No doubt we saw a decent rally off the pivot points Wednesday – while volume was light going into an extended weekend holiday it did afford the opportunity to address exciting positions and look for opportunities. The market got a boost when we saw Obama’s bating lineup – giving the market a little more clarity. Last week also brought us the whooper bailout of Citigroup and further showed another huge dumping of tax dollars into another bailout (what is it now the 4th or 5th bailout)?
We had a good Thanksgiving – side note: I de-boned my 20lb Turkey (backbone, ribs) – to get that massive air-cavity out in order to cook that damn bird faster. Anyway – I couldn’t believe how much faster it cooked (a 20lb bird in 2 hrs). We had all the trimmings and family and friends – a nice walk after dinner (with more wine) – and then onto desert. It’s good and at the same time a little sad that we have become such a busy-body society – (hurry up to wait) – that we need a special holiday just to be Thankful and spend some “down time” with friends and family. Unfortunately with most Thanksgivings – it’s about pressure to perform and stress over relatives – why – I am guessing because we make such a big deal out of it. Thanksgiving has become another CONSUMER holiday – increase in food sales, travel, wine, gifts, and now Thanksgiving marks a bigger economic day – BLACK FRIDAY!
_________________________________________________________________
Black Friday (short expiration)
I had a friend (not in the market) ask me “Why do they call it Black Friday?” – He thought it marked a bad event, like a stock market crash or something. It was a reasonable question – if you didn’t know, since BLACK is usually referred with negativity (and this year that might be right). In accounting, just like any other business or sport, they have their own lingo (slang) – in business we say “being in the Red” or “being in the Black”. Traditionally RED numbers in accounting represent LOSSES and BLACK numbers represent gain. If a company is making enough revenue to cover it’s expenses – it’s known as being in the “black” – if they can’t it’s called being in the “Red”.
For some (possibly most) retail businesses if they were to measure their net costs vs. revenue for the full year – their breakeven is sometime in November, meaning that everything after that date they are now in the black (profit) for the rest of the year. It’s just like that saying “You work Jan through April just to pay your taxes!” or something like that.
Since Thanksgiving falls on a Thursday and many people don’t work on Friday – (being that we live in The Consumer Nation) – the stores realize this is an excellent marketing “Sales” opportunity to get people to spend. People will line up for hours and sometimes days just to buy something that is on sale (and probably something they don’t need). The marketing behind it is genius – no doubt. Since Thanksgiving is a floating holiday (always on Thursday) – then Friday that follows (because of the light work day) can always be counted on as a big shopping day. Hence the name “Black Friday” - Black for companies getting into the black (or profit zone) and Friday – because that is the day of the big sale. I am sure there are other stories about “Black Friday” or how it got its name – but I’m going with the accounting story.
Interesting fact of sales vs. time. Since most of you are traders – I make this interesting. If you look at Christmas being expiration day and Black Friday being the start of the cycle – there is a interesting measurement – time to expiration! Since Black Friday is a FLOATING holiday (it can be as early as Nov 23 or as late as Nov 29) – that means that there is more or less time to X-mass measured from the Black Friday sales event. On years where Black Friday is the earliest it can be – that adds several days of SALES prior to X-mass – more sales means more revenue, means more profits. This year if falls on almost the latest date it can (the 28th) meaning that it will be the one of the shortest expiration cycles into X-mass. That means LESS shopping days. Now we all know that there really isn’t LESS shopping days – but we have to put this in the mind of the consumer and the business – they launch their BIG sales event the day after X-mass on Black Friday. That being said – I think in an already tight economy – having a short Black Friday expiration cycle means LESS revenue – and LESS profit.
Add that to the big economic slowdown – and it’s not going to be a great X-mass.
______________________________________________________________
LIBOR
We had seen the over-night Libor rate below the Fed Target rate and the 3-month (in my humble opinion the more important one) coming down but well above the Target – but now it’s changed. Libor overnight has been rising and now it’s over the Fed Target rate (first time in a month) – The TED and OIS spread rose as well – showing that banks are becoming LESS likely to loan each other money at favorable rates. I am sure the Citigroup bailout had impact on the creditability of the US banking market.
As the government does everything they can to bring down Libor, pump money into the system, and take anything and everything as collateral just to keep the credit system flowing – it only takes one Citigroup to send another serious jolt of “No Confidence” to get Libor to jump back up.
_______________________________________________________________
Futures Pre-market
The futures are off pre-market – but this is also a very light volume and short trading day. Don’t expect Arb traders to rush in and leg long to short the basket at the opening. Expect a slight down opening – but anything is game.
_______________________________________________________________
Support / Resistance
From the pivot points on Wednesday we got a good rally – now it’s a half day and do any that are in today want to hold into the weekend?
INDU 8500 / 9000 (8500 was the pivot point we rallied off of – now today will probably be high volatility - because of the light volume. Don’t expect this to be the measure of any future trend.)
NDX 1100 / 1200 (Almost at the resistance)
SPX 850 / 900 (Almost at the resistance)
RUT 450 / 500 (Nice move from below the pivot point)
These are not supports as much as they are previous pivot points of high volatility – they could easily be revisited and fall back through them. Look to them as GAMMA points.
________________________________________________________________
Conclusion
People still are sleeping in front of Best Buy to get $100 off a Flat Panel monitor. I saw an interview this morning with a guy that had been sleeping out in front of Best Buy since Wednesday. He wants to buy a Laptop and a 40” TV (now on sale $200 off). OK let’s do some math – Let’s say the Laptop and TV together are about $300 off. Pretty good savings right. But let’s measure the guys time – if they dude is getting $10 an hour – that’s $80 a day for a normal work day, however he is there on the cement in a tent for 2 days. I am sure he would rather be somewhere WARM and INVITING – not parking his butt in a tent in front of Best Buy. So we have to add in those hours – 48 hours ($480). In business we would call this operating in the RED. His hourly rate ($10 an hour) vs. the $300 savings is a $180 loss. I guess some people don’t value their time and are driven by marketing hype. He should of PAID someone $100 to wait-in line if he really wanted that $300 discount.
Have a great half-day.
No comments:
Post a Comment