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Monday, February 26, 2024

Turnaround Tuesday – Crisis? What Crisis?

Wheeee!  Isn’t this fun?

We were so giddy with excitement on yesterday’s dip that we went with 12 new long positions while the markets were heading down and the people who didn’t read my morning post were panicking.  Things could not have gone better for us as we had a great spike down that let us lighten up on our many successful short plays and turn around and put that cash to work establishing what we hope will be some nice long-term positions, even though long-term in this market has been "more than a month" this year

Fundamentally, nothing has changed and we’re not letting go of our disaster hedges (in fact we added one yesterday too) but we are happy to do a little bargain hunting from our mainly cash positions as our Discount Stock Buying Strategy gives us a built-in 20% cushion in our first round.   That takes us all the way down to 8,500 on the Dow before we even have to worry about dollar-cost averaging, which also helps us sleep at nights – a nice bonus!

It looks like we also picked the right day to go long on oil and the Euro and short on gold but those are more directional plays and we will be taking money and running as those run out of momentum since we do not have 20% cushions on those entries.  We still have our technicals to get through and despite our amazing V-shaped recovery yesterday, Asia was not all that thrilled and only managed weak bounces with the Hang Seng failing to retake 20,000 (19,944) and the BSE still below 17,000 (16,875) while the Nikkei barely held their critical 10,200 line (10,242) in today’s trading and the Shanghai is still languishing at 2,594 but at least has averted a total disaster below 2,500 so far (300 on StockCharts). 

There’s no need to annotate these charts – our foreign friends are in deep trouble until they get back over those "death-crossed" 20 dmas (blue lines) and will not be impressive at all until they get over the red 50 dmas.  Europe is up about 1% this morning for no particular reason and that’s not reflected in the charts but we’ll be watching the DAX closely this morning to see if they can stay above that critical 6,100 line, which they’ll have to do if the FTSE and CAC are to have any hope of regaining their upside momentum

Unfortunately, a lot of German buoyancy is based on talk of pulling out of the EU and letting the rest of the union crash and burn.  Not a realistic plan but it’s a nice fantasy for the Germans.  Germany hasn’t actually approved their 30% share of the EU rescue package yet – that vote comes up in the Budestag (parliament) this week and will not be a cake-walk as Merkel’s party lost control in last week’s elections – pretty much over this issue!  Still the Bundestag can be overridden as this is a Federal Budget item so IF they vote to block – THEN we want to take advantage of the panic drop in the Euro (EUO would still be our play but short on a spike up).  

Our own Senate voted 94-0 yesterday to make it much harder to deploy US funds to rescue foreign governments.  The measure, adopted by a 94-0 vote as an amendment to the financial regulatory overhaul bill the Senate is considering, would require the Obama administration to certify that any future loans made by the International Monetary Fund would be fully repaid. Absent such as certification, U.S. representatives to the IMF would be required to oppose the lending. The U.S. is a major funder of the IMF, which provided loans to Greece as part of a larger support package. "American taxpayers should not be involved in bailing out foreign governments," said Sen. John Cornyn (R., Texas), chief sponsor of the amendment. "Greece is not by any stretch of the imagination too big to fail."  "The thrust of the amendment is the correct one," added Senate Banking Chairman Chris Dodd (D., Conn.). "This is a good amendment deserving of our support."

Our indexes have their own "death crosses" to bear but yesterday’s action gave us the excuse to show a clear reversal signal to the TA people and that can bring in some fresh buyers if we can make those marks (where the lines cross).  As you can see from the uniformity of the movement of 18 global indexes – the machines have total control of the markets and it’s almost a joke to talk about "leading" or "lagging" indicators but, like the DAX in Europe, the Russell has the best chance of getting back over 710 and showing us some backbone so we’ll be looking to them for upside leadership while the NYSE will be our danger signal if they can’t get back over 7,250.  Dow Transports will also activate the warning bells if they fall below 2,150 as they are already a huge disappointment compared to the very excited Baltic Dry Index – one of them is wrong… 

iPad guyLet’s watch AAPL today because you CANNOT buy an IPad at any price in the tri-state area this week – they are totally sold out.  Apple’s on-line store says 7-10 days and next week they are launching the IPad in nine more countries.  Not only that but the IPad is having a "halo" effect, with Mac sales up a whopping 39% in April and they are on track for unit sales this quarter of 3.2M units – well ahead of expectations.  IPod sales are down 17% as they are cannibalized by $199 IPhones (which play music AND make phone calls AND browse the web) and $599 IPads, which have 4x the margin so ignore any bad news they try to spin on the IPod sales – Apple is knocking it out of the park this quarter!  That means there is no excuse for AAPL to not beat that $275 mark in a healthy market and, since AAPL is 15% of the Nasdaq (I know, ridiculous), a 10% move in AAPL will add 1.5% to the Nas which takes them back over 2,400 at least – anything less than that will be a huge disappointment as we recover…

Falling oil prices has brought the PPI down 0.1%, well below the +0.1% expected but the core PPI was higher than expected at 0.2% vs 0.1% expected.  Housing Starts were good, up 5.8% to a still pathetic 672,000 but that was due more to the end of the tax credits (shovels had to get in the ground) than any resurgence in interest – as evidenced by forward looking Building Permits falling 11.5%, back to a 606,000 rate.  They are excusing ICSC Retail Store Sales‘ 2.5% drop to "cold weather" last week (???) and we may have to give them that one since Redbook Chain Store Sales were up 2.9% year/year but, of course, as I’ve said before – they should call it the Redbook SURVIVING Chain Store Sales Report as there are 10% less stores than last year so of course the ones that are left standing have more business…

WMT had a nice beat today (one of our buys from yesterday) so no excuses for the markets to be gloomy today.   We’re done shopping for a while after yesterday’s big sale and now we’ll be able to sit back and watch those technicals.  We get Fed Minutes around 2pm tomorrow and those should be the excuse to pop us higher and then we flatline into options expiration on Thursday and Friday – how’s that for planning the week? 

 

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