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Thursday, February 29, 2024

Telling Tuesday – Tops Truly Tested Into 2010

Yes!  Once again the futures are up!

Who could have guessed such a thing?  At 7:30, we have about a half-point gain in the US futures despite the fact that oil is languishing at $73.35 and gold is down to $1,091 with silver failing $17 for the first time since October and copper bouncing off $3.12 again.  So no one wants any commodities but the economy's great???  Perhaps it's because, according to the Rasmussen Report, that as of yesterday, 52% of Americans were not done with their holiday shopping.  In fact, according to what has to be either an idiotic survey or a survey of idiots, 24% of adults have not even started their shopping yet – with just 2 shopping days left!  

Sixteen percent (16%) of adults say they will be spending more money on gifts this holiday season compared to past years. That's up seven points from last week and the highest level measured so far this year. However, most (63%) say they expect to spend less money this year.  

I suppose we can always hope that the 16% who spend more will spend more than 4 times what the other 63% cut back and then all our Retail Christmas wishes can still come true.  So forget the disappointments of Black Friday and Cyber Monday and Super Saturday and Snow-Bound Sunday – we still have "Take What's Left Tuesday" and "Whatever is On-Sale Wednesday" and "Thoughtless Gift Thursday" for all the real last-minute enthusiasts. 

I'm sure if this week disappoints, the media will be waiting to spin how great they expect the post-holiday rush to be as everyone comes in for the sales (as retailers desperately race to clear their shelves so they have less to load on trucks when they close 20% of their stores and lay off a few million people next quarter).  Why would the media spin retail so positive?  Who do you think pays their bills?  The most important message the media needs to send every minute of every day is:  "Advertising works!

So get out there you last-minute maniacs and shop or the economy drops!  Unfortunately, no one will tell you this is happening but me and I almost feel silly to keep saying it BUT LOOK AT THE SIGNS!  We've been reading the tea leaves since the weekend with our PSW Holiday Shopping Survey, which has given us mixed reports from around the country and I urge Members to contribute their shopping anecdotes as it gives us a great picture of what's hot and what's not this year – miles better than the Rasmussen Report! 

China, where they make all the stuff we buy, had another down day on the Shanghai Composite, dropping 2.3% and now off 12.5% from the December 7th high, a drop that is pacing the 25% drop in the Baltic Dry Index over the same period (2 weeks!) as the logical connection between lack of Chinese economy and lack of shipping actually holds, despite all the other silliness in the Global Markets.  Bulls should be terrified that there is any logic to the markets anywhere in the world as logic is the bitter enemy of this rally and should sanity rear it's ugly head in 2010, the markets will be sorely tested indeed!

The mainland's misfortune was shrugged off by the Hang Seng, which gapped up 250 points thanks to their futures and finished up 143 points on the day, only falling 107 points in real trading (and most if it right after lunch), much like our own 60-point dip from the fakey, fake, fake open we had yesterday.  By the way, my FREE play of the day yesterday, right in the Morning Post, to short oil at $75 in the futures yielded a gain of $1.50, which is $150 PER CONTRACT so don't say I never got you anything for Christmas!  Back to Asia though – we are long on Japan and the driving dollar sent the Nikkei up 2% – flying over our 10,200 line all the way to 10,378.  That should give us nice gains on our EWJ calls, probably enough to cash them out this morning.

I'm a little more worried about Japan than I was yesterday as Eisuke Sakakibara, formerly Japan’s top currency official, said the yen may climb to 80 per dollar in the first half of next year, hampering the economic recovery.  “A strong yen would cause stock losses and enhance deflation, which may cause Japan’s economy to slip into a double-dip recession,” Sakakibara said at an event today in Tokyo hosted by Citigroup Global Markets Japan Inc.  Japan’s government would find it difficult to intervene effectively to weaken the yen, said Sakakibara, who became known as “Mr. Yen” during his 1997-1999 tenure at the Ministry of Finance for his efforts to influence the yen rate through verbal and actual intervention in the currency markets. 

I found that statement and it's timing (coming during a dollar rally) a bit strange and I don't know who pays Sakakibara to say what so we have to take his statement at face value and exercise a little caution regarding Japan.  Of course, Sakakibara was not alone on the gloom squad yesterday – also ignored by the rallying markets was Chinese central bank Governor Zhou Xiaochuan, who said that reserve ratios for lenders remain an important tool, fueling speculation that requirements may be increased to limit the risk of asset bubbles.  A record 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of this year drove a recovery in the world’s third-biggest economy, pushing up stocks and sending property prices to their biggest gain in 16 months in November. As I mentioned, the Shanghai Composite Index fell 2.3 percent today to the lowest close since Oct. 30 on concern the government may tighten policy. 

Europe was off to the races this morning as Greece was downgraded less than expected by Moody's to A1, avoiding the B's for the moment.  The UK economy "only" shrank 0.2% in Q3, which is considered encouraging the same way it's encouraging when a coma patient wiggles their toe.   Goldman gave Europe a nice spin by adding Julius Baer to their Conviction Buy list, which boosted the banking sector.   “We view Swiss private banks as an attractive sub-sector of European financials,” said Goldman analysts.  Baer gained 4% and the banking sectors led the advance on the European exchanges this  morning while miners and other commodity pushers held their ground despite the commodities themselves taking a tumble – following yesterday's perplexing US action.   

What's really perplexing this morning is the way the futures are holding up despite a 20% miss in the Revised Q3 GDP, possibly supported by the declining dollar as it seems we'll need a few Trillion more stimulus dollars to keep our economy from falling apart so YAY – I guess…  So now the GDP has been revised down from 3.5% (which rallied the markets) to 2.8% (which rallied the markets) to 2.2% (will it rally the markets?) since the estimates began coming out.  2.2% is lower than the lowest (2.5%) estimate of 73 expert economists polled by Bloomberg, some of whom were looking for a 3.7% gain! 

It's funny to watch the analysts scrambling to spin this on television this morning but, like yesterday, the pre-holiday volume is so low that anything can happen (or be made to happen).  ICSC Retail Store Sales were up just 0.4% year over year, which is off a cliff from the 2.4% previously reported but that too will be ignored by the MSM today.  Redbook Chain Store Sales are up 1.9% year over year indicating the chains are able to draw customers away from Main Street with bigger discounts but Redbook also says retailers are scaling back their December forecasts but shhhhhhhh….   You also probably won't here that Q3 Corporate Profits were revised down to +13.8% from +14.5% and why not, as it could confuse you when you realize that the stocks are up 60% from when Q3 was reported last year. 

The number of borrowers that fell behind on their mortgages – including the most creditworthy – rose in Q3 as the percentage of current and performing mortgages dropped for the sixth consecutive quarter. Those that fell behind on their prime mortgage payments more-than doubled to 3.6% from a year ago.  In good news for the banks though,according to a new academic report, banks that lavished more money on lobbying were more likely to get government bailout money – so at least we know the system still works!

Looking at the tremendous nonsense in the futures this morning, I won't be surprised if we have another opening rally like we did yesterday but, as I said to members into the close, we're going to be a bit more aggressive with our shorts today as we expect the same kind of pattern where we have a low-volume rally, followed by a day of selling off as the real market players head for the exits.  We have already made our exit and are happily in cash but that doesn't mean we can't have a little fun gaming the game this week!

Just be careful out there.

 

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