Seriously, this is 4 Tuesday's in row – is anyone seeing a pattern?
Of course this Tuesday we are 100 Dow points lower than we were last Tuesday and the BS pre-market pump job at 6am has already faded (7:30) although we're still working short bets on the Russell futures (/TF) and the Euro (EUR/USD) from 813 and $1.256 as I put up a note in early morning Member Chat as we spiked on – get this – the news that Draghi cancelled his appearance at Jackson Hole this weekend.
Why would it be good that Draghi is NOT going to the last Central Bankster conference of the year but the buzz is that he MUST be so close to a masterful solution to all of Europe's problems that he can't be bothered to gather with his brother bankers on the eve of his triumph. The announcement was timed to coincide (10 minutes before) bond auctions by Spain ($2Bn 3-month notes at 0.95%) and Italy ($3.75Bn of 2-year notes at 3.06%) and the Euro jumped 0.7% into the auction – lowering the effective rates and both auctions were a "success".
That pulled the EU markets off the floor (still down half a point at 8am) and got the US futures out of the red zone as we finally pushed the Dollar under that pesky 81.50 line, goosing the indexes and commodities. Unfortunately, it's just a sugar rush and we've already run out of steam but I'm sure someone will start another rumor around 9:15 to get us back to green into the open.
As I said last Tuesday, with the Dollar at 81.50 we're looking for adjusted levels of: Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and we held the Nasdaq yesterday but that was all so no reason to capitulate on our bearish stance just yet. Last Tuesday we also discussed 3 more trades (there we 3 the Tuesday before) to make 300% if the market did break higher and our first batch had several 100% winners so let's see how our 3 new trades did in a downtrend:
- 2 FAS Oct $107/117 bull call spreads at $2.05, selling 1 BBY 2014 $15 puts for $3.75 for net .35 is now net $1.52 – up 334%
- AGQ Oct $38/45 bull call spread at $3.10, selling BTU 2014 $20 puts for $3.60 for net .50 credit, now $1.18 – up 236%
- 3 DIA Oct $135 calls at $4.05, selling 1 HPQ 2014 $20 put for $3.80 for net .25, now -$2.56 – down 924%
HPQ had a rough week, dropping 20% and that killed that trade, which was the most leveraged of the 3 but not a bad consolation on the first two considering the market moved against us. Of course, setting a stop somewhere before you have a 100% loss can save you a fortune in these situations as well! We never did made our levels and, as we discussed yesterday, our bearish positions had a fabulous week so the hedges certainly did their job.
Obviously, we take the money and run on the first two hedges and there's no need for 3 new hedges when the DIA spread can now be played with 2 DIA Oct $135 calls at $1.23 selling the HPQ $15 puts for $2.30 for net .16 and, if you don't mind owning HPQ for net $15.16 (12% off the current $17.21 price), then there's not much to worry about on this trade but, as I said last week – we are NOT bullish and these are just small hedges against our generally bearish bets.
Realistically, if we played all 3 spreads with even distributions, we laid out .10 in cash and the two winners made $2.70 while the loser dropped $2.56 so, even without stopping out the loser, we're no worse for the wear on the drop. A great example of why all your eggs should never go in one basket.
Speaking of broken egg baskets – check out this Bespoke chart of the Shanghai Composite – what a mess! Our stock indexes are currently back where China was in late 2007-early 2008 and a lot of the reason we're back there is the way we're so enthusiastic about potential expansion into China and the growing Chinese demand for our goods and services and swelling Chinese Middle Class and the endless Chinese demand for commodities and…. hey, what's that smell? Smells like BS to me…
You can read 100 articles and the Punditocracy on the MSM can hit those talking points until they are blue in the face but this chart is A FACT! The Shanghai is down 66.6% from the top and anyone on TV using CHINA as a reason to be bullish should be given a few hundred volts through is chair! What if the US market looked like this and people tried to tell you how great things were? Would you say "well, that certainly not what I see here but, if you say so – it must be true"? Just because the MSM assumes you're an idiot, doesn't mean you have to invest like one.
Despite the "great" bond auction this morning, the rats are leaving the sinking ship of state in Spain at an ever-accelerating pace. The chart on the left shows the outflows from Spanish banks, where deposits fell 4.7% in July alone. A few more months like this and there won't be any banking system left to save!
Spain's once-wealthy Catalonia region has officially requested an emergency liquidity injection of $6.5B this morning from Madrid's sadly insufficient bailout fund. Don't worry Spain, Germany says CHINA will buy up all your debts (not a joke, sadly). Spain officially admitted they are in a recession today as Q2 GDP fell 1.3% after falling 0.6% year/year in Q1 and is projected to fall further in Q3.
At this point, even the Swiss are running out of money, and patience, as the SNBs policy of supporting the Euro at all costs. The SNB is currently holding 230 Billion Euros, which is 1/2 of their entire GDP, adding 34Bn in July alone. If not for Swiss support, the Euro would surely be at $1.20 or less – even against the weak Dollar. "The minimum price is not for eternity," said SNB's Jordan, "this is an extreme measure for an extreme situation." Any sudden removal of this support can have a sudden and devastating effect on the Euro.
Just ahead of the open we're getting our predicted pre-market re-pump and that's fine with us because – we don't care IF the game is rigged as long as we can figure out HOW the game is rigged and place our bets accordingly. The Russell bottomed out at 808 – up $500 per Futures contract and the Euro hit $1.24, which doesn't seem like a big move (.016) but it's $10 per .001 so up $160 per contract on that one and that is how we pay for our Egg McMuffins.
Now we get to sit back and watch the fun!
The irony is just so sweet…
Add one continent to the list of problems:
Phil – Just in case you thought there are not women at the GOP Convention:
FWIW….not that we are uninformed….Paul McCulley, the former legendary economist and fund manager at PIMCO, who was once being touted to join the Fed as a policymaker, told me last year at the Altegris-Mauldin conference, the YoY trend in the three-month moving average of core capex orders had for a long time been his preferred indicator of how the broader economy was going to fare a few quarters into the future. Well, if you are bullish on U.S. growth prospects over the near-term, I suggest you look at the chart below.
Notice how the YoY trend just sliced below the zero-line in July (to -1.7% from +1.1% in June).Only once in the past did this NOT tip the overall economy into recession and that was back in September 1998 when the Asian crisis was at its peak, LTCM had to be wound up and Russia defaulted … not exactly a pretty sign even if the recession was delayed for another two years.
In terms of sectors, it was order declines in machinery, electrical equipment and communications equipment that far outpaced gains in metals, autos, aircraft, and computers.”
IBM Envisions Watson as Supercharged Siri for Businesses
Unclaimed Corpse Indicator (and 37 Others):
IWM is looking really bad 80.40 line would not be good and that FIB is 80.26. Phil your hold call is solid in my book.
Tampa strippers encourage GOPers to party like a liberal
Australia/StJ – Without Asia growth they are screwed.
Things That Shouldn't Be Said In Modern Society To Be Said At Least 1,400 Times At RNC
ROFL – I love that article!
Lance Armstrong Lets Down Single Person Who Still Believed Him
RNC Builds Levee Out Of Poor People To Protect Convention Site
Capex/Pharm – More scary stuff…. Corpse indicator funny. Huge drop-off in trash too – all bad signs.
Mining stocks are starting to feel the pain:
Are you thinking that no stimulus will come (in September)? Or, that it may or may not come, but even if it does it has lost it's effectiveness (sans a very short term pop upon announcement)? I have become a moderately short (SQQ,VXX, USO) against some very long term positions. I have been effectively neutered to a little baby on the sidelines sucking his thumb watching the big boys play!
stjeanluc/australia. aussie banks made 35b npat this past year, very profitable. australia has floating fx rate so banks not reliant on offshore for liquidity. however, they are reliant for term preference. internal economy is still relatively ok but external position is not. currency is way overvalued
This market will continue to until it
Do you have a link to the actual words repeated?
dclark – I noted that they were sucking premium out of both sides a few weeks back, but the net shorts were falling as they were selling Aug/Sept puts OTM. The bots are using the PP to perfection, on the daily plays, and the trend lines are acting as support/resistance. It is a waiting game. I still think they head fake this thing. TLT remains elevated.
Speaking of TLT…the Calendar play is holding well, up about $40/contract. If it continues up, we are going to need to set a stop on it at $30/contract. I don't want it to get away if there is a sell off, as it will skyrocket and the short sale calls will burn us. Patiently waiting, but I have a finger on the trigger.
The S&P/Case-Shiller index of property values in 20 cities increased 0.5 percent from June 2011, the first gain since September 2010
TZA weekly $15 calls back at $1.45 with TZA at $16.45 This should still be a play as we yo yo back and forth until uncle Ben speaketh?
You really have to get in and get out or join me on the sidelines!
It seems like the low volume environment gives them a better opportunity to manipulate the market, news, and the players. And everyone is playing along nice, for now. The question is when does someone throw in the towel and call bad BAD? My problem is I haven't been told the script!
Your responses always appreciated.
Australia / Aussie – I guess they will soon join the race to currency debasing!
Why bother with facts when the fiction sells so much better:
It's going to a fun 3 months!
Ann Romney to Show the Softer Side of Mitt at Tuesday RNC Speech
She would be wise to skip religion considering that known view on women.
SQQQ sept $38 are $1.55
– planning on DD if they catch $1.45
Demand down Oil contracts need to be flipped to April 7 months out. Looking better for the heating season.
Stimulus/DC – Our rule of thumb is $10Bn of G20 stimulus buys one S&P point for 6 months. We're up 140 points from when Draghi fever began and less than $500Bn committed (mainly by China) plus the drip of Twist, which is good for about $400Bn but, since it's monthly, it's more like $80Bn tops so 58 S&P points justified from 1,280 is 1,338 and we're at 1,410 so about $700Bn to maintain this plus 2 months of decay on the original $500Bn (the Fed's drip doesn't decay until they stop the program) brings us back to $800Bn needed just to maintain where we are. That's a lot of money and it's very unlikely the ECB will come up with that much on its own and I don't think the US is good for anything at the moment so – EVEN if we do get some sort of QE/Stimulus – it's going to have to be a lot to justify the run-up.
Link to words/Shadow – You mean the RNC? That's a joke article from the Onion, click the title.
TZA/Den – It's more like a futures play – nothing you want to leave alone to go to the bathroom – let alone overnight! I'm getting bored with it now as it didn't do what we wanted it to and the Dollar is just playing dead at 81.33. I'm more inclined to pull the plug even than ride anything out but there's still a better than 50% chance of another down leg to 808 on the RUT.
"We're not going to let our campaign be dictated by fact checkers" – ROFL. Really GOP people – how can you seriously have any respect for this party? 20 Historical Facts That Republicans Distort Or Just Get Plain Wrong ..
What's Draghi up to???
LLY @ 52 wk highs….
11:00 AM On the hour: Dow flat. 10-yr +0.13%. Euro +0.54% vs. dollar. Crude +0.83% to $96.26. Gold -0.09% to $1671.75.
11:39 AM European shares close with solid losses, helped only for a moment by news Mario Draghi is skipping Jackson Hole due to a heavy workload (a bond-buy program?) back home. Bailout requests lose their ability to shock as Catalonia's request for a rescue from Madrid (itself needing assistance) doesn't move the needle. Stoxx 50-0.9%, led by Spain and France each 1% lower
12:00 PM On the hour: Dow +0.05%. 10-yr +0.15%. Euro +0.53%vs. dollar. Crude +0.6% to $96.04. Gold -0.09% to $1671.75.
1:00 PM On the hour: Dow +0.07%. 10-yr +0.14%. Euro +0.57% vs. dollar. Crude +0.75% to $96.19. Gold -0.21% to $1669.75.
Three lunchtime reads:
1) Five stocks that could jump 20%
2) A new take on the 4% rule
3) Finance is in need of a technological revolution
VXX – Reverse stock split just announced.
Historical facts / Phil – Wow, reads like the historical editing of Joe Kernen's book…
Phil, do you still fancy those PCLN 540 Sep Puts at $3? They didn't fill for me a coupe of days ago, so there is a new opportunity right now.
VXX/aaronc – as i read the news item, it looks like only UVXY is reverse splitting. i have not seen any statement that VXX is, but i would not be suprised if it follows sometime soon.
VXX / AAron – I would not be surprised. The last time they split in Nov 2010 they were trading around 11 as well.
Alert TMZ and CNBC, found video of Mario Draghi and what he's doing:
From Pillows at Slope….IF these (Gas futures) break that glass ceiling…things are not going to be good for the little guy…..nope, no good at all.
VXX/STJ SCOTTMI – You guys are right it's the UVXY. It would be nice though.
SQQQ/ITrade – Keeps falling just short. Good indication our channel is right though.
Draghi – If they had a plan (and don't forget it was two months ago that he said he had one) then it would have been announced. I think he's buying time because the ECB meeting is the 6th but I still don't see how they can do anything without the German vote on the 12th and if Bernanke punts (which I'd say is 75%) – I don't see people being that patient. Draghi's a GS guy and he know better so there is no way he blew off Jackson Hole if he had something to announce. There is a teeny, tiny chance that they are legitimately all just getting back from vacation and the only way to coordinate with a Fed announcement is to meet all week and iron out details but – not after 2 months of BS.
Joe Kernan/StJ – I can't believe someone in the nanny state hasn't taken that poor girl away from him to a safer place!
PCLN/Hemas – I don't know, Shatner's back… Just kidding – of course I still like them.
VXX/Arron – Not VXX, the ultra that tracks it.
And what Scott said!
VXX / Aaron – You mean it would be nice so you could short it again? 🙂
Kernen / Phil – Of course there is always a chance that Blake Kernen turns out like that young kid who spoke at the RNC convention 8 years ago but is a staunch Democrat now….
The idea is to attract those who have rejected it. The outcome is usually bad.
Kernen – With youth there is always hope; not so much with the old cur dog.
Excellent! That chart was about what I detailed about IWM this AM. Doesn't matter what index all the same, kind of tells a story or warning.
You holding TZA overnight?
Just saw your earlier answer to my question. Forget I asked.
Pennant forming on 3 min SPY with Higher Lows. IF they follow TA…should break up, not down. Char it SPY 5 min (Cobra), but same info.
VXX/ STJ – That would be a nice long term trade, but I'm on the other side presently. Short some Jan 13 10 Puts. Sitting on a nice profit but haven't gotten nearly the pop I would have expected by now. Holding till Jackson Hole then I'll reevaluate.
Another excellent chart shown the trend/trap/POINT!, I see. I gave up on posting my charts all I seen to know how to is links to others and I don't search for them, I creat them.
Shadow – all my (borrowed) charts are excellent…heck, all my posts are excellent…. 😉
1020 – no comments from the peanut gallery!
Kernan – Very clever by the way, making his 10 year-old daughter the co-author. It makes the book virtually attack-proof as no on wants to rip to shreds the misguided musings of a child. Also probably had some nice tax advantages….
1:00 PM On the hour: Dow +0.07%. 10-yr +0.14%. Euro +0.57% vs. dollar. Crude +0.75% to $96.19. Gold -0.21% to $1669.75.
2:00 PM On the hour: Dow -0.11%. 10-yr +0.21%. Euro +0.56% vs. dollar. Crude +0.72% to $96.16. Gold -0.4% to $1666.55
3:00 pm and only 51 mil. shares traded on the DOW.
OK, here we go….