Whenever the manipulators need to boost the markets, they just crash the Dollar.
And what a dive we've had! As you can see from Dave Fry's Chart, the Dollar is down 7% since last summer and down 2.5% this year and that keeps stocks and commodities 2.5% higher – because we buy them with Dollars.
Keep in mind, at the same time you are buying IBM shares for $200, someone is buying the same shares for 20,400 Yen and another guy is buying them for 340 British Pounds and yet another guy is buying them for 280 Euros.
It's obvious that, if the value of the Pound or the Yen or the Euro changes, the price of IBM in those currencies will change to reflect the currrency valuation but Americans tend not to realize the same thing happens when the Dollar gets stronger or weaker too. Once you do realize this – you have a huge advantage in trading the Futures (and we have a Live Futures Workshop this afternoon at 1pm).
The Fed's easy-money policies keep the Dollar weak (because we're printing another Trillion of them each year and, in this economy, no one is using them – ie. no demand) and that has goosed the market by 7% since last summer, when the S&P was about 1,650 – about 10% lower than it is now.
That means that 75% of the gains in the S&P since last summer have been the result of a weak currency and have noting to do with a "strong" economy. Now THAT makes sense, doesn't it?
"THEY" had to tank the Dollar to get us over the 1,600 level, which was a very key technical off our consolidated bottom at 800 during the crash. It's no coincidence that we were hitting resistance there in May and pulling back to 1,560 and looking weak in July when, suddenly, the Fed went into a new round of crazy, which led to 6 months of fairly steady value erosion for every single Dollar you have worked for and saved your entire life.
It's kind of a tax on you – the Government has reduced the value (in International Terms) of EVERYTHING you have by 7% in order to transfer market wealth to the top 1%, who own 85% of all equities and, of course, who control pretty much 100% of all corporations, who are able to use their inflated stock prices as collateral to sell or borrow against (or acquire other companies). It's a fantastic game – if you're the one on the top of it!
It's also a great way for the Government to reduce their debt, which is mainly owed to foreign Governments like Japan and China. A weaker Dollar means our debt, which is priced in fixed Dollars can be paid back with less Yuan, Yen, Pounds and Euros. It's not that simple of course – Japan is racing us to the bottom as they try to devalue the Yen to reduce their own 200% debt to GDP ratio.
It is, however, a fantastic way for our Multinational Corporate Masters to cut our pay by 3.5%, since half of the S&P 500's revenues come from overseas, which means paying us in US dollars that have dropped 7% saves them half of that reduction on their balance sheets and that makes their earnings seem 3.5% higher (depending on how many US employees, of course) than they would be otherwise.
It's amazing how we villify Putin for essentially doing the exact same thing in Russia as the top 0.01% are doing to America – the only difference is, we haven't invaded Canada yet for their resources – but don't worry, there will be hostile takeovers down the road – look how quickly Blackberry was destroyed. Now we are messing with their oil and gas revenues with our "drill baby, drill" and pipeline policy – just like Putin did with the Ukraine before he invaded (allegedly). Maybe we'll just get the French Canadians to declare themselves a state and then we'll run in to support their right to choose…
As I said above, being aware of currency fluctuations makes us much better Futures Traders. This morining, for example, in our early morning Member Chat, we did a chart review and we had a good discussion about the 5% Rule™ and I pointed out to our Members that the Dollar was down 0.5% this morning and breaking below support, saying:
Dollar down to 79.19 is down 0.5% so I guess that's the big, BS news that's propping up the market. Nikkei hasn't reacted much to it yet, still 14,350 so shortable on that line (/NKD) but out if the Dollar bounces.
Overall, I'd say yesterday was low volume BS and we should see more downside today. S&P 1,880 (/ES) is still a good shorting line as is /NQ 3,600 and Dow 16,450 confirmed by /TF below 1,120. If we can't move up on a 0.5% Dollar drop – thats' not a good sign!
Already, as I'm writing this at 8:30, the Dollar is down to 79.10 but that's not stopping the slide in the Futures with the Nikkei at 14,275 (up $375 per contract), S&P Futures (/ES) 1,873 (up $350 per contract), Nasdaq 3,586 (up $280 per contract) and Dow 16,425 (up $125 per contract). That, as we like to say, pays for the Egg McMuffins this morning and that is what I will be teaching you how to do in our Live Futures Trading Workshop at 1pm today.
If you already made $1,130 trading 4 contracts in less than two hours this morning – by all means don't bother – I'm sure you have some shopping to do!
We're expecting more downside because, as noted on Dave Fry's SPY chart, yesterday's volume was ridiculously low and Monday's are always to be taken with a grain of salt, so we're throwing out the chart and focusing on the data and the data (earnings, etc) is not any better than it was on Friday, when we decided to move back to more cash – in anticipation of a bigger drop than the 1.25% we hit at yesterday's brief low.
We're not betting heavily to the downside – we've been burned too often to gamble on that. What we have done is cash out our non-hedged, directional longs at what we're pretty sure was an interim top and we'll see how things go from here. Meanwhile, playing the Futures is one of the many fun things we can do with CASH!!!
Futures allow us to make quick in and out trades with low friction and often we can make a few hundred Dollars very quickly. Occasionally, we get big winners, like last Thursday's call to short the Nikkei (/NKD) Futures at 14,500 and this morning, just 3 sessions later, we're already testing 14,250. At $5 per point, per contract, that's $1,250 for each contract in just 3 days. The call was there, for free, right in the morning post – don't say I never gave you nothin'….
We were also shorting oil at $100 that day and we have had a couple of rides down to $99 and, this morning, we're testing $100 again (/CL). Needless to say we're shorting it again as well. You can play along – it's a free trade idea – maybe you can buy a Membership with the winnings!
We're still looking for follow-through to the downside. Watch the Russell closely for a breakdown below the 200 dma (1,114) or the S&P below 1,865, which would be $450 per contract on our Futures play!
From Bloomberg, May 6, 2014, 1:42:17 PM
David Einhorn, manager of the $10 billion Greenlight Capital Inc., said he found a recent dinner conversation with former Federal Reserve Chairman Ben S. Bernanke scary.
To read the entire article, go to http://bloom.bg/Rozyjo
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From Bloomberg, May 6, 2014, 5:23:52 PM
Does anybody really know why Twitter Inc.’s stock price fell 18 percent today? I, for one, do not.
To read the entire article, go to http://bv.ms/1j0cygB
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From Bloomberg, May 7, 2014, 6:05:22 AM
Good morning. Here’s my take on some of the stories driving the debate in politics, finance and social issues across Asia today:
To read the entire article, go to http://bv.ms/1hwEOYN
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From Bloomberg, May 6, 2014, 3:37:35 PM
The Fix’s Aaron Blake is correct that the 2016 Republican nomination battle is the party’s “most wide-open primary in recent history.” He bases that conclusion on the polling, but it’s probably true of the invisible primary, too.
To read the entire article, go to http://bv.ms/1rZRHiZ
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From Bloomberg, May 6, 2014, 2:51:39 PM
So Institutional Investor’s Alpha put out its 2013 hedge fund compensation ranking today, and I guess we should talk about it because rich people got paid money and that is fun to gawp at. The obvious thing to say about this is that these managers’ pay doesn’t reflect performance, so everyone said it. DealBook:
To read the entire article, go to http://bv.ms/1sh7qMk
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From Bloomberg, May 6, 2014, 1:09:15 PM
Last May, researchers studying a randomized controlled trial of Oregon’s Medicaid expansion released a bombshell report that found no significant improvements in mortality rates or key health markers for blood pressure, hypertension and diabetes control. I did three major posts on it (one of which was a guest post from Jim Manzi, the world’s leading popular author on the virtues — and limitations — of RCTs). At the end of my first post, I wrote:
To read the entire article, go to http://bv.ms/1nlGhpm
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From Bloomberg, May 6, 2014, 12:35:01 PM
Lots of people are addicted to their smartphones and hate themselves for it. Otherwise the video called “Look Up” by Gary Turk, a self-described writer and director, wouldn’t have garnered so much attention.
To read the entire article, go to http://bv.ms/1kHSVLB
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Watch this video at http://bloom.bg/1ijkaiB
Disney Profit Rises as ‘Frozen’ DVD Leads Charts
May 6: “Frozen” continues to sizzle for Walt Disney Co., where quarterly profit rose 27 percent as kids snapped up DVDs and merchandise tied to the animated mega-hit. Jon Erlichman reports on Bloomberg Television’s “Street Smart.”
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Watch this video at http://bloom.bg/1huUn38
Einhorn: There Are Opportunities to Fix Markets
May 6: David Einhorn, co-founder & president at Greeenlight Capital, discusses high-frequency trading on Bloomberg Television’s “Market Makers.”
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Fracking appears to continue at pace.
DJ US Silica: Frack Sand Flying Off the Shelves — Market Talk
US Silica (SLCA) is selling every grain of sand it can get its hands on. The industrial-sand company says it sold 1.3M tons of sand to the oil-and-gas industry for hydraulic fracturing in 1Q, up 45% on-year. That helped SLCA blow past analysts' overall revenue forecast, though EPS was a penny light. "We are currently sold out of all grades of frac sand," says CEO Bryan Shinn. Even with a new mine and processing plant set to open this year, the company says oil-and-gas demand is on track to outpace expected new sand supplies. SLCA jumps 8% to $44.75 in hitting a fresh high. The stock has jumped 17% this month and 31% for 2014. (alison.sider@wsj.com)
Good morning!
Nikkei took a big dive last night – all the way to 14,045 and settled at 14,100. Officially it was down 3% for the day (424 points) and that makes it our biggest winner, once again. Bigger news though, is the Shanghai diving into the close, finishing down 0.9% at 2,010 – just over that life and death 2,000 line. Hang Seng dropped 1% and below 22,000, India fell 0.8% and Singapore was the star, down just 0.25%.
Europe majors are down a little but Italy is down 1% and Spain is down 0.6%. Our Futures are down just a bit but don't forget Yellen speaks at 10 – so hope springs eternal. Her speech covers "economic outlook" at the Senate's Joint Economic Committee.
Check out what the WSJ is treating as headline news:
Didn't we get bored of talking about this a month ago?
Meanwhile, the Dollar is still at 79.19 but, now that it's stabilized, it no longer has an effect on the indexes until it moves again. Oil is $100.26 after topping out at $100.59 and, for those following the conviction play, we hit $99.81 just after the close and then stopped out at $100.06 for a $500 loss and then hit a re-entry on 2x at $100.20 so that's where we are – effectively with 2x short at net $99.95 (putting in the first loss) with a DD target at $100.90.
I can't find the API report for some reason but Brent is down to $107.34 and those two have been running neck and neck.
My theory is that any build today or low demand for gas is going to freak out the longs, who are holding 292,000 contracts (not too many) with 10 days to rollover (21st). The thing is, these are June delivery contracts – AFTER the holiday weekend. That makes these a very big gamble because, if holiday driving is a bust – these guys are stuck with a very hot potato.
Chart
May 07
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May 07
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May 07
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May 07
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Notice July is already stuffed with 200,000 barrels and Aug and Sept have over 100K as well. That's the magic over 650,000 in the front 3 months (post rollover) that usually gets them in trouble. During that time, traders risk peace breaking out in the Ukraine – which would be a complete disaster for them – as would the success of the electric BMW or more hybrid/electric announcements as people are starting to realize gasoline demand is on a long-term downtrend.
Gold is still $1,310 but copper dove off a cliff below the cliff it already dove off – now $3.035 as it turn out no one is building anything anywhere. Nat gas stays up at $4.80 on Ukraine fears and it's swimming pool heating month – big money raising the temperature of 20M pools x 20,000 gallons = 400Bn gallons by about 15 degrees. I don't know the math but it's a big number (I know it is at my house!).
Silver topped out at $19.77 and gasoline is a dead fish at $2.88 – a better indicator of true demand.
Now the markets are heading up on a 5.3% rise in Mortgage Applications. That's silly as it's a weekly report and it's been down all year:
Of course, nobody reads past the headlines – just keep this FACT in mind as you hear over and over and over today how this is a good sign.
Productivity for Q1 is at 8:30 – that's way more important and I can't see how they can squeeze any more out of the workers – especially the Unit Labor Costs (wages), which are so low they are becoming an issue:
Notice it's not a good thing for the market when they drive Unit Labor Costs negative – that happened in our last two crashes.
Infrastructure/StJ – That was my premise for ALU when they crashed in 2012. They were $1 then, now $4 as that's a macro picture that can't be ignored. Also why I liked CSCO. Those two are my favorites still, though not as cheap as they were before other people began to catch on. Of course, now I like CLF and IRBT and TASR – but no one will believe me on those either until they triple and THEN people will begin to ask me for good ways to play them. No one ever wants to buy low…
Nice actionable call on oil, Burr!
Big Chart – Good timing by Yellen, right when we're testing those 50 dmas on the Dow and S&P. It's all about the RUT and the 200 dma at 1,115 though – if it can't get over that, the rest are likely to head lower.
SLCA/Sibe – Too bad they already had a big run.
10% Dividend Payer Linn Energy’s Plan For A Big 1031 Exchange Could Lift The Stock Considerably
May 7 2014, 5:25 | by David White | about:LINE
includes:BRY, LNCO
Summary
LINE/LNCO’s acquisition of Berry Petroleum has improved its financials significantly.
LINE has approximately 55,000 net development acres in the Midland Basin that it plans to spend $275 million in CapEx on in 2014.
LINE management is indicating that it would like to do a 1031 like kind exchange for more mature assets.
If LINE manages a like kind exchange, that should have a highly positive impact on its cash available for distribution.
LINE’s apparent net loss in Q1 2014 appears to be a mirage created non-realized derivatives losses that seem likely to be regained over time.