3.7 C
New York
Tuesday, November 29, 2022


Tempting Tuesday

Wow, talk about a round-trip.

All that work last week and here we are, right back at last Monday's close with Tuesday's open looking like last Tuesday's open – which was a gap up that led to a flatline of a day with a sell-off into the close.  In our first alert of the day last Tuesday, we were watching for breakouts at: Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420 – the same levels we blew yesterday.  We were also cautious of a possible retrace to the downside, our 10% (off the non-spike bottom) levels of Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402.  That sure does make today easy as we're right between the two again as our stock market roller coaster makes another loop around the tracks.

My additional commentary in that same Member Alert was: "As usual, the Russell is going to be our best indicator, so over 425 is good, 420 is dangerous and 402 is very bad.  Also, note in the morning post that if we adjust our breakout targets (which were set two weeks ago) to compensate for the 7.5% drop in the dollar we still have a ways to go before we can relax and go long:  That's going to be Dow 8,000, S&P 847, Nas 1,585, NYSE 5,321 and Russell 456."  Keeping an eye on those levels last week allowed us to get out right at the top and flip bearish, where we rode out the 7.5% pullback (so far).  We went into yesterday's close 55% bearish – after enjoying the ride down, we're ready for a change but not yet willing to throw caution into the wind.  The adjustment to bullish is easy, we simply sell more short puts against our long puts and we hope to have good reason to add to our 1/2 covers this morning but it will take more than the 1% bump I'm seeing in pre-markets (7am) to get us to saddle back up.

As usual, we made our bullish plays yesterday, while everyone else was selling.  We once again got our $5 FAS entry and selling the naked $5 puts for $1 means our worst-case scenario is FAS is put to us for net $4 – that's something we can live with long-term!  We were too early trying some SPY calls but we got a nice entry (we hope) selling X puts, a fun C spread and even a play on GM calls, where we played the $3s for .29 ahead of Obama's talk.  We were looking for .50 and we got .47 – A 62% gain is nothing to complain about for an hour's work!

We flipped bearish again at 1:08, when we couldn't hold our 788 target on the S&P and we drifted into the close from there with a quick dip and recovery that came out just .47 under the 788 target – not bad for levels we've been watching for a week!  As you can see from David Fry's chart, we really can't afford ANY downward follow-through with that 50 dma right at 788 NEEDING to act like serious support because it would look A LOT more natural for the S&P to double test the bottom (target box) before mounting a serious rally.  Since this 3-week leg just happens to correspond with earnings season – you can forgive us for hedging to the downside just a bit!

Speaking of earnings – here's a good one:  Zero Hedge claims to have "inside information" from a trader who claims essentially that the "good earnings" claimed by C, BAC et al that led to the rally of March 10th were nothing more than a gift from the Treasury, funneled through AIG in the form of ridiculously profitable counter-party trades that made Billions for the banks which AIG turned around and wrote off as their stupefying losses.  If true, it's a hell of a scandal and it's also a great reason to load up on FAZ, which fell from over $100 on March 9th to as low as $20, closing yesterday at $24.64.  No matter what you think of the financials, I bet you can sleep better through earnings season with the Oct $24s for $11 backstopping your bullish financial plays.

Asia was mixed this morning with the Nikkei falling 1.5% but the Hang Seng, Shanghai and Bombay all put up about a point – which is far less than exciting when put into perspective against the drop, as our 1.5% bounce will be this morning if that's all we get.  What's scary about the Nikkei is they jammed the Dollar all the way back to 98.5 Yen, which should have thrilled the exporters and they still dropped 1.5% on the session despite continued stimulus talk.  Perhaps Japanese traders have their eyes on the Baltic Dry Index, which fell yet another 2% on the day, now 28% off the 3/10 high.

Europe is off to a happy start this morning, up over 2% across the board as British Retailer, Marks and Spencer, beat expectation with "only" a 4.2% drop in sales.  Things in the UK are bad enough that that is considered something to celebrate…  We're going to be back to watching our EU levels from last week to see what sticks:   FTSE 3,880, DAX 4,200 and CAC 2,900 – only the FTSE is likely to test at the moment, up 3.3% for the day so far.  The S&P put Ireland on credit watch but – shhhhhh!

Oil got a nice boost from Moscow this morning as Russia's Energy Minister, Igor Sechin said Russia's resources "are a God-given good that should be used effectively," he said in his first major interview with a foreign media outlet. "Somebody is always wanting to take them away."  He supports "coordinating actions" with OPEC because of the shared interest in lifting prices. He said Moscow isn't in a position to mandate lower production, but Russian oil companies will curb output this year as falling prices cut into their ability to produce.  That was enough to send oil up 3% in pre-market trading, back to test $50 after touching our target $48.50 yesterday.

That should give a nice pop to the OIH and XLE and XLF ought to retest $8.50, which will be a major pass/fail for the morning rally.  The quarter ends today and we'll see how things end up but we're not going to get all excited about a bounce this morning until we start making some real progress.  In addition to Ireland, the S&P also issued a warning on Hungary that is no surprise but all that could put pressure on the Euro and another dollar surge this week could be a real rally killer for our markets.   Don't forget there's a huge G-20 protest scheduled for 1pm tomorrow at the Bank of England (just ahead of US market's open).

The Case-Shiller Home Price Index showed 19% declines for January with average home prices in the US back to where they were in 2003.  This is worse than the -18.6% expected  but not really a market mover as no one expected much from January.  Chicago PMI is out at 9:45 and Consumer Confidence will be at 10 – both are March readings and both are expected to be awful.  Tomorrow morning we also get the ADP Report and that's been a market mover and then we get Construction Spending, Pending Home Sales and ISM at 10 so a very exciting day tomorrow at least.

Speaking of Chicago, the Sun-Times Media Group filed for Chapter 11 this morning.  This is a very big deal as the Sun-Times publishes 400 papers worldwide…




Notify of
Inline Feedbacks
View all comments

Asia Markets :    Wednesday, April 01, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                         8351.91    242.38     2.99%
Hang Seng*                             13519.54     -56.48    -0.42%
China: DJ Shanghai*                 280.19         3.94      1.43%
Seoul Composite*                    1233.36      27.10      2.25%
Bombay Sensex                        9901.99    193.49      1.99%
Baltic Dry Index                          1615.00     -31.00     -1.96%

*at Close

Asian Markets Extend Rally But Caution Sets In

Asian markets started the new quarter with more gains after an impressive performance in March on expectations the frail global economy is about to bottom out and hopes the financial system was on the mend. However, the safe-haven yen also rose on concerns about the fate of General Motors and Chrysler, in a possible sign that more bad news could spur investors to ditch riskier assets just as quickly as they piled in on March. Evidence of economic weakness abound. Data on Wednesday showed Japanese business confidence tumbled to a record low, while reports on Tuesday showed plunging U.S. home prices and consumer confidence holding at just above record lows.

Japan’s Nikkei closed 3 percent higher, with carmakers such as Honda Motor climbing on relief that a solution for struggling U.S. automakers could be near, prompting bargain hunting.

South Korea’s KOSPI was finished 2.3 percent higher led by banking and auto issues including KB Financial Group and Hyundai Motor, with news of a record high trade surplus in March lending further help.

Australian stocks eased 0.1 percent, down for a third straight day and pressured by drops in Macquarie Group and Rio Tinto, but banks gained on hopes of an interest rate cut next week. The market oscillated between positive and negative territory during the day, reflecting a lack of confidence, and ignored Wall Street’s gains on Tuesday.

Hong Kong shares dropped 0.4 percent after starting on a firm note. Bank of China, the country’s largest foreign exchange lender, said it would raise its stake, currently at 65.77 percent, in its unit by market purchases over the next 12 months.

Singapore’s Straits Times Index closed 2.3 percent higher, led by financials.

China’s Shanghai Composite Index climbed nearly 1.5 percent to test major chart resistance in heavy trade, buoyed by hopes for an economic recovery and an ample supply of funds for short-term speculation in shares.

The BSE Sensex closed at provisional 9,914 higher by 206.30 points or 2.12 per cent from the previous close.  After an extremely choppy session, Indian stock market ended Wednesday’s trade in a positive terrain. Unexpectedly, traders were seen taking long positions in the frontline stocks despite demonstration of mix cues from global markets.

Euro Stocks Dragged Down Ahead of G20

European shares were lower in early trade on Wednesday, weighed by banks and commodities, with investors cautious ahead of a summit of G20 leaders in London.

The pan-European FTSEurofirst 300 index of top shares was down 1.1 percent at 725.46 points, following a 3.5 percent rise in the previous session.

"Investors are looking at the G20 for any commitment… like government expenditure, or more importantly, getting the banking system working properly so that there is more lending. Everyone is on egg shells waiting to see what happens with G20. Everything … is now predicated on what comes out of G20," said Justin Urquhart Stewart, director at Seven Investment Management.

Banking stocks weighed heavily on the index, although stocks within the sector were mixed. Societe Generale lost 4.3 percent after the French bank said on Tuesday it expects additional writedowns of risky assets in the first quarter "at (a) manageable level." Lloyds Banking Group, HSBC, Banco Santander were down 1.7-6.5 percent. Swiss bank giant UBS gained 0.7 percent after the group said it had appointed former Credit Suisse executive Ulrich Koerner as its new chief operating officer.

Energy stocks fell as crude lost 2.8 percent. BG Group, BP, Royal Dutch Shell and Total were down 2.4-3.1 percent. Goldman Sachs cut BP to "sell" from "neutral."

Miners were in the doldrums as copper slipped 2.2 percent.Anglo American lost 6.8 percent after the group said on Tuesday it had sent out a request for proposals to banks for a loan of about $2 billion, three banking sources close to the deal said. Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, and Rio Tinto were 3.5-5.5 percent lower. Lafarge was down 4.4 percent after the world’s biggest cement maker launched a 1.5 billion euro rights issue at a subscription price of 16.65 euros, compared with Tuesday’s closing price of 33.89 euros.

Across Europe, the FTSE 100 index was down 1.8 percent, Germany’s DAX was 1.7 percent lower and France’s CAC 40 slipped 1.9 percent.

Oil Falls Toward $48 on Prospect of Rising Inventories

Oil fell more than 2 percent to below $49 on Wednesday, pressured by weak economic data and the prospect of a further rise in U.S. crude inventories, which are already at their highest since 1993.

U.S crude [ 48.27    -1.39  (-2.8%)] were down, eroding Tuesday’s 2.6 percent gain.
London Brent crude [  48.28    -0.95  (-1.93%)] fell.

Crude futures on Tuesday rose in tandem with Wall Street, which was headed for its best month in six years, despite bleak data showing U.S. house prices had plunged at a record pace of 19 percent in January and consumer confidence held just above record lows in March.

Business confidence in Japan, the world’s second largest economy and the third largest oil consumer, tumbled at its fastest pace ever in the first quarter to the worst on record, the Bank of Japan’s tankan corporate survey showed.

Oil prices could reach $75 per barrel in 2009 despite a the economic crisis, OPEC president Angola said on Monday, adding that compliance by the 12-member group with the agreed cuts remained at around 80 percent.

Dollar Underpinned on US Carmakers’ Fate

The dollar was supported on Wednesday as uncertainty over the fate of U.S. carmakers and falling share prices prompted investors to seek perceived safer assets and shun high yielders. The euro backtracked from sharp gains the previous day, but was off lows as European share prices pared some losses after falling 1.0 percent in early trade.

The euro [1.3237    -0.0012  (-0.09%)   ] was flat versus the dollar. Against the yen, the euro [ 131.15    0.04  (+0.03%)   ] was lower.

The dollar index, a gauge of the greenback’s performance against six major currencies, rose 0.3 percent to 85.771.

Separate data showed the pace of decline in euro zone factory activity eased slightly in March. The Markit Eurozone Manufacturing purchasing managers’ index rose to 33.9 for March from 33.5 in February. That was revised down from a flash reading of 34.0 and forecasts for an unchanged figure.

The dollar had earlier risen to 99.48 yen, the highest since March 5, after the Bank of Japan’s tankan survey showed confidence among Japan’s big manufacturers fell to a record low of minus 58, down 34 points from the previous survey and the largest drop on record.

The dollar [ 99.04    0.13  (+0.13%)   ] was slightly higher against the yen.

Reduced investor risk appetite sent higher-yielding currencies such as the Australian dollar lower, which was also dented by data showing Australian retail sales fell by the most in nine years, adding to the case for a cut in interest rates next week.

The New Zealand dollar extended a big slide after New Zealand’s central bank warned on Wednesday that a recent rise in market interest rates was unwarranted and out of sync with its view of the economy.

Gold steady as traders eye G20 for direction

Gold was steady in Europe on Wednesday as traders awaited direction from this week’s G20 summit in London, with the firmer dollar versus the euro curbing interest in the precious metal. Bullion ended the first quarter of the year up 4 percent, boosted by fears measures to stimulate the global economy would lead to a rise in inflation.

Gold was little changed at $919.30/921.40 an ounce at 1007 GMT from $917.15 late in New York on Tuesday. Trading is expected to be muted ahead of Thursday’s meeting of G20 leaders.

Traders said gold’s failure to build on the gains it posted last quarter on fears over the inflation outlook and strong inflows into exchange-traded funds such as New York’s SPDR Gold Trust is also weighing on prices.

The European Central Bank said it completed the sale of 35.5 tons of gold on Tuesday. However, the news had little impact on price.

The other precious metals were little changed. Platinum was at $1,123/1,131 an ounce from $1,123.50, while palladium was at $215/218 an ounce, against $213.50.

Silver was steady at $12.93/13.00 an ounce against $12.93 late in New York on Tuesday, awaiting direction from gold. Silver prices rose 14 percent in the first quarter.

phil what are the oil etf’s-thank you

dig dug? think i found them

if you were to want to be bearish overnight, but did not want to do an option (maybe because you wanted to jump out right after a bad ADP, like today) are you using the BGZ or another leveraged play?

Stay Connected


Latest Articles

Would love your thoughts, please comment.x