Wheeeee – this is fun!
It's always fun when the market does what you predict it's going to do. Last Wednesday I said we were going to see a pattern in the indexes that was going to look like the "M" in the McDonald's arches and Stock World Weekly did a nice job of illustrating it this weekend, which I put up in yesterday's post as well. At no point did we change our mind but we did change direction as we bounced around within a fairly tight intra-day trading range but our macro picture remains intact and now those patterns are looking very obvious on the charts.
In last Thursday's post, I had mentioned: "those Ms are going to look dangerously sloppy (more bearish) if they can’t at least round out the top today" and that's where we are now, with sloppy M's that may not even hold our reference levels, which were our old breakout levels that we had hoped would support the broader rally.
Of course we didn't have much adjusting to do (which is why we're just having fun with day trades) while we wait for the pattern to complete because it was the Wednesday before that, on May 4th, when I called the bottom on the Dollar and, therefore , a top on the market.
Right in the main post (which is Emailed to Report-level Members and above at 8:30 every weekday) I suggested the TZA June $37/42 bull call spread at $1. This one is going very well as TZA is already at $36.65 and the spread is at $1.35, up 35% in 2 weeks – now THAT's a hedge! Our offset to that was to sell the weekly RUT $825 puts at $1.15 and they did, as expected, expire worthless that Friday which made the whole trade a free ride with a .15 credit and up 1,000% so far. Notice how that's a great cover because if the RUT went up, for sure we keep the $1.15 and we have a free hedge but if it went down but held our levels (it did) we still get a free hedge and, if it went down and exceeded our expected range, then we have $5 coming to us from the spread to help pay for a roll.
Other hedges we took that day in Member chat were GLD Aug $135 puts at $1.45, those are just $1.65 so far (up 14%) so still playable. It's too late for the SQQQ June $22/25 bull call spread, which we picked up at $1.15 but those are already 100% in the money at $1.80, up 56% but those were offset with WFR May $11 puts at .45 (now .30) or the PFE May $21 puts at .75 (now .20) to lower the basis. SQQQ was also a straight play with the May $23 calls at .80 on the 6th, now $2.30 – up 187% in 11 days. Hedging is easy, picking long-term upside winners is the tricky part!
Our other go-to hedge is EDZ, as we felt the commodity sell-off would hit the overbought emerging markets. Just last Thursday, we were still adding EDZ hedges, with the July $16/20 bull call spread at $1.60, now $2.20 (up 25%) but offset with the sale of PCLN May $545 calls at $1.60, now .20, for a net spread of .20 that's up 1,100%. On 5/6 our cover had been similar, with the June $17/20 bull call spread at $1.15, selling the PBR Jan $25 puts for .90, which are still .90 but the spread is $1.56, up 35% so far but EDZ is at $19.43 so it's $2.43 in the money and time is on our side.
The question for today is whether or not time in on the side of global equities, which are generally failing their 50-day moving averages with the Hang Seng now joining Brazil's Bovespa, Mexico's Bolsa, India's Sensex (go EDZ!) and Japan's Nikkei as golbal indexes that have now failed their 200-day moving averages (chart by MacroMan).
"You can't ignore the World," my Grandfather used to say, "It's right below your feet." That was probably the best investment advice I ever got as my Grandpa Max would make me read the papers (more than one because you can't trust one to be right) with him every morning before we even looked at the financial pages.
To this day it amazes me how little attention American investors pay to the Global Macros but God bless CNBC and the rest of the MSM that keeps herding the sheeple back and forth into poor investments shouting "USA, USA, USA" as a substitute for proper analysis. It gives those of us in the thinking crowd a huge advantage!
Of course what happens in the US matters a lot to us but it's a Big World out there and we ignore it at our peril. Unfortunately, our own Fed and Congress seem to be ignoring as they debase the currency and act like fiscally irresponsible children, playing chicken with the debt ceiling. Our biggest loser lately has been TBT, which keeps going down instead of up but, at some point, the Fed and Treasury's Ponzi scheme will end and it will end badly. At the moment, the Fed is buying about 80% of the Treasury notes that are issued – do you really think they will stop in June and someone else will fill their place at these prices?
At the moment, the betting is that the Fed won't/can't stop and that plus the relative strength of the Dollar is keeping rates ridiculously low. TBT may end up being a dead bet – it sure was for people who thought Japan's rates would head higher at some point over the past two decades but, for now, we still like it. This dip is a fine time to take advantage of short puts like the TBT Jan $32 puts, that can be sold for $2.50 and, on the long side, I like the 2013 $30/40 bull call spread at $4.50 for net $2 on the $10 spread. That's a nice hedge against proper inflation.
I already made a call for Members this morning at 6:57 that I didn't think the pre-market rally would stick and now it's 8:40 and we're turning red. We took a short on oil at $97.50 and it's already down to $96.60 so congrats to the futures players (again) as this has been, by far, our favorite slot machine! The Dollar was 75.60 at the time, now 75.85 (up 0.2%) and that neatly erased the 0.25% pre-market pump but the Dollar will probably re-test 76 and breaking over that will not be good at all for our equity indices (or commodities).
Boosting the Dollar today are concerns that Greece may, indeed, need to be restructured. You may be thinking "duh" because you read us every day but this is taking most investors totally by surprise and the Euro has fallen 1% since yesterday as has the Pound – only the relative strength of the Yen (which EU investors also panic to) is keeping the Dollar from breaking over that 76 line. Bill Gross flat out called Greece, not only insolvent, but at the end of the road with no more room left to kick the can further along.
China is certainly no escape route as JP Morgan now says "Chinese economic data suggests that the risk of a “hard landing” in the world’s second-largest economy is rising." Keep in mind that in 2007 and 2008 we were constantly being told that we were going to have a "soft landing" and we know how that worked out so the fact that JPM is already calling it a hard landing should really give you pause if you have money inside the China Bubble.
Gold isn't going to help you according to George Soros, who dumped his holdings of GLD last quarter, getting rid of 4.7M shares of GLD while the MSM herded the sheeple the other way and Soros is now reported to have dumped all 5M shares held by his fund. Dennis Gartman says the "smartest people" are getting out of commodities – I don't know if being a bit early with that call makes us smarter or dumber but it sure is fun for us to have our cash on the sidelines and able to short the commodities while all the slower "smart people" are scrambling to get out (see our "Roach Motel Theory" to explain how commodity players get trapped in their positions).
Even typical safety plays are not working as insurance companies just coming off the devastating Japan quake are now being hit with $6Bn worth of tornado losses in the South from last month and are looking at much more than that in flood damage as the mighty Mississippi overflows this week. Not to start a controversy but this is the cost of NOT dealing with global warming but it's the insurance companies that are idiots because they should be out there supporting the green side of the argument, rather than letting the polluters control all the lobbyists while the environment spins out of control. Oh well, with any luck the Earth will end as scheduled on Saturday and then the Koch brothers will get to say "I told you so."
We're still operating under the premise that Judgment Day will not be on Saturday or, if it is, that it won't have any major bearing on our current virtual portfolios. If the World does end on Saturday, it will be a nice break for HPQ, who warned yesterday that their managers should "brace yourselves for "another tough quarter." The word "another" in the leaked memo forced HPQ to move earnings up to this morning and, as inferred, earnings were not so good and HPQ is down over 5% in pre-market trading.
Two other things not worth investing in, from yesterday's news, are A) A college education – with a Pew survey finding 57% say the U.S. higher education system fails to provide students with good value for the money, and an even larger majority (75%) says college is too expensive for most Americans to afford and B) New Homes – which James Altucher blasts in: "Why I would rather shoot myself in the head than own a home," saying, for starters: "Leveraging up 400% in an illiquid investment with no diversification is a scary concept to me and should be to any rational person." That is some solid investment advice. Also read my article on the subject: "Interest Scams and How to Avoid Them – Mortgage Madness" which, if you MUST buy a home, at least shows you how to knock $100,000 off your mortgage payments.
Hopefully we do hold our reference levels on the dips. Obviously the NYSE and the RUT will be first to test but, if they break below those lines, the others are likely to follow. There's certainly no improvement in the data and we did not expect good data this week as a lot of it relates to housing which, to use the proper economic term – SUCKS!
- U.K. inflation jumps to 4.5%, up from 4% in March and above the 4.2% consensus.
- Germany's ZEW expectations index falls to 3.1 in May, vs. 7.6 in April and the historical average of 26.5.
- State Bank of India after the country's largest lender reports a 99% fall in Q4 profit.
- ICSC Retail Store Sales: -2% W/W, vs. flat last week.
- Redbook Chain Store Sales: -2.3% Y/Y vs. +4.7% last week.
- April Housing Starts: -10% to 523K vs. 585K last month (revised from 549K). Permits -4% to 551K vs. 574K (revised from 594K) last month.
- April Industrial Production: 0% vs. +0.7% (revised from +0.8%) in March. Capacity utilization 76.9% vs. 77% (revised from 77.4%) in March.
- China faces maybe its worst-ever power shortages as drought conditions hurt hydropower generation at the same time booming coal prices threaten power plant supply. Unable to raise prices to meet higher costs, power plants are trying to cut losses by operating at a lower capacity level.
- Apple (AAPL) continues to face serious iPad production problems, FBR's Craig Berger writes, likely rendering the company's internal goal of producing 40-45M iPads this year "out of reach."
We're very well positioned for this dip so let's just sit back and relax and see what sticks. Bad news aside, our plan was to complete our M pattern, consolidate into expirations on Friday and then hopefully move back up but, as I said above, the sloppy M's are a concern and if we can't hold those bases – there's another 5% down before we test any serious support!
RUT/Yodi – How about give me positions and entries and I’ll see if I can find a decent roll. That’s certainly not an aspect of the trade you want to get wrong but I’m not understanding how you lose a lot since buying the $900 call and selling the $910 call couldn’t have cost that much as they were both so out of the money.
Dollar was knocked down to 75.45 and stopped dead. They rolled the /QM oil futures to July already (QMN11) so the /QM contract we now see is not the QMM11 that was trading this morning. The July contract is up to 98.30 but check out how many contracts are still in June:
Click for chart
The June contracts settle on the 19th apparently, so it’s an early roll but clearing 165M barrels worth of crude out when the front 3 months are already stuffed with 550M barrels is going to be a neat trick over the next two days. I shorted some futures, just in case but it’s very dangerous – who knows what kind of crazy crap they will pull to make this work. Don’t forget that’s $16Bn worth of oil people are sitting on that needs to be rolled or sold by Thursday. That explains why we had such a mega-pump into the close – they are trying to get the price of June up near the July price so they can roll the contracts in the futures.
If my calculations are correct, once trading starts, these suckers (the QMM11s) should drop pretty hard and, if the QMN11 (July) guys are smart, they will jack up the new front month and make the rollers suffer – although it’s probably all the same 5 guys so maybe they don’t do that to each other.
Anyway, CNBC is pumping oil by screaming (literally, it’s Kudlow) about Amadinejad taking over as Iran’s oil minister which Kudlow says means he will be the next head of OPEC and cut the US off without a drop. I’m not kidding, that’s what he’s saying!!!
So that’s why I had to short – logic plus anti-Kudlow is a powerful combination but I won’t be able to sleep well as I’ll be worried about rent-a-rebel or some attack on the dollar – as I said, there’s $16Bn riding on this, 5% one way or the other is $800M – more than enough to pay for a kidnapping and a bombing…
TBR/Exec – They are a long-term accumulate. Last time we had this much discussion of them, they were down to $30 last summer so I have a good feeling about this when I see so many people frustrated with them already.
NFLX/StJ – I can’t wait until they actually do double their subscriber base and use up 60% of the web bandwidth! As a non-subscriber, I feel like I should have my low usage account subsidized by these guys because they are slowing down my access.
TLT/Pharm – I like to see them hit a big number.
Clouds/ZZ – Too complicated for me. GOOG has the most dark bandwidth, that makes them a good play. Then VZ and T have local wires and those are the logical providers long-term. I think GOOG has the best chance of getting the security right but T people are smart (VZ people are efficient) and then, of course, IBM is an outside possibility as they would certainly get the security right and, in the end, it’s going to be all about the security in a never-ending war with hackers.
NFLX/Stu – Thanks, good to know what’s up in Canada!
Asia/StJ – I hope that happens with oil! I’m pretty sure the ultras don’t break – if they didn’t break in ’08, they’re not going to.
Belarus/StJ – That one I just don’t have time to care about!
Thanks for the chart Ilene. Look how nice that Nasdaq "M" looks, why couldn’t they all be that pretty?
The Dollar is all – right, Goober?
Phil Thanks for coming back to me. You right I reread the instructions Here is the trad as I entered it the day it was published sold 15 x RUT JUn 910 c for 1.41 and bought Jun 900 c for 2.41 now the long is .62 and the short is .37 down 1,125.00
thanks
Phil/Oil
in addition to 5 guys, there are also contracts that USO holds.
I have no idea how it affects the game??
Damn, the Dollar is down to 75.40, messing up my oil trade, now 97.775, was below 97.550 but greed killed me! Have to hope the BOJ doesn’t put up with the Yen below 81.50 now.
USO/Lol – They apparently roll their contracts about a week before expiration (so last week) over 3 days to the next 3 months so as to avoid getting gamed too much but the roll is analyzed by hedge funds and gamed all the time with all the USO investors handing their nickels over to the FundBots.
RUT/Yodi – Well, you needed RUT 901 to win that one. Can you leave the long naked? At least you recover .62 that way. Unless, of course, the RUT then rallies up, then you are screwed.
OK, you are in for net $1. If you intend to do this trade regularly, I would invest $2 more and roll out to the Sept $960s ($2.70) or the Sept $970s at $2 for just $1.40. Keep in mind you have a $60 or $70 spread on 15 contracts and that’s $90K but, if you can swing that, you can leave the June caller until he expires or roll him down to the $885 caller for + $1 (paying for that roll already) as the delta on that call is .07 and yours is .08 so you are not likely to get in too much trouble as long as you take action before they cross 850. Figure you pick up another $1+ in July and Aug and you should be caught up by September.
Market recap: Stocks bounced off early losses to end mixed, with H-P’s weak forecast causing an outsized loss for the Dow. Investors were spooked by the first drop in U.S. manufacturing production in nearly a year and weaker-than-expected housing starts. A pullback in the dollar helped crude oil recoup early losses. Yields on 10-year Treasurys fell tofive-month lows. NYSE decliners led advancers three to two.
Phil, didn’t get a chance to post this weekend on your large income portfolio but I had stored on Evernote (a real great tool for keeping stuff BTW) a link to SA related to dividend paying stocks including a list of the S&P dividend aristocrats that have raised dividend for the last 25 years. That would be a good list to get started, no?
http://seekingalpha.com/article/190601-comparing-dividend-aristocrats-to-dividend-champions
Some of them are already in the portfolio, others like JNJ are damaged, but there are some good boring ones there!
NFLX / Phil – I don’t have any figures, but I imagine that the available Internet bandwidth increases every year and probably even faster than NFLX subscriber base! Compare what we have today to what we had 10 years ago. I would not worry too much just yet… In any case, that’s what CSCO, JNPR and others are counting on to make money!
So Hatzius thinks that with 9% slack in the labor market, we are far enough from increases in labor costs to keep the stock market rising on increasing profits. Stock market historian Russell Napier believes that developed economies are starting down the barrel of Deflation, and that equities are only rising because they are being driven by the Fed creating a sort of artificial inflation through its credit creation. This has forced EM countries to do the real dirty work of money printing to maintain their forex rates in parity with the U.S. dollar [the U.S. money supply has not actually risen] thus igniting inflation in EM countries.
Napier says that this EM inflation will force revaluation of EM currencies to contain the social pressures created domestically by this internal inflation, and that this will force U.S. yields up, essentially to defend dollar levels, which will precipitate a stock market decline to …….400. Napier helpfully recommends buying U.S. equities at that level.
Both Hatzius and Napier are in agreement that dollar levels are the prime mover in respect of equities. Hatzius apparently sees no current risk of the dollar plunging to levels that would force the Fed to raise rates. Napier thinks that EM inflation will either end, or move, the "dollar pegs" of China and other EM countries, allowing their currencies to rise [and imports presumably fall] to contain domestic inflationary pressures. This would shove the dollar down in relative terms, forcing the U.S. Fed to raise rates to prevent U.S. stagflation [the U.S. already has the "stag"], but tanking the stock market in the process.
I would guess that Phil would be more sympathetic to Napier’s view, because of Phil’s enthusiasm for TBT. Which, fortunately for all of us stuck with a portfolio of equities, continues to fall. What bothers me is the fact that TLT fell from @ 105 in September 2010 to 88 in March 2011 while the S&P went straight up. It is now back up to 96, and the market is still rising. Equity markets have so far shown only the slightest of correlation with the equity markets.
The implication of this might be that Hatzius is right: as long as there is no upward pressure on U.S. wages, markets are up, up and away, and all this interest-rate fretting is quite overwrought, since average U.S. 20 year bond yields have probably averaged between 7-8 %. I have no independent opinion. I just think Chicken Little may be having a panic attack. Although having to pay a 7% yield on today’s extraordinary U.S. deficit might be somewhat disconcerting to equity markets, admittedly. But then, a revaluing of EM currencies is just as likely to precipitate an orgy of U.S. asset buying which would support the dollar. Such assets as Rockefeller Center, or Pebble Beach again…or U.S. equities. The matter is, as they say, is not free from doubt.
25K if we have pop tomorrow morning, is it worth to uncover XRT?
Correction: "…equity markets have shown only the slightest of correlation with BOND markets."
Goober – you said "Some combination of events related to this and the QEs could well be the next black swan or a portion of several black swans(think Japan) coalescing/morphing into one large black swan?"
I can’t help but give that concept a name – how does "Swanzilla" grab you?
Phil Thank you for the advice on RUT Just have set it up and the long roll to Sep 970 c has a margin of 3000 and if I would go along with the short caller from 910 to 885 would be a total margin of 20,000. on PM But I think I will just roll the long and let the short caller expire and see what the market brings.
Protest in Spain…..and the Euro is moving up? Oh, this is not going to end pretty.
zero – I would say that since that ‘bottom’ on TLT…..@ 88, that TLT has outperformed the market and will continue to do so over the coming months.
Monthly Charts/Phil – do you review/use monthly charts of stocks when evaluating? if so, anything you look for in particular?
STJ: Re: Belarus ‘dictatorship’.
Don’t believe everything you read. Lukashenko did not let the banksters in that is why there is a constant propaganda against him. In reality Belarus is not a rich country like Russia, there is very little natural resources. They survive on agriculture, which they sell throughout Europe and heavy machinery. Pensions and salaries although are higher than in Russia. Do understand that Moscow is very different from the rest of Russia, all the wealth is concentrated there. So the money stolen by the banksters during perestroika sort of trickles in into local economy. RE prices are very high as supply/demand is very out of whack. Belarus has free education (including universities, free health care, decent welfare system. Lukashenko is the peoples president and is very loved by the people,same way Stalin was. Banksters constantly foam at the mouth as they would like nothing more than to come in and rob the people the same way they did in Russia and Ukraine. So all the ‘opposition’ is nothing more than another KGB/CIA payroll monkey. Keep jailing them or better just shooting them Batka (Lukashenkos niockname, means father). Every once in a while the banksters announce that they seized his accounts somewhere. He just keeps on laughing at it. When there is no accounts and no money, whats there to seize? Those scumbags medvedev and putin however are multibillionares. Lukashenko is running the same game as Arabs, but does not have the oil to share great wealth, but he takes care of people best he can.
Elliott – Swanzilla seems very appropriate, we shall see how that plays out. Give yourself a gold star !
Phil – not sure what your comment about dollar meant ? I was making the point of how hypersensitive it is now to commodities and equities and correlated in sink. I have no doubt there are other machinations as well like the balance of QE until June. But it will be interesting and likely profitable to ascertain the "NEW" machinations going forward. Personally I think a lot of the new machinations will be hidden and called something else or simply accounting slight of hand and word games plus USD up or down as is necessary, daily. As you said it is only monopoly money and do TPTB really care ? Seems to me the numbers are so absurd now they simply push buttons and get the results they want and think everything is just fine with little regard for any final outcome. At least during their tenure/election cycle. So is anybody really steering the ship or all asleep or drunk in wheel house? Politics in the mix is a main driving force at this point in time as well and that is not a good thing.
Futures up USD down , messing with my overnite NKD short.
Everything is pointing to bounce so perfectly, that there is feeling of trap.
Or is this paranoia?
Oil – BTW inventories go lower (http://ransquawk.com/headlines/139409)
Good morning!
Woke up for the 3am trade as it was such an easy set-up today. Check out the Dollar chart – like clockwork! 75.45 down to 75.30 already and that kicked up gold to $1,494, silver $34.62, copper $4.05 and they even got the QM June contract up to $97.95 where it’s good for a short under the $98 line and a long above it.
Europe is up about a point, led by commodity sector, Asia finished down 0.36% on BSE but up 0.54% Hang Seng, 0.7% Shanghai and 1% Hang Seng, which pretty much opened there and flatlined all day. Other than the Glencore IPO, there’s not really any exciting news. Of course the prospect of Glencore having $60Bn to play with is terriflying and could send all commodities flying for quite some time.
And woops, had to go long on oil – $98.90 now – super tight stops.
API/Lol – That’s very interesting as it’s a completely untrue report. API inventories were, in fact UP 2,67Mb, gasoline was down 676K and distillates down 2.8M – which is the surprising number of the group. I’m kind of shocked to see Ran Squawk with false numbers but, as I said earlier this evening, there’s $16Bn on the line and we can expect all sorts of shenanigans to boost oil – it just didn’t occur to me that data manipulation would be one of them. Market Watch seems to have it right:
This can get very interesting with a widely-used news service reporting oil the wrong way by 5Mb! Back to short at $98.90 with a stop at $99.
Phil,
How are you trading oil after hours? Are you using TOS?
Dividends/StJ – Thanks, hopefully things will calm down long enough for us to find a few things to buy.
Bandwidth/StJ – I don’t believe that because NFLX’s growth isn’t so fast that it could possibly take up 30% if that were the case. Meanwhile, I think the main point is that we’re focusing on 30% but those stats remind us that another 20% is Bittorrent and another 15% is YouTube so if we just banned video downloads the entire Internet would probably be cheaper and faster for those of us who use it for business.
Anyway, it doesn’t do any good to print money if you don’t give it to people to spend. Wait, that’s not true – it is FANTASTIC for Corporations and the top 1% to print money and not give it to the bottom 99% of course. That’s why Corporate Spending is the star of earnings season – they have money falling out of their asses because they’re not giving any to workers and booking all sorts of profits. Since they are not taking those profits and hiring or building new office, warehouse or manufacturing space (not in this country, anyway), they can spend them on consumables like computers and other stuff for their existing offices and, of course, everyone can speculate in stocks and commodities (with M&A being just a form of speculation).
My support on TBT is that you can take all the EM nations and put them together and they don’t borrow in one year what we borrow in a month. Japan needs money, EMs need money (China just had a failed auction) and Europe is not likely to want to step up to be the lender of last resort so either the Fed keeps insanely printing $100Bn a month or Treasury is on it’s own and will have to begin bidding in a fair market for note buyers and that fair market for 10-years (we are at 3.17) includes Greece at 15.44, India at 8.28, Mexico 7.17, Australia 5.37, Israel 5.20, Brazil 4.33, China 3.85, Norway 3.47, France 3.42, UK 3.36 – all those nations are 10% and higher than us and I’m pretty sure I don’t have to tell people that Aussie notes are very arguably safer than US notes.
So, no, I don’t have some convoluted premise for why rates should rise – it’s simple supply and demand because, at some point, either the Fed will stop printing money and buying notes or the Fed scheme will become so worrying to other borrowers that the Fed is forced to buy 100% of the paper (and currently, US pension funds are major buyers after the Fed, not foreign countries) and our currency itself begins to rapidly decline which also would put upward pressure on rates.
There are so many ways this can all go horribly wrong and really just one extremely lucky set of coincidences that can allow things to go right – like jobs coming back to the US and commodities falling on their own (except the food we export) and people magically having 20% deposits to buy homes and the foreclosures not knocking housing prices lower and government collections jumping by 40% without any new taxes as projected even by Paul Ryan because if they don’t, we are so screwed it’s not even worth talking about. So I guess if you are comfortable with that outlook, you can lend the government money at 3.17% for 10-years but sure as hell no one is going to lend you money on those terms.
Don’t forget if inflation is "just" 2% and you have a 3.17% note, you only make 13.7% in 10 years (simplified) in real money.
doesn’t anybody sleep anymore?
boring night.
Yes, Exec, TOS. QMM11 is now 98.57 so going well. The new QM contract is $99.025 though so that’s a worry but the people bailing on QMM11 have to roll to QMN11 so I suppose they can move in opposite directions but tight stops make sense. Dollar is 75.36 at the moment and has not been able to get back over 75.40 despite the Pound dumping as the BOE holds rates steady and the Pound falls back to $1.62. Euro refuses to lose $1.42 and the Yen barely held the 81 line, but that came after the Nikkei closed, of course as they don’t let the Yen rise like that while the Nikkei’s in session. Hopefully now the BOJ begins buying some dollars because that last rise had to scare the crap out of them.
@phil
The futures Gasoline price has dropped by a dollar in the last two weeks. Do you watch that price to determine where to short oil?
XRT/Lol – No, if we get a real push over our 4% lines (and the 2.5% lines I indicated above) then we’re having the bounce we originally expected off our reference levels and we’re back to "ignore and soar", maybe all the way back to the top of the channel because, you know, everything is just so peachy!
Silver rejected at $35. Oil holding $99 (July), Dollar rejected at 75.40. I’m worried the Dollar is already considered a toxic asset although a lot of today’s weakness is based on playing up the impasse over the debt ceiling, which plays well in foreign markets.
Swanzilla/Elliot – I like that. That or Frankenswan.
PM/Yodi – Don’t you just love PM? Just watch your deltas and remember you have a pretty bullish position overall, down is still bad for you but I’m assuming you are still selling on the put side as well.
Yay – 75.45 – Moving fast!
Good morning Phil,
Do you sleep occasionally?
I have just updated my predictive charts. It looks like the SPY/VIX options players bought the dip. The indicators are on bullish levels they were at the end of April again. However since it’s expiration week the indicators tend to be rather volatile.
Spain/Pharm – Not according to the WSJ – not a word about it. Didn’t hear a thing on CNBC either. Unhappy workers? Unhappy poor people? Don’t be ridiculous!
Good summary of Greece with a good title in the Times: "Greece Has Ways to Fix Debt Woes, but All Lead to Misery."
Also "Who has Europe’s Loans?" – $2.6Tn is owed by just Greece, Spain and Portugal, who have a combined GDP of $2Tn (130% of combined GDP assuming no recession).
See, it’s good to remind ourselves that, no matter how screwed up we are – the rest of the World is just as bad! 8)
On the other hand, who can really claim to be more F’d up than we are: "Senate Refuses to End Tax Breaks for Big Oil."
In Consumer Behavior, Signs of Gas Price Pinch:
Flooding Takes Vast Economic Toll, and It’s Hardly Done:
The flooding is pushing up gasoline usage as cargo can’t move on barges and is being trucked. That explains the drawdown in gasoline.
TLT/Pharm – That 3% line on the 10-year is hard to cross unless there is a panic of some kind. The EU admits to 4% inflation so locking up money at 3% is just throwing it away unless you are betting the Dollar will be much stronger than the Euro when you cash it. The Yen has gained so much against the Dollar that I can see Japanese investors buying US paper (also the carry trade, since they can borrow at 0.25% too) and betting that the BOJ won’t let 90 Yen to the Dollar fail and 3% sounds good to a Japanese investor!
Monthlies/Scott – I pretty much just use the basic Gallery View on Stockcharts, with the daily and weekly charts on the same page. They have the 50 dma and the 200 dma and the EMA and the PPO and the CMF and that X’s and O’s thing at the bottom that makes no sense to me… I’m not a technical guy so I mostly watch the moving averages because that’s what enough people watch to make them work. Mainly, I look for consolidation points like 1,180 on the daily S&P chart and then I look over to the longer chart below it to see if that’s a realistic base and it seems OK so then I see that 1,300 seems to be the next consolidation line and I subtract 1,180 from 1,300 and that’s 120 and that’s 10% and now I look at 1,240 to see if that was some kind of support and it was a breakout and then support so now I’m comfortable that the S&P is more or less obeying the 5% rule and 15% is 1,357 and, wouldn’t you know it – that’s about where we topped out.
Keep in mind these are LOOSE numbers based on eyeballing the lines vs. the more refined levels that we come up with when factoring in the dollar and, of course, we like to defer to whole numbers as psychological levels are often significant too. So I’d call 1,200 to 1,300 a range and 1,333 is 2.5% over 1,300, which is where that number came from (as well as being, not coincidentally, 100% over the spike low of 666.79).
You can do that with any stock but you have to keep in mind that a stock is much more likely to be affected by other things so it’s only going to give you an idea of where your s/r lines are going to be in normal movement and, of course, the less actively a stock is traded, the less predictable the movement is going to be.
Europe has been selling off since the gap up open, now up about 0.7%.
Interesting perspective Lapper, thanks.
Dollar/Goober – I forgot now but I was agreeing with you that the Dollar is pretty much steering the ship. It’s a fantasy economy and, like a game of D&D, if everything is just made up anyway, then the words matter more than the reality (4 geeks sitting at the kitchen table) – that pretty much sums up the economy with the top 10% (because the bottom 90% don’t give a crap about the price of AAPL’s stock) playing the game along with small business and government and the Top 1%, including Big Business and their MSM – are the dungeon master who get to make up the scenarios and the rules – they still have to roll the dice – but only after they have created a narrow range of outcomes that they are able to control.
Paranoia/Lol – A bit of paranoia is very healthy in this market.
Gas/Flips – Not really. Oil drives gas and not vs. vs. but gas prices going against oil can give you an early indication of demand destruction but it’s more important to watch the retail prices and things like the above MasterCard data, which comes in the middle of each month. I called a short on oil over $105 because it was simply unsustainable since people aren’t making more money. You can ask for anything you want but, eventually, people have to be able to buy it. I think $85 is probably a realistic price but I wouldn’t be going long until $65-70. Anything over $90 is clearly bad for the broader economy but energy companies are 15% of the S&P so it’s hard to get a good read when most of them double up on higher oil prices – giving the top 1% the impression that high oil prices are "healthy".
Good morning Phil Question on BAC Jan 12 17.5 c long pd 3.70 now .09, 20 c short rec 2.60 now .04, 12.5 p short rec 2.73 now 1.50 what ajustment would you make thks
$25KP position adjustments:
Phil Our NLY play have been called on the Jan 13 12.5 calls shall we wait and see before bying some back ?
BAC/Yodi – It would be good if you asked before the position is down 90%. We’ve been off BAC for ages but they’re not so bad (or no worse than the others). You can spend .90 to roll out to the 2013 $15s and I’d kill the caller for .04 just in case BAC pops and you want to sell something else. As to the puts, they are a lot of premium so I wouldn’t do anything unless BAC gets much worse. So then you are in the 2013 $15 calls for net .50 out of pocket and, if the putter expires worthless – not in such bad shape. If he doesn’t expire worthless, then you can roll the Jan $12.50 putter to the 2013 $10 puts (now $1.20) more or less even once the Jan premium burns. See, isn’t it nice to take conservative spreads – BAC totally failed and you still have a reasonable path to recovery where the worst likely case is you own 1x at net $10.50 in 2013.
Phil,
Boring isn’t that the definition of sleep – or sleep might be the definition of boring actually. 😉
Anyway you picked a great profession. Maybe really the only one where you can work 24h a day…
24 hours/Pentax – It’s more like I can work ANY hours I want (except of course I’ve turned it into a bit of a job). That’s what I’ve always liked about the markets – I can wake up and if there’s something interesting I can play it and, if not, I go to sleep, watch TV or read a book. I can take a day off when I want and the markets are still there when I get back and IBM doesn’t call me on my vacation asking me what to do like my employees used to and if Google’s server goes down, I don’t have to spend $10,000 over the weekend to fix it (but I may lose that much on their stock). This IS my retirement job – I’ve worked plenty and this is fun for me. I don’t have to commute, I don’t have to go to meetings and I’m doing something I’m interested in. I still have way too much energy and I’m home with the kids on their school schedules for another decade anyway so I may as well work but, after that, there’s no way I’ll do this 5 days a week. My plan it to eventually be Kipplinger and work about 2 days a month and have a Million people pay $300 a year for a newsletter.
Phil,
I have no doubt will reach your "Kipplinger-traget". About the job: you certainly have a number of true points, that I share. I live in Europe so it’s even easier to cover the European and US markets – just skip your evening social life.. 😉
However I still think it is important to not get sucked into it too much. I can see in my own performace that I usually trade better if I had a day or two off.
@phil
re: paranoia
Is it my imagination or is GMCR ‘pinned’ precisely between the 67.5 and 72.5 OpEx on Friday? For almost two weeks now.