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Tuesday, November 29, 2022


Just Another Manic Monday

I'm crushing your head - crush, crush!Go Timmy go!

We discussed the details of the Geithner plan in our Weekend Reading post and my take was "On the whole, it's pretty clever."  This morning it seems global investors are in agreement as we have a heck of a pre-market rally in progress so we are having another manic (as opposed to depressive) Monday although, maybe I shouldn't say "just another" as it's been a while.  Manic Mondays were a habit during the rally but have been such a rarity this year that, IF we stay positive, this would only be our second green Monday of the year.

Green Mondays are good.  Once upon a time we had "Merger Mondays" in which some sector or another would fly up on an uber-merger announcement and these announcements often came over the weekend because companies were so busy during the week that it was the only time they had to sit down with lawyers and get a deal done.  Having great Monday's leads to an atmosphere of fear among the bears, who dread going into a weekend with short positions.  This causes them to cover into Friday's close and gives us a positive end to the week, which makes all our charts look pretty and keeps people in a good mood.

Paulson was well aware of this and that's why, in the fall, we had a series of big government announcements over the weekend, aimed at keeping the bears at bay (plus they even banned short selling at one point) but the bears have run rampant over Geithner as he struggles to find his groove in his first 60 days.  Geithner is scheduled to release a briefing at 8:45 but enough details have now been leaked that we're getting a big, early push.

As I mentioned in our special Weekly Wrap-Up, where we reviewed all 43 trade ideas that were posted for the week, we went with selling naked FAS $5 puts for $1.20 because, as I said to members during Friday's chat session: "How many times will you watch in disbelief as it hits $7.50 before you buy some at $5?  You can sell naked Apr $5 puts for $1.20, which should leave you with about $1.10 in margin used for a double and hell yes, we’d be happy to own them at $3.80."

Keep in mind that just because we love our financials when they are down, doesn't mean we don't take the profits when we get a quick bump like this one.  We'll be watching our 10% levels with great interest – it looks like that's about where we'll be opening.  They are Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402.  The Russell has been a great fulcrum to keep our eyes on, as has XLF $8.50 and 29.50 on the Qs so we'll be keeping an eye out for possible breakdowns and, of course, our breakout levels of Dow 7,450, 788 on the S&P, 1,475 on the Nasdaq, 4,950 on the NYSE and 425 on the Russell.  With any luck, we can finally hold a few of those today and we MUST break over and hold this week or we are right back to a long-term bearish trend.

Asia got off to a rockin' start this morning with the Hang Seng flying up to the 5% rule and finishing the day at 13,447, all the way back to their Feb 11th drop-off point.  The Nikkei came off a break and jumped 3.39% to finish at the day's high at 8,215, right back to their 2/9 high.  The Shangai Composite missed the 2.5% rule by 0.09% and finished the day at 267.66, BETTER than their February highs and the Bombay Sensex also hit the 5% rule on the button at 9,424, still 300 points below their 3/10 high with a nice break-out over the 50 dma line that had held them back last week.  The only dark spot in Asia was the Baltic Dry Index dropping off to 1,782 but – shhhhhhhh…  I won't worry about it today if you don't!

Europe is following Asia higher pre-market but is not as happy as either the Asian market's close or the pre-markets in the US as they post modest, 1.5% gains as of 8:30.  The EU markets are nowhere near their 2/9 levels with the CAC just under the 50 dma of 2,866 (380 points below – 13%), the DAX is right on the 50 DMA of 4,182 (506 points below – 12%) and the FTSE still has 2.5% to go just to get to the 50 DMA at 3,998 (335 points below – 8.6% total from 3,884) but they were the leader so it makes sense that the other indices need to catch up a little.

Our man, Trichet pooped the party in Europe this morning, saying (not wrongly) that no new stimulus is needed and instead of pushing new measures, governments around the world should move faster on what they've already announced — referring in part to delays and difficulties in the U.S. government's rescue of its troubled banks. Europe and the U.S. should "now, as efficiently and rapidly as possible, do what has been decided," said Mr. Trichet, "Nothing will really work until the financial sector is back on track and ready to lend on a sustainable basis. I would say exactly the same with the budget. Decisions have been taken; they are very important. Let's do it! Quick implementation, quick disbursement is what is needed."

European leaders contend their more-generous social-welfare states provide a buffer that offsets the need for bigger fiscal boosts. Mr. Trichet also warned that if governments went too deeply into the red, the move could backfire by pushing up long-term interest rates and puncturing public and business confidence.  "To be efficient in rebuilding confidence, you have to demonstrate that you are doing, immediately and audaciously, what is necessary," said Mr. Trichet. "But at the same time, you have also to reassure your own people that you have an exit strategy."

So we have a plan now but the question remains as to whether or not the plan will work.  Several weeks ago, I compared the economic meltdown to an unoccupied car that begins to roll down hill – If you catch it right away, it's possible that you can stop it yourself but, once it gets just a little bit of momentum, it would take several people to stop it and those people run the risk of being squashed.  Once a runaway car (or economy) gathers enough downhill momentum – there's really nothing you can do but watch it crash and then try to go see what can be salvaged from the wreckage.  Have we let things slip too far or is Mr. Trichet right that we already have enough leverage to do the job – if only we can apply it without delay…

Now it's 9 am ant the official plan is out and it's pretty much exactly what we discussed over the weekend.  Our futures have pulled back about 1/3 but still up 2% from Friday's close but, as we did last week, we need to stay unemotional and let our levels be our guide.  We have our Buy List ready to go but we're still a bit cautious and, as I often say to members, if it's a real rally, we have a long, long way to go so we won't miss much watching to see if we can break 7,450 without giving up the floor at 7,402

SU is buying Petro Canada for $15Bn in stock, combining two of Canada's largest oil companies and an Abu Dhabi investment firm is buying 9.1% of Chrysler for $2.65Bn and, of course, we have earnings starting next week.  Existing Home Sales are expected to be an anemic 4.43M for Feb and anything above Jans 4.5M rate may give some relief to that sector but last year Feb had an extra day so tough comps.  Wednesday we get Durable Goods for Feb and those are expected to be down 2.5%, not as bad as Jan's -5.2% but still sad.  New Home Sales for Feb are Weds too with 305K expected (pathetic)  and Thursday is a biggies with the usual 650,000 lost jobs expected and a -6.6% Q4 Final GDP.  I used to think this would not be shocking to the market but the market has gotten stupider this year and does tend to react to 3-month old numbers as if they are news so be very careful on that one. 

We finish this week with Personal Income and Spending for Feb and that should be a bit better than the flat expected and then there's Michigan's March Consumer Sentiment from a state  where the average selling price of a home in Detroit was $7,500 last month.  Earnings this week from SONC, CCL, WSM, JBL, SOLF, CKR, PAYX, RHT, BBY, CAG, DPS, GME, LEN, SCHL, TXI, WTSLA, CHINA, DRYS (Thurs pm), HLYS, LULU and KBH will be very interesting to give us an idea of how bad Q1 was so stay tuned and we'll look into those.  TIF had a nice beat today but WAG missed by a penny.

It looks good but beware irrational exuberance – let's make sure we make our levels before committing too much cash to the bull side of the virtual portfolio.



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It is obvious to all that the outcome of all this is not particularly bullish for any of us. I suppose the fear was so overwhelming that we accepted a bunch of crap as policy for today. The complaints will begin soon. If we have looked over the cliff (as I did on 3/9) and experienced real fear, we should hope for some sort of future. It won’t soon be fabulous, but perhaps it will be adequate. Adequate is a traders paradise, or at least, it always has been.

Good Morning everyone. The UK opened bright enough but is currently in the red. FTSE -0.72% @3924. Dire sales figures from Toyota and Honda. Small rise in the manufacturing service reports but I’m not sure whats driving it down. We certainly didnt have the rally you guys did.

Good Morning Phil, DB & all

Asia Markets :    Tuesday, March 24, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                      8488.30    272.77    3.32%
Hang Seng*                          13447.42    613.91    4.78%
China: DJ Shanghai*              269.28         1.62     0.61%
Seoul Composite*                 1221.70      22.20     1.85%
Bombay Sensex*                   9471.04      47.02      0.50%
Baltic Dry Index                      1773.00        -9.00     -0.51%

*at Close

Asian Stocks Hit 2-Month Highs on US Debt Plan

Asian markets touched two-month highs on Tuesday, with financial stocks among the leaders, as the U.S. government’s plan to absorb toxic debts met with investor approval.

Japan’s Nikkei jumped to a two-month high to close up 3.3 percent with bank shares rising, after details of a U.S. plan to rid the banking sector of bad assets sparked hopes for the stabilization of the financial system.Exporters also gained as the yen fell across the board, hitting a five-month low against the euro and a 4-½ month trough versus the Australian dollar.

South Korea’s KOSPI closed 1.9 percent higher buoyed by news the government had finalized plans to boost spending by 17.7 trillion won ($12.7 billion) this year. The key banking plays remained firm.

Hong Kong stocks extended their gains in the afternoon session. The Hang Seng Index ended 3.4 percent higher.

The Shanghai Composite Index rose 0.6 percent in heavy trade, rising for a seventh day as property and financial shares remained firm, but the index pulled back from a five-week intraday high as profit-taking pressure mounted.

Singapore’s Straits Times Index tracked the region higher to climb 2.5 percent led by 5-6 percent gains in key banking stocks.

Australian shares gave up some of its morning gains to close 0.8 percent, with banks leading the gains on optimism over a U.S. plan to rid bank of toxic assets that had fed a strong rally on Wall Street.

Euro Shares Dip as Commodities, Data Weigh

European stocks dipped early on Tuesday, weighed down by commodity shares and breaking a three-day winning streak after euro zone and UK macro data showed job losses and higher inflation.

The pan-European FTSEurofirst 300 index was down 0.1 percent at 738.76 points. The index is down about 11 percent this year, but has recovered about 14.8 percent since falling to a record low on March 9.

Commodity shares tracked weakness in oil and metal prices. Anglo American, Rio Tinto and BHP Billiton were all down 4.5 to 5.9 percent as copper fell more than 2 percent, while Royal Dutch Shell fell 2.3 percent.

On Monday, the U.S. government offered incentives for private investors to help free banks of up to $1 trillion in toxic assets, helping shares to a massive recovery. However in Europe banks gave up early gains, with Credit Suisse down 2.6 percent after it said it would ask shareholders for the option to raise equity capital. HSBC fell 6 percent on worries about Asian growth.

Shares in Metro dropped 3.7 percent after the world’s fourth-largest retailer reported fourth-quarter results that met analysts’ forecasts, but said it saw 2009 sales falling significantly short of its medium-term goal.

British consumer price inflation rose unexpectedly to 3.2 percent in February, while key figures from euro zone services and manufacturing activity showed the economy’s contraction eased a bit, while companies continue to slash jobs.

Across Europe, the FTSE 100 index was down 1.2 percent, Germany’s DAX was up 0.1 percent and France’s CAC 40 lost 0.2 percent.

Oil Retreats Below $54 After 3% Surge

Oil edged down towards $53 on Tuesday, as investors took profits after a 3 percent rise in the previous session that was supported by a surge on global stock markets on a new U.S. banking rescue plan.

U.S. light crude [ 53.37    -0.43  (-0.8%)] for May delivery fell, after settling at $53.80, up $1.73 on Monday.
London Brent crude [ 52.89    -0.58  (-1.08%)] was down.

U.S. oil fundamentals have yet to show significant improvements, with a preliminary Reuters poll forecasting a 1.1 million barrels rise in U.S. crude oil inventories last week with imports on an upswing. Gasoline supplies were projected to be down by a moderate 200,000 barrels and distillate supplies, which include heating oil and diesel, were expected to be little changed. Weekly inventory reports to be released by industry group American Petroleum Institute on Tuesday at 4:30 p.m. New York time.

China’s refined fuel stockpiles rose 11 percent in February despite a sharp post-holiday rebound in domestic sales, media reported on Tuesday, suggesting that demand in the world’s No. 2 consumer may be weaker than thought.

Nigerian oil unions on Tuesday called off plans for a workers’ strike this week after the government promised to do more to improve security in the restive Niger Delta.

Yen Falls on US Bank Plan, Dollar Index Edges Up

The yen fell to multi-month lows on Tuesday as optimism about a U.S. plan to rid banks’ balance sheets of toxic assets continued to drive financial markets and boost riskier investments like stocks. The dollar consolidation and profit taking on the euro on Tuesday showed currency traders trimming some of the bets built up in recent sessions as they waited to see if equities could extend their sharp gains from the previous session.

The dollar [98.19    1.27  (+1.31%)    ] was up on the day versus the yen, as was the euro [133.12    0.98  (+0.74%)    ] , having earlier struck 134.36 yen on trading platform EBS, its highest levels since October.

The euro [ 1.3552    -0.0078  (-0.57%)   ] was slightly lower against the dollar, down around a cent and a half from $1.3739 touched last week. This pushed the dollar index up 0.2 percent to 83.60.

The dollar took heart, reversing some of the losses it suffered after the Fed said last week it will boost the money supply but buying a range of assets, including Treasuries.

In a sign of growing debate over the dollar’s status as the dominant global reserve currency, Chinese central bank chief Zhou Xiaochuan said on Monday that Special Drawing Rights allocated by the International Monetary Fund could be used as a super- sovereign reserve currency, eventually displacing the dollar.

Gold rises, ETF dips from record

Gold was at $942 per ounce at 0606 GMT, up 0.5 percent from New York’s  notional close of $937.15 on Monday, when it fell more than 1 percent as investors moved away from safe-haven investments.

The world’s largest gold-backed ETF, the SPDR Gold TrustGLD, said its holdings nudged down about a third of a tonne to 1,114.29 tonnes on March 23 from their record high 1,114.60 tonnes.

Fed’s Evans:  US 1Q GDP to show "Quite A Severe Contraction".

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