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Wednesday, April 17, 2024

GDPhursday – Big Chart Review

Same as it ever was.

It's a very sad day in the market when I can send out an Alert at 9:48 that pretty much lays out the whole day's action (move up to 2.5%, pullback to 2%, failure there leading to 1.25% finish).  In fact, my comment to members was: "the closer we get to yesterday's highs, the more nervous I am that we get about a 2% pullback on profit taking so don't be the last person to take gains off the table!"  We had one mother of stick save into the close but all it did was get us back to my levels so now we'll see if part tow of my prediction pans out and we fall all the way back to test yesterday's lows again on the GDP and Jobs data.

We are still overbought and the VIX certainly isn't complacent at 42.25 but the buyers still are as Da Boyz sell the hell out of the markets from noon until 2 then start buying again for an hour and then have CNBC tell the retail investors that the sell-off was all because Tim Geithner "accidentally" said that a global currency wasn't a terrible idea.  Good comedy is all about timing and teamwork.  Geithner floated his one-liner during a Foreign Relations Council meeting and the dollar went into free-fall – that was the set-up.  Then, after the damage was done, his long-time comedy partner (they both worked in Clinton's Treasury) and now Fund manager, Roger Altman, pretended to be a regular member of the audience so they could close the conference with this zinger:

"I'd like to ask one final question, in effect on behalf of the market," said Altman, "Let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world's key reserve currency?"  Geithner responded: "I think the dollar remains the world's dominant reserve currency."  See, all better!  Not since the great comedy team of Rice and Bush have we had a policy duo that could keep the audience turning in circles like this trying to figure out what the hell they are saying. 

If you thought the markets were jacked up at the end of the day, you should see the pump job they did on the futures once the markets closed.  The Dow was driven all the way up to 7,794 at 2:45 am in a buying frenzy of dozens of contracts while the S&P peaked out at about 822 as literally hundreds of traders must have wanted to buy calls at that price at 2:45 in the morning US time ahead of the GDP and Jobs data.  Why would someone want to waste 2% buying fairly iliquid S&P futures 8 hours ahead of the US open?  Mainly they want to do it when they intend to dump S&P shares into the open so the higher they can push the open, the better.  This is almost a daily occurrence on the NYMEX, where you can buy almost every day at 1:30 and sell the next morning for a profit

Perhaps we won't lose 650,000 jobs this week.  Perhaps our GDP is BTE.  Perhaps Geithner will announce a toxic asset bailout pre-market…  Certainly there are several events that could be bullish and we went into the close just 55% bearish as we weren't positive that we'd get a big sell-off but it does seem a little more likely than rallying off the worst GDP report in decades.  It didn't hurt that we had a great day for market timing.  Our 10:02 alert was: "The dollar just fell hard against the Euro for some reason – another positive for the markets so let's be very disappointed if we can't make and hold 2.5% now" and, at 1:27, I called it dead saying: "Doesn't look good to me for holding this spot – not without a stimulus of some sort" just ahead of a 160-point drop. 

We were playing around with the financials as momentum plays but generally, we made our bullish bets last week (see Weekend Wrap-up) and we hit our Buy List on Thursday, Friday and Monday so now we're just along for the ride.  The play of the day yesterday was at 3:07, when I called the bottom – saying to members: "They’ll need a pretty big stick to save this day!  790 is worth a try on the S&P futures now, with a stop at 788."  That was a perfect entry and, as I mentioned, the S&P Futures topped out a ridiculous 34 points higher early this morning (the futures don't quite trade exactly where the S&P itself it but close).  Each S&P futures contract (the minis) pays $12.50 per .25 move in the S&P or $50 per tick – lots of fun on a slow day!   As I'm writing this right now (8:10am) the Nas Futures are 1,254 and make a great short at $20 per tick with a $200 stop and the S&P is now back to 820 and make a fun short too!  Generally, in the futures, we try to pick an overhead resistance point and look for a 4 tick down move where we set a 1.5 tick trailing stop.  There's more to it, of course but that's the basics.

So that was our day – lots of fun waiting for our ship, which already came in, to crash and burn on the rocks.  We will be pleasantly surprised if all goes well today and we have lots and lots of things we'd like to buy if this rally gets serious but, so far, we're not even at our dollar-adjusted breakout levels.  Also, from a Big Chart perspective, things may have gotten a lot better since our March 6th Review but they are still a long way from great: 

    3 Week 2007 % 50% March % From
Index Current Move High Loss Down Low Low
Dow 7,749 1,123     14,021 45% 7,011 6,469 20%
Transports 1,473 217       3,114 53% 1,557 1,233 19%
S&P 813 130       1,576 48% 788 666 22%
NYSE 5,127 843     10,387 51% 5,194 4,181 23%
Nasdaq 1,528 235       2,861 47% 1,431 1,265 21%
SOX 231 36          549 58% 275 188 23%
Russell 426 75          856 50% 428 342 25%
Hang Seng 14,114 2,770     32,000 56% 16,000 11,344 24%
Shanghai 263 51          588 55% 294 234 12%
Nikkei 8,632 1,546     18,300 53% 9,150 7,021 23%
BSE (India) 10,003 1,843     21,200 53% 10,600 8,054 24%
DAX 4,241 622       8,151 48% 4,076 3,588 18%
CAC 40 2,896 408       6,168 53% 3,084 2,465 17%
FTSE 3,892 417       6,754 42% 3,377 3,460 12%

We are still down 50% on almost every index, having pulled back from DOOM at the 60% off line last month.  We needed at better than 20% bounce to get bullish and that would be the 50% line, which we are still waiting to cross on all but 5 of the indexes we watch.  When your index is down to 40% of it's high, a 20% bounce off the bottom is only 8% of your original total coming back.  We need a 12% retrace of the 60% we lost to be bullish, winding us up at -48% and, by that standard – only the Dow, Nasdaq, DAX and FTSE are hitting levels we can hang our hats on.  So 20% of 60 is 12 which is  30% of 40 – that's what constitutes a real rally, not 20% off the bottom when you are down 60% (8 out of your original 100).  That is the faulty media logic that leads them to tell you a .50 move on a financial that fell from $30 to $1 is a "rally."

Notice the Russell is at the hyper-critical 50% line and needs to take out 428 to join the party.  The NYSE should be next at 5,194 and the Transports already made a nice run at 1,557 last week but were soundly rejected by the declining 50 dma, which is not a good signal to Dow theorists.  It is not good that Asia is still closer to 55% off the highs than 50% and this chart includes this morning's trading.  One has to wonder how much of our own "progress" reflects end of quarter "window dressing" as well.  So color me skeptical at the moment – it's been a great rally but we have a long way to go before we hit a comfortable new floor.

  

It's 9am now and the GDP was a little bit better – revised up to "only" -6.3%, which is revised down from the earlier -6.2% estimate but those always-reliable experts put out expectations of -6.6% so we have a relief rally on those numbers.  Total jobless claims rose 652,000 and over 5.5M people are now collecting unemployment – a new record!  That should push the official unemployment figure up to about 8.1% so we have that report to look forward to.  We got a little sell-off on the announcement but, at 9:06, we're still very surprisingly holding onto most of the futures pump.  There won't be much else to do but cover the rest of our long puts and run with the bulls if the Dow can stay above 7,800, which is where the open indicates but I'll believe it after I see it.

Be very careful out there – lots of shenanigans going on this week.

 

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