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Saturday, February 24, 2024

Watch Out Wednesday – Retail Edition

Wednesday's of expiration weeks are usually flat, Thursday's usually down.

But what constitutes flat when the market is jammed up 200 points in the afternoon and gives back 1/3 into the close?  We had a fabulous day as our put plays from the morning post were spectacular:  I said USO $34 puts for about $1 and they opened at $1.35, made a quick 20% and finished at $1.50 (up 11%).  FSLR $190 puts opened right at our $2.95 target and shot up to $6 (up 100%) and finished the day at $4.40 (up 49%).  FAZ opened exactly at my $4.95 target and ran up to $5.83 (up 17%) and finished the day at $5.41 (up 9%), which isn't bad for a stock and, of course the hedged entries worked perfectly.  Pretty impressive isn't it?  I know some services that have to pick through a month of selections to find 3 winners like this and here they were for free yesterday.  And those are just the free picks I saw pre-market!  We did even better once the market opened and we could see what was happening in Member Chat.

This would be a good time for my members to make sure they referred at least one friend this month in order to keep the bonus 20% discount we gave them for May.  Even trial PSW Report Members can lock in a future 20% discount by making a May referral.  Just go to your account link and send an Email to a friend – it's not hard!  If you are not already a member, use this link to sign up for a free trial of our Report Membership (no CC required).

Going to cash kept us flexible and able to take advantage of the wild market swings.  We added FSLR $185 puts at $2 right out of the gate in our 9:42 Alert and those flew up to $3.75 by 1pm but we got cautious on shorts at 10:47 when our levels seemed to be holding.  AMZN looked ripe for a fall at 11:30 and the $75 puts gave us a quick 20% an hour later (right on target) and 3 minutes later we went for BIDU $230 puts for $2.30, which topped out at $2.75 at 1pm.  We'll have to wait for inventories to see if our XOM $70 puts for .70 pay off.  FSLR was doing so well I had to warn members not to be greedy at 12:37 and, at 1:42, I called a full market turn by going full cover on our long DIA puts, selling the May $85 puts for $1.65 which we later took off the table at $1.15 (up 43%) leaving us pretty much all bearish into the close.  We did a quickie (20%) on the POT $100 puts and I like them again at $1.90 this morning and we got stopped out of some DIA puts that I almost wish we had held onto overnight but our goal was to make quick hits and get out, something we get to do every expiration week as the premiums come down far enough to make day trading contracts interesting.

We get Retail Sales at 8:30 this morning and the expectations are high for a 0% decrease in sales vs. -1.2% in March.  Since gasoline rose 25% during the month, costing American consumers $10Bn extra dollars on gas alone – it is very possible that we hit that target.  It's an interesting dynamic that we can effectively force consumers to spend more anytime we want to by simply raising gas and food prices and those are then considered a "positive" in both the Retail Sales Reports and the GDP, as if the actual consumers benefit from higher commodity prices.  Again, we seem to have learned nothing at all from the last bubble and crash…

342,038 American families learned something last month.  They learned that the bank was foreclosing on their homes.  That's right 1 out of ever 374 US homes got a foreclosure notice in April.  On an annualized basis, that's one of every 31 homes so SOMEONE in your neighborhood is being foreclosed on this year, this is an epidemic that is spreading a hell of a lot faster than swine flu and it will infect over 3.4M families with an average of 3 people per household so 10M more people will be out on the streets in 2009 and possibly out of the consumer pool.  "April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high."  The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. "We had been predicting 3.4 million filings for the year," he said, "but we'll blow those numbers out of the water."

This must be that rally that Cramer is telling us to invest in!  Not helping, of course, is the steady erosion of home prices. The National Association of Realtors reported record home price losses Tuesday. "The home price decline will lead to more foreclosures," said Mike Larson, a real estate analyst for Weiss Research.  The loss of home values put many more mortgage borrowers underwater, meaning they owe more on their loans than their homes are worth. That increases foreclosure rates in two ways: Underwater borrowers have no home equity to draw on should to pay for unexpected expenses such as big medical bills or major car or home repairs. That's makes them more likely to miss payments. And when home values fall far below mortgage balances, homeowners often walk away from their loans.  "There has been much more 'deed-in-lieu-of foreclosure' activity lately," said Sharga. This is a transaction in which borrowers simply tell their banks that they're not going to pay their mortgage and hand back their keys, and deeds, to their lenders.  "People are making the rational financial decision to walk away from underwater homes," he said. 

Speaking of evil market manipulating crooks – Cramer helped goose the markets yesterday by dropping the rumor in his 2:30 appearance on CNBC that (3:40 in on video) "I hear that April is up NICELY (for GOOG) for the on-line business…  I think the web had a very strong month in this country in April."  That was enough to send GOOG back over $400 and the whole Nas perked up and boosted the markets but what I said to members at 2:58 was: "Cramer spiked the Qs from 33.65 to 34.15 in 5 mins on nothing!  He cited no study, no evidence – just a comment he makes and the markets started flying – too coordinated to be a coincidence so I imagine he just did a favor for a hedge fund buddy who’s trying to get out of GOOG and other tech so let’s watch for a hard sell-off in all the things that just spiked up into the close."  You can see from GOOG's volume action into the close (after Cramer's 2:30 comment) that someone was jamming every share they could down the throats of the sheeple who Cramer herded into the stock with his well-timed BS.

Then, as we expected, Cramer goes on his regular show at 6 pm and uses the rally that he started by rumor-mongering (and I see no evidence whatsoever backing Cramer's claims on GOOG or the web having a great April) to "prove" that his buy on the dip thesis is correct – driving more of his sheeple into BK and ADP for the slaughter as he tries to convince his viewers to scoop up stocks that have had dilutive secondary offerings, a move that benefits (surprise!) Cramer's hedge fund buddies, who get in early on these deals and need fresh suckers to dump shares onto. 

Asia was mixed this morning with the Hang Seng giving up half a point but Shanghai making it up and the Nikkei up half a point despite Japan logging a 48.8% drop in their trade surplus.  India gave up 1.1% but not bad after yesterday's gains and the Baltic Dry Index gained 1.7% and got back over 2,250 BUT I have some bad news there.  The BDI measures the rates charged by shippers and, ordinarily, that is a measure of total demand for goods shipped but it turns out that an artificial shortage of ships has been created as shippers have "parked" 735 cargo ships off Singapore Harbor according to the AIS Live tracking service of Lloyd’s Register-Fairplay Research.  So, just like China's stockpiling of copper gave us false demand signals, the mothballing of 1/3 of the world's cargo ships has been making the demand for goods seem more robust than it actually is.  The cost of shipping a 40-foot steel container full of merchandise from southern China to northern Europe tumbled from $1,400 plus fuel charges a year ago to as little as $150 early this year, before rebounding to around $300, which is still below the cost of providing the service, said Neil Dekker, a container industry forecaster at Drewry Shipping Consultants in London.

Vessels have flocked to Singapore because it has few storms, excellent ship repair teams, cheap fuel from its own refinery and, most important, proximity to Asian ports that might eventually have cargo to ship.  The gathering of so many freighters “is extraordinary,” said Christopher Pålsson, a senior consultant at Lloyd’s Register-Fairplay Research, the consulting division of Lloyd’s Register-Fairplay. “We have probably not witnessed anything like this since the early 1980s,” during the last big bust in the global shipping industry. Ships are anchoring at other ports around the world, too. There were 150 vessels in and around the Straits of Gibraltar on Monday, and 300 around Rotterdam, the Netherlands, according to the AIS Live tracking service.

Europe is now well off this morning, down around 2% as the morning "rally" was based entirely on energy companies and that was based on $60 oil which quickly evaporated once the commodity actually started trading and the crooks who pumped it up in pre-market could no longer jack up the prices on low volume (cough, Goldman, cough, cough).  We shorted XOM into the close yesterday and I warned members that was going to be an all or nothing trade into the inventory reports and it does look like we're going to have it all this morning so congrats to those who shorted that joke of a dinosaur.  XOM is trading at $70, which is down 17% from their average price of $85 per share last quarter but oil (the stuff they sell), EVEN AT $60 PER BARREL, is down 50% from last year's Q2 average.  Gas is also down 50% and XOM investors are lunatics if they think XOM trimmed costs 50% to match.  The only reason XOM kept putting up good numbers was their massive stock buybacks and XOM wasted $66Bn in 2007 and 2008 buying their own stock at an average price of $80 so, even at $70 – that's $8.25Bn down the drain but, when reality hits the pricing of this stock, you can expect XOM to have flushed more than $20Bn into buying their own overpriced stock rather than investing it in something productive for the long-term.

What other fun news do we have?  Well, the EU figured out how to make money – they fined INTC $1.45Bn for monopoly abuse and demanded Intel change their practices going forward.  Germany is allowing banks to remove those pesky toxic assets from their balance sheets – much like foreclosure notices, maybe if people pretend they are not there they will go away!  What else can you expect from the country that invented fairy tales?  The BOE issued a statement that pretty much said they have no idea what is going to happen and neither does supermarket giant, Sainsbury's, who sold more product but had a 12% drop in net profit as customers (surprise) gravitated towards sale items.  Overall, Industrial Production in the EU dropped at a record pace in March, dropping another 2% in a month and now down 20.2% since last March.  Projections were for a 1.2% decline so much worse than expected. "The Euro zone industrial production figures for March remove any lingering doubt that first-quarter real GDP, due out on Friday, will show an even steeper decline than the 1.6% reported for the fourth quarter of 2008," said Martin van Vliet, European economist for ING Bank.  So we have that to look forward to – Quick Cramer, there's a sale on BP!

The big news this morning is no surprise to our members, who went to cash already.  Retail sales were a huge miss, down 0.4% for April AND March was revised down to -1.3%.  Consumer spending is 70% of the GDP and our GDP would have been far worse than -6.6% in Q1 had it not been for a 2.2% INCREASE in consumer spending that quarter.  Starting Q2 off with a negative number is double plus ungood.  Remember the EXCUSE for a poor March was a late Easter and April was going to be the good number….  Despite the massive rise in the price of gasoline, gas sales were down 2.3% indicating demand destruction is proceeding at a rapid pace.  Import prices were up 1.6% last month, more than double the 0.7% increase forecast by the same idiot economists who tell you there is no inflation – no wonder the BOE is confused!

As we expected, oil is sucking all the available dollars out of consumers pockets, forcing them to cut back on other things to pay for oil.  The administration, as well as the rest of the world governments need to stop pretending that $60 oil is anything but BAD for the global economy and they need to do something about it

It's going to be a fun day for us as this is what we expected but let's be careful out there as you never know when some idiot will pop up on CNBC, drop a false rumor and say BUYBUYBUY so the poor suckers watching can turn over the last of their savings to the market manipulators…

 

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