Global Chart Reveiw Shows Key Inflection Point
by phil - January 25th, 2010 3:00 am
Chart Review by Michael Clark
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
-- John Maynard Keynes
SO, IS THIS FINALLY THE 'REAL' CORRECTION?
What a week it was. The Bears gave the Bulls some payback. Obama got a wake-up call. And the banks got a well-deserved scare (and we hope they will get a well-deserved hair cut).
The markets reacted, as one might expect, with selling. Actually, the selling began before the Massachusetts election and before Obama sent a shot across the Goldman Sach's bow. Last week Intel announced surprisingly strong earnings; and the stock started up and then sank. For the past half-year investor behavior had been the reverse: a buying spree for any stock that did not lose as much as it might have — beating 'Street expectations' that had been dumbed down over and over again during a quarter so that the company could report 'surprising' strength. Suddenly, now, even good earnings are being greeted with selling. Then came Massachusetts — wasn't that a Bee Gees' song?
All the lights went out in Massachusetts
Anyway, readers want to know where the markets stand today, after the sell-off this week. My view of it — my 'view', not my gut-feeling — is that we are, so far, merely correcting from an over-extended rally. This rally has been bizarre, to say the least. This has been a 'fear rally' — usually the 'fear' side of the equation is when selling comes in, 'greed' driving the expansion. But fear of systemic failure has driven this rally; and Ben Bernannke has been the captain sailing the 'Boat of Fear', Ben's logic — that more debt will solve the insolvency crisis — has a shadow side, the logic that a collapse in stock prices will result in systemic failure, international chaos, revolution, repression…made him believe that preservation of the status quo was requiired, at any price. A 'make-believe' recovery could be jump-started, perhaps, if the Fed could just stimulate (and simulate) another asset-bubble. After all – that is how his mentor and predecessor, Alan Greenspan, had become the darling of the coctail party crowd, leading member of Time Magazine's 'Committee to Save the World';…
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Wednesday When Wen Chips In
by phil - March 4th, 2009 8:34 am
China is leading the markets this morning.
Word is that Chinese Premier Wen Jiabao may announce new stimulus measures tomorrow, adding to a 4 Trillion yuan ($585 billion) spending plan as the government tries to revive growth in the world’s third-biggest economy. Wen will announce “a new stimulus package” in his annual address to the nation’s legislature, former statistics bureau head Li Deshui told reporters in Beijing today. That was enough to send the Shanghai soaring 6.1% with the Hang Seng jumping right to the 2.5% rule, finishing at the high of the day in a bullish move up.
Copper futures, which we have been watching closely, went limit up in Shanghai trading, oil jumped back to $42.50 and the Baltic Dry Index hit 2,034, a very far cry from the 700s we were seeing in the Fall. China will spend more on infrastructure and to boost manufacturing in addition to the stimulus package announced in November, Reuters reported today, citing an unidentified official at the country’s top economic planning agency. Wen’s speech to the legislative meeting, which starts at 9 a.m. tomorrow, will be the equivalent of a U.S. State of the Union address, setting priorities for the year. Keep in mind that China's GDP is "just" $3.5Tn, a $600Bn stimulus from China's leadership is like a $2.6Tn stimulus bill from us, not the $787Bn Washington is wringing it's hands over.
The Nikkei "only" gained 0.85% on the day but that doesn't really tell the tale as the index jumped 200 points off the bottom (2.8%) as Bank of Japan board member Miyako Suda said today the central bank should signal that it’s prepared to take “bold” measures to counter the recession. Japan’s lower-house of parliament approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus. This kept the dollar from falling below 100 yen, which is a line Japan would really like to avoid crossing again.
This suits us just fine as the final play of the day, at 3:34 was: "Now is a good point to reload on those SKF plays. The $170 puts are back to $11 (from $14), the $120 puts are back to $1.45, the $270 calls can be sold for $9.70. Once again we have an air pocket under the gains, it’s a…
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Testy Tuesday – A Very Dangerous Line in the Sand
by phil - February 24th, 2009 7:17 am
Well we are up in the pre-markets (7am) – that's something…
Interestingly the global markets took our dip rather well. The Shanghai fell 2.8%, the Hang Seng gave back yesterday's 3.5% gain, India hit the 2.5% rule, and the Nikkei fell 2.2% – a bad day but not worse than ours, as is often the case in Asia. The DAX is, of course, leading Europe lower with a 2% loss into lunch but the CAC and FTSE are down just a point. I had a busy evening doing a Big Chart Review and indulging in my political rant of the week about the budget fiasco but maybe that will be a weekend article as my comments alone in the members section were over 2 pages.
We went mildly bullish into yesterday's close, mainly by covering our long index puts, looking for at least a bounce off what is now a 1,100 point drop since February 9th, when we did our previous Big Chart Review. We are actually 14% below the 8,280 on the Dow that we held that morning so another 1% down to go before we hit our next bounce, just over the 7,000 mark. The gravity of the 5% rule dictates that we are more likely to go down than up now that we blew through 12.5% and finished at yesterday's low and getting back to that 12.5% line (7,245) will be our challenge for the day. On the S&P we'll be looking for 760 to be taken back but we are just a hair over 738, which is the 15% drop off that 2/9 open. The Nasdaq is about 2% over 1,352 and just under the 12.5% line at 1,392 so we'll be looking for leadership there to the upside.
The NYSE is our most worrying index. They are aleady down more than 15% (4,675) at 4,633 and the Russell (see David Fry's chart) is the NYSE's partner in crime, failing the 15%, 400 mark by 5 points already. So it's going to be an easy day to look for a turn as we need the NYSE to break over 4,675 and 4,790 is our next stop. The Nasdaq needs to hold 1,352 and get back over 1,392 and the Russell must break over 400 and return to 411 in…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.