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Tuesday, April 16, 2024

Thrill-Ride Thursday

Is this fun or what?!

I love it when a plan comes together and we have been nailing these crazy market moves.  I have to admit Cramer had me worried on Tuesday night as we were short into the evening as the master said: "Let this be a lesson to all investors: Watch for these kinds of bull-market pullbacks, because they often precede a continued move higher…  All they needed was a catalyst, any old excuse, and that’s where consumer confidence comes in."  Fortunately, Jim's jubilation was short-lived (and this is a great flip-flop on last night's show) and we were able to press our shorts in the morning off my premise that the Consumer Confidence was BS that would be quickly reversed and we made enough in yesterday's decline to finish the day with some bullish speculation.  I don't mean to pick on Cramer but, as David Fry wisely points out in his chart, it would be nice if he just admitted he has no clue and people should just be cautious. 

While we are still mainly in cash and just having fun betting against Cramer's sheeple, we went a little bullish on the Dow for the overnights (covering our long DIA puts) on the assumption that Obama would probably not have touted economic progress yesterday if they weren't expecting some good data backing it up.  As I said to members before we even got the speech at 2:18: "It’s not the kind of thing you’d want to say if you knew there was some bad data coming up so I have to assume that we’re going to get an upward revision to Q1 GDP on Friday or, in the very least, jobless claims should be below 600K tomorrow so I don’t want to be short overnight."

One thing we did short is oil and we loaded up on the USO puts as they climbed higher ahead of an OPEC meeting that we expected would yield nothing but sound bites.  That went about as expected and we had great fun in member chat this morning already shorting the oil futures as they raced up to a failed test of $64.  I am really happy with our short oil position as it turns out we can add OPEC to the list of nations that are counting on other nations to pull them out of a slump to the circle now goes like this:  OPEC is counting on stronger demand from China, Japan and the US who are counting on their own citizens and China who are counting on the US and Japan who are counting on China and the US whose market is being led higher by energy companies counting on OPEC to keep prices high.  Oh yeah, that's going to work!

OPEC (oh and don't call them a cartel, they don't like that – they are a "social club" – like the mafia) has decided to leave production unchanged but did call a special meeting for December, likely in anticipation of a crisis like the one they had last December when oil plunged below $40.  They are going to "push for better compliance" and that's giving the bears hope but that is plain stupid as they have already said they have better than 80% compliance on a 4.2Mbd production cut so, at best, they can shave another 800Kbd from 86Mbd of global production (0.9%).  The US army alone uses 1.5Mbd in Iraq, should operations there wind down, OPEC has much bigger problems on their hands than deciding what the secret handshake is going to be at "the social club."

Some members of OPEC, which produces about 40 percent of the world’s crude, are still wary of oversupplying the oil market. Al-Naimi acknowledged that he has yet to see signs that demand for oil is increasing in Europe or the U.S., the world’s biggest oil consumer.  Libya’s Ghanem said OPEC is concerned this year’s increase in oil prices was driven by increasing optimism about an economic recovery rather than the supply and demand for oil.  “Prices are moving because the speculators are back,” he said today. “Fundamentals do not tally with psychology.”  U.S. crude oil inventories rose to the highest level in two decades earlier this month, while the International Energy Agency says global demand is falling the most since 1981.  We have our inventories today at 10:30 and they should reflect holiday driving demand.  We expect a draw in crude of about 3Mb as exports are very low but it's gasoline that's going to tell the story today.

Woops, it's 8:30 and here's our good news with Durable Goods up 1.9% and Jobless Claims at 623,000 (in-line) but March Durable Goods were revised lower to -2.1% from down 0.8% so an amazing 162% adjustment do one of our most critical market indicators.  We have a big pre-market rally on the news even though Durable Goods ex-Transports for March was adjusted to -2.7% from -0.6%, a 350% revision.  We'll be getting new home sales at 10 but we're not expecting much there so now we wait for the GDP tomorrow morning but, as I said, Obama probably didn't time his speech ahead of bad news

Hong Kong and the Shanghai were closed today and there's going to be hell to pay when they open back up if we don't put up some good numbers.  The Nikkei finished flat on the day in a wild session where they opened down 100, went up 150 from there and pulled back 50 into the close – WHEEEE!  The Baltic Dry Index put up ANOTHER 6.5%, now at 3,164, up 500% from the November lows.  Too bad they don't have options but at least our tanker plays are doing well and our weekend plays on DHT and TNK are still doable.  Japan was saved by MASSIVE Dollar buying against the Yen that took the dollar back to 97 Yen, up 2.5% in one day!  This is what we in the industry technically refer to as shenanigans.  Europe is off about a point at 9am and there is seriously not enough news to merit giving them a paragraph…

So far the markets are choosing to take the April Durable Goods figures at face value but we'll be quick to take profits on our bullish Dow plays and get back to cash ahead of tomorrow's GDP report, which could send us flying either way.  I do not see anything to get excited about and if oil does head back down below $60, we're going to see some serious unwinding in the OIH and XLE companies that make up about 20% of the S&Ps value.  I called a short on XLE in yesterday's morning post and they dropped 2% yesterday from the open.  Today we'd love to see OIH retest $102 ahead of inventories and we'll be happy to short them there.  USO is testing $35 along with oil at $64 and that's another place we like to take a stand.  We expect a 3Mb draw in oil, anything less than that will be very bad for oil bulls and any build in gasoline will be bad for the energy sector and the markets as they are really counting on holiday demand to justify the 25% run in oil this month.

On the whole, we don't know which way the market will go from here – that's why we went to cash sure can speculate on overpriced run-ups with no fundamentals like the energy sector while we wait for some real bargains for the long side.

Do be careful out there…




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