This is starting to get funny.
The Beige Book was certainly no great shakes yesterday but we got our usual afternoon "stick save," with the indexes gaining 1% between 1:30 and the close to bring us to barely negative finish. By the time Asia opened, another half point had been added to the US futures and that allowed China to bounce back and we made yet another half point on Europe’s open around 3am. So here we are at 7:30, with our futures up almost a full point on no particular good news.
Of course, this is the same pattern we got in the days following the last Beige Book – a blow-off top into the cliff we fell off on the following Monday and we’ll have to see what we get this time. This is why I said in yesterday’s morning post: "We’re in "take the money and run" mode on our puts as we’ll be happy with a quick dip and a quick profit as we test our lower levels." You can’t press your luck in this market – especially if you are a bear! I screwed up because I thought the GDP was today but it’s not until tomorrow and that makes a very big difference and explains why the pumpers were able to come out in such force yesterday, as they already think they have the jobs nuber "in the bag."
I’m starting to think the GDP may be in the bag too as we have to pin this new round of market exuberance on our President, who managed to get himself quoted all over the planet saying "the Recession is Over." Now, what he actually said, in the proper context was:
Now, I don’t know if any of you noticed it. Maybe they’re selling Newsweeks by the check-out stand, but the latest cover of Newsweek says, quote, "The Recession is Over." Now, I bet you found this news a little startling. I know I did, because obviously people are going through a tough time all across the country.
This is a really good tactic for Obama to take. He gets to be quoted (like Nouriel Roubini last week) completely out of context but, if anyone comes back to question his wisdom later he can easily point to his statement and say "that’s not what I said at all." Unlike Roubini, don’t expect Obama to immediately demand for the MSM to clear up his statement – I’m pretty sure that being misquoted internationally was pretty much the game plan.
Recovery was the last thing we were thinking after reading the Beige Book yesterday, which included the zingers: "Commercial real estate sales volume remained low, even "non-existent" in some Districts" and "Most Districts indicated that labor markets were extremely soft, with minimal wage pressures, and cited the use of various methods of reducing compensation in addition to, or instead of, freezing or cutting wages."
So we don’t just have unemployment, we also have the employed people making less money! If we’re worried about 15M people (9.5%) who don’t have jobs, what about 136M employed people getting paid 5% less? Isn’t that the same as losing another 6.8M jobs? We may be getting improved corporate earnings as companies cut costs, but the costs they are cutting are the spending power of 136M consumers…
Combine a 5% drop in wages with a 5% increase in spending and it’s hard to imagine how we’re going to have an upside surprise to the GDP report tomorrow. We’re waiting for jobs numbers but there would have to be a hell of a turnaround this week to make up for all the wages that are evaporating out of the paychecks of those lucky enough to still be getting one. Sure corporate profits are great and, eventually, they may even use some of those profits to hire someone again – IN INDIA! What we really can’t afford is a jobless recovery – we had one of those in the beginning of this decade, it didn’t stick.
8:30 Update: Great news – "Only" 584,000 people lost their jobs last week and the media is selling this as a big improvement as the 4-week moving average drops to the lowest level since Jan 24th with 6.197M continuing claims vs 6.250M last week. To some extent, the data is telling us that many people are giving up and accepting jobs with lower pay but, hey – at least they’re not unemployed anymore! This great news is pushing the futures to new highs and it seems certain we’ll be gapping up at the open above the previous highs.
So it’s going to be time stop worrying about all those silly fundamentals, switch off our brains and join the rally as our breakout levels become our hold levels. We’ll be looking for 9,100 to hold on the Dow, 980 on the S&P, 1,950 on the Nasdaq, 6,232 on the NYSE and 545 on the Russell. Those will be this week’s bullish hold points and they are generally 5% over our mid-point targets. As I said to Members in this morning’s alert, I will be surprised if this isn’t a blow-off top but being surprised and acting like a deer caught in headlights are two different things.
Our play on the Dow yesterday was DIA was to grab the $92 calls for $1.05 and we got some $88 puts for the same as a spread looking for a big move one way or the other on the Dow. We’ll see how far it goes today but I’ll be inclined to cash the calls if we get a big win and let the puts ride but we’re going to watch our levels – NO THINKING!!! Thinking already got us into trouble into the close as we added some QQQQ $40 puts at $1.29 and QID $27 calls at $1.30 as we looked to protect the gains on our longs. At the moment, it seems that our long plays didn’t need any protection at all!
XOM missed but no one seems to care and GS kept the plates spinning with an upgrade to GE that countered XOM’s drag on the Dow nicely. Mega Global corporations: Nintendo, SNE, Mitsubishi and Mazda all reported significant revenue slumps and, over in Europe, Shell also had bad news as did SI, Telefonica (Europe’s largest telcom), BASF, National Express and ALU but those markets are flying on what the WSJ calls "Strong Earnings in Europe." International air travel is down 30% from last year but the EU markets are up over 1% so our bullish premise is that no bearish news seems to matter – kind of an "everybody’s doing it" sort of logic…
We are ready to switch off our brains and BUYBUYBUY but first, please, let’s see our breakout levels hold for more than a day – then we’ll be happy to join so we can party like it’s 1999.
Phil: Can you explain why STT increased by .69 to $49.20 ,but the Aug $46 call increased by $1.45. Iwould expect it to do the reverse.Thnaks
re: that last little meltdown …….
The GS "trader dude" had to go to the bathroom and the market got away from them for 14 minutes.
I see now he is back at his terminal and we are headed back up!
Phil, is this is gap down alert for tomorrow? I know if GDP is good they can do anything but today is looking like a complete setup!
Grant, RE: Tradelog
I saw your recommendation on Tradelog and I am evaluating it. Looks very good. Got busy so didn’t respond yesterday and then forgot! Allen
"STICK FOUL" !!!
Watch the SOX, almost red and testing 300!
Miss/Chuck – Your guess is as good as mine…
LOL/Conf – If you learned something it was worth it!
Well we stopped at the morning gap so that’s being defended. I don’t see the significance but it seems like they are going for the 2nd consecutive week of magazine headlines by giving us the best July since 1939, which is kind of funny because, overall, that was the top of a run and the Dow dropped about 40% from there over the next 3 years.
STT/Dflam – There is a certain short-term supply and demand with calls. If some idiot wants to overpay and set a crazy price on a thin option, he can.
GS guy/Chuck – Well, that would explain things!
Gap/Matt – Oh yeah, if we miss GDP we drop like a rock wearing cement shoes and a stone around it’s neck…
well, I managed to turn a home run trade (DIA 91 puts) into a push …. very frustrating.
Wheee – good day, eh?
That was totally fun.
SPWRA STILL going up!
FSLR good but not good enough for the callers!
FSLR … I sold a 210 call for 3.20 b4 the close.
My attitude at 9:58 was this -> This…is hilarious.
My attitude at 3:58 was this -> This…is hilarious.
No really, days like today are obvious signs of solid bull market activity!
Phil: am out of FM puts aug 88 DIA, did hang in and recouped some of the loss, the caller aug 92 helped also,
well, that’s what I thought that they cannot resist racking in some of the gains, the Dow dropped 1/2 of its gain today in last 30 minutes.
Marketwatch ran a comment piece that stated something like "Some well capitalised banks are in trouble". It flashed past in the etrade news window , from which you can’t cut and paste, so I can’t be accurate. I was dealing with the AntiStick at the tiem, will try to find it.
fslr still flying … 192+
Did Maria just say that Obama just said GDP tomorrow will be negative ?
WTF is up with this Obama idiot ??
Hi, Phil, Are you sure you want to be out tomorrow afternoon? Could be more fun hanging around.
Okay, okay! Just kidding. Go and have a fun weekend.
[How the hell do I put a smiliey here!]
GDP WILL be negative tomorrow Cap. I’m sorry you are so used to your Party lying about everything that when someone tells the truth they seem like an idiot to you but there are, believe it or not, intelligent people in this world who are willing to answer a quesiton truthfully when asked because they have enough respect for the people who elected them to be able to handle the truth when they hear it.
Weekend/Cwan – Gotta fly and had no choice. Smiley is 8 + )
FSLR fell hard after the initial bump.
YRCW missed by $1.82! That’s more than the shares cost!
By telling the truth, you mean all that blather about spending, the deficit, not raising taxes; health care being revenue neutral, cost saving, and so on ????
Ah…… Truth are Lies; Lies are Truth.
My comment was simply relating to why on earth does Obama feel the need to release information that’s not supposed to be available until a certain time; in this case 8:30 tomorrow morning.
Seems rather irresponsible to me…
Cap, Because GS asked him to wait untilt the Market was closed and they were positioned for tomorrow ahead of us…
Cap, I am not even sure Obama knows right now what the GDP number, to be announced tomorrow, is.
Interesting video, trying to explain today’s bizarre behaviour of spike up and then spike down in the morning. Attributed to the data errors in $TRIN and "HAL5000s".
You HAVE to watch this … Denninger ….. look why the market may have jammed up !
tradansh … nice catch; I was watching the video and didn’t see your post …. great minds ….
Just a quick note from KC. My sis works for Staples Corporate and she is in account managment. Overall, she says that business is trending still in a down fashion, as all but one of her accounts (a community college) are scaling back even further on office supplies…..FWIW. My bro works for Target, and he is saying the same thing from the consumer end. Back on Monday. Enjoy.
Cap, it’s what I’ve said before. We are trading against computers. It’s like trying to play chess against a computer. The best will be able to do it. But 95% or more won’t. We are merely spinning the roulete wheel. Add to that malicious strategies of pushing on the market in key opportune times and we have nothing to do with fundamentals. It’s all just a ponzi scheme where we try and get our money in or out of the market before the next guy. It’s just gambling anymore. And I’ve given the house about as much as I can take (give). Sounds like this guy Deninger has, too.
Pharm, have some ribs for me will ya?
matt: don’t i know it !!
Cap – Check out Wed morning also. There was a similar spike in TRIN, not as high as today tho.
Phil – Thoughts on how the TRIN can be manipulated to show such extreme values which are not even possible by definition?
Cap – You follow TRIN more closely right. So, can you help me understand why are there divergences between TRIN and market moves. E.g. From 3-4pm today, TRIN was decreasing (moved from 2.3 to 1.8), so basically a up move, whereas the market kept on dropping.
Phil – Would like to know your thoughts also.
I have no idea …. its only one of a bunch of indicators to look at and take in to consideraton.
I guess this is why BIDU will never ever go down…wish I saw this before I bought all those puts…
I like this guy
Karl Denninger on Dennis Kneale’s CNBC Reports
Good Morning Everyone
More bad news but futures well up after that spike down at the close. I suspect a bad GDP number which will put an end to that. Computers will indeed be the end of trading. I could point at loads of bearish articles but just one comment today : "Singapore Airlines posts its first loss since 2003 and warns on adverse business conditions". Many companies have accompanied their earnings (made by cost cutting) with warnings about business conditions – but nobody is listening.
DB… you trade UK stocks? I don’t do much here, but like PTEC at 300p. Very strong support (or let’s hope so) and big over-reaction from its recent warning.
neverworkagain – I dont trade uk stocks, more investing. I tend to hold them for a year or so. Sorry I dont know PTEC. Currently I’m in Rexam (bad) , RHL (Nuclear), FWP (Pharma), BP and a couple of others. Not great investments at the mo but certainly not big losers either.
Hello Good morning.
FSLR.. I saw 200+ spike yesterday …166 now wow. Cant understand the investors of this company, playing with their feelings (and money) in that way. From happiness to tiers in minutes.
So we have GDP today ? 🙂
Hope GDP numbers not get jammed like TRIN values yesterday. Even the VIX got some ugly spikes… but can be some big found hitting their buy/sell buttons.
After watching Denninger video it makes sense yesterday moving. So yesterday was an airgap busted at end, when computers realized input data was wrong? Man, if that is true, Its like Matt explanation, playing chess against a computer. And thinking to take the money to play at other place/game 😉
Good morning Phil & all,
Hey Phil… whatchya think??? We get a bad GDP number that finally puts an end to this ridiculous rally?
I think there is no way "they" can push it up any higher. The "cash for clunkers" auto program is reported to be running out of money, and I’m betting PPT is running a little thin too. The market is way overbought and techncial indicators are red lining.
I expect a reversal of the futures to some bloody red after GDP (-0.7% is expected) is reported worse than expected. But I did notice CNBC is saying -1.5% is the "expected" this morning. Sharon Epperson came on around 5:15 am to say the GDP -1.5% is the expectation for this coming report, and came on 10 mins later to repeat it again. So that made me pause for a bit of surprise, since consensus is for -0.7% this quarter. I hope this isn’t gonna be another one of those CNBC enabled manipulator set ups.
I’m looking for a gap down open and huge triple digit selloff down…. and duh bearz swack the cover off the ball for a grand slam homer. I went in for a big play before lunchtime yesterday and was expecting to see , if I was right, the anti-stick selloff finally show itself again just before the close. It did.
So I’m salivating for the market to open today.
Merk: I see both Reuters and Breifing.com saying Q2 GDP expectations are at -1.5%. I don’t think it really matters. We are very close to market reversal. Maybe they can squeak out SPX to 1,000. Maybe they can paint the last day of July green. I continue to set up my portfolio for the reversal. And if it goes another week or two, it’ll just be a nastier sell-off. I particularly like the seasonal parallel with last year, in both the market and commodities. Maybe we get lucky with a few nasty days in August, but I still think September or October are the real danger months for the blind bulls.
As always statistics can be misleading ,but Tyler thinks Q2 EPS/Revenues are worse than Q1. Have to say thats my gut feel as well.
GDP/ neverworkagain… yeah, I see that…
I was going off the CNN economic calendar which I usually use for planning ahead my trade plays… how long has that
-1.5% GDP number been floating around the newswires cuz it seems suddenly new to me?
I also see a expected -1.5%
Yes, probably will get a green day for an AMAZING end of month, close to a 7% gain. wow.
Next weeks: We have to think about how hard has been for shorts last 3 month… I do think that shorts brings some support when market sell-off. If we have a couple of weeks like last 2 ones, we will "run out" of shorts and as you say, it can be nasty. The s&p 1000 and nas 2000 are strong psychological levels and they are at or over 50% from march lows…
Trading against computers/Matt – These guys aren’t claiming that the computers are moving the market, the issue is that there are certain special players who get to see the order flow before the general public. That’s the front-running issue, they have information you don’t that there are 1M orders stacked up fror SPY and they get to put their order in for SPY before you see the first tick up. By the time SPY starts running out of gas, they have already seen it and get out near the top and THEN you see it start to sell off and you can put your order in behind "THEM." All this takes place automatically a Billion times a day and most of these transactions are done in 30 seconds because these guys are scalping pennies. It doesn’t really affect the move the stock makes but it does exaggerate it, that’s how we get all these wild swings in the market (and individual stocks) that all end up with no net movement once they’re done.
TRIN is a very quick-moving measurement of advancers/decliners divided by the ratio of their volumes so that 1 is balance and plus is negative and below 1 is a positive indicator. Interestingly, the daily TRIN jumped 113% yesterday to 1.6 (very bearish) and, on a weekly basis, it’s up 63%. The swing yesterday was one of the biggest I’ve seen in a while, from 0.7 to almost 3 at one point. I think it’s a useful directional indicator but not extremely useful. If you want to manipulate it, all you have to do is jack up the volume of the side you want to "win" because it gives a double boost by increasing or decreasing both the numerator and denominator at the same time, ie:
So you can see the effect volume has is pretty intense and you can whip the TRIN around by simply holding up some buys and flooding the sells or vs. vs. They system was designed in the 60s for much calmer markets than these…
BIDU/New – Hard to play against them while China is on a run, pretty much because of that math. If China and India get 10% more of their population on-line in the next 5 years, that adds over 200M new Internet users, like adding the entire current US base. It doesn’t matter that those people are poor because they are still eyeballs and that works for GOOG and BIDU’s model because, no matter how poor you are, there’s still a guy who wants to sell you something…
GDP/DB/Merk – As far as I know, -1.5% is the generally expected target and that hasn’t changed. 70% of GDP is consumer spending and that certainly seemed to be down very slightly last Q. The big boost to GDP is decliniing inventories, which is a silly way to boost GDP as the logic is that, if inventories are falling then we must need to restock later and that’s good for manufacturers but that’s an assumption from a constant growth economy and supposes that we were not oversupplied and/or overconsuming in the past. Still, you won’t hear that logic from the MSM, they just want the headlines so whatever the number is, they will run with it. Government spending was way up, that’s about 10% of the GDP so if consumer spending was down 1%, that’s -0.7 on GDP and then you have corporate spending, which sucked but boosted by the fact that no one manufactured anything so the inventories went down and then a boost in government spending and -1.5% is a pretty realistic target.
FSLR/Spider – I went from tears to happiness in the same minutes! Actually, you know how I feel about them, I would have loved to see them open at $200 today so I could have loaded up the truck with puts.
Stimulus still works if you actually give it to people instead of Banks. Cash for clunkers whole $1Bn budget used in a week. At $4,500 per car, that’s a quarter million cars sold under that program in one week! The home incentive program is working well too but needs to be more I think. Incentifying people to make long-term asset purchases is sensible policy, way better than giving people $300 to blow on gas like they did last year but somehow they allocated $160Bn for that but only $20Bn this year for cars and homes…
Computers/Trin/market. What Karl Denninger actually said was that there was a "glitch" in the TRIN numbers yesterday, when the glitch was corrected the computers reacted as though the data was real and initiated a ton of buying. He said it could have been selling if the glitch had been the other way. What he did say was these sort of problems can lead to massive dislocations (as per the big buy yesterday) and need to be looked into.
DB, yes thats the point KD was speaking about. They took a erroneous input and reacted hard. Market went up so no worries? NO – And what if it goes in the other side? We have to agree we all want a free market. This sort of glitch can bring a lot of pain to all of us, despite is it moves up or down.
Phli: cjek this link, nice Obama cartoons, maybe some of them situable for your articles (dunno about copyrights on em)
and here some more: 🙂
futures going higher and higher everytime I check…. that is getting so annoying
don’t these dumkoffs know GDP is gonna be negative???
The 2009 Q1 real GDP was 11.34 trillion with PCE being 8.21 trillion of it… consumer sentiment went down hard on the report released this week then you would think in a normal world that should translate to a lower PCE
HGSI: This article describes very well current situation on HGSI, Still the analysis should be more deep, taking into account future gains increase if they can give a successful treatment to combat lupus :