Traders,
WOW – can you say WOW. I guess that inferred “Pause” to the rate cuts – whether real or imagined has sent a serious JOLT into the markets. The dollar was the first to see strength – when the dollar started its move higher against the EURO (and other currencies) - oil started retreating. I forgot what one of the OPEC members said but something like a 10% rise in the dollar would see a 30% drop in oil prices. Well – yesterday we got see some of that action. This spurred buying in the equity markets across the board. There was some serious short-covering going on into the close – as shorts from the previous day as we hit resistances got caught out today and were forced to cover – helping push the markets even higher.
The move got back up to the resistance levels and through them for the most part. The important thing is that we did NOT retreat after touching them, we actually closed above them. The NDX, the most volatile, showed the BIGGEST breakout and with many stocks helping lead the charge – not just the overweight’s. It will be interesting to see the opening action – I expect a follow-through in the morning – but then it will be the close that will be the tell-all. Do we remain above the resistances? Do they become supports? The close will have to make that determination. Today is confirmation day – either we move higher or test those resistances to SEE if they become supports.
However – this rally is rather puzzling to say the least. We tested the resistances on Wednesday to get a pull back into the close. Then I think everyone over dinner last night was probably saying to each other “Did he say Pause, I swear to God I heard Bernanke say Pause. What was that guy on CNBC saying if Bernanke said Pause – wasn’t that Bullish or was it Bearish. No it was Bullish, Pause meant Bullish and Bernanke said Pause.” The euphoria kicked in – and the rally sent this market through those resistance levels and it closed strong. So while the puzzlement? The economic data for the most part is painting a different picture. Additionally, reports on Manufacturing shrinking and inflation eroding buying power hit the tape. Even Home Depot is closing 15 stores and laying off 1,300 employees. The economic landscape is still looking bad and consumer confidence hit a 5 year low – but you would never guess that from our bi-polar investor confidence. So why the euphoric rally? Well – it’s all about perception baby. The worse is behind us. Wonder how much had to do with short-covering? I don’t know but you DO have to add that into the mix.
We are getting into uncharted waters up here – because over the last quarter when we hit this area – we retreated – like the day before. But now we have broken through and closed above it. We could very well get some follow through. However – this is a time that while remaining bullish you ROLL UP your hedges. This is Bull Trading time – and make sure to lock in gains and roll up hedges.
The volatility unloaded and it sent this market higher.
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Good money after Bad?
Citigroup had sold off the other day when it announced after another horrible quarter that it was selling (diluting themselves) $4.5 billion worth of stock to raise much needed capital. Kuwait’s Sovereign fund my up their stakes in the troubled company or they too could face more dilution and little or no dividends. Of course the spin is (since they have to convince themselves it is the right decision) that these low prices have created opportunities to make large investments. I guess the question to ask is if they did NOT already have a stake in it – would they make an INITIAL investment?
No doubt that they companies have been beaten up and true the valuation and opportunities could very well be there. The fog-of-war is still keeping us from KNOWING the true write-down bottom – as foreclosures ramp and 2nd mortgages are NOT BIDDING at auctions (side note – 2nd not bidding = 100% write-down).
Kuwait already has a $3 billion stake in Citi and a $2 billion in Merrill to help them replenish capital – but how many more write-downs and losses can they take before tossing more money in is a good idea. It seems like the big boys are just bottom picking at this point.
However – they have an ACE up their sleeve. They KNOW the FED will bail out Citi or at the very least broker a deal if necessary. So why not – the Fed is like owning a FREE PUT on Citi – as long as the Fed is willing to sack-up and get first in line on losses – then why the hell not make a big investment.
I guess only time will tell.
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U.S. Car sales slump – dropped to 1995 levels
In the reports yesterday – US automotive sales slumped as both the weak dollar and higher fuel prices push customers away. Those customers that did buy we looking for better fuel economy vehicles – and tend to visit the Toyota lot – rather than Ford.
Ford had a 12% dropped as GM saw a 16% drop and expectations is that more are to follow. The stocks stayed above water yesterday – buoyed by the market as a whole. But more pressure and a slump in sales seems to be the tune this summer. J.D. Powers is expecting a tough year for US automakers and only sees a recovery in profits if oil falls and consumer buying power picks up.
After consumer confidence dropped to a 5 year low, ramping food and energy prices, and mounting jobless is affecting big ticket purchases in the U.S. total vehicle sales dropped a surprising 8%.
Maybe the automakers are not the best place to invest. Wonder what Kerkorian is thinking now?
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Job Numbers – losses less than expected.
The job losses came in lower than expected and unemployment rate fell. The futures in the pre-market are getting a huge boost. As far as the market is concerned they may has well come in positive. Expectation avg was for a decline of 50k.
Economist were speculating all over the place as to the job numbers from a decline of 150,000 to a positive 18,000. Expectations are right in the decline of 50,000 – 75,000 range. With all the revisions – which have been significantly to the down side – the question that economist ask themselves are if those revisions reflect the impact of job losses? I continue to hear confusion in their voices during interviews on CNBC and Bloomberg. With the government’s ability to always revise and those revisions have recently be fairly large – it is hard to ascertain how accurate the initial number will be and if previous revisions impact those numbers.
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Futures Pre-open
The futures were looking flat for the most part – waiting for a confirmation of the job numbers before they make a run in either direction. The jobless numbers has sent a HUGE boost in the pre-market. The futures are front running the cash. Expect ARB traders to sell into the futures and buy the basket on the opening.
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Support /Resistance
We broke through resistances and now we need to confirm if they are supports. Today is the test!
INDU 13000 (The 13000 number will either be a new support or the resistance again – if yesterday was a false hope rally. Think of 13000 as a pivot point – even with the move in the futures from the job numbers – the close will give us better resolution.)
NDX 1900 / 2000 (Looks like there is no stopping this index and a resistance area – which was the support of the 4th qtr. last year – could be tested. Expect volatility in this index.)
SPX 1400 (Just like the INDU this is a pivot point – it will either become resistance or support – only the close will help give better resolution)
RUT 720 / 740 (We haven’t broken out like the other indices in the RUT. The RUT broke down from 740 and has a resistance range in the 720 to 730 range. To really build confidence to this rally we would LOVE to see this index above 740. Being the broader market this is a good measure to see if money on the whole is flowing into or out of the market.)
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Conclusion
No doubt I was shocked by the rally – thinking that we would of seen it after Bernanke spoke on Wednesday – not the following day. But I think the thought of a possible “pause” and the fact that it seems the credit crisis from the banking side has been averted – well that got investors confident. Toss in the fact that we don’t expect to hear from Bernanke until the end of June – we would hope no new is good news.
The old saying “Sell in May and Go Away” was not on the lips of any traders during yesterday’s rally – but was yesterday a knee jerk reaction? Today – even with the job numbers will be a good test based on how we close. This no doubt is a pivot point.
But what should we watch out for to see if this rally has any legs? Make sure to keep a close eye on the dollar – the dollar rally yesterday is what sparked the commodity sell off and the equity rally – thus triggering some short-covering on top of that – which really got this rally to heat up. The dollar needs to hold here and make this a solid support area and start to rally to see oil come off and the market continue its upward momentum.
Bernanke and the Fed are not concerned about inflation and the consumer – a weak dollar will continue to create inflation pressure and also keep commodity prices high. So a key indicator to watch is the dollar. If it gets some more follow through strength today we could see this market make another leg up – in which case those resistances DO become supports. If not and oil starts heading higher – well those numbers could be resistance again. For now the job numbers are giving this market a good opening boost to the upside. Let’s see if we can maintain that momentum.
Today is confirmation day.
WOW – can you say WOW. I guess that inferred “Pause” to the rate cuts – whether real or imagined has sent a serious JOLT into the markets. The dollar was the first to see strength – when the dollar started its move higher against the EURO (and other currencies) - oil started retreating. I forgot what one of the OPEC members said but something like a 10% rise in the dollar would see a 30% drop in oil prices. Well – yesterday we got see some of that action. This spurred buying in the equity markets across the board. There was some serious short-covering going on into the close – as shorts from the previous day as we hit resistances got caught out today and were forced to cover – helping push the markets even higher.
The move got back up to the resistance levels and through them for the most part. The important thing is that we did NOT retreat after touching them, we actually closed above them. The NDX, the most volatile, showed the BIGGEST breakout and with many stocks helping lead the charge – not just the overweight’s. It will be interesting to see the opening action – I expect a follow-through in the morning – but then it will be the close that will be the tell-all. Do we remain above the resistances? Do they become supports? The close will have to make that determination. Today is confirmation day – either we move higher or test those resistances to SEE if they become supports.
However – this rally is rather puzzling to say the least. We tested the resistances on Wednesday to get a pull back into the close. Then I think everyone over dinner last night was probably saying to each other “Did he say Pause, I swear to God I heard Bernanke say Pause. What was that guy on CNBC saying if Bernanke said Pause – wasn’t that Bullish or was it Bearish. No it was Bullish, Pause meant Bullish and Bernanke said Pause.” The euphoria kicked in – and the rally sent this market through those resistance levels and it closed strong. So while the puzzlement? The economic data for the most part is painting a different picture. Additionally, reports on Manufacturing shrinking and inflation eroding buying power hit the tape. Even Home Depot is closing 15 stores and laying off 1,300 employees. The economic landscape is still looking bad and consumer confidence hit a 5 year low – but you would never guess that from our bi-polar investor confidence. So why the euphoric rally? Well – it’s all about perception baby. The worse is behind us. Wonder how much had to do with short-covering? I don’t know but you DO have to add that into the mix.We are getting into uncharted waters up here – because over the last quarter when we hit this area – we retreated – like the day before. But now we have broken through and closed above it. We could very well get some follow through. However – this is a time that while remaining bullish you ROLL UP your hedges. This is Bull Trading time – and make sure to lock in gains and roll up hedges.
The volatility unloaded and it sent this market higher.
_____________________________________________________________________
Good money after Bad?
Citigroup had sold off the other day when it announced after another horrible quarter that it was selling (diluting themselves) $4.5 billion worth of stock to raise much needed capital. Kuwait’s Sovereign fund my up their stakes in the troubled company or they too could face more dilution and little or no dividends. Of course the spin is (since they have to convince themselves it is the right decision) that these low prices have created opportunities to make large investments. I guess the question to ask is if they did NOT already have a stake in it – would they make an INITIAL investment?No doubt that they companies have been beaten up and true the valuation and opportunities could very well be there. The fog-of-war is still keeping us from KNOWING the true write-down bottom – as foreclosures ramp and 2nd mortgages are NOT BIDDING at auctions (side note – 2nd not bidding = 100% write-down).
Kuwait already has a $3 billion stake in Citi and a $2 billion in Merrill to help them replenish capital – but how many more write-downs and losses can they take before tossing more money in is a good idea. It seems like the big boys are just bottom picking at this point.
However – they have an ACE up their sleeve. They KNOW the FED will bail out Citi or at the very least broker a deal if necessary. So why not – the Fed is like owning a FREE PUT on Citi – as long as the Fed is willing to sack-up and get first in line on losses – then why the hell not make a big investment.
I guess only time will tell.
______________________________________________________________________
U.S. Car sales slump – dropped to 1995 levels
In the reports yesterday – US automotive sales slumped as both the weak dollar and higher fuel prices push customers away. Those customers that did buy we looking for better fuel economy vehicles – and tend to visit the Toyota lot – rather than Ford.
Ford had a 12% dropped as GM saw a 16% drop and expectations is that more are to follow. The stocks stayed above water yesterday – buoyed by the market as a whole. But more pressure and a slump in sales seems to be the tune this summer. J.D. Powers is expecting a tough year for US automakers and only sees a recovery in profits if oil falls and consumer buying power picks up.
After consumer confidence dropped to a 5 year low, ramping food and energy prices, and mounting jobless is affecting big ticket purchases in the U.S. total vehicle sales dropped a surprising 8%.
Maybe the automakers are not the best place to invest. Wonder what Kerkorian is thinking now?
_______________________________________________________________________
Job Numbers – losses less than expected.
The job losses came in lower than expected and unemployment rate fell. The futures in the pre-market are getting a huge boost. As far as the market is concerned they may has well come in positive. Expectation avg was for a decline of 50k.
Economist were speculating all over the place as to the job numbers from a decline of 150,000 to a positive 18,000. Expectations are right in the decline of 50,000 – 75,000 range. With all the revisions – which have been significantly to the down side – the question that economist ask themselves are if those revisions reflect the impact of job losses? I continue to hear confusion in their voices during interviews on CNBC and Bloomberg. With the government’s ability to always revise and those revisions have recently be fairly large – it is hard to ascertain how accurate the initial number will be and if previous revisions impact those numbers.
______________________________________________________________________
Futures Pre-open
The futures were looking flat for the most part – waiting for a confirmation of the job numbers before they make a run in either direction. The jobless numbers has sent a HUGE boost in the pre-market. The futures are front running the cash. Expect ARB traders to sell into the futures and buy the basket on the opening.
____________________________________________________________________
Support /Resistance
We broke through resistances and now we need to confirm if they are supports. Today is the test!
INDU 13000 (The 13000 number will either be a new support or the resistance again – if yesterday was a false hope rally. Think of 13000 as a pivot point – even with the move in the futures from the job numbers – the close will give us better resolution.)
NDX 1900 / 2000 (Looks like there is no stopping this index and a resistance area – which was the support of the 4th qtr. last year – could be tested. Expect volatility in this index.)
SPX 1400 (Just like the INDU this is a pivot point – it will either become resistance or support – only the close will help give better resolution)
RUT 720 / 740 (We haven’t broken out like the other indices in the RUT. The RUT broke down from 740 and has a resistance range in the 720 to 730 range. To really build confidence to this rally we would LOVE to see this index above 740. Being the broader market this is a good measure to see if money on the whole is flowing into or out of the market.)
____________________________________________________________________
Conclusion
No doubt I was shocked by the rally – thinking that we would of seen it after Bernanke spoke on Wednesday – not the following day. But I think the thought of a possible “pause” and the fact that it seems the credit crisis from the banking side has been averted – well that got investors confident. Toss in the fact that we don’t expect to hear from Bernanke until the end of June – we would hope no new is good news.
The old saying “Sell in May and Go Away” was not on the lips of any traders during yesterday’s rally – but was yesterday a knee jerk reaction? Today – even with the job numbers will be a good test based on how we close. This no doubt is a pivot point.
But what should we watch out for to see if this rally has any legs? Make sure to keep a close eye on the dollar – the dollar rally yesterday is what sparked the commodity sell off and the equity rally – thus triggering some short-covering on top of that – which really got this rally to heat up. The dollar needs to hold here and make this a solid support area and start to rally to see oil come off and the market continue its upward momentum.
Bernanke and the Fed are not concerned about inflation and the consumer – a weak dollar will continue to create inflation pressure and also keep commodity prices high. So a key indicator to watch is the dollar. If it gets some more follow through strength today we could see this market make another leg up – in which case those resistances DO become supports. If not and oil starts heading higher – well those numbers could be resistance again. For now the job numbers are giving this market a good opening boost to the upside. Let’s see if we can maintain that momentum.
Today is confirmation day.
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