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Thursday, December 1, 2022

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Falling Thursday – WMT Gives the Market a Cold Slap in the Face

SPY 5 MINUTEWheeeeee again!  

I know I'm doing my job correctly when we have down days and nobody is panicking.  Frankly, the only panic we have this week is from people who got nervous and covered AAPL too soon.  In fact, we just cashed out most of our AAPL long posiiton in our Long-Term Portfolio and flipped it to a higher-leverage, smaller and more speculative play in yesterday's morning Alert to Members (also tweeted).  

Learning to take profits off the table is the 3rd hardest trading lesson we try to teach our Members.  The first two are PATIENCE and learning not to chase.  This AAPL trade is a great example of all 3 as we PATIENTLY scaled into a very large position as AAPL went down from our initial entry and now, still almost 20% below our initial entry ($585), we're taking profits off the table.  

At the same time, I have to keep telling people who weren't in AAPL or are already in AAPL and didn't double down at $400 or simply aren't satisfied with their current AAPL gains – to NOT chase the stock when it's testing $500 at the top (maybe) of a 100-point run (25%) since early July.  25% is a lot.  

I know it may not seem like it in this insane market that's literally drowning in liquidity, which is pumped in daily by the Fed at a rate of $85Bn PER MONTH, but it's still a lot – especially when it represents $100Bn of market cap.  $100,000,000,000 is, I'm sad to say, still a lot of money.  I know it doesn't seem like it when Japan's debt is now 1,000,000,000,000,000 but those are Yen, not Dollars and it took Japan a century to make that move, not 45 days.  

We're also having a blast with our oil trades, with another good entry this morning at $107.50, that's already up .50 at $107 for a $500 per contract gain and, if it bounces back to $107.50 at the 9am NYMEX open – we'll short it again!!  They punched oil all the way up to $107.90 overnight on news of riots in Egypt but the cold reality is that they still have 148M barrels on fake order for September and they have to either cancel or roll them by Tuesday or all those barrels will actually be delivered to Cushing, OK next month, where they would increase our oil inventories by millions of barrels each week and crash the oil market. 

We discussed long-term shorting of oil (with December 2015 hedges) in Friday's post, don't confuse that with our short-term shorting of the oil Futures (/CL), where it's more of a hit and run game.  As is proven from our fantastic winning streak playing for breaks below the 0.50 lines most of this month – the pressure is certainly down and we're fairly confident it's only a matter of time before we get a nice, 5% breakdown as trades begin to panic out of their FAKE positions before they have to accept delivery of REAL barrels:

Click for
Chart
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Sep'13 106.98 107.87 106.92 107.36 08:30
Aug 15


 

 

 




0.51 33542 106.85 148898 Call Put
Oct'13 106.71 107.52 106.65 107.04 08:30
Aug 15


 

 

 




0.48 19930 106.56 301828 Call Put
Nov'13 105.51 106.34 105.51 105.89 08:30
Aug 15


 

 

 




0.48 6583 105.41 163928 Call Put
Dec'13 104.10 104.85 104.00 104.45 08:30
Aug 15


 

 

 




0.48 10361 103.97 222802 Call Put

Aside from the MASSIVE build-up of fake orders in the front 4 months (836,000 1,000 barrel contracts currently open!), which become the front 3 months on Tuesay, we have evidence from WMT and other retailers that the US consumer is already at their breaking point with oil over $105, let alone $107.  US sales for WMT fell 0.3% in Q2 and WMT has dropped guidance by 2.5% for Q3 on – the weak consumer.  

Debt LoadNot only are US consumers cutting back their discretionary spending, but they are plowing back into debt with Credit Card debt up 1.2% in Q2 vs Q1 and Auto Loans up 2.5% and not only are Student Loans up 0.8% for the quarter but now 11% of them have become delinquent – that's 11% of over $1Tn!  

You can only fake a market rally for so long before someone actually has to buy all these pumped-up goods and services to justify the runaway valuations – especially the forward multiples, that are now based on some best-case, fantasy scenario that simply is not playing out on a global, or even a local scale.  So, if the consumers (70% of the US Economy) aren't opening up thier wallets and the Government (Sequestration, Debt Cieling) isn't spending more to fill in the Gap and Big Business isn't hiring and expanding – WHAT THE HELL ARE PEOPLE SO BULLISH ABOUT???

This stuff isn't complicated – mostly common sense…

 

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Phil/ABX – Much more relaxing.  Thanks for the thoughtful response.  It seems so obvious when you describe things :).

scot.

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