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Thursday, December 1, 2022


Thousand-Point Thursday for the S&P 500!

The Fed did nothing – yay!

That's the take on the futures market, which are up about 1% this morning.  We thought we were pretty clever taking some bearish bets into the post-Fed rally (see David Fry chart) as it seemed a little overdone and those bets paid off into the close but holding them overnight was a huge mistake so far as the dollar dropped a point, mostly since Europe's open (but not against the Yen, of course to keep Japan happy) and that plus the IEA upgrading their demand outlook (despite OPEC disagreeing) has sent oil flying back to $72 and gold back to $960 and the commodity pushers are sll singing happy days are here again, keying off Bernanke's promise to continue to "employ all available tools to promote economic recovery and price stability."  

Now price stability may sound like a good thing but it's not because Ben is not promising the US consumers that prices will remain low, Ben is promising us, the investing public, that he will not allow deflation to harm our long-term investments so we should BUYBUYBUY because he also promises to keep "exceptionally low levels of the federal funds rate for an extended period."  I always think it's funny when conservatives complain that the government shouldn't be telling people what to do but here is the Federal Reserve telling us exactly how they want us to invest our money.  They're NOT going to give you a high interest rate for keeping it in the bank so you'd better get it off the sidelines and into stocks and commodities, where they do promise to use "all available tools" including the purchase of $1.2Tn of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year.  BY THE END OF THE YEAR!  Wow, that's $350Bn a month.  Hey Mr. Chairman, I have some mortgage backed securities I'd like to sell.  Mr. Chairman.  Mr. Chairman.  Ben….  Darn, he's gone – maybe next month….

As I said in my Alert to members just after the Fed yesterday, the statement is not bullish on the economy, even the $1.4Tn is not new money, it's just a renewed commitment to spend it.  This was taken as a dollar negative in Europe but, "in reality" (such as it is), Fed accounting does not affect our national budget so they can spend this money without impacting US debt but it is a sneaky way to jam the money supply to nosebleed levels.  To me, this was nothing to be bullish about and is simply more of an example that our economy, like China, is stimulated but not improved.   

I hate to be a gloomy gus but I had to point out to members last night that Foreclosures Set 3rd Record High in 5 Months.  A total of 360,149 properties received a default or auction notice or were seized last month.  “We’re in a deep hole,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said in an interview. “There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy.”  The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter, the most in records dating to 1979, the National Association of Realtors said yesterday.  “There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate in Los Angeles. “We have not seen the bottom of the housing market.”

We nave not seen the bottom of the jobs market either as another 558,000 Americans lost their jobs last week, more than the 540,000 expected and last month was revised slightly higher as well.  This may come as a shock to Uncle Ben as he seeks to maintain the stability of $70 oil but unemployed people can't afford to drive to the mall and buy semiconductors and other commodities so July Retail Sales came in at -0.1%, which is about what we at PSW expected but is a total shock to the "expert economists" who thought they were going to be up 0.9%.  A 1,000% miss is pretty normal for these bozos, who generally live within walking distance of a college and spend about $5 a week on gas as they take their classic cars out for a spin so forgive them if they are totally clueless as to what is happening in the lives of real people

In California, a state that is bigger than any country in Europe except united Germany, 1 out of 10 homes is being foreclosed this year.   That rate is 1/123 for the month of July and is UP 15% from June.  Arizona is our second most foreclosed state but they are catching up with a July rate of 1/135 but that's up a whopping 25% from June – mmmmm, can't you just smell those green shoots?  Also, 126,000 people went bankrupt last month, 34% more than last July and we are on pace for 1.4M for the year and that’s in the average 3.2 person household so 4.5M people in families that have nothing at all and will not likely be "rebounding" for 7 more years at least. 

Even WMT posted lower 2nd quarter sales this morning with same-store sales falling 1.2% and miles below expectations of up 3%.  The company managed to save their stock by raising the low end of their guidance for they year by a nickel as they are managing to put the squeeze on their suppliers and pay remaining workers a lot closer to minimum wage ($7.25/hr).  The company did make $3.44Bn for the quarter and that's .88 a share so still not a bad place to park your money but if WMT can't do well then you can expect a few major retailers to join the 1.4M individuals in bankruptcy court at the end of this year as we are just one bad Christmas season away from catastrophe

And let's not kid ourselves with that down 0.1% number on Retail Sales as that includes automobiles under the $1Bn "cash for clunkers" stimulus.  Without automobiles, which were up 2.4%, retail sales were down 0.6%.  Also interesting for the oil bulls is gasoline sales were down 2.1% so Americans are not going anywhere and are not buying anything.  Retail sales excluding autos and gas decreased 0.4% in July, the fifth drop in a row.  Furniture retailers fell 0.9% and building material and garden supplies dealers were dropped 2.1%. Food and beverage stores declined 0.3%. Electronic and appliance stores were down 1.4%.  General merchandise stores tumbled 0.8%. Sporting goods, hobby, book and music stores fell 1.9%.  There were some increases: Health and personal care stores, up 0.7%; restaurants and bars, up 0.4%; clothing stores, up 0.6%; and mail order and Internet retailers, up 0.1%. 

So that's the bad news but it's time, once again, to switch off our bains and watch our levels.  Previous highs in our indexes for the month were Dow 9,432, S&P 1,017, Nas 2,015, NYSE 6,632, RUT 576 and, as I said to Members yesterday afternoon, 3 of 5 of those indexes at new highs means we have to go bullish although I can't see being anything more than neutral into the weekend based on today's data.  Asia was bouncy this morning with the Nikkei getting back over 10,500 (up .8%) and the Hang Seng's weekly chart looking like they need a defibrillator with a 2% gap up this morning to almost make up for the 3% gap down yesterday.  

Europe is up about a point at 9am with Germany and France showing 0.3% growth in their GDP despite the overall Euro-zone Industrial Output falling 0.1%.  Of course France is an evil country that forces universal health care on their citizens (as do all EU nations) and has been vilified by the right-wing media in this country so the fact that their economy isn't spiraling out of control will come as quite a shock to conservative investors, who only have to hear the headlines on Fox to make their decisions and probably haven't looked up a single, actual fact about French health care (ranked #1 in the world).  Estonia joined the Baltic nightmare with a 16.6% decline in GDP

So we'll try to keep an open (switched off) mind if the markets manage to hold their levels despite all these pesky "facts" that make it seem like you'd have to have a screw loose to buy at these prices.  If we can't hold the August highs, we'll have our normal "must hold" levels to fall back on but we're getting into a very, very uncertain point over the weekend so I think it's going to be cover or cash tomorrow, no matter what the market does today. 



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Good advice Eric I’m off for a quick bottle of Veuve 🙂

MarketWatch also spinning Clinkers as a reason retail sales were bad.

Miraclensis – you can trade some options (e.g SPY) for 15 minutes after the close. If I’m trading the market I use SPY because I can react for 15 minutes to earnings etc.

OK- put stop on the stock @ 16.50 using that price as the "trigger"; i.e, out/back in on the stock then 2x the callers if/or once confident in nirvana @ $17.50 plus?
Got it?

I don’t get it. The market stops at 4:00. That should mean that my dia puts should stay PUT at that time and yet I see them continue to lose value.

miraclensis – you can trade DIA puts until 4.15 hence they follow the index as it trades after hour for 15 minutes.

the futures are still trading.

Don’t forget one of the biggest conflicts going … Jeff Immelt is on Obama’s economic advisory board which gives him oval office access.

Pharm – thanks for prompting me to exit NNVC; they dropped 10% today.  A liittle lower i might wade in again.

Pushed the trigger too late and am saddled with the stick play. It worked well, but will it be there tomorrow? (Guessing probably no, lesson learned about getting distracted)

Its been a "perfect" month. Every stock I wrote calls against will be called away tomorrow, every put I wrote will expire. I am essentially out of the equity market. The usual response to this is to sell naked puts, get the equities back, and start again. I am reluctant to sell puts, because I expect a pullback. I felt the same way in 2003, and spent several months on the sidelines, waiting for a pullback that never came.
Phil- need some new buy/write candidates, or the new 100K portfolio….

Barfomger – tomorrow is not options expiration … that’s next Friday

barf, you should write up a strategy. I’ve had the opposite of a perfect month.

you are quite correct. Options have another week. I got misdirected by something, but I can’t say exactly what.
blair: i’m being somewhat sarcastic. I hate when everything goes at once, and I have to start from scratch with everything. And yes, I’m working on writing up some of what I’ve learned over the years – I will post a link to it for those who might find it useful. Phil has plenty in the archives, of course.

Miracle, may options stop trading at 16:15, so you need to check carefully the contract specs based upon what you are trading.
http://www.cboe.com has everything you could possibly need.

I meant many not may. Too much bubbly.

 Meteorologists say…….this will be a very bad hurricane year.   Think.   

Phil: I’ve got 1000 shares of LYG but sold the puts & calls  for a profit. I missed your previous call, so now I just have the stock w/no dividend. Any recommendations.I’m up 26% in the stock.
Ps: I have learned a lot, and made a very good profit, in the 3 months that  I’ve been a subscriber.I’m a loyal fan.

Anyone here put much confidence in the "Option pain" theory?  If so, the max pain for X is at $39.  I sure hope they’re right :).

There are some stocks for which options pain sometimes seems to work e.g. GOOG.
There are some stocks for which it seldom seems to work e.g AAPL.
I have no idea whether it sometimes or seldom works for X.
If life were as simple as look at options pain and buy an option, we would all be filthy rich, wouldn’t we?

Cap-Janjuah- good article-makes a lot of sense that fundamentals will eventually rule. By the way, do you know what the VOLA jargon is that is mentioned in the last paragraph?

UNG – its NAV dropped to $11.50!

Good Morning everyone.
Inventory Correction / GDP – worth a read while waiting the pre-market pump.

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