"An awful May is replaced by the start of a frightening June" is CNBC's opening voice over and it gets dumber and dumber from there as "America's Financial News Network" bangs the fear drum right at Asia's open (9pm) and then uses the panic in Asia to prove their point to EU and US traders that there's something to worry about.
I could go on and on about how ridiculously evil this network is and how horrible it is that we allow these Financial propaganda networks to manipulate the markets to the benefit of the highest bidder but, in the long run – who cares? If you watch CNBC and take it seriously – just like people who watch Fox to find out what's going on in the World – you reap what crap you have sown.
We are not, in any way, gung-ho bullish but we're also not going to play bearish. On the whole, as we reviewed in this week's Stock World Weekly(available free this week!) - we are "wishy washy" in our positions, cashy and cautious and doing just a bit of bottom-fishing as we HOPE (not a valid investing strategy) that this is the bottom as we HOPE the G8 takes some rational action.
As the guy in Airplane kind of said – "Looks like I pricked the wrong week to get bullish!" Of course, as I often tell people I am neither bullish nor bearish – I'm rangeish – and our range is the 5% band between around Dow 10,200 and S&P 1,070, which takes us as low as Dow 9,690 and S&P 1,016 and as high as Dow 10,710 and S&P 1,123 before I really "flip flop" my positions. Despite the fact that this is the range we predicted last October and is the range we've been in (other than a brief trip to 11,200, which we shorted the hell out of) all year – people still seem to find it necessary to call me either bullish or bearish as we navigate the channel.
I suppose I have been HOPEFUL for the month (now heading into day 14) that we will finally make a little progress and establish a higher floor at our usual mid-points while, at the same time, the MSM have decided that we are all going to die. That does make me kind of bullish by comparison doesn't it? We are mainly in cash and we are well hedged to the downside so, unless we are REALLY heading much, much lower, there is little profit in speculating to the downside, other than our quick trades. As PT Barnum once said:
"A man who is all caution, will never dare to take hold and be successful; and a man who is all boldness, is merely reckless, and must eventually fail. A man may go on "’change" and make fifty, or one hundred thousand dollars in speculating in stocks, at a single operation. But if he has simple boldness without caution, it is mere chance, and what he gains to-day he will lose to-morrow. You must have both the caution and the boldness, to insure success."
Balance is the key to long-term success and we've had many conversations about that in Member Chat. Our goal is to be neither bullish or bearish but rather to sell premium to both the bulls and the bears when conditions permit us. As Ravalos said Friday in Member Chat:
"Ever since I became member (actually before I became member I
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
-- John Maynard Keynes
SO, IS THIS FINALLY THE 'REAL' CORRECTION?
What a week it was. The Bears gave the Bulls some payback. Obama got a wake-up call. And the banks got a well-deserved scare (and we hope they will get a well-deserved hair cut).
The markets reacted, as one might expect, with selling. Actually, the selling began before the Massachusetts election and before Obama sent a shot across the Goldman Sach's bow. Last week Intel announced surprisingly strong earnings; and the stock started up and then sank. For the past half-year investor behavior had been the reverse: a buying spree for any stock that did not lose as much as it might have — beating 'Street expectations' that had been dumbed down over and over again during a quarter so that the company could report 'surprising' strength. Suddenly, now, even good earnings are being greeted with selling. Then came Massachusetts — wasn't that a Bee Gees' song?
All the lights went out in Massachusetts
Anyway, readers want to know where the markets stand today, after the sell-off this week. My view of it — my 'view', not my gut-feeling — is that we are, so far, merely correcting from an over-extended rally. This rally has been bizarre, to say the least. This has been a 'fear rally' — usually the 'fear' side of the equation is when selling comes in, 'greed' driving the expansion. But fear of systemic failure has driven this rally; and Ben Bernannke has been the captain sailing the 'Boat of Fear', Ben's logic — that more debt will solve the insolvency crisis — has a shadow side, the logic that a collapse in stock prices will result in systemic failure, international chaos, revolution, repression…made him believe that preservation of the status quo was requiired, at any price. A 'make-believe' recovery could be jump-started, perhaps, if the Fed could just stimulate (and simulate) another asset-bubble. After all – that is how his mentor and predecessor, Alan Greenspan, had become the darling of the coctail party crowd, leading member of Time Magazine's 'Committee to Save the World';…
It is generally true that prices climb higher at a far slower rate than they drop. This rally, however, has been a remarkable exception. The push higher has been explosive, and it has pushed higher with just about the same timetable and force as the drop itself.
The question, of course, is: when (if ever) will it end?
There are as many opinions as there are traders, but a few general camps would be, using the example of the Russell 2000 above:
It has another 10% to go, and it will happen quickly. That would be painful for the bears, but I would hasten to point out that, at that level, the Russell would have completely retraced to the neckline of a head and shoulders pattern spanning three years whose beauty would make bears (if there are any left by then) weep tears of joy.
It’s done climbing and will start falling. This has been uttered so many times by so many parties (including, I admit, a few times by me) that it’s not even worth considering anymore. The entire, "OK, now………….errr………OK, NOW!………..oh, wait…………….errr, NOW!" gets really, really old.
We’re in a major new bull market and it’s simply going to keep pushing its way through to progressively higher prices.
For the bears out there who would like some encouraging news, the semiconductor index – which is a helpful bellweather – is looking like it is approaching a huge area of resistance. This is why I bought SSG yesterday.
We came right back to 1,000 on the S&P yesterday but it held like a champ and that gave us the confidence to take a bullish cover on our longer DIA protective puts, right at 3:04, ahead of the usual 50-point stick save but it was a move we initiated right at the bottom at 2:30, catching almost the dead bottom on our roll. Of course it's total nonsense but it's total nonsense we can count on with 8 stick saves of at least 50 points in the last 90 minutes coming in the last 10 market sessions accounting for 400 points of Dow gains or ALL of our gains since July 20th when we "broke out."
As illustrated in David Fry's SPY chart, the only exceptions to the stick save were the last two Fridays and I said to members in yesterday's chat, perhaps that is somehow significant that the collective we call "Mr. Stick", does not feel confident enough to make bullish plays into the weekend anymore. Today we should head right back to re-test 1,000 on the S&P but we are much more bearish overall, having taken profits yesterday and covered our unrealized gains in our $100KP - the plan we discussed in yesterday's morning post.
We got a re-test and a re-failure of the Russell at exactly our 574 target right at 11:15 and the the Qs never even mounted a serious threat on our 40 line so it wasn't a tough call for us in the morning. The other levels we are watching, Dow 9,297, S&P 1,000, Nasdq 2,017, NYSE 6,438, Russell 562 and SOX 308,are looking shaky and may not stand up to another test, especially if we get any bad news on our upcoming data with Wholesale Inventory and Productivity Reports on deck this morning. Our bearish additions were an ERY spread (3x Energy bear) and COF Sept $40 puts, which are already up 10% from our 12:17 pick. It wasn't all negative, we liked a couple of buy/write plays and we took a very bullish spread on FRE, which should do very well this morning. At 12:57 we had noticed FRE moving up and, in Member Chat, we were discussing the merits and my take was this:
FRE/Ifl – The float of FRE is just 650M shares and they
As we can see from AlphaTrends chart, that's going to be a tough breakout and, even if we do make it, can we hold it? In yesterday's post I said we were ready to switch off our brains and BUYBUYBUY the rally and our breakout levels did all hold yesterday but I decided, in Member Chat, that we needed to raise the bar slightly before we started shutting down our thought processes into the weekend. We simply used the 2.5% lines of Dow 9,297, S&P 1,000 (interesting!), Nas 2,017, NYSE 6,438, Rut 562 and SOX 308 in my 10:16 Alert as our official buying breakouts but those same levels gave us a great indicator to get out of our longs and press our shorts as they ALL failed by 11:09.
It is going to be very much up to the GDP report and we have a pretty low-bar expectation of -1.5% but that's a heck of an improvement over last quarter's -5.5% and this earnings season has been nothing if not a celebration of "getting worse more slowly." As we all know, personal consumption makes up 70% of the GDP while government is about 18% and business investment just 12%. Durable goods are only 8% of the GDP while consumables (which includes clothes and, obviously, food and fuel) are 20% and 40% is "services" but 1/4 of that number is Real Estate so that's a little confusing.
As we know, not much is actually getting better but that's not the issue with GDP as we are measuring "growth" compared to the prior 4 quarters and our prior year was a disaster! This is like when a raging fire causes a house to collapse and you stand there looking at the wreckage and say "at least most of the fire is out now."
The good news is the comps just keep getting easier and easier the worse things get so, at some point, you are bound to improve! As you can see from Briefing.com's Real GDP chart on the left, there's a pretty wide disparity between the Real and Nominal GDP and that's because the Real GDP meansures the production of goods and services valued at constant prices. So we aren't…
Today the Institute for Supply Management published its monthly Manufacturing Report for June. The latest headline PMI was 53.2 percent, an increase of 1.9 percent from the previous month and above the Investing.com forecast of 51.4.
Here is the key analysis from the report:
"The June PMI® registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent. The New Orders Index registered 57 percent, an increase of 1.3 percentage points from the May reading of 55.7 percent. The Production Index registered 54.7 percent, 2.1 percentage ...
US Manufacturing PMI fell back very modestly from its flash reading but rose MoM to 51.3 as Markit warns "producers are struggling in the face of the strong dollar, the energy sector decline and presidential election jitters." But, ISM Manufacturing surged full of hope to 53.2, above the highest analyst estimate (a 4 standard deviation beat of expectations). Every subcomponent rose aside from Prices Paid as it appears - as opposed to everything we have seen in earnings and chatter - that Brexit, election uncertainty has done nothing at all to da...
In September of 2012, when Silver was trading at $28, the Power of the Pattern shared the chart below. The patterns suggested that even though Silver had already declined a great deal ($50 to $28), patterns called for it to fall nearly another 50%, to the $15 level.
Chart below was from 2012, see original post HERE.
By Jacob Wolinsky. Originally published at ValueWalk.
John DeVoy, a long time analyst at Seth Klarman’s Baupost Group has left the hedge fund for a position at Loomis Sayles. Devoy formerly worked at Loomis before spending close to ten years at the Boston based hedge fund. The news was announced via a press release from Loomis. The statement says that DeVoy will be returning to the company “as a dedicated credit strategist for the flagship full discretion team.”
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I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.
For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....
One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...
After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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