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Wednesday, April 17, 2024

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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