumers to have an income to spend and aside from inflation (real inflation, not the Fed's BS numbers) eating into their buying power, when someone loses a $50,000 job and replaces it with a $35,000 job – that's NOT an improving economy – not for the long run, anyway.
Of course the stock market will like it, at first – as lower wages paid for the same job = greater Corporate Profits but that only works as long as there are people outside your country who have money to buy your goods.
As we noted just yesterday with the Retail Reports, the high-end stores are doing very well as the top 10% is doing well but those serving the bottom 90% are struggling because, clearly, these people are running out of money. While the market has been content to "ignore and soar" during this gathering storm, now we begin to see the size of the wave that's coming in and it's starting to look scary indeed…
8:30 Update: An anemic 120,000 Jobs added in March! That's about 1/2 of what was expected by Economorons, who can't even get a handle on a major, critical number like Payrolls – how scary is that? So many of…
by Phil Davis - September 2nd, 2011 8:18 am
$30 Billion – that’s bound to get their attention!
According to the WSJ, the Federal Housing Finance Agency is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble. The suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims arguing the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.
Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues, agrees with what I told Members in last night’s chat:
"While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again.”
In other words – MADNESS! What was the point of spending Trillions of Dollars bailing out the Banks if you are going to turn around and sue them for $30Bn and drop their stock price another Trillion, causing them to need another bailout?
Perhaps this is the denouement of a week of scary market rumors that seem to have been designed to stop the markets from breaking too high. We were speculating on this last night in Member Chat before this…
by Phil Davis - September 2nd, 2010 8:25 am
Wheee, that was fun!
We’re already back in our range after all that hand-wringing last week. I like to do these perspective charts once in a while even though I’m not much of a chart guy. It’s funny how people lose their minds over what was clearly a minor dip so far – never even coming close to threatening our 5% rule, which is the only way we’re likely to give up hope.
Our next big challenge is getting over the 1,088 Fibonacci line but after that we should have a clear shot to retaking 1,100. Nobody expects good jobs numbers today but more than 460,000 lay-offs in this morning’s report will probably keep us on hold through tomorrow’s NFP report at least. Notice how yesterday’s fat-body candle was as big as any of our recent big drops – that means the bears are as freaked out about yesterday’s action as the bulls were about the flash-crash and there’s a lot of bears out there – crossing that 1,100 line this week could lead to a pretty good short-squeeze into the weekend.
As I had mentioned way back on May 5th, our expected downtrend along the 5% rule was 1,155, 1,114, 1,100, 1,073 and 1,045. Now we just have to work our way back up that ladder! Since earnings were not as exciting as we had hoped, our expected mid-point on the S&P has since dropped from 1,100 to 1,070, which alters (lowers) our expectations slightly but not too much from a long-term standpoint and there hasn’t been a need to adjust our long-term positions as we hit our buy point on the nose at 1,045 and, of course, we have our hedges.
Speaking of hedges, on August 25th, with the S&P down at 1,045, we looked at Disaster Hedges that could make 500% if the market falls. The idea is to take 2% of your virtual portfolio value in a play that makes 10% if the market falls 5% or more as insurance. We do this so we DON’T have to panic out of positions at an inflection point.
Some people take them right off if we hold our levels and some people use our 1,070 and 10,200 lines (both passed yesterday, of course) as a signal to take them off and some don’t mind the carrying cost of insurance but let’s look at the damages if we had done nothing while the Dow jumped over 250 points…
by Phil Davis - July 2nd, 2010 8:23 am
Do I know what the jobs data will be at 8:30? Nope.
Then why would I title a post "Thank Jobs It’s Friday!" – what if the report sucks and we go down? Well, at this point, even if that does happen, I think that will be the end of it. We’ve been building up to this "terrible" jobs number all week and we got a rotten ADP Report and a rotten Unemployment Report so everyone is expecting a rotten Non-Farm Payroll report. When everyone expects the same thing, we like to bet against it. Sometimes we’re wrong and sometimes we’re right but you make some amazing money when you are right. The magnitude of the short squeeze that would follow a significantly BTE NFP Report could send up up 300 points or more on the day, likely with a big finish this afternoon and some follow-through on Tuesday as the rest of the world plays catch-up.
A bad report, on the other hand, is already baked into the cake and we have yet to test S&P 1,000 so we can expect support there. It wouldn’t be pleasant, but we should be able to scramble and protect ourselves if we head lower so the smart move is to play for the mega-move higher, and that’s where we are. Of course, it’s also a balance issue. In our last Weekly Wrap-Up, we had the following open trade ideas going into June 21st (we had gotten bearish at the end of the previous week):
- APOL July $40 puts spread at .46, now .60 – up 30%
- BBY Jan $37 puts sold for $4, now $3 – up 25%
- BP July $30/32 bull call spread at $1, now .70 – down 30%
- YRCW at .21, now .15 – down 28%
- BP Oct $33/July $33 ratio backspread (3:5) at net $225, now $524 – up 132%
- TZA July $7 calls .08 (net of spread), now $1.50 – up 1,775%
- SIRI 2012 $1 puts sold at .33, still .33 – even
- USO July $33 puts at .51, now $1.08 – up 131%
- GLL July $37 puts, sold for $1.30, now .35 – up 70%
- TBT July $38 puts sold for $1, now $2.05 – down 105%
- OIH June $104.10 puts at $2.02, now $8.70 – up 330%
- TZA July $6/8 bull call spread for .55, now $1.48 – up 169%
- TZA July $6 puts sold for
by Phil Davis - April 2nd, 2010 8:21 am
US Markets are closed today.
Most markets are closed. Japan was open and they went up 41 points (0.37%) and the MSCI Asia Pacific Index also went up 0.3% in Tokyo 1trading and Russia fell 0.1% but markets in Australia, Hong Kong, China, New Zealand, Singapore, India, the Philippines, Indonesia, the U.S. and all of western Europe are closed today for holidays. Strangley though, the Futures Market is open this morning so that can make things very tricky on a big data day like today.
The MSCI Asia Pacific Index has gained 1.7 percent this week as growth in China’s manufacturing and an increase in U.S. consumer spending bolstered optimism the global economic recovery is gaining momentum. The index this week completed its fourth consecutive quarterly advance with a 3.9 percent increase in the three months through March 31. Shares in the gauge trade at 16.4 times estimated earnings, compared with 14.8 times for the MSCI World Index of 23 developed nations. “The global macroeconomic recovery is behind the current uptrend in equities,” said Tomomi Yamashita, of $3.8Bn Shinkin Asset Management. “That trend is unlikely to change though the market is getting overheated.”
We get Non-Farm Payrolls at 8:30 and, obviously, investors are expecting a report that shows the US firmly on the road to recovery but I have already been reading a Gallup poll on Underemployment that suggests otherwise. According to the March tracking poll, 20.3% of the US workforce was UNDERemployed and that is UP 0.5% from February. . Gallup classifies respondents as underemployed if they are unemployed or working part-time but wanting full-time work. Gallup employment data are not seasonally adjusted.
Those underemployed people are mainly counted as employed in the NFP report and are a major distortion of the numbers, especially as the main delta component was a huge rise in part-time workers, from 9.2% to 9.9% and, like temps, they tend to be counted by the government as happy, happy workers. Unemployment (no job at all) measured by Gallup decreased from 10.6% to 10.4% and you can see from the following chart how those two are related:
According to Gallup, as unemployed Americans find part-time, temporary, and seasonal work, the official unemployment rate could decline. However, this does not necessarily mean more Americans are working at their desired capacity. It will continue to be important to track underemployment — to shed light on the true state of the U.S. workforce, and the millions of Americans who are searching…
by Phil Davis - January 8th, 2010 8:25 am
Well I promised a thrilling ride yesterday and we sure got one!
We had a quick and wild drop right out of the gate, falling 75 points off Wednesday’s drop from 10,589 at 3pm. But we rapidly gained it all back after holding our watch levels across the board, which was certainly technically bullish. Our big mistake this year has been to ignore the technicals and worry about the fundamentals and we are very much on the wrong side of this trade if we do hold our breakouts into the weekend. It’s all about the jobs report, of course – and we’ll get that news at 8:30.
We are going to have to not worry and be happy about our breakouts should they come today. I think it’s all a load of ridiculous crap and we had a long discussion this morning in Member chat about my fundamental concerns but the GS trade-bots don’t care what our fundamental concerns are, especially now that the heat is on Geithner and the great gifts he bestowed on GS et al through the AIG payments (following through on ex-Goldman CEO Paulson’s plans). If the markets falter, the Congressional investigations begin again so everyone involved now has more of a vested interest than ever to keep these plates spinning no matter what the underlying fundamentals may be.
We’ll get a jobs number shortly but, as Mish points out, the government spent a record $14.7Bn on unemployment benefits in December, up 24% from November’s record $11.8Bn, "Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid." Did we pay thos 200,000 newly unemployed people $7,350 a month each or is there some kind of nonsense going on with the statistics?
As you can see from the chart, "emergency compensation" is flying, even as the standard-measured continuing claims numbers begin to slow down. The black line on this chart illustrates what happens when you count what the government doesn’t – the emergency and extended unemployment benefits. How long can we keep sweeping $14.7Bn a month under the rug while claiming to be in recovery? Apparently, a long time!
8:30 Update: Hey, maybe I’m wrong. Somehow we lost 85,000 jobs, which is a lot more in-line with reality than the bullish expectations we’ve been hearing all week. November was revised to +4K from -11K…
by Phil Davis - August 7th, 2009 8:23 am
Well, yesterday was fun!
As we expected, the massive pre-market pump job failed once again to push our breakout levels and that led to 6 of our 7 day trades coming out winners in Member Chat. We’re still waiting on the 7th, our MOS puts that were meant to be a weekend hold anyway so not really a day-trade but it was lots of fun after sitting mainly on the sidelines this week waiting for a good opportunity to jump in. Our plan from the morning post to buy out our DIA putters worked perfectly as well and we even went bullish on the DIA’s into yesterday’s stick save so we’re not even going to complain about that nonsense today!
It will take more than a stick to save the markets today if the jobs report is a disappointment. GS, BCS and JPM have all lowered their loss predictions from around 370,000 lost jobs to 250-275,000 job losses and DB has gone completely off the wall with a prediction of just 150,000 losses! As the US is gearing up for the 2010 census and as no one understands the mystical "seasonal adjustment" game and as GS pulls all the strings in government, we are hard-pressed to dismiss this seemingly ridiculous prediction. What do the big 3 market manipuluators have to gain by raising expectations so high just ahead of the actual numbers? Perhaps they have already finished their selling and have now fipped negative, looking to initiate a massive sell-off as jobs disappoint? Or, perhaps, they are brilliant analysts who are well ahead of a number that will, finally, give us our long-awaited break out.
If the figures do surprise, it won’t be in a statistically significant way. A payroll decline of 450,000, which would mortify Wall Street, would mean a 0.3% decline in total payrolls. A market-friendlier decline of 150,000, on the other hand, would represent a 0.1% decline. Percentage-wise, the difference is a crapshoot. At some point, jobs data should improve meaningfully. The four-week moving average of new jobless claims is down 10% from late June. That translates into about 200,000 fewer job cuts a month, estimates High Frequency Economics economist Ian Shepherdson. "The risk of a substantial upward surprise on payrolls over the next few months has risen," Deutsche Bank economist Joseph LaVorgna wrote recently.