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Tuesday, February 7, 2023

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Just Another Manic Monday – Stagflation Official in China

Wheeee, everything must be great! 

We are crushing our levels as the market flies ever higher.  Our 11,500 target on the Dow looks sure to be tested and we're already flipping bullish with our "Breakout Defense" trades, in which our goal is to make 5,000% in 5 trades or less.  We are not ashamed to jump on the bullish bandwagon – if they are giving away money, we'll stand in line with everyone else, only we'll take a larger share – thank you very much.  We certainly know how to use leverage just like a Bankster – we have a spread and we're not afraid to use it!  

Speaking of Banksters, the must-read article of the weekend is the NY Times piece that goes into surprising details of secret bank meetings that are regularly held in NY where the Gang of 12 (just 9 of them) do their best to manipulate the derivatives market, influence regulations and regulators and, of course, crush their competition.  The article even goes so far as to name my old friends at ICE as possibly maybe having something to do with these shenanigans and I am SHOCKED at these allegations as the good people at ICE were so good about telling me how I had things all wrong when I made similar statements last year (which I now legally know cannot be proven and therefore must not be true).  

And thank goodness that the commodity and derivatives clearinghouse that was founded by Big Banks and is controlled by Big Banks cannot be proven to be operating in favor of Big Banks because we wouldn't want to think that the Big Banks had some preferential treatment (beyond the access to the discount window and the TARP money and the POMO money, etc.) – that would just be unAmerican.  By unAmerican, I mean the old America that they write about in the Declaration of Independence and the original Constitution, of course – not the Corporate Kleptocracy this country has developed into.  Under the new guidelines, leveraging your influence and having the government rob the people to increase your profits on which you don't pay taxes is the very definition of patriotism, isn't it?  

VIXAh well…  As I said last Monday, this is really Somebody Else's Problem because we are in "get it while the gettin's good mode" at the moment.  So we're not going to dwell on the negatives and we will, instead, accentuate the positive as sell our premiums to Mr. In Between to fund our bullish plays.  Our first two bullish plays in this series are already a week old as I put up trade ideas on DBC and FAS in the December 3rd morning post.  

While the FAS trade is already getting away with an 833% gain in the first week (out of 3,233% potential gain by April if the XLF keeps climbing), the DBC trade idea is still playable as commodities haven't quite run away just yet.  As you can see from the VIX chart on right, market complacency may be peaking or the fabulous Obama Administration may have truly eliminated all the potential economic negatives in just two short years – INCREDIBLE!  

Unfortunately, China does not seem to be as lucky as we are to have such tremendous leadership that all of their problems are solved and just this weekend they reported shocking 5.1% inflation – if by shocking I mean pretty much totally ignored by the US MSM.  The inflation was not, however, ignored by China's own Deputy Director of the Finance and Economic Affairs – He Keng, who was reported as saying that China began experiencing a period of stagflation in the second half of this year with high inflation and unemployment. The nation will also face the possibility of an economic double dip next year, the Guangzhou Daily cited He as saying at a meeting yesterday.  That's STAGflation, as in stagnant economy, not the more benign INflation, as in the stuff the US pretends doesn't exist.  

Speaking of inflation that doesn't exist – commodities are flying this morning as the dollar takes a nose-dive from 80.70 down to 80.20 and that should be good for yet another 1% day in the markets.  Gold is testing $1,400, oil is $89.30, copper is $4.18, natural gas is $4.52 and hi ho silver is away at $29.59.  That's enough to get us to finally move some of our cash off the sidelines as we're going to get less and less stuff for it every day at this pace.  The Euro jumped an entire penny from $1.318 to $1.328 since their open at 3am and our normal 3am trade on the Yen (as it tends to go down while the Nikkei is open) didn't see the Yen bottom out until 4:30 but then it violently gained half a point against the Dollar and is now (8:30) at the day's high.  

The dollar is down on excitement about the Obama Tax Cuts moving through the Senate today and the House is now expected to pass tomorrow so there's $1Tn worth of new debt we'll be taking on.  At the same time, the EU has been making moves to stabilize the Euro and it's expected that, by the year's end, there will be a fund bigger than the current $1Tn bailout fund the EU currently has at its disposal.  

Meanwhile, the Shanghai Composite leaped 2.9% this morning and led Asian markets higher as an anticipated rate hike by Beijing seems to have been put off until at least after the holidays.  Lack of tightening by the PBOC gave commodities the green light to fly higher with both Jiangxi Copper and China Oilfield Services hitting limit up at 10% this morning.  Investment sentiment in the region was also helped by Wall Street's gains Friday after data showed that U.S. consumers were more upbeat on the economic outlook in early December and that U.S. exports in October surged to their highest levels in more than two years.

It's the same old story – we go up because China went up and then Europe goes up because the US and China goes up and then we go up because Europe and China went up.  As long as none of us ever look down, it will all seem perfectly normal, I suppose – kind of like when the coyote heads off a cliff and keeps walking until the road runner points out that he's standing in mid-air.  

One short we will be taking today is oil as that is just silly back over $89.  We have a standing entry to short the Futures but USO puts should be attractive at $38.50 on that ETF as there are still 550M barrels on pretend order for the three front months at the NYMEX with 194M barrels scheduled for January delivery to Cushing, OK – a facility that has a capacity of 45M barrels and happens to be full.  Those contracts that are still open next Tuesday must be delivered and, with the January contacts at $89 and the June contracts at $90.08, it's hardly worth storing oil for 6 months to make $1, is it?  

As I pointed out to Members this weekend, there's no point in being skeptical when the Gang of 12 is determined to run the markets.  Just this morning the big gun analysts weighed in at Bloomberg with an average forecast of 11% gains on the S&P in 2011 (about 1,379) with Goldman's own David Kostin leading the bull charge with a 17% rally target.  Readers of the WSJ this morning were treated to GDP upgrades from the economists they polled with 3% growth now expected in 2011.  GS is also targeting index movers like AAPL for big upgrades – just what the doctor ordered to push the Nasdaq even higher..   

Yep, things could not possibly be better, I suppose – and that's what scares me!  

 

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Good morning,

 

No change; still in the channel 

IWM 78.68, 78.22, 77.98, 77.62, 76.81, and 76.45……………but there is this from PUG

 

Primary count is that major [1]-P3 ended at 1240.40 Friday with minute wave (5) of minor 5 terminating in an Ending Diagonal (ED) with a small over-throw.  The first significant target for the developing major wave [2]-P3 correction is minor A-[2]-P3 at 1177/1187 pivot support.  There is gap at 1180/1187 that needs filling.  This A-[2]-P3 wave should take 2 to 3 weeks or the end of 2010.  Minor B-[2]-P3 should bounce to the 1219/1229 pivot area by mid-January Q4 earnings season.  Finally minor wave C-[2]-P3 will terminate in the 1153 area in mid-Feb 2010 for a 38% retrace of major [1]-P3.  So what we are looking at here is a minimum 87 point -7.0% correction for major [2]-P3.  There are certainly deeper correction targets of 1126 (50% retrace) and 1098 (62% retrace), but 1153 is the minimum target.

Alternate count is that an ascending triangle for wave (4) broke-out today with a wave (5) target of 1251 by Tuesday, 12/14.  This would finish up at the Inverse H&S target of 1251 off the 1011 low of late June 2010 with neckline at 1229.  The major wave [2]-P3 correction from this alternate count are virtually the same as for the primary.  The 1257 pivot resistacne should stop this alternte count

SP-500 5-min chart (EOD):

SP-500 15-min chart (EOD):

SP-500 60-min chart (EOD):

SP-500 Daily chart (EOD):

 

 Pharm/ AWRY
thinking to open Buy/write, do you see any risks to do it now?

JRW – Great charts. Thanks for all the help

JRW / S&P  — so your charts say "it’s going to go one way or the other", right 8)
 
Any idea what software that is?

 Pharm
sorry it is ARRY

 MolyCorp (MCP) being pumped by CNBC. Up 11% today.

danosu77
On HMY yes you are correct by buying the stock you will not pay margin on the short caller but you only pay margin on the putter. Just remember Phil’s rule sell only putters if you like the stock and in this case you would buy the stock at a dicount of in my case .50 for 13.50 if consigned to you, but remember in that case you still have the credit of the caller so your net is 11.75 in my case.

Hi JR,
 
You TNA on this POMO day?  How’s the weather in your area.  Nice blizzard in our parts.

JRW as my dad used to say, "you are one fart smeller!" but i think what you were trying to tell us is that we are either going to go up or we are going to go down. šŸ™‚ 

aw, rainman beat me to it.

 Can our PSW Vegas planner send me an email?  I have some questions about the meeting. Thanks drdanwilliams.com

danosu77
Some of our members are very strong on buy write, which should be the fundamental base of a portfolio. We do have now a excel calculator on B/W. , A combination of effort from various members. You just need to check when entering a B/W that your basic profit is over 3% per month so it does not help to set up these plays for many month ahead if your return is less as well as you are exposed for a longer time! Stock paying a good divident will not pay very much for the callers. But you always can combined the interest together with the pay on the short caller.

Yodi:
Where is the "excel calculator on B/W" located?

GOLD , Phil , I am to old to look for it on the moon but I am in the gel1 camp on this one, It does not bring you much return, but is feels to me like a hedge against todays up and downs.

Looking for a bounce at IWM 77.62 +/-

rainman, morx

Wow, you guys read my book šŸ˜Ž

exec / TNA

I was in TNA but got out as IWM failed 78.22; looking to get back in !!  60 degrees and clear here; perfect for maximum air/fuel ratio; I may have to scoot out early šŸ˜Ž

Phil , Your EBIX play is showing life again up 1.32. The Dec 21putter is now running out of steam, shall we roll it to a higher number 22 or even 23 1.50 or 2.07  Mar 11? thks

Phil,
 
It’s amazing what is going on with the banks.  Did they really F*** with you for daring to use ICE name in vain?
 
Tom

Phil
What is the NFLX target, got the puts @ $1.60, $2.20 + mow?

dclark41
 
I do not know how to place it on Phil’s site but can send it via email send request to yodiet@yahoo.com

shadow

Talk about symmetry. Right now it’s real simple. Trend channel support is the lower green line. Trend channel resistance is the top green line at about 210-212. A retest of the recent highs is 205 so to the upside those are places where they’ll have to deal with some issues.

So where to from here? All we know is where the technical support and resistance levels are, actually that’s all one ever needs to know when trading stocks.

As an aside from what we understand there are 11 million shares short this issue, but that doesn’t mean they are all going to cover. And the index funds have 5 days before this issue is in the SPX. What remains to be seen is whether they’ll have an upward bias from now till then.

That also by the way is right smack dab into options expiration for December.

 Thanks Phil… I have several struggling shorts (the 1050P ones)… but I agree NFLX needs to go lower.  I took your suggestion (sold 1/2… and put in a 20% stop on the rest).  This give me a 22% gain worst case.  Thanks for the great insight as always!

humvee,
Just a note to make sure you saw the nyt article about ntap. An awfully big bite at $20B as takeover.

Phil,
Since I am 90% cash I am looking for a couple of down trodden long term plays. I like DF down here with their 12B in revenue. Since they do not pay a dividend do you have any spread ideas, or just buy the stock and sell leaps?

 rj_jarboe/long term down trodden plays – see CSCO play from last Thursday.

Thanks for the thoughts and the Disney video

Phil / ICE

And I thought your article was about THIS private club !!

1210-bar

Judy;  thanks so much for remembering me; no, I didn’t see the article, I will check it out right now!!

Phil JRW
Thanks for the advice, just sold @ $2.25 FOR 40%, to bad only 5 contracts on the 1050P.

And there goes the dollar !!

 ObamaCare UnConstitutional   (no surprise there)  
 
A Judge Just Ruled Obamacare To Be Unconstitutional by @thestalwart http://read.bi/gUv5VY
United States District Judge Henry E. Hudson ruled that individual mandate "exceeds the constitutional boundaries of congressional power.
 
 
This will wind up in Supreme Court …

Interesting to see insurers stock spike after the judge rules individual mandate unconstitutional (2 have ruled it constitutional BTW) as the individual mandate is favored by the industry – more clients. Once again, irrational reactions in the market! And starting tomorrow, I am cancelling my car insurance. The government can’t force me to pay for that either!

And banks stocks should head higher soon:

Spencer Bachus, Republican of Alabama and new Chairman of the House Financial Services Committee:

“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said.
It seems to me that bank robbers are now just trying to get their money back…. Where are Bonnie and Clyde when you need them.

 Phil, if you GOOGLE "netflix short"  the first 5 entries are articles saying not to short netflix yet.  Is this a tell?

C = 1245.34, F =1240.25 at 12:40
oil +.35, gold +13.70
10yr = (1.09)%,  30yr = (.79)%
VIX (3.58)%

NET $ +1.62%, dx/y = (1.13)%
 if the NET is anywhere close to right, things (market) should be collpasing, but gold and gold seem to be showing the NET $ as invalid
this is the biggest discrepancy I have ever seen on the two, see what the market does
 
the $$$/Franc (1.60)% now

stjeanluc

do you have a link for that quote, I have someone I need to share that quote with
 
sounds like him though

let me know which worked, trying to get embedding down cold šŸ™‚

Phil,
A technical question in in rolling a short caller to the following month as the present caller has run well in to ITM.
I wish to refer to , which I recommended a while ago. Sold the MSB Jan 50 caller in combination with the stock for 3.30 stock MSB went up to 57.68 3$ today! The 50 Jan caller is now 8.60 with a delta of .80 Rolling the caller to Mar 11 say 55c at 6.50 with a delta of .60. The basic question, is it better to roll at present circumstances or wait till the stock has cooled down. just for the record I bought the stock for  originally 9.80 and 42.70. The same is actually on fire with an interest payment of 6.3%.
Obviously the .80 delta always has a better bang than the .60. When and where to would you roll. Thanks

thank you

Phil DIA mattress I am thinking of rolling the Mar11 114 to 115 for .45 or to 116 for .92 your thoughts

banks and wall street going to love that Bachus quote, unreal

Wow, nice pop in oil going into close….

blogs.wsj.com/marketbeat/2010/12/13/pre-lehman-highs-dont-look-now-but-sp-is-almost-there/
 
maybe misguides, but all I can think of, is that old support becomes resistance

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