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Which Way Wednesday - Probably Down

ilene's picture




 

Which Way Wednesday - Probably Down

By Phil of Phil's Stock World

I love it when a plan comes together!

We promised you M's, and it's M's we have, but let's take a closer look at what's going on.  EVERYONE blew their 2.5% lines yesterday and we had a bit of a recovery but only because the Dollar went from 76 at the open down to 75.35 at the close.  That's a 0.85% drop and what did our markets do?  Other than the Nasdaq they all finished in the red.  If an almost -1% pullback in the Dollar can't move the price of equities up even half a point - the VALUE of those equities must seriously be questioned.  

I set the following retrace lines for Members at 2:18 in Member Chat - these are what we call "weak bounce" levels off our 5% Rule - anything less than this and we remain bearish:

  • Dow 12,505 (the 2.5% line) – needs 26
  • S&P 1,333 (the 2.5% line) – needs 5
  • Nas 2,767 (the 4% line) – over by 13
  • NYSE 8,362 (the 4% line) – needs 29
  • RUT 823 (the 4% line) – needs 5 

$USD WEEKLY The Nasdaq close was SUPER FAKE yesterday as was the take-down of the Dollar but fake is effective in this joke of a market and David Fry made a good comment on the action

With markets now at least short-term oversold bulls took a stab at perceived value and/or defended open long positions late in the day. But sometimes this type of buying is wasted buying power against a poor economic backdrop and with earnings season done. This leaves only QE to get them buying.

Note on Dave's Dollar chart, that we were soundly rejected at the 76 line, which is to be expected on a first attempt but not all the way back to 75.35 - that's overdone by any stretch so we woke up early this morning and shorted oil (the new July contracts) at $99 on expectations the Dollar will come back today.  

It's very easy to shove the markets around after hours and in pre-market but it's very expensive to do so once the bell rings and the Fed is stingy today and tomorrow with the POMO, with just $2.5Bn scheduled to be handed out to the Banksters each day - barely enough for Lloyd to tank up the limo!  Friday they make up for it with $8Bn and then next week it's 8+7+6+7 = $28Bn into the holiday and another $18.5Bn even on the short week following.  

THAT'S when we want to be a bit more bullish, not today.  Hopefully we get another shove down and we can do a little bottom fishing but, if we do pop 3 of 5 of our bounce levels - we'll have to take some short-term bullish positions there, using the 3 of 5 rule to stop back out if it doesn't stick.  It's been a bad week for the markets but, in the grand scheme of things - it's just a 20% pullback off the 30% POMO run since September - still bullish if we hold those reference levels:  

 

Notice that declining green line on the chart is our Dollar - the thing you get when you cash in those "amazingly performing" stocks.  Pretty much, as fast as your equities move up in price, Benny and Timmy will print more Dollars and they'll keep it going for as long as they can because, when they stop - where are the Dollars going to come from when you want to cash in your "valuable" shares and commodities?  Certainly the bottom consumers don't have any and the top 1% are busy giving $60Bn worth of funny money to Glencore - a commodity IPO that marks the height of insanity if ever there was one.  

It's brilliant really, the IBanks ramp up commodity prices, triple the "value" of Glencore and then take them public so they can remove $60Bn perfectly good dollars from circulation (and take a $6Bn fee plus warrants) that are now invested in the hopes that commodity prices go even higher and make that $60Bn near worthless - very much like all the builders and REITs the retail schmucks were being herded into at the top of the last rally.  Oh yeah - and Ethanol! - case closed....

Here's a quick summary of investing in companies like Glencore in a bad market:

You are one of 100 people on an island and you all make a decent living and you are in the top 10%. Glencore comes along and corners the fish market and begins charging double for fish.  After a while 50 people go bankrupt but you are in the top 10% and earn 3 times more than the the bottom 90% so you don't really mind paying double for your fish because Glencore sells it under the label "Whole Fish" and tells you it's better for you than the other fish used to be and, of course, not being a fool - you only buy the best stuff.  

Now there are only 50 working people left on the island and Glencore is making $2 per fish but selling less fish so they buy up the coconut and pineapple farms as well and now all food comes from Glencore and, to fund the acquisitions, they start charging $3 per fish but they tell you that's because there's a shortage and you believe them because you are rich and too lazy to check whether there is a shortage or whether Glencore is lying to you to rip you off.  Still $3 per fish is fine and you are making even more money now because 50 bankrupt people have driven wages down for all of the new bottom 10%. Incidentally, since 50 people are effectively out of the economy, the bottom 90% is now 45 and 5 of the former top 10%'ers have also died but that's great for you as you get to charge what you want for goods and pay what you want for labor.  In fact, things are going so well, you invest in Glencore.  

That's about where we are now and if you think the next stage of this farce isn't going to affect you, then you must truly believe you are "one of them" and will never be concerned about looking for a job or inflation or health insurance or in any way, shape or form taking responsibility for your nation's debts (because, when there's only 25 working people on the island, the Debt will still be there and goes up every day if the Government tries to keep the other 75 people alive).    

That's why the current strategy in Congress is focused on NOT paying for those 75 unemployed people - this IS the direction this country is heading so the quicker the top 10% walk away from supporting the bottom 90% the better because we already stopped hiring them or giving them raises or paying for their health care, helping them get housing or lending them money, so now we need to stop buying them food and and stop educating their children (ours can go to private school - why can't they?) and stop providing them with emergency medicine and NO FRIGGIN' WAY are we going to pay them not to work or, even worse, RETIRE!  

So God bless Paul Ryan and all those other hard-working Congresspeople for looking out for our interests - otherwise we may end up suffering for profiting off the system that impoverished everyone else.  

It's not just Congress, of course, never let it be said that our Senators don't give us our money's worth as well.  Just last night the Senate only voted 52-48 (60 votes were needed) to block the evil Democrats proposal to end tax benefits for the 5 leading oil companies, who made $35Bn in Q1 alone.  Mark Begich of Alaska, Mary Landrieu of Louisiana and Ben Nelson of Nebraska were the only Democrats to vote no while Sue Collins of Maine was the only Republican to vote yes.  

We have to stand up and say, ‘Enough is enough,’ ” said Senator Al Franken, Democrat of Minnesota. “While oil prices are gouging the pocketbooks of American families, these companies are on a pace for a record profit this year.”  Under the proposal, Democrats would have eliminated five different tax breaks enjoyed by the multinational oil companies, producing an estimated $21 billion over 10 years.  That's 10 years in which the 5 oil companies are projected to make $1.5 Trillion in profits.  More than $12 billion would have come from eliminating a domestic manufacturing tax deduction for the big oil companies, and $6 billion would have been generated by ending their deductions for taxes paid to foreign governments.  

Critics suggest that the companies have been able to disguise what should be foreign royalty payments as taxes to reduce their tax liability. It has also been pointed out that those 5 companies spent $137M on lobbyists last year - a total of $274,000 per elected official - and that's not including campaign contributions but still, it's a return on investment of 14 times their lobbying investment in the first year alone!  And let's not forget they already took another $60Bn in tax cuts off the table just to get this bill to a vote.  Now that, my friends, is how you buy yourself some good Government!  

When you are done being mad at oil companies, try reading Matt Taibbi's new article on how Goldman Sachs flat out lied to their clients and lied to Congress or, better yet, you can just check out this short video that explains it well:

Shenanigans everywhere, including a convenient (for oil bulls) fire up in Calgary, Canada that is probably going to shut in 100,000 barrels a day of production.  I told Members last night to expect some Rent-A-Rebel action to support the contract rollover at the NYMEX but arson is a new one in their bag of tricks.  Sure, you might think 100,000 barrels a day would matter little in a World that uses 88 Million barrels a day, especially to a country that has 1.4Billion barrels in storage like America but that won't stop CNBC from making it seem like the Apocalypse today - mark my words...

We have oil inventories at 10:30 this morning and there was already a "mix-up" on Rand Squawk, where they reported a draw-down of 1.479Mb of crude when, in fact, the API report showed a 2.7M barrel BUILD.  Hey, what's a 4.2 Million barrel swing between friends.  Still, that and the fire are doing wonders to hold prices up at the NYMEX open, despite the Dollar testing the critical 75.75 line.  

Perhaps we should all go buy some XOM today.... 

We may as well join 'em because we sure can't beat them, right?  Fed minutes will be out at 2pm and, if nothing else, that should be able to kill the Dollar so bottom-fishing it shall be as we celebrate inflation and the destruction of our American Dollar.

Enjoy.

 

Try out Phil's Stock World here > 

 

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Thu, 05/19/2011 - 07:16 | 1290671 dcb
dcb's picture

we are going to about 1400, regardless of anything. It's already programmed in.

Thu, 05/19/2011 - 07:01 | 1290654 dcb
dcb's picture

i wish I had a way to share charts, but I don't think you get the quants very well. all this stuff is in a channel and they use speed lines. I think the charting system you use is rather outdated. it may sound crazy, but it is very simple you have to play around until you get the chart that reflect the major computer algo. I will tell you they are speed lines. then add channels. so what you will see a potential short on the s and P around 1350. you also the rsi wilders helps. you can almost always buy in and oversold condition. the market because of the quants does not move the way people would trade. if you use the last low, critical support lines, over all they bounce up at these, then go up, then maybe come down through

 

for instance the last major line on the s and P was about 1300. use this and it will hit that go a bit lower then bouce up through it. in fact you can almost always trade the lower low.

you get a bit too bearish, th market only really drops wh the algo's want it to. logic has nothing to do with it.

Wed, 05/18/2011 - 16:01 | 1288620 JW n FL
JW n FL's picture

Blankfien was out in Wellington with a really cute blond a few weeks ago.. the girl looked NOTHING! like his wife.. running around in an Ford Expedition.. without a driver? Oopsie!

Wed, 05/18/2011 - 15:30 | 1288488 Zero Govt
Zero Govt's picture

Blankfein lying (twice) to Congress ...what a shocker!

..in the land of pots, the kettle can also be black (without fear of prosecution) 

Wed, 05/18/2011 - 15:31 | 1288481 chistletoe
chistletoe's picture

um,

all these people who are so upset about $4.00/gallon gas,

and who somehow, some way, did not see it coming, despite all the warnings for the last 40 years,

now they want to increase the taxes on oil companies?

Exactly what do they think that is going to do to the price of a gallon of gas?

Wed, 05/18/2011 - 16:38 | 1288739 BigJim
BigJim's picture

Taxing corporations is stupid. And taxing more profitable corporations at higher rates than less profitable corporations is 'stupider'. Why?

Because companies don't pay tax. People do. Take, for instance, a company that made a profit of $500,000 last year. Virtually everyone will agree that it should be taxed at a lower rate than a company that made $500,000,000 profits... despite the fact that the 'small company' may have only 2 shareholders (ie, they made $250,000 each), whereas the 'big' company may have 100,000 shareholders, getting $5,000 each.

End the loopholes and tax the stockholders. Simple.

Wed, 05/18/2011 - 15:16 | 1288396 Ergo
Ergo's picture

Love Phil's writing style.  Always enjoyable and educational. 

I'm a little surprised that PM's are up a little on hawkish Fed statements (although we all know they're lying).  But, given my confusion, I'll just go write a few more patents, and leave financial speculation for another day.  Accumulating fiat.... is at least better than losing fiat. 

Wed, 05/18/2011 - 15:55 | 1288589 ilene
ilene's picture

write a few more patents .... that sounds interesting, perhaps more so than the financial speculation. 

Wed, 05/18/2011 - 15:10 | 1288367 t0mmyBerg
t0mmyBerg's picture

The problem with rants that are political in nature is that they invariably miss things.  Like the fact that Democrats are also bought and paid for.  At least with the Republicans you will get something reasonably true out of their mouths some 15% of the time and at heart they think they are for maximal freedoms (except for this that and the other thing).  With Demunists and Commocrats, they really do want to enslave you to their statist nightmare and it will be filthy lies out of their pieholes out to 5 nines or so.  bangpath.com

Wed, 05/18/2011 - 15:03 | 1288325 Eagle1
Eagle1's picture

Mark Begich is NOT a Senator from Arkansas. Check your facts

Wed, 05/18/2011 - 15:22 | 1288426 ilene
ilene's picture

Thank you - it's Alaska - and I'll fix.  Can't fix when wrong about the direction of the market, that happens. 

Wed, 05/18/2011 - 14:18 | 1288114 BeerGoggles
BeerGoggles's picture

Lol. The market went up.

Wed, 05/18/2011 - 13:55 | 1287989 Diamond Jim
Diamond Jim's picture

XOM is a "dog"...too heavy on nat gas and refiner margins are crap. One of these days though.....

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