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Wednesday, July 24, 2024

Thank The Supreme Leader It’s Friday!

Well, I am inspired!

I watched Iran's Supreme Leader, Ayatollah Ali Khamenei's speech at Tehran University this morning in which he called the the re-election of Mahmoud Ahmadinejad a "definitive victory" and said there was no rigging of the elections while telling the protesters to stop being manipulated by "Zionists, America and the UK."  The crowd ate it up and chanted "Death to America" and "Death to England" (I suppose "Death to Israel" is a given and not worth chanting) – it was a rousing speech! 

The best part of the speech for me, was watching the FTSE go up while a stadium full of people chanted "Death to England" but, of course, the US futures loved it too.  Perhaps it was just the $2 jump in oil (up almost $3 from yesterday's lows) that boosted the energy sector or perhaps it was the defense sector – even I was making sure I had a gun handy as I watched 60,000 "students" calling for my death, just in case…

So party on markets!  The Supreme Leader said "Whole regions of the world simmer in resentment and tyranny – prone to ideologies that feed hatred and excuse murder – violence will gather, and multiply in destructive power, and cross the most defended borders, and raise a mortal threat…  We will defend ourselves and our friends by force of arms when necessary…  A few have accepted the hardest duties in this cause – the dangerous and necessary work of fighting our enemies. Some have shown their devotion to our country in deaths that honored their whole lives…  These questions that judge us also unite us.  We have known divisions, which must be healed to move forward in great purposes – and I will strive in good faith to heal them."  Oops, sorry, that was Bush's inauguration speech – I must get a new translator! 

Hey, this could be a fun game:  Who said it – Bush or Khamenei?

  1. "The people have chosen whom they wanted.  This is challenging democracy after the elections."
  2. "I trust God speaks through me."
  3. "This crusade, this war, is going to take a while"
  4. "The fate of the Afghan people is extremely important to us"
  5. "There ought to be limits to freedom

The answers are: Khamenei, Bush, Bush, Khamenei, Bush.  Pretty good game isn't it?  Someone should call Conan

On a more serious note, it's options expiration day and it's the dreaded "Quadruple Witching" quarter when contracts for stock index futures, stock index options, stock options and single stock futures all expire.  NYMEX futures expire on Monday and the wizards of Wall Street traded 75,000 contracts 265,000 times yesterday, driving the few remaining barrels from $70.15 to $71.75 at the close and a further $1 in overnight trading (so far).  That's right, they have canceled delivery of over 300M barrels of crude (1,000 barrels per contract) that were paid for and scheduled for delivery to the United States in July at prices between $60 at the beginning of the contract period to $74 at the top.  One would think that the holders of contracts for  325M barrels of crude below $60 on May 21st would have been thrilled to take delivery as oil rocketed straight up from there to $74 but, FOR SOME MYSTERIOUS REASON, they didn't want the barrels after all and they canceled their orders. 

Well, not so much canceled as moved them…  NOW they"want" 266M barrels of oil for August delivery and 132Mb in Sept, 44Mb in Oct, 26Mb in November and 150Mb in December.  I will go out on a limb and predict right now that HALF of the remaining 75Mb scheduled for July delivery, plainly viewed on this NYMEX chart, will be CANCELED by Tuesday.  That will be energy traders creating a 40 Million barrel delivery shortage to the United States of America in the month of July, at which time they will point to future demand (the long contracts they roll to) and the current "shortage" as evidence of why they need to charge the American people an EXTRA $5.7Bn for the month's supply (+$10 per barrel).  WHEN WILL THESE CRIMINALS BE STOPPED? 

Is this not economic terrorism?  How does this differ from Nigerian terrorists blowing up a pipeline when traders on the NYMEX floor shred contracts and create oil shortages during our summer driving season?  There is no explosion, there is no gun but you WILL be forced to reach into your pocket, as will 200M other driving Americans and you will pay that extra .50 per gallon for gas.  At 50 gallons a month it's "just" a $25 robbery but it's committed against 200M of us and that's a nice chunk of change for the terrorists – $5Bn a month per 50 cents they raise gas prices (up from $1.50 in January already).  Why do we regulate the phone company, the cable company, the satellites, water and even the electric company but these bastards are allowed to run wild and pillage our nation?  And how foolish are our nation's retailers, who stand mutely by while their production costs increase and the discretionary income of their customers is diverted away from American companies? 

I'm sorry but I warned that high oil and commodity prices would wreck the economy last year and I was right and here we are, just 12 months later, zooming right along the same path while energy company employees on TV tell us that a commodity rally is a good thing…

 While we enjoyed a market bounce yesterday, David Fry points out (as I did in Member chat) that the volume remains "minimal" and we are getting excellent at predicting our stick saves as we seem to have figured out just the right mix of volume and position that leads to the manic upticks at the end of a day.  Yesterday was a "no stick" finish as we got our pump action (as expected) early on with most of the volume coming to the downside for the rest of the day.  This is not a very healthy-looking rally but we don't care – just show us that you can take out the 40% lines and we'll be happy to play along! 

We played long yesterday with IWM calls, but then we went short on DIA puts at 10:21 and made a very quick 20%.  We took a spread on YRCW as they got cheap enough but that was it for the day as we continued to sit on the sidelines, waiting for a real reason to deploy some more cash.  This morning we now (8:30) have a full percent pump in the futures on no particular news (other than the glorious re-election of Mahmoud and $73 oil) and it might be fun to short the Qs or the DIA but we'll have to see how the morning progresses. 

The Nas is looking like it will open at 1,825, which is right at $36 on the Qs and that has been a tough nut to crack so we can use it as a stopping point for the $36 puts, perhaps .20 at the open.  If the DIAs can hold $86, it's the same deal with those puts as we can use $86 as a stop point and enter the downside momentum trade (looking for just 10-20% with tight stops on a directional move) from there.  I also like selling naked QID (ultra-short Nasdaq) puts like the July $31 puts for $1+ or even the June $33 puts for .50 or so as the premium expires today and we can roll those to July at the day's end.  Bespoke had a great chart comparing last options expiration week movements to this one so we're kind of hoping they stick to the trend as it's easy money to the downside:

 

Of course the QQQQ $36 calls and the DIA $86 calls are the way to play a move above the lines so we'll be ready either way.  Asia had a nice recovery today although I've never seen a stick save quite like the last few minutes of the Nikkei, which accounted for half of the day's gains, gapping the index from 9,750 to 9,786 in the last minute of trading.  All right folks, move along, nothing funny going on here…  That and the 80-point rally into the open (that was reversed by a 100-point drop by lunch) allowed the Nikkei to post a 0.85% gain on the day.  The dollar was also rammed up 2% into the Nikkei session and that helped too!   The Hang Seng also hit 0.81% for today's gain but it's a very ugly down 1,000-point week.  The Shanghai gained 0.93% and the magically delicious Baltic Dry Index climbed to 4,073 as China parked 47 tankers full of oil off their coast as temporary storage while they finish an addition to their Strategic Petroleum Reserve

In news that I'm surprised isn't getting more notice, TM exceeded their goal of selling 10,000 of the new version of the Prius hybrids in Japan last month BY 170,000!  A combination of tax breaks and other government incentives and the ridiculous run-up in oil sent Japanese consumers running to upgrade their mileage.  US dealers sold just 700 of the new Prius last month and 10,091 of the old and new combined.  Perhaps US consumers are not willing to change their wasteful ways but we "only" consume 20% of the world's fuel and it seems other nations are anxious to conserve.  Toyota bumped HMC's hybrid Insight out of the number on spot for Japanese car sales.    Japan is driving auto sales with tax breaks on fuel-efficient cars as well as a "cash for clunkers" program aimed at getting gas guzzlers off the road. 

Europe is up nicely pre-market with the UK gaining almost 2% since this morning's call for their deaths.  No one threatened Germany so the DAX has only managed a half-point move so far but no market-moving news of note over there.  We have our Philly Fed at 10 am and that's expected to be -18 (with over 50 being growth, under 50 contraction) but that would be better than -22.6 last month so maybe a green shoot, even though you have to dig pretty deep to find it. 

Just a fun day today, no serious betting is likely on an options expiration day but it could be a wild ride down if we snap back to match last month's chart so – be careful out there!

And have a nice weekend,

– Phil

 

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