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Friday, April 12, 2024

Atomic Testing Tuesday

Welcome back everyone! 

I hope you all had a nice holiday weekend.  PSW provided the Kindle crowd with some great beach reading with and update of our now $104,340 Virtual Portfolio, a 3-part series called "Hedging Your Way To Healthy Dividends" and our very timely "How To Vacation-Proof Your Virtual Portfolio" with an on-line lesson from Option Sage's Market Tamers.  All this sudden interest in North Korea's nuclear test didn't catch us unaware as Tyler reported on this Sunday night!.  Hey, the markets never sleep and neither do we!  

36 hours later, the North Korea nuclear test is still the top story and global markets are down and the dollar is bouncing as a flight to safety BUT IT'S NOT NEWS…  Come on people – this has been going on for more than 15 years with these guys, are we really going to freak out every single time we hear that North Korea has nuclear capabilities? REALLY???  Hey, I can write tomorrow's fear headlines today:  Iran doesn't like us, the Middle East may erupt in violence, the Taliban are still a threat.  Oops, looks like I got scooped on that last one by Defense Secretary Robert Gates, who decided that this weekend would be a good time to inform us that "the momentum in Afghanistan is with the Taliban, who are inflicting heavy U.S. casualties and hold de facto control of swaths of the country.

At the suggestion of some of his staff, Mr. Gates has begun referring to himself as the "secretary of war," saying that shows he and his department have no higher priority than the conflicts in Iraq and Afghanistan.  "If people begin to absorb the fact that we've got several dozen very dangerous terrorists in our jails right now…maybe a little greater perspective would be brought to the issue," he said.  Do not make the mistake of assuming anything Gates says is not carefully planned and coordinated – he was previously the director of the CIA, just like Poppa Bush (who he served under)!

We have been playing for the dollar bounce over the weekend so this is just great for our oil shorts as well as our overall market posture, as we were looking for another catalyst to push us to a lower level test and last week's Cheney/Obama virtual debate was just a warm-up for this weekend's fright-fest, which sure has caused damage in Asia as well as early European trading but probably won't be enough to keep US equities down without some bad data to back it up.  According to Briefing.com, we have a pretty big week ahead of us:

Date ET Release For Actual Briefing.com Consensus Prior Revised From
May 26 09:00 S&P/CaseShiller Home Price Index Mar   NA -18.4% -18.63%  
May 26 10:00 Consumer Confidence May   43.0 42.0 39.2  
May 27 10:00 Existing Home Sales Apr   4.65M 4.65M 4.57M  
May 28 08:30 Durable Goods Orders Apr   0.0% 0.5% -0.8%  
May 28 08:30 Durables, Ex-Transport Apr   -0.5% -0.3% -0.6%  
May 28 08:30 Initial Claims 05/23   615K NA 631K  
May 28 10:00 New Home Sales Apr   365K 363K 356K  
May 28 11:00 Crude Inventories 5/22   NA NA -2.10M  
May 29 08:30 GDP – Prelim. Q1   -5.5% -5.5% -6.1%  
May 29 08:30 GDP Deflator Q1   2.9% 2.9% 2.9%  
May 29 09:45 Chicago PMI May   41.0 42.0 40.1  
May 29 09:55 Mich Sentiment-Rev May   68.0 68.0 67.9  

So, we are starting the short week off with a bang with the Case-Shiller Report and Consumer Confidence could be a market booster as long as the took the poll before the "duck and cover" headlines hit the weekend papers.  Durable Goods may be better than expected tomorrow but it's all up to the GDP on Thursday and we are expecting a worse than expected number there and that will keep us cautious this week.   

Asia was cautious this morning with the Hang Seng and Shanghai each falling about 0.8% with the Nikkei faring better, down just 0.4% but the BSE hit the -2.5% rule (but held the gap test so far) even as the Baltic Dry Index climbed yet another 2.76%, all the way up to 2,786 now.  This is going to make last week's shipping plays look very, very good and we're probably heading for a test of 3,000, where we'll find out how real a resurgance in global shipping looks at that critical juncture. In general, Asian markets were open yesterday but ended up pretty much where they left off Friday ahead of the US open so it's up to us to give some guidance.

Europe had a bad start this morning but is recovering a bit into our open (9am), also waiting for direction from the US markets and we are waiting from direction from home prices so – yawn so far….  Euro-Zone Industrial Orders fell another 0.8% in March and are down 26.8% from last year but that's an improvement from February's annual decline of 34.5%.  Is this getting worse more slowly or was March 2008 just an awful month giving us easy comps?  Orders for intermediate goods dropped a monthly 1.6% in March, while orders for capital goods fell 2.1%. Orders for durable consumer goods declined 1.8% and orders for nondurable consumer goods were 2.5% weaker.

Uh oh – Case/Shiller just came out and, as we expected, no green shoots in March housing.  Home prices are down 19.1% with ALL 20 metro areas still showing negative rates of return and this is the "biggest quarterly decline for the reading's 21-year history."  For the 12th straight month, no region was able to avoid a year-over-year decline. Phoenix and Las Vegas were again the worst performers, with drops of 36% and 31%, respectively. Phoenix is down 53% from its peak in June 2006. Dallas has been the least hurt, down 11% from its June 2007 peak.  Two regions reported a slight price increase in March from a month earlier: Charlotte and Denver. A third, Dallas, was flat. Also, nine of the 20 areas reported better month-to-month results in March than February. 

So there you have it:  A crazy guy has nukes, the terrorists are still out there, Europe and Asia's economies are in shambles and no one is buying either durable goods or homes.  Is it finally time to start buying stocks?  We'll be looking for signs of a bottom this week as we test my theory that THIS (around Dow 8,100) IS the bottom and the BOTTOM we hit in March was just plain stupid and will not happen again (unless the world really does end).  While we were HOPING for cheaper entries and we are still poised negative, it's a very wary negative and I am much more in the mood for bargain hunting this week than I was last week.

Hopefully the energy complex will give up the ghost and head lower, dragging the markets to whatever low we can achieve at which point we can whip out our Buy List but I think we'll be starting this week off by looking at our dividend payers and setting up some long-term positions.  Let's keep an eye on copper, which is squeezing into our test zone and really needs to hold that 200 dma at $200 this week – if they can hold that against a bouncy dollar, that will be impressive!



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