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Monday, February 26, 2024

Full Thrust Thursday – GS, China and the EU Pump It Up!

Sorry bulls but, as the great Phil Collins said:

Well it feels like something you want so bad
And then you think you've got it, but it's somethin’ you already had
And you can feel it all around you, but it's somethin’ you just can't touch, uh huh huh
And I can feel it coming at me
Yes I can feel it coming at me

Aaw, did I miss again?
I think
I missed again, uh huh

Very appropriately for this market, in the video, Mr. Collins is a one man air band – he pretends to be playing with instruments but THERE'S NOTHING THERE.  This is just like our markets, which are being held up by the air spouting out of the MSM, GS and their government puppets while, in reality, the recovery is something you (the people) "just can't touch, uh huh huh."

We thought we had all our breakout levels: Dow 9,297, S&P 1,000, NYSE 6,438, Russell 562 and SOX 308 but the Nasdaq – JUST the Nasdaq, could not close the deal at 2,017.  As I mentioned in yesterday's post (when I was the only analyst in America brave enough to title an article at 8:23 am, with the futures on fire: "Will We Break Out Wednesday?  No."), 40 on the QQQQs was the key level to watch and we did open at 40.13 on the Qs but all that ended up being was a fantastic short play as they dropped like a rock to 39.50.  In fact, the entire rally was in serious trouble yesterday but was gallantly saved by our friends at Goldman Sachs, who initiated the stick save with a slap shot at the bears as they RAISED their outlook for the GDP in the second half of 2009 by 200%, from 1% to 3% GDP.  As David Fry said in his column last night:

Today’s disappointing employment report from ADP was the dose of cold water an overbought market needed to sell-off. But then the cavalry came to the rescue at just the right moment with Goldman’s call upgrading economic growth estimates. The effect was a ragged rally reducing more selling. There’s a concerted effort in officialdom and with their Wall Street brethren to lift markets they’ll use whatever new rules and tools are needed to get things going. Making you feel good makes them money and reelects incumbents. With regard to the former is this eyebrow raising Bloomberg story about how GS is making $100M per day trading. Yep, they’re trading free money from you and me with their High Frequency Trading systems (HAL 9000s).

I sent out the Alert warning Members ahead of the 50-point stick and we got our first real sign of market trouble as the Dow failed to hold 9,300, falling off to close at 9,280.  The Dow futures fell another 50 points in after hours trading but the futures have been on a tear since the Asian markets opened on word from our Chinese masters that the PBOC will continue it's easy-credit policies, citing numerous risks to early signs of a recovery in the global economy.  "China's economy is now in a critical period of stabilization and recovery, and maintaining stable and rapid economic growth is still the most important task we face," the People's Bank of China said in its quarterly monetary-policy report.  They also said: "Although the general trend of stabilization in the [global] economy has been basically established, the process of recovery may be slow and tortuous" but it doesn't seem like investors in China read past the first sentence as the Hang Seng jumped 404 points to finish just shy of 20,900. 

"We will continue to unswervingly implement the appropriately loose monetary policy, and carry out fine-tuning with market tools according to changes in the domestic and international economic trends and prices," the report said.

Not to be outdone by easy Asian monetary policy, both the BOE and the ECB issued statements today that not only would they both leave rates unchanged, despite the recovery everyone is seeing, but the BOE is going further down the path of quantitative easing by increasing their asset purchase program by 40% to 175Bn Pounds which, thanks to the weak dollar, is now a hefty $297Bn.  That's like California, all by itself, having a $300Bn to lavish on it's banks.  There was also some good economic news in the EU as UL came in better than expected, with "just" a 17% drop in profits and the big booster was German Manufacturing Orders jumping 4.5% in June, down "just" 25.3% from last year.  One could point out that, although Producer Goods Orders rose 4.6% (mainly exports as China stimulated), Consumer Goods Orders FELL 0.5% but really, what's the point of analysis when the market is ready to rally?

So that brings us back to the futures, which are up half a point at 8:30 and it looks like a replay of yesterday.  On July 27th I put up a Big Chart Review and we were looking for 33% (off the top) breakout levels for the International markets that could give us a strong indication that the rally is real.  The closest US index to the mark is the Russell, which needs to make 574 to be just 1/3 off it's 2007 highs.  On Tuesday we came just inches away from the level I had predicted the week before but we were soundly rejected.  This morning, we will take another run at it so the Russell will be today's second major break-out indicator at 574.  Our third major mark would be DAX 5,461 and that's where I think our chief worry is.  Despite the exciting goods orders today, the Dax has made virtually no progress since the 27th and, like the Russell, was soundly rejected off an almost exact test of our mark on Monday.

"THEY" are pulling out all the stops today because if we can't make our breakouts by tomorrow, the weekly charts start looking questionable again and the one thing "they" can't control is volume selling.  We are in a very dangerous area here where sensible investors would cash out their gains and wait for the next dip.  Only by perpetuating the myth that there will never be a next dip are the market pumpers able to sustain this better than 50% run in the global markets since the March drop.  Did you get a raise?  Did your home jump 50% in value?  Did 50% more people get jobs?  Did 50% less people lose jobs?  Anything???  If not, then maybe we're a little overbought up here and maybe these levels, despite this globally coordinated pump job, is still doomed to failure.  I want to get more bullish, truly I do, but I remain in my rangeish outlook until we break the 2.5% levels (Dow 9,300 etc) and hold them. 

Earnings are mixed this morning and retail sales are coming in spotty but we did get a better than expected jobs report with "only" 550,000 filing for unemployment last week, down from 584,000 the week before.  Continuing claims were not so good though, with a rise to a stunning (if we still had the ability to be stunned) 6,310,000 people drawing benefits.  We discussed earlier in the week how 25% of those 6.3M people will run out of benefits by December – that could be a bit of a problem in Q4 but, again, why dwell on the negative when GS is raising it's forecasts?  We'll be watching the Pound today but, as I predicted on Tuesday, they were firmly rejected at the $1.70 mark and it would be very poor timing for our commodity pushers if now is the time the dollar picks to reassert itself. 

We are still picking our spots and waiting to see what holds but, after all the effort made globally to push us through the roof, I think we may start getting a little bearish if we can't make it today.  Congrats to Oxen Group's David, whose new featured "Gamble of the Day" went out to members at 3:25 yesterday calling for a buy on CSIQ ahead of earnings at $16.  David said: "Out of all solar companies reporting, thus far, 3/4 beat estimates. The one miss GT was up over 15% on its marginal miss. In the specialized electronics sector, since July 22, 11/13 companies have beat estimates. Overall, technology companies have been underestimated, and I think that people were way too scared about the drop off in solar companies. They will surprise, starting with CSIQ tomorrow."  $19.50 is the pre-market run as the company came in much better than expected and we're not greedy so we're out ahead of the bell.  Nicely done David and congrats to all who played! 

I am NOT expecting us to make it today.  We're going to take a chance and buy back the August DIA puts we sold to cover our long covers and see if we can get a proper pullback.  If the Dow can break 9,300, we'll cover back up but I'm not seeing the fundamentals to support all the pumping.  As I said to members about GS in yesterday's Alert: "Are they in control or desperately trying to keep things together?"



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