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Thursday, December 1, 2022

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Thank Jobs It’s Friday

Well, yesterday was fun!

As we expected, the massive pre-market pump job failed once again to push our breakout levels and that led to 6 of our 7 day trades coming out winners in Member Chat.  We're still waiting on the 7th, our MOS puts that were meant to be a weekend hold anyway so not really a day-trade but it was lots of fun after sitting mainly on the sidelines this week waiting for a good opportunity to jump in.  Our plan from the morning post to buy out our DIA putters worked perfectly as well and we even went bullish on the DIA's into yesterday's stick save so we're not even going to complain about that nonsense today!

It will take more than a stick to save the markets today if the jobs report is a disappointment.  GS, BCS and JPM have all lowered their loss predictions from around 370,000 lost jobs to 250-275,000 job losses and DB has gone completely off the wall with a prediction of just 150,000 losses!  As the US is gearing up for the 2010 census and as no one understands the mystical "seasonal adjustment" game and as GS pulls all the strings in government, we are hard-pressed to dismiss this seemingly ridiculous prediction.  What do the big 3 market manipuluators have to gain by raising expectations so high just ahead of the actual numbers?  Perhaps they have already finished their selling and have now fipped negative, looking to initiate a massive sell-off as jobs disappoint?  Or, perhaps, they are brilliant analysts who are well ahead of a number that will, finally, give us our long-awaited break out.

[Total workers on nonfarm payrolls]If the figures do surprise, it won't be in a statistically significant way. A payroll decline of 450,000, which would mortify Wall Street, would mean a 0.3% decline in total payrolls. A market-friendlier decline of 150,000, on the other hand, would represent a 0.1% decline. Percentage-wise, the difference is a crapshoot.  At some point, jobs data should improve meaningfully. The four-week moving average of new jobless claims is down 10% from late June. That translates into about 200,000 fewer job cuts a month, estimates High Frequency Economics economist Ian Shepherdson. "The risk of a substantial upward surprise on payrolls over the next few months has risen," Deutsche Bank economist Joseph LaVorgna wrote recently.

China lost a little faith this morning as the Hang Seng fell right to the 2.5% rule (down 523 points) and the Shanghai went them a little better, dropping 2.9% despite Goldman's bullish assurances.  I would urge readers to check out this morning's post "Is China's Growth an Accounting Miracle?" for some perspective on the subject.  Property companies led the declines  on persistent fears that China may tighten lending policies, especially in the property sector, to prevent asset bubbles.  "While property developers themselves have raised money and probably have loans from banks sitting in their deposits, it's still going to be very negative if the central bank tightens significantly in the sense that end users can't buy flats," said Main First Securities sales trader Andrew Sullivan.

"The smart move is to take profits now," because carrying positions over the weekend and before U.S. payrolls data is too risky, said Yukio Takahashi, market analyst at Mizuho Securities. "Players won't make any big moves until they see how Wall Street reacts to the unemployment figures."  Gee, more pressure on us!  No pressure on CIC, China's Sovereign Wealth fund who are up 50% in 2009 with assets now totalling $300Bn.  Why can't the US do this?  Crash the economy, start a Sovereign Wealth Fund that uses government money to buy the crushed assets of ordinary investors at the very bottom, then initiate a massive stimulus package that artificially boosts the markets and makes that fund a fortune?  Oh, that's right – we did do that, and our Soverign Fund is called Goldman Sachs! 

Europe is trading with some caution ahead of the US jobs report (8:20).  Russia continues to cut rates to 10.75%, sending the Ruble even lower as 10.75% is not enough reward for the risk of holding Russian currency.  Inflation in Russia is 8.1% so, unlike the US, at least Russian savers can stay ahead of the game.  Greece has been warned by the IMF that they must reduce their deficit, which is around 6% of their GDP.  It's a good thing the IMF hasn't seen our books, as our deficit of $2Tn is 15% of GDP! 

8:30 Update:  Well Kudos to GS, who were off by just 3,000 jobs as the Non-Farm Payroll came in at -247,000 for July.  That's a rate of "only" 2,964,000 jobs lost in a year if, of course, you ignore the fact that we've already lost 3,787,000 jobs in the first 7 NFP reports of 2009.  Still, this is the lowest number of job losses since November of 2008, when we "only" lost 240,000 jobs.  For the historians out there, we haven't had a job gain since Jan of 2008, when we added a whopping 18,000 jobs in this nation.  We're not expecting the market to keep this in perspective though, it's a good number and it will be extrapolated out to a massive victory this weekend.  Heck, Obama was already taking credit last night (notice he says "job losses cut in half" so GS is not the only one who gets an early peak at the report!).

Obviously, we're going to get a retest of our breakout levels:  Dow 9,297, S&P 1,000, Nas 2,107, NYSE 6,438, Russell 562 and SOX 308 and we'll be paying special attention to the Russell, which tested the 33% line (off the top) at 574 on Tuesday.  We would consider a breakout over that level to be an extremely bullish sign for our indexes.  Our tip-off to get bearish at yesterday's open was the failure of the QQQQs to break 40 so that will be our bull/bear signal for the day.  If we don't fail our levels on profit taking into the weekend, we may have to finish this day slightly bullish as we could get strong follow-through from Asia on a snap-back on Monday.  That makes FXI $41 calls at $2 a good momentum play this morning, playing for the China bounce and out if the Dow can't hold 9,250. 

Not breaking our levels on this tremendously good jobs news would be a huge disappointment but it's holding them that's key.  We may get a nice pop as technical traders come off the sidelines but we'll still be looking for short opportunities this morning, probably buying out our DIA putters yet again.  It's all about how we finish and, sadly, you never know that until the bell rings with all these crazy last-minute programs.  What will be our key indicator this morning is volume.  If we break out but the volume stays low – then it's more likely the volume will come in to the downside later.  As Mr. Takahashi said above:  "The smart move is to take profits now!"

 

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YRCW & SRS & AIG – I wonder if we should do the opposite: Long the worse companies.  We’d be making big $$ for today!

why do you think Dec 11 Calls on FXP are so cheap?

Phil,
Are we still going into the weekend neutral, per your earlier post, or has the rejection changed our stance for the weekend?

Phil,
What’s your feeling on POT at this level, does it go lower?
Thanks

Was that a failed stick ?

I have SRS Sep 10 calls for 2.20. Is it worth fully covering with Aug 13s?

DIA- I am in the Dec 95’s now-naked. Still looking to sell 1/2 cover into the close? Sept 93’s? @ ?
Confirming

Phil, my premise since this morning has been that with GS trumpeting the low jobs number, we’d have an up day.  And Monday’s open will be up with a correction starting sometime midday.
 
I took off my covers right before the last squeeze on SRS and DHI (short).  I didn’t cover or capitulate.  Just rode it out.  Of course, having my heart race like that prompted me to cover once we pulled back and got below the levels were I took them off in the first place.  So now I’m covered and my covers were underwater but now even.  Don’t you think they are going to paint the best possible picture today, perhaps closing near the high so that we can have a premarket pop on Monday?  When you say a 300 point drop.. you aren’t suggesting out of the gate are you?  I’d say no sooner then 10.  Would you agree?  (I’m trying to get you to tell me to stay covered!)

TNA/Peter D – Is the TNA play you mentioned 2-3 days ago a good play now?  I didn’t do that one when you recommended.  (It’s a bearish play of buying an Aug put 36/35 vertical + selling an Aug 44 call to make the whole thing a zero cost play.) Perhaps different strikes.
On a 2nd thought, maybe I should try the same strategy on a less dizzy 1x ETF.  The ultra & 3x ones are really crazy.  Any suggestions?

Well, the joke on the AIG CDS unwinds is that they (i.e. us taxpayers) have apparently been paying the counter-parties full value. I’m sure the contracts have lots of complexities, but if you’re just going to pay in full anyway, is it really that hard to figure out that, say, this ABS is market-marked at .21 on the dollar, so we’re going to pay you .79?
 
So according to every report I’ve seen, these AIG people aren’t even trying to score a good price for the American taxpayer-suckers. They just pay, pay, pay.

WASHINGTON -(Dow Jones)- Two top U.S. Senate Democrats were cleared on Friday of any wrongdoing when they received loans through a special VIP program run by Countrywide Financial Corp., though both should have exercised better judgment, Senate investigators said.
The bipartisan Senate Select Committee on Ethics said it found "no credible evidence" that either Sen. Christopher Dodd of Connecticut or Sen. Kent Conrad of North Dakota knowingly sought out a special loan or treatment because of their standing.
No special treatment here!! The rest of us would be in jail already.

 QQQQ needs to close below 39.6 today… not looking good from a bearish point of view… we need a real good push down in the last 10 mins
 
If "they" can hold technology up here at these levels… then I’m feeling bulls got a win today and making me feel nervous about Monday

Bilderbergers, Phil.  They used to be a foil of the right wing wackos like me!

I wish we didn’t have to worry about what the heck China is going to do.. well, my covers are closing even.  So I feel better then if they were underwater.  But whatever.  After all this.. I can’t imagine that we will open down on Monday.  They have worked way too hard for me to see that happening.  On the other hand, the levels were there for the taking today.  If they’d just flatlined us till close they could have gotten more of the TA traders on board.  Guess we’ll just have to wait and see.
 
Next week is beach week for me.  I’ll  be trading a little bit here and there.  My bro will be there too so it will be interesting to trade with him.  Never done it before.  Hopefully some of his good fortune will rub off on me.  I could use it.  Have a good one!

Good weekend all !

Email Alerts
I just got Phil’s 11:21 email alert at 4:39PM
Is anyone else having the same delayed delivery?
Thanks

To paraphrawe Shakespeare,
 
"first kill all the bilderbergers"

cwan/TNA – Yes, the play is still on.  We can go for Aug 38/37 PUT vertical that gives a better breakeven point.  Going to September, selling Sep 50 CALL gives us $0.85c, which is good for almost 3x the Sep 36/35 long PUT vertical.  My order to sell TNA CALLs expired yesterday and I forgot to reset today, which is a good thing as I may get a better price on Monday.

Peter D/TNA – Are you suggesting buying Aug PUT vertical 38/37 and selling SEP CALL 50?  Sounds like a good idea.  Aug CALL options only have strikes up to 45.  Selling Sep 50 gives you good premiums and it’s further away from TNA’s current price.

Peter D – TBT short strangle.  Sold some puts about 5 days ago.  Been waiting on selling the calls as it moves towards the top of it’s BBands.  With a whole lot of treasuries going out next week would you hold off on selling the calls till the end of week?

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