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Wednesday, July 6, 2022

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Manic Monday – Dubai, CitiGroup and GS Move Markets

What a morning it's been already! 

Last night, at about 11:30 EST, Abu Dhabi gave a $10Bn bailout to Dubai (until the end of April, anyway) with the following statement from Sheik Ahmed bin Saaed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee: "We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices."  That was enough to send the Hang Seng from down 300 points to up 300 points in less than 30 minutes of trading (on both sides of their lunch break) while the Shanghai went from -2.2% to +1.7% and the Nikkei also reversed a 100-point drop, but only managed to get back to even at the close

US futures trading also went wild, up over 100 points at the time but we've given up about half of those gains as of 7:30.  Does it make sense that the Dubai crisis, which dropped us from 10,450 back to 10,250 when it came up, should be the catalyst to get us over 10,500 just because they were bailed out?  Of course it doesn't – that's why we went to cash.  This is one of the most ridiculously irrational markets I've ever seen.  The other "good" news this morning is also the same old songs:  Citigroup will repay their $20Bn TARP loan by diluting their stock by about 20% and GS says oil will go to $85 early next year.   

I don't know why they even bother to pretend anymore – they should just put 10 market-boosting statements on a chip that randomly plays one of them whenever the MSM needs a quote for the morning.  People don't seem to notice it's the same thing over and over and over again so why even bother with the pretense?  Speaking of pretense – I mentioned in the Weekend Wrap-Up that we expected this nonsense this morning but, had I realized that Greenspan AND Cramer were going to be on Meet the Press yesterday, I would have gone more bullish as those are the two biggest market hypers GE could have used for this week's quotes.

 

Europe seems happy enough with Asia's recovery and all the bull*** commentary (that's bullISH – what were you thinking?) and they are up about a point ahead of our open DESPITE the FACT that Q3 euro area employment is down 0.5%, the fifth straight quarter of contraction.  All sectors reported declines, except public services, health and education.  October euro area industrial output was also down 0.6%, the first contraction since March.  Production was down 11.1% vs. a year ago.  Yes – 11.1% WORSE than last year.  Economists, however, expected a steeper 0.8% decline so yay – I guess…

As we usually do on a Monday, we have to plan to switch off our brains and simply watch our levels.  Other than the silly Dow, we are no closer to making new highs than we were last Monday.  There is little change to our level watch in general as we still need to see those 27.5% levels broken to call this anything but a range top and the NYSE is STILL not even over the 25% line, nor are the Transports, who are still below their retrace level.

        Dow S&P Nasdaq NYSE Russell Trans HSI Nikkei  FTSE  DAX 
Current  10,471  1,106  2,190  7,125  600  1,920  22,085  10,105 5,314  5,807
27.5% Up 10,500 1,127 2,242 7,380 615 2,113 22,421 11,787 5,381 5,894
Recnt High 10,549 1,120 2,190 7,241 625 2,045 23,100 10,397 5,396 5,888
2.5% Down  10,128 1,077 2,139 7,002 587 1,878 21,766 9,913 5,157 5,640
July Base 8,200   880  1,750  5,600  480  1,650  17,500  9,200  4,200  4,600 
25% Up  10,250  1,100 2,187 7,200 600 2,062 21,875 11,500 5,250 5,750
Retrace 9,840 1,056 2,100 6,720 576 1,980 21,000 11,040  5,040 5,520

No wonder our plays from 2 weeks ago performed so well last week – NOTHING HAPPENED!  Since most of our trades are the selling of premium, we love it when an entire week goes by the market doesn't move.  Sure it can go up 500 and down 500 – we don't care – as long as it ends up in the same spot and last Monday morning we were at Dow 10,388, S&P 1,105, Nas 2,194, NYSE 7,182 and Russell 602.  So it was a big, fat nothing for the week last week but today they've got the hype machine cranked up all over again because 67,200 brand new suckers were born over the past 7 days and Cramer, Greenspan, Goldman and all the other carnival barkers are going to do whatever it takes to bring 'em into the tent.

XOM pitched in this morning with a $31Bn deal to by natural gas giant XTO and that's boosting the entire energy sector but it's an all stock deal, which is kind of like you buying 20% of your neighbor's house at an inflated value by pledging to give him 20% of your house at the same inflated value and then holding a press conference to tell investors: "Look how valuable our houses are!"  Once again, at a birth rate of 6 suckers a minute, you can do stupid crap like this and make it work…

As a bullish hedge, I was struck by the still very high premiums in the Russell Index Futures that we can take advantage of as they sit right on the 600 line.  You can buy the Dec $590 calls for $14 and sell the $600 calls for $7.50 and sell the Jan $560 puts for $7.50 which is a net $1 credit and you collect $10 more if the Russell holds 600 through expiration, at which point you can set a stop on buying back the puts or just ride them out for an additional gain if we stay bullish.  I'll be making a similar play on IWM and other ETFs for members in chat this morning as we need some upside covers but it's likely to be more of a watch and wait day as we see how high they can push it.

Be careful out there.

 

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Euro was under relentless assault in early morning European trade today, after reports on the website http://www.benzinga.com suggested that Austria may be the latest trouble spot for the credit crisis spreading throughout the region. The Austrian regulators have already nationalized Carinthian Hypo Alpe Adria Bank AG  and speculation is mounting that Austria’s fourth largest bank Oesterreichische Volksbanken AG (OeVAG) may be the next to be rescued.

OeVAG  which reported an accumulated loss of 607 million euros in the first three quarters of this year  has a balance sheet of 53 Billion euros. Investors are concerned that credit writedowns could skyrocket to 20 Billion euros on the loan book of Austrian banks putting massive stress on the European financial system.

The euro tumbled below the 1.4600 level for the first time since October 5th as the single currency suddenly became a toxic asset of its own, with traders loathe to buy it until further clarity in Austrian banking sector can be established.  The unit has now come off more than 500 points from its yearly highs as concerns over the fiscal integrity of the European financial sector along with better than expected US economic data have markedly changed the dynamic in the FX market in favor of the dollar.

FX traders will now look to the ZEW survey due at 10:00 GMT for latest data point on the state of the Eurozone economy, but if the report disappoints, the combination of weak economic data and heightened fears over another possible  credit crisis in the European financial system could easily drive the pair below 1.4500 figure before the day’s end.

Source: FX360.com

Gel –
"Low Lives" compared to whom? Politicians speaking in plattitudes – that’s a surprise.
FYI – the guy cannot get a lot of his agenda passed because of Republicans and Conservative Democrats –
"Did the American people elect him in order to convert the country into a Socialist government entity, recklessly in debt to the level bordering bankrupt status, with no possible way to pay it back without debasing the currency?"
It’s not Obama’s fault that he walked into the worst economic disaster since the great depression –
The financial crisis can be blamed on plenty of people – including those conservatives that think that markets are self-regulating – a myth proven over and over again from food safety – think China – or the U.S. in the 19th century when thousands died from food poisoning caused by unregulated milk and food production – to the latest behavior by everyone associated with the mortgage crisis – consumers – all the way up the chain – both dems and rep. – sorry hard to blame this on the poor guy holding the bag

booya tchayipov.  There are a bunch of different ways to solve it.  I ended up  finding 3 numbers, x,y,z such that
x=1 mod 7, x=0 mod 11, 0 mod 13
y=0 mod 7, y=1 mod 11, 0mod 13
z=0 mod 7, z=0 mod 11, z=1 mod 13.
 
then 2z+7y +13x solves the equation.  To find the smallest such solution you take 2z+7y +13x mod (7*11*13).
 
Phil, since I also just used your approach first, plug everything into a spreadsheet till it finds a solution.  But I was informed by my proffessor (who happens to be Russian) that she would not accept a spreadsheet as justification for my answer :(.
 
On a side note,  All of the Russian students / professors I meet are orders of magnitude better mathematicians than I am.  They must be doing something right over there 🙂
 
Tchayipov, I have 3 Russian proffessors all from Moscow university.  You are going to have to give me Russian lessons so I can start listening to their what they are saying about me 🙂

Phil,
A Bloomberg talking head was pumping BBY big time this morning, the stock has really run up too. Is there a short opportunity here, especially if there’s a big rise on the earnings announcement?

craigzooka
we have a jock in Russia: what is american University?
answer: it is a place, where Russians Math professors teach chinise students

 That is very close to the truth, tchayipov.

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