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Tuesday Top Off – Europe Ascending

All right, now we're making some progress!

Not with the indices, who cares about them – I'm thrilled that we chased 23M people out of Google today.  In what may have been their busiest day since their IPO, 10% of Google's shares were sold and, shockingly, bought as close to 10% of the float changed hands.  Google is 80% owned by institutions and, as we noted last night, they weren't selling

Also significant is Google's bottom today at 299.99 – Euros, that is.  That's the point at which buyers starfted swarming in, just another indication of how the dollar, even as it relates to stock prices, no longer matters in International trading and technical traders better learn how to do their conversions if they want to get a clear picture of what's going on with a chart.  You can't analyze a stock if you base it on an unstable currency!

If you look at the chart of the S&P in real money, you'll see that the trend line has been far from baffling as we've simply been following the 50 dma lower and lower since our October highs with a very brief breakout attempt in December (courtesy of the Fed).  What looks to be, in dollars, a surge in the S&P back to the 50 dma at 1,392 over the past 3 days is merely a flatline to Europeans.  The good news is we are nowhere near our Jan 22nd lows and have put in a fairly orderly consolidation since then, staying in a tight 4% range, almost half of the 7% range we've seen as measured in dollars.

So it's no surprise the VIX is coming down hard, volatility washed out weeks ago – we're just the last ones on Earth to get the message!  I'm not saying we are unbound by US technicals but let's keep in mind that, as we drift lower and lower as an economic power, the power of our charts to sway International investors diminishes as well.

The Dow, meanwhile, stopped dead at the 50 dma of 12,688 today as gold and oil both gained about 1% ahead of Helicopter Ben's testimony tomorrow.  We're touching $1.50 to the Euro and that is just beyond pathetic.  Your $3 gallon of gas costs a European $2, even less if you compare the dollar to what it was when we mattered more.  That $950 ounce of gold is only 633 euros, only 15% above the early 2006 highs, not the 30% increase we see in dollar terms.

Oil was $70, in '05 and $79 in '06 and is now at $101, a 44% increase.  For the Europeans, oil was 56 Euros in '05, 63 Euros in '06 and is now 68 Euros, a 21% increase.  While 7% a year still sucks, it sucks far, far worse to be US!  It really is the economy, stupid in the '08 election as ours is coming apart at the seams but, as you can see, the International picture is nowhere near as dire.

We are the global gluttons – we are the wasters of fuel, the burners of carbon that create the greenhouse gasses and the gluttons that cause the world food shortage.  Our eating habits are so poor as a nation that even prisoners at Guantanamo Bay gained an average of 13 pounds eating American prison food

Since this administration hasn't been listening to reason and has continued to gorge on oil and has continued to pay farmers not to grow food while millions starve (and now we are turning food INTO fuel rather than curb consumption) and has pulled out of the Kyoto treaty to stop global warming – do you think its possible that the entire rest of the World is just thrilled to stick it to us financially?  We use 25% of the World's fuel and now we got hit with a 44% increase – perhaps that will get us to cut back a bit since they can't get any cooperation from the administration.

We like to think of ourselves as setting the global political agenda but we don't get invited to those parties anymore.  Our next leader is going to have a lot of fences to mend (and I don't mean the one they are building to keep out the Mexicans) and it's perhaps something we should pay more attention to this election season before the last of our dollars burns up in the last tank of gas we can afford.

Needless to say we covered into the close (in fact I hit it on the button with a call to cover at 3pm!) - you don't look a gift horse like the last few day's run in the mouth!

 


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  1. Good Morning all,

    Have a newbie question regarding the NDAQ trade in the 25k port. Currently have 5 NDAQ Jun 42.5 covered by 5 NDAQ Mar 40s. Read yesterday’s post and Phil advises 1/2 cover at this point. So is it better to have 3 NDAQ Mar 40s covering or 2 NDAQ 40s?

    Many thanks


  2. Ongba, I noticed Phil said that as well, the portfolio sheet does however show it fully covered at this time. I think fully covered for now is probably fine, NDAQ popped back over $41 yesterday, but we are still about 19 trading sessions out from expire, so I wouldn’t sweat it right now.