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Tuesday, November 29, 2022

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Which Way Wednesday

Yesterday was a wild one.

We call it "Testy Tuesday" for a reason and our 5% rule was tested twice during the day but the market failed to break out despite what seemed to be a contrarian rally to Fed minutes that I summarized to members at 2:02 as "BAD!!!!"  Of course we expected them to sound bad, I said as much in the morning post and Forbes summed it up better than me with a headline stating "Fed Minutes Offer No Comfort." 

As the market was "rallying" I predicted we would not break our watch levels for the day and we ran right up to them and failed.  Sadly, we were looking at put plays on FCX and OIH and selling SKF puts (which pay off when the financials go down) in a reversal of our positions from last week.  We're hoping to hold the line on the sell-off and gear up for an Obama rally next week but that's 3 long days away at the moment.  We actually love days like this as we get to test the resolve of the bulls, who still have not shown up in force and now will have to defend 8,866 and 8,650 to show us that they do mean business. 

I remain bottomish and I'm going through the good exercise of re-analyzing the 38 stocks I had selected for members in various sectors on December 1st as my favorite bottom picks and, about halfway through, we still have no rejects although 2 (TIE and GLW) have fallen off our buy list for this month.  Since we had picked TIE at $7.28 (now $9.39) and GLW at $8.45 (now $11.55) it's really just a choice not to be greedy and possibly push our luck too far. 

I am proud to say that our list went 38-0 with better than 30% average gains since December 1st and the format is popular enough that we'll try do a list like it ahead of each cycle (currently we are selling Feb contracts so in early February we'll be looking at March).

We'll need to make 30% a month the way Obama is casually talking about the US running up "Trillions" in debt during his administration.  That was enough to halt the dollar's recent rally as we took a harsh rejection of the 50 dma at 84, finishing near the day's lows at 82.83.  81.50  is the line to watch on the dollar and we need to hold that in order to keep a positive trend on the 200 dma.  81.50 is our mid-point on the dollar and represents a 5% decline from our 12/11 breakdown as well as 5% up from the 12/18 bottom.  At 82.83 we are still down 5% from where we were on 12/1 and you can see from this chart that oil, priced in relative dollars, has not been as impressive as you may have thought on their "bounce."  $50 is indeed the magic number and, even priced against the falling euro, we can see oil has not yet broken over any technical long-term declines.  $50 is NOT the 50 dma of WTIC so failing there is a VERY poor showing by the NYMEX pump crew and Criminal Narrators Boosting Crude are working overtime this week trying to get people back into that busted bubble.

The energy pushers also need to beware of France and Egypt, who are teaming up to put together a cease-fire agreement between Israel and Hamas on this 12th day of bombing.  Russia is pushing the other way as they have accused the Ukrain of stealing gas (they are) and have now cut off shipments entirely but natural gas is a local matter and this is not enough to support a gain in US prices.  Today we have the crude inventory report and another big build can send oil quickly back to $45 and that will take the markets with it as the energy sector has been our rally leader for the past week so let's be very careful out there today.  As I said on Monday morning, this is not an economy that can support a run-up in oil when every $10 barrel gain costs US consumers $1.4Bn a week. 

We forgot to pick up the very cheap FXP's in yesterday's excitement, that is one of our favorite covers when we turn a little bearish and that's a shame as the Hang Seng dropped 3.4% on the Fed's prospects of a very weak 2009 for their largest customer.  AA's outlook was no help either but what really killed Asia today was a 7% drop in India as SAY turns out to be a scam with years of ficticious profits.  Satyam fell 78% and took the whole Indian tech sector with it. "Some people have been saying it's time to buy but I think it's not time yet. I wouldn't hold my breath and say the worst is over," said one analyst at a local brokerage in Singapore.

Europe is off about 1.5% ahead of our open, led down by the energy sector despite Russia's escalation with the Ukraine.  Banks were also hit hard asthe EU debates the fate of credit default swaps and profit taking hit the miners (mainly coal), who had led the recent rally.  UK retail giant Marks and Spencer announced the closing of 27 stores on a 7.1% decline in sales along with declining margins in December and German auto sales were off 6.6%.

Obama is holding a press conference this morning but we already got an ADP report that shows 700,000 jobs were lost in December and that does not bode well for Friday's Payroll Report.  We also had warnings from TWX and INTC which wil be no help this morning.  Tomorrow we get weekly jobless claims so the hits may just keep on coming this week – a wonderful environment to test our levels so let's keep our eye on our 38 favorites and see what discounts we are offered this week.

 

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Phil,
I need some advice on rolling a vertical position. I have 7-Jan 17.5 puts ($4.74 basis) against 7-Jan 12.5 puts ($1.13 basis). I am willing to put more (Margin) money into this position to roll down and out in time to try and salvage this loss.
Thanks

 Yeah Cap.  Phil should use some sort of super slick watermarking on his comments.  Like maybe reference the correct title, but use the author’s name spelled backwards, or stick in a non-existant middle initial.

i wonder why you all watch CNBC, it has become another format such as entertainment tonight.. When are we going to rain in these commentaries and say bullshit.  Is this news or entertainment tonight.  I am tiried of their personal commentary, again i will turn to bloomberg.

Good Morning Phil and all

Asia Markets :    Thursday, January 08, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                         8876.42    -362.82    -3.93%
Hang Seng*                             14415.91    -571.55    -3.81%
China: DJ Shanghai*                 206.50         -4.87    -2.30%
Seoul Composite*                   1205.70       -22.47    -1.83%
Bombay Sensex **                   9586.88    -749.05    -7.25%
Baltic Dry Index                           789.00        14.00      1.74%

** Market Closed for holiday, data from yesterday’s close
*at Close

Asian Stocks Drop as Economic Fears Return

(Indian markets are closed for a holiday, will resume trading Friday)

Asian stocks dropped sharply Thursday, with a recent rebound in investor willingness to take risks jeopardized by dire U.S. private employment data and fears about corporate earnings.

Japan’s Nikkei slid 3.9 percent, snapping a seven-day rally, after grim U.S. jobs data and that Intel revenue warning fanned fears the recession was deepening, hitting chip stocks and other exporters.

Seoul shares closed 1.8 percent lower, ending five consecutive sessions of gains as technology issues retreated on earnings worries, but shipbuilders rose on expectations for large overseas orders.

Australian shares fell 2.3 percent as renewed worries over the outlook for commodities amid a global downturn sparked a sell-off in resource stocks.

Hong Kong shares tumbled 3.8 percent with Chinese banks tanking for a second day in a row after equity selldowns in two major banks in the first week of 2009 put nervous investors on the backfoot.

Singapore’s Straits Times Index was down 2.8 percent with DBS Group leading the declines with a 5 percent fall.

Chinese stocks fell, led by banks after two high-profile sales of Chinese bank shares in Hong Kong sparked fears of more such selling.
 

Miners Lead Euro Shares Down

European shares were down in early trade on Thursday, with heavyweight mining stocks taking most points off the index, after a record drop in German exports and weak U.S. jobless data rekindled economic worries.

The FTSEurofirst 300 index of top European shares was down 0.6 percent at 872.27 points, having ended a six-day winning streak on Wednesday by dropping 1.3 percent. The index lost 45 percent in 2008.

The DJ Stoxx basic resources index was the top sectoral loser, down just over 2 percent.

The bleak economic outlook hit shares in raw material producers such as steelmaker ArcelorMittal and mining groups Rio Tinto and Anglo American, all of which fell around 3 percent.

German exports posted a record fall in November as demand for cars and others mainstays of the manufacturing economy plummeted, deepening worries about the country’s already bleak 2009 outlook.

Shares in J. Sainsbury, Britain’s third-biggest supermarket group, were down 1.5 percent, after the company posted third-quarter underlying sales at the top end of forecasts but said economic conditions were set to remain "particularly challenging" in 2009.

The market’s focus later on Thursday will be on the Bank of England (BoE), which is expected to cut interest rates by 50 basis points to 1.50 percent. Its decision is due at 12 pm London time.

Royal Bank of Scotland gained 3.5 percent after a newspaper report saying the bank is mulling a sale of its 4.3 percent stake in Bank of China as part of a widespread review of its international assets.

German chipmaker Infineon dropped 5 percent after iSuppli said global sales of dynamic random access memory (DRAM) chips are expected to fall 4 percent in 2009, extending their decline for the third straight year amid a prolonged industry downturn and chronic oversupply.

Across Europe, the FTSE 100 index, Germany’s DAX and France’s CAC 40 were down between 0.2 and 0.8 percent.

Oil Rises Toward $43 after Record Overnight Fall

Oil traded higher on Thursday, reaching $43 after diving 12 percent overnight, partly due to higher than expected U.S. crude stockpiles data that hardened evidence of weakening demand.

U.S. crude [ 43.06    0.43  (+1.01%)] for February delivery was up, after sinking 12.3 percent to $42.63 overnight, its biggest one-day percentage loss since Sept. 24, 2001.

London Brent crude [49.58    0.91  (+1.87%)] rose.

U.S. Energy Information Administration (EIA) data showed crude stockpiles up 6.7 million barrels, more than seven times the 900,000-barrel increase analysts expected.

Prices had gained some support from violence in Gaza, widening natural gas supply disruptions due to a row between Russia and Ukraine, and mounting evidence of OPEC’s compliance with production cuts.

Three rockets fired from Lebanon struck northern Israel on Thursday, slightly wounding two people and prompting the Jewish state to respond with artillery fire, officials said. It was not immediately clear who fired the rockets.

Russia and Ukraine will argue their case to Europe on Thursday in a gas price dispute that is choking off gas flows to European countries.

The dispute has cut heating to tens of thousands of households in Bulgaria and hit supplies as far west as France and Germany as Europe faces freezing temperatures.
 

Dollar, Yen Rise as Stocks, High-Yielders Slip

The dollar and yen rose broadly on Thursday as falling share prices sapped demand for risky investments, while the euro fell as dismal German economic data kept concerns intact about the deteriorating euro zone economy.
The dollar gained versus higher-yielding currencies as ongoing worries about the global economy stung oil prices and pushed commodity currencies like the Australian and New Zealand dollars lower.
This helped the U.S. currency recover some losses suffered in the previous session due to a disastrous reading of U.S. employment, but the dollar fell against the yen, which benefited from risk aversion as European shares fell 0.8 percent in early trade.

Sterling slipped against the dollar ahead of a rate announcement by the Bank of England due at 12 pm London time.

The euro [ 1.3573    -0.007  (-0.51%)    ] had fallen to a session low against the dollar of $1.3536 according to Reuters data, edging towards a three-week low around $1.33 hit earlier in the week.

Selling in the euro picked up following figures showing an unprecedented 10.6 percent month-on-month fall in German exports in November as global demand for cars and other manufactured products have plummeted due to a global recession.

The data comes ahead of a raft of regional figures due later in the day, including economic growth, unemployment and business and consumer sentiment, as well as German industrial orders.

The dollar rose half a percent against a currency basket to 82.550, and rallied roughly 2 percent against the Australian dollar [ 0.7019    -0.0106  (-1.49%)   ] .

The Aussie sold off after a hefty fall in Australian building and trade data reinforced the case for more rate cuts in the country.

Commodity currencies have also come under selling pressure due to falling oil prices, which have taken a hit on the view that a slowing global economy will decrease demand for oil.

This helped to push the New Zealand dollar [  0.5869    -0.0044  (-0.74%)    ] down 1 percent against the greenback.

Despite its gains against most currencies, the dollar [  91.61    -1.03  (-1.11%)   ] fell nearly 1 percent against the yen to a session low of 91.57 yen, according to Reuters data.

ADP jobs report has decreased demand for risky investments, prompting investors to continue unwinding risky yen carry trades, which involved using the low-yielding yen to pick up assets in higher-yielding ones.

High risk aversion was also reflected the bond market, which rallied despite damp demand for new issuance around the world, and pushed the two-year euro zone government bond yield to its lowest since the early 1970s, according to market participants.

Gold steadies as oil stabilises; U.S. data eyed

Gold steadied above $840 an ounce in Europe on Wednesday as oil prices stabilised after a 12 percent slide, and traders awaited key U.S. non-farm payrolls data due on Friday for fresh impetus.

Gold was quoted at $841.45/843.45 at 1020 GMT, against $842.20 an ounce in New York late on Wednesday. U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange were up 80 cents at $842.50.

Platinum edged up to $985/990 an ounce from $972.50 in New York late on Wednesday. The metal has held firm this week despite gold’s fall and a spate of bad news from carmakers, the main buyers of platinum.

Among other precious metals, silver was at $10.98/11.06 against $11.01, while palladium eased to $193.50/198.50 an ounce from $195.
 

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