108.50.
That’s how low the Dollar went into the market close yesterday. Manipulating the Dollar lower makes the price of stocks and commodities rise but, as you can see on the hourly chart – it doesn’t last. As we expected, the ECB raising rates 0.75% followed by Powell NOT being more hawkish than usual got the Dollar off the 110 line but 108.50 (-1.36%) was not justified.
For it’s part, the S&P 500 was erratic but it finally climbed from 3,960 at the open to 4,010 at the close, which was a 1.26% gain for the day – see how that works? Still, the currency manipulators did their job as it got us over that critical 4,000 line and that then triggers the Algos (which don’t tend to take currency fluctuations into account) to start buying and now, this morning, we’re at 4,034, with no major resistance until 4,160 (the Weak Bounce Line).
It’s certainly not the way we wanted to get back over 4,000 but we’ll take it at this point as we were becoming concerned as the MSM was turning sour on the markets again – and that would have made for poor weekend reading which then could have led to a poor Retail attitude into next week’s inflation data.
Any gains we make today against the rebounding Dollar will be very welcome and, as long as 4,000 holds on the S&P (Nasdaq 12,000 is a given), we’ll be going into the weekend in decent technical shape.
Over in Europe, they are passing another $350Bn in stimulus to offset rising energy costs and that’s just from the ECB (and not even for the UK), as Germany alone is pushing out $65Bn in additional aid and even Greece is putting in $7Bn, which is 4% of their entire GDP to offset rising energy prices. Additionally, the EU is still moving forward with its plan to be carbon-neutral by 2050 – which is very bad news for countries which currently make money selling them Oil and Natural Gas:
This is all on top of the ECBs $1Tn stimulus package that’s been rolling out all year (5% of GDP) and STILL we are skirting along the edge of a recession. So let’s not get too excited about the markets just yet – we’re simply happy to be holding the line we thought we should be holding in the first place.
Speaking of alternate energy, our Stock of the Decade – Sunpower (SPWR) has popped nicely the past month – so much so that we’ll give it until next week to see if it breaks out over the top of it’s channel. Notice we went from $16 to $27, which is up $11 (68.7%) and $24 would be the more natural 50% line and that would make the overshoots 20% of $8 or $1.60 so $25.60 (weak) and $27.40 (strong) and, value-wise, we really think $24 should hold so we have little to lose by waiting to see what happens before we cover our very aggressive (and now very profitable) long positions:
SPWR isn’t our Stock of the Decade because we think it’s only going to double but that doesn’t mean it can’t get ahead of itself. It’s just that $16 was ridiculously low. They are already in all of our Member Portfolios and my most recent trade idea on them was from June 29th, in our Live Member Chat Room:
SPWR – From scratch I’d sell 10 of the 2024 $20 puts for $7.70 ($7,700), which is aggressive and use that to buy 30 of the 2024 $15 ($5.25)/25 ($2.60) bull call spreads for net $2.65 ($7,950) and that’s net $250 on the $30,000 spread and worst case is you own 1,000 shares for net $20.25.
That fairly conservative play is already doing well, with the 2024 $20 puts down to $3.75 ($3,750) and the $15 ($15.35)/25 ($10) bull call spread at net $5.35 ($16,050) for net $12,300, which is up $12,050 (4,820%) in the first 3 months but still has $17,700 (143%) left to gain if SPWR can just hold $25. Aren’t options fun?
We will be reviewing our Member Portfolios next week and that should be fun as well.
Have a great weekend,
– Phil
45 years ago – can you believe it?
