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Wednesday, March 29, 2023


Monday Market Movement – Are We Done at 1/3?

There it is!

The Nikkei gave up another 2.5% overnight and is now down 1,000 points for the month of July, retracing 1/3 of the gains since March 10th, at 7,000.  The Hang Seng also fell 2.5% (this is why we have rules!) but finishing at 17,254 is down just 1,750 points (10%) since July 1st but also represents a very neat 1/3 retrace off 7,650-point run to 19,000 from the March low of 11,500.  I hate to say I told you so (actually, it’s kind of fun sometimes) but the 2 full paragraphs I devoted to playing the FXP (ultra-short China) in Friday’s post are all huge winners, with the July vertical spread looking like a clean double already – how’s that for weekend protection?  Don’t be greedy, if we are not heading lower today in the US, it’s a good idea to kill the short-term trade and take the profits off the table.

On a global basis, we need to be concerned with this 1/3 retrace trend as the Shanghai has not gone down much at all off it’s 54% run from March.  The Shanghai Composite only fell 1% this morning and has miles to go to match the sell-off of the other indices.  Over in Europe, the FTSE is down to 4,125, falling from 4.500 in June (8.3%) after rising from 3,500 in March (28%) so, PRESTO, a 1/3 retrace there too!  The DAX is right on the 1/3 line at 4,600 and the CAC is right on the nose after rising from 2,550 to 3,500 (37%) and falling back to 3,100 (12.7%), just about 1/3.  Are we sensing a theme here? 

The Dow rose from 6,500 on March 9th to 8,800 on June 12th (up 35%) and is now back to 8,150 (down 7.4%) with about 5% more to fall before hitting the magic 33% mark.  Call 700 the floor on the S&P with 950 as the top and we have a 35% gain there as well with 880 being a 7.4% drop.  Wow, what a coincidence!  Only there are no coincidences, just quant trading programs that decide these things long before you read the paper and decide what stocks look good and bad…  The Nasdaq was our Icarus index, flying too close to the sun with a 50% move from 1,300 to 1,850 and they are down just 100 points which works out to 15.4% down, a 30% retrace

We’ll be watching the 1/3 line on the Nasdaq with great interest to see if it holds.  1/3 of the 650-point gain is 217 points and we arrive at 1,633, quite a ways down from 1,750.  Had the Nasdaq gained the same 35% as the Dow and S&P, they would have gone from 1,300 to – you guessed it: 1,750!  So the Nasdaq is holding the top of the range that the other indexes ran to.  If the Nas can hold 1,750, it will be a very good signal that the drop is over here.  Not to be forgotten, the NYSE ran from 4,300 to 6,200 (44%) and pulled back to 5,600 (9.6%) but, if we throw out the spikes up and down on the NYSE,we have a pretty neat run from 4,500 to 6,000, back to 33% there and the expected drop zone would be 5,500.  The Russell ran (non-spike) from 350 to 525 (50%) and has pulled back to 480 (8.5%) also a very good sign if they can hold it. 

SP 500 Chart

Last week, Jesse’s Café Américain gave us this S&P chart which shows the various resistance points the S&P is meeting on both sides.  We were bottom fishing last week into the move down to the heavy resistance at 870 which, as I pointed out last week, is just about 10% off the spike high so we liked it for a bounce at least.  I’m no chart guy, my technicals are math-based on our 5% rule, which just happens to often agree with charts, but I think if you draw a line from the November support line at 800 to the 890 line that was holding when this chart was drawn, you’ll discover a hidden uptrend that I believe will be established as long as we get some reasonable earnings results.  That line would put us on a path to establish a new uptrend that could take us about 10% higher by the end of the year IF we can break through the top of the major downtrend in September.  That is, of course, a lot of ifs to get through so don’t mistake this for a gung-ho bull premise but we are keeping an open mind! 

For now, let’s just enjoy the ride as we have little upside resistance and a very heavy negative sentiment that can lead to a lot of bears getting caught with their pants down as it will be hard for the earnings news and economic data of the coming week to be as bad as what has now been priced in during the panic of the last 30 days.  As I said in my weekend post, this is simply the pullback we predicted when we went to cash after Memorial Day – we stuck with our plan and finally put some of our sidelined cash to work after 6 weeks of waiting.  If we don’t hold these levels, it’s easy for us to flip more bearish but, hopefully, we caught a good bottom and we’ll be pleasantly surprised by the week’s news.

We have plenty of data coming out this week as you can see from the Briefing.com chart:

Date ET Release For Actual Briefing.com Consensus Prior Revised From
Jul 13 14:00 Treasury Budget Jun   NA -$77.5B $33.5B  
Jul 14 08:30 Core PPI Jun   NA 0.1% -0.1%  
Jul 14 08:30 PPI Jun   NA 0.8% 0.2%  
Jul 14 08:30 Retail Sales Jun   NA 0.5% 0.5%  
Jul 14 08:30 Retail Sales ex-auto Jun   NA 0.5% 0.5%  
Jul 14 10:00 Business Inventories May   NA -1.0% -1.1%  
Jul 15 08:30 Core CPI Jun   NA 0.1% 0.1%  
Jul 15 08:30 CPI Jun   NA 0.6% 0.1%  
Jul 15 08:30 Empire Manufacturing Jul   NA -5.00 -9.41  
Jul 15 09:15 Capacity Utilization Jun   NA 67.9% 68.3%  
Jul 15 09:15 Industrial Production Jun   NA -0.6% -1.1%  
Jul 15 10:30 Crude Inventories 07/10   NA NA -2.90M  
Jul 15 14:00 Minutes of FOMC Meeting June 24          
Jul 16 08:30 Initial Claims 07/11   NA NA 565K  
Jul 16 09:00 Net Long-Term TIC Flows May   NA NA $11.2B  
Jul 16 10:00 Philadelphia Fed Jul   NA -5.0 -2.2  
Jul 17 08:30 Building Permits Jun   NA 523K 518K  
Jul 17 08:30 Housing Starts Jun   NA 530K 532K

Not too much going on today but busy, busy starting tomorrow morning with PPI, Retail Sales, and Business Inventories in the morning, allong with earnings tonight from CSX and NVLS and tomorrow morning from GS and J&J, followed by AIR, ADTN, INTC and YUM.  Wednesday morning we hear from ABT, AMR, SCHW, CBSH, GCI, NITE, TXI, WOR and GWW.  CSX will be very telling, they should have had a good quarter moving commodities around but the outlook is going to be key as commodities are tailing off and there is no uptick in building, supplies for which is another major part of what the rails move.  David at Oxen Group is expecting good things from GS and the whisper on the street is they are heading to another beat this Q so we’ll see.  Word is out already and they are gapping up pre-market so I wouldn’t chase them.

Bears are chasing the bottom with bets against the S&P 500 Index rising to the highest levels since April as investors shorted more shares of health-care, technology and financial companies.  Short interest on the S&P 500 increased to 10.01 billion shares as of June 30, a gain of 2.4 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg yesterday. That’s the most stock sold short since April 15. Wagers against health-care shares (the ones Cramer was pushing) rose 8.1 percent, the most among 10 industries, to 962.8 million.

12-07-09-02It doesn’t take much to force short-covering at these levels of bearishness, perhaps something like Goldman Sachs upgrading the tech sector or Atlanta Fed President Dennis Lockhart saying: "I see the economy beginning to recover in the second half of this year” like he did yesterday.  Even President Obama is on the case, using yesterday’s radio address to defend the stimulus, saying: "As I made clear at the time it was passed, the Recovery Act was not designed to work in four months – it was designed to work over two years.  We also knew that it would take some time for the money to get out the door, because we are committed to spending it in a way that is effective and transparent." 

We went into the weekend with lots of bullish plays, mainly hedged entries and we still have a long way to go before we get super-confident in the market but hopefully this week we’ll get a little bit of clarity and hopefully we’ll find that we are still in our predicted consolidation channel, not failing a breakout as the head and shoulders crowd would have you believe.  We have some speculative DELL calls in our $5,000 Virtual Portfolio, hoping GS still has some market mojo left after their bullish call on Friday and we intend to play some more earnings this week but not until we see how the morning goes.  We also still have our SGR play outstanding and all updates will now bee posted on Seeking Alpha’s "Stock Talk" section and you can sign up to follow the $5KP trading HERE

It’s a watching and waiting kind of day, we already made or bullish bets during last week’s panic so our finger is going to be on the short trigger if our levels are failed in the morning rally.  Last Monday was a fairly straight-up 100-point day but we gave it all back Tuesday and then some on Wednesday but that was all based on rumors, not facts.  With any luck, the truth shall set us free – or at least back to 8,650!



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Cool!! I got .38 for the UAUA roll and should have negotiated harder on the put side. Only a small position (I hate airline stocks) but good for practise 🙂

I hope there was no major caveat to the GS indicator you pointed to earlier, so I’m buying back some putters here!!!

ZION / Phil, What  you mean with   "that’s a good reason to short them"?  You are now bearish on ZION?
VOLUME / I also like to know witch volume is the one you check?  – TY spider.

Wow.  What a joke this market is.  Now all of a sudden volatilty is gone and she’s steady as a rock.  It’s funny how they try and suck people in (steady market) so they can flush em out (volotile market).  Today we’re hearing a giant sucking sound off in the wall street distance…

miracle: i was able to save the Optionsoracle quickstart guide then  convert to word so i can print specific pages. Is that what you were talking about?

Well I wanted to read the whole guide but it doesn’t allow me to print it. How would I convert it?

I picked up GE on friday and enjoyed the 6% run today.  I was planning to hold for a long term position but 6% in a day is looking juicy. Would you consider selling calls at this point or maybe locking in a gain and looking for a better re-entry?  I am currently uncovered.

I’ve totally accepted the fact that the market is 90% fixed.  The problem is they change how the manipulate it on a nearly daily basis.  Furthermore, they move it in directions against conventional wisdom, as in this am, so that you never really can trust, or at least shouldn’t trust, its moves.
As for a stick save today.. I don’t think you can use the term on a mostly up day like today.  What  you are asking for is an acceleration in upwards manipulation.  Very different from a stick save!

Dear Phil,
do you recommend selling GOOG & GLD call before reports coming out?
Thanks for morning’s advice…has a nice profit.

Wow!  What an utterly silly day in the market.

Miracle – after Phil’s response I am not sure which guide you are talking about?
First download the PDF version to your computer. Then google "convert PDF to Word"  and select one of the free services that comes up. It will take your doc and give it back to you in word.
Hope that helps.

Got wayliad firefighting my shorts. Considering the overnight futures had S&P at $87 that was some pump.
Phil – Re 26% unemployment mentioned earlier. Like I said not sure I believe it but here is an extract from an article Ilene posted in Phils favoutrites TODAY….
…which is why this sort of reflexive "buy everything!" reaction to Merideth saying that Goldman probably had a great quarter (does anyone doubt it when you have your fingers in the taxpayer’s wallet via AIG payoffs and sales of record amounts of Treasury debt?) is beyond stupid.
The economy does not run on going into debt on any sort of sustainable basis, even though certain people make a lot of money by conning you into going into debt!
Of course when you’re a banking analyst, and banks rent money (that is, make loans), you’d have a bit of trouble justifying your existence if you told the truth – that pulled-forward demand via credit eventually must end, and when you delay the day of that reckoning you make things much, much worse than they would otherwise be.
I sit in bemused amazement at the spin job that Kudlow and others on CNBC put on this sort of "presentation" by an analyst.  There is never an exposition on the fact that 13% unemployment will absolutely blow the cover off all records in this regard, and that it is flatly impossible for there to be economic growth with 13% of the employment base out and on benefits, with another 10% or more off benefits and not counted!
That is one in four people of working age in this country without a job!
If you buy this pump as an investor you deserve what you get.

That is one in four people of working age in this country without a job!
This says it all. If I can create my own definition of the size of the employable work force I can declare what ever unemployment number I like. That is why we have to look at employment numbers, not unemployment numbers.
If there is a person that never had a job, isn’t looking for a job and doesn’t want a job, the fact that they didn’t have a job yesterday and still won’t have a job tomorrow doesn’t change the economy one jot.
Bullshit is published on all sides of this debate.

CIT – well, woulda shoulda….up after hours….damn shame.  Still like the Aug 2s…..the reason for not taking the Jan11s is that spread should be good anytime.  I was playing the short term debt relief due by months end.  The next round it 1Q next year, that is more iffy.

By the way, Advanta – GOB (going out of business).  Layoffs of most coming FWIW.

StephenP – jobs. You should read the whole article in Phils Favs to get the context. When she upgraded GS Meredith forcast 13% unemployment. Everyone should read Phils Fav to get a Bears view. 🙂

Sorry Mispelled StevenP.

You seem to be the guy in the know on these- any insight/knowledge/inspiration on Spectrum Pharma (SPPI)

Does anyone know what time will GS release their earnings tomorrow morning? The conf call seems to be at 11.


Pstas – I think I noted them a while ago here when they were at 2.6 or so.  Pricey here, but cancer gives a big bang for the buck right now.  Don’t follow them regularly, but they have a shelf registration for more shares 3.2M or so, and some insiders are buying (at 2.6 albeit, small lot at 5.15 by a Director – I like Officers buying, not directors), but institutions are selling (last quarter data).  They do have an FDA answer pending for an extension for their lead mAb. Overall, I would look at other companies now, and revisit in a few weeks – closer to the approval/rejection by the FDA.  Most likely that is the reason for the sell off (FDA delay).  I like CRIS better.  Below is fexcerpt from SA.
On 7/8/09, Spectrum Pharma (NASDAQ:SPPI) submitted a formal response to the Complete Response Letter (CRL) it received from the FDA 7/2/09 regarding its supplemental Biologics License Application (sBLA) for Zevalin (ibritumomab tiuxetan) in the first-line consolidation setting for non-Hodgkin’s Lymphoma (NHL) patients. Zevalin is currently FDA approved and marketed by SPPI for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell NHL, including patients who have rituximab-refractory follicular NHL.
The FDA requested the Company to submit data files from the FIT study to support and verify a subset of the data that are currently under review to support the proposed labeling. CRL resubmissions are classified as either Class 1 (60-day) or Class 2 (6-month) reviews by the FDA once they are officially accepted by the Agency. My expectation is for the FDA to formally accept Spectrum’s resubmission within 1-2 weeks and classify it as a Class 1 review.

 morx / miracle
you’re both talking about two different things.. i posted two links today…
you cannot print the options book…you can print the optionsoracle software guide…

Pharm-thanks- looked mighty tempting w/ November puts & calls selling for almost $3. Do you think its worth $2?

This is a good piece …. watch and then think about what you saw transpire today ….

Volitility….Wasn’t looking at the options.  1.23 is book value/share, so could B worth a small gamble as that would take it 2X price to book. I don’t like playing with FDA data, like going to Vegas.  Even a delay can crush the stock, esp small ones (e.g., Neurocrine).

Thanks,- I think I will pass on it.

Against all prognostics (bears) Phil pointed in the morning the correct direction, and in middle of day he pointed the possible move to 2,5%  Incredible…I’m starting to serious believe on the program trading and the human nature behind the programing those "trade-bots".
I’m worried about the day (if there is such day) they pull the plug. Will be like the music chairs game. Liquidity will drain, spreads will widen, etc .  This is discussed in the parer "Toxic Equity Trading Order Flow on Wall Street" By Sal L. Arnuk and Joseph Saluzzi.
Sometimes I think on stop trading and put my savings to work in other place. But can realize where. Nothing looks interesting. And probably I’m not alone with that conclusion.  A couple of days ago I asked Phil about  where "he parked cash" because I’m getting 0% on money market founds. The answer was:
"Cash/Spider – Just the normal account sweeps but there’s nothing paying so much on cash that I’d want to forego an opportunity to make an obvious bet. "
This, the lack of invests alternatives, probably, can explain a big % of market  rally. Even if we think there are not much fundamentals. Its what it makes rational this irrational market. Crazy, I will join the bandwagon (carrying my chute & mattress) and hope those trade-bots don’t shoot me. 🙂  Spider

Hey Phil,
   Looks like FAS and FAZ are converging on a price point again at around $45.  What was the play that you suggested for that? 
Thanks in advance.

scobe, i think it is short both

Good Morning Phil & all

Asia/Pacific Markets    Tuesday, July 14, 2009
(The following is from Yahoo, please confirm with other sources)   

Australia All Ordinaries*             3,858.80    120.80    3.23%
Nikkei Average*                         9,261.81    211.48    2.34%
Shanghai Composite*                3,145.16      64.60    2.10%
Hang Seng*                            17,885.73     631.10    3.66%
Seoul Composite*                     1,385.56        7.44    0.54%
Singapore Straits Times*           2,310.55       43.91    1.94%
Bombay Sensex                      13,902.55    502.23    3.75%
Baltic Dry Index                         2,975.00    -10.00    -0.34%

* at Close

Asian Markets Bounce, Japan Breaks Losing Streak

Asian stocks bounced Tuesday, extending gains as a rally in U.S. financial shares helped Japan break a 10-session losing streak, while also reversing a little of the recent safe-haven rush into the yen. Helping was upbeat news from Singapore, as economic growth in the trade hub climbed 20.4 percent annualized in the three months to June, putting an end to four quarters of contraction. Analysts said other export-dependent Asian economies were also expected to see improved second quarters, but questioned whether improvements can be sustained amid still weak consumer demand in the region’s major Western markets.

Japan’s Nikkei gained 2.3 percent to snap a nine-day falling streak, with banks buoyed by upbeat analyst comments about the U.S. financial sector and exporters lifted by a halt in the yen’s sharp appreciation.

Seoul shares ended half a percent higher after volatile trade, with gains led by banks and steel issues but markets trimmed earlier 1.7 percent gains as shipbuilders and OCI retreated.

Australian stocks finished 3.5 percent higher, helped by better economic news at home and abroad, though traders played down the move pointing to extremely thin trade volumes.

Hong Kong stocks rebounded from a seven-week low, up 2.3 percent, after strong gains on Wall Street spurred bargain-hunting in banks and financials, but traders said the rally could fizzle out as fears about the broader economy weighed.

Singapore’s Straits Times Index advanced 1.9 percent.

China’s Shanghai Composite Index closed 2.1 percent higher, boosted by solid gains in overseas stocks and hopes for an improving earnings outlook. Financial shares led gains.

Bombay Stock Exchange’s Sensex was up 500 points. Markets were near day’s high on Tuesday in line with the global markets. Positive opening of the European markets had also boosted sentiments.

Euro Shares Gain as Financials, Miners Rise

European equities extended previous session’s sharp gains on Tuesday, lead by banks and miners, with investors keenly awaiting quarterly results from companies such as Goldman Sachs and Intel. The FTSEurofirst 300 index of top European shares was up 0.5 percent at 833.90 points after surging 2 percent in the previous session.

Financial shares were in demand, with Standard Chartered, HSBC, Barclays, Lloyds, Royal Bank of Scotland and BNP Paribas up 0.7-2.7 percent.

Miners got strength from higher metals prices. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.1-3.2 percent.

Q-Cells, the world’s biggest maker of solar cells, fell 11.3 percent after it withdrew its full-year sales outlook, expecting a substantial operating loss in the second quarter, as market environment remained dire.

Around Europe:
FTSE     4,232.16     30.03     0.71%
DAX       4,763.92     41.58     0.88%
CAC      3,071.08     19.00     0.62%
SMI       5,362.54     47.25     0.89%

Oil Rises Above $60 Amid Stocks Rally

Oil reversed the previous session’s losses and rose above $60 a barrel on Tuesday, thanks to improved sentiment amid a stock market rally, but lingering fears of the deep and long recession capped oil’s gains.

U.S. crude [ 60.39    0.70  (+1.17%)] for August delivery rose. The contract finished down 20 cents at $59.69 on Monday, after briefly touching its lowest level in almost two months.

London Brent crude [ 61.49    0.78  (+1.28%)] rose.

Separately, Nigeria’s main militant group widened its offensive against Africa’s biggest oil producer on Monday despite the release of its suspected leader, raising concern there might be further attacks.

Dollar Steadies Ahead of US Earnings

The dollar and yen were steady on Monday as risk appetite improved on the back of rising equity prices, spurred by expectations for stronger U.S. corporate earnings and some positive economic data. Currencies perceived as higher risk such as the Australian dollar rose, also buoyed by a robust business conditions report.

The dollar index, a gauge of its performance against six major currencies, fell 0.1 percent to 79.984.

The dollar [93.07    0.17  (+0.18%)   ] was flat against the yen after hitting a five-month low of 91.73 yen on electronic trading platform EBS on Monday.

The euro was steady against the Japanese currency [ 130.13    0.19  (+0.15%)] , and also the dollar [1.3978  0.0003  (+0.02%)].

The Australian dollar climbed versus the yen [73.29    0.47  (+0.65%)    ] and the dollar [0.787    0.0039  (+0.5%)] and the New Zealand dollar [0.6332   0.001  (+0.16%)] was up against the greenback.  

The German ZEW investor sentiment survey due out at 10 am London time is forecast to rise to 47.8 in July from 44.8, while the current conditions index is seen at minus 88.0 versus minus 89.7 in June.

Gold inches below $920/oz after rally

Gold gold had fallen to $918.45 an ounce by 0249 GMT (10:49 p.m. EDT on Monday).

he world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,109.81 tonnes as of July 13, unchanged since July 8.

Silver was unchanged at $12.82 per ounce from the notional New York close. It hit a fresh 10-week low of $12.44 on Monday as economic worries helped investors to focus on the white metal’s industrial uses.

Platinum was at $1,092 an ounce against $1,104.50, while palladium was at $227 against $232.

Morning !
Yes, I realized money from EM & commodities into US stocks too. And Europe isn’t in a great shape. The problem I see: we have stock demand fueling stocks. Better we have some good fundamentals coming from earnings to support current levels.
FAZ/FAS and any other 3x : Consider the acceleration this things can have. Acceleration happens  with several consecutive moves in the same direction.
For example, if we had a 3x on the Nikkei, both starting at 100, this last 10 consecutive down days would make the +3x down to 75 and the -3x up to 132. Not so bad. But consider another run like this: +3x=56 -3x=175. Ouch. Its unlike to happen that way, but still there is a small probability.
So, as I understand, you need to rebalance time to time to keep under control.

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