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Miraculous Movement Masks Momentum

ilene's picture





 

Miraculous Movement Masks Momentum

By Phil of Phil's Stock World

It's a miracle

 

Despite Asia continuing its downhill slide, despite the Bank of Korea lowering their Economic Outlook, despite Swiss PPI showing DEflation, despite Spain's 10-year bonds rising to 6.07%, despite India's inflation at 6.89%, despite the 5-year CDS spread on Spanish debt hitting new records, despite James Galbraith warning that the EU periphery will collapse, despite the Saudi TASI Index dropping 4% in the last two days, despite the biggest weekly drop in Copper Futures of the year, despite Credit Suisse cutting 5,000 jobs and Best Buy closing 42 stores, and even BMW sales off 30% in Brazil.... 

Despite ALL these weekend news items and DESPITE our Depressing Weekend Reading - the bears, as Steve Martin says in the above clip, still have DOUBT in their heart and are allowing the Futures to rise this morning as Europe bounces up 1% from its 30-day lows in this traveling revival show known as the stock market. 

 

 

Faith is a wonderful thing and we may like to believe in miracles but a good investor demands PROOF - much the way many of our biblical heroes required signs from the Lord before making commitments.  We don't need a burning bush but we do need more than vague promises of EU action before we believe their 5 loaves and 2 fish will be enough to bail out the entire continent, right?   

On the chart above, I drew a blue line across the 50% levels between the tops of the last 6 days and the bottom.  Not reflected on these charts is the fact that the Nikkei FELL another 1.74% this morning or that the Hang Seng dropped 0.44% - pushing them further from their goals.  

The EU markets were off to the races on rumors that US Retail Sales will save the World at 8:30 am with an upside surprise off very low expectations.  Even if we got a bump - so what?  Retail sales were anemic last month except Gasoline, which was up 3.3% while General Merchandise was DOWN 0.1%. Gasoline was up 10% in March so YAY!, I guess - but is that really the basis for a rally?

How many times will the bulls be sucked in by the same empty promises?  How many times will they reach into their pockets and BUYBUYBUY the snake oil valuations sold by the Reverend James Cramer at the Church of "Whatever is Working Now" - as the late, great Mark Haines used to call him (before he died just days after Cramer got him to taste test Soda Stream!).  

You may have noticed the recent LACK of miracles from our Central Banksters - who used to be able to rain money from heaven at the drop of a hat but now rely on hot air from their speeches to keep this market balloon inflated.  Has the monetary well run dry already or is it just that we have reached the promised land of our 2007 highs and now it's the faith of the bulls that is being tested by the self-appointed economic Gods of the Global Economy? 

6.5% and 7.5% are the key, preaches JPMorgan's Pawan Wadhwa. If the Spanish 10-year yield hits 6.5% (this week if momentum holds), look for the ECB to restart its bond-purchase program. If (when) it hits 7.5%, get ready for LTRO 3.  In other words - look for the signs and expect miraculous things.  Bad (6.5% yields on debt) shall be good and, if things get worse - expect divine intervention in the form of another multi-Trillion Dollar bailout - Hallelujah!

Speaking of bailing out the rich.  Grover Norquist was on CNBC this morning and he claims A) the top 1% pay 40% of all Income Taxes and B) that the Buffett Rule, which would take the average tax rate paid by the top 1% from 16% to 35% would only generate $40Bn a year in taxes.  This would lead anyone with a calculator to believe that EITHER A) The Federal Government only collects $100Bn in taxes or that B) Since 40% of $2.2Tn actually collected is $880Bn and since Norquist himself says we are unfairly doubling the tax rate of the top 1% - that 2 times $880Bn = $40Bn - IT'S A MIRACLE!!!

No wonder the GOP keeps voting to cut education - anyone getting past 5th grade math can see right through their BS...  

8:30 am: Retail Sales up 0.8%! WOW!!! Forget the fact that that's down from 1.1% last month and forget the fact that it's the same as last March and forget the fact that the March before that we were up 2.2% and forget the fact that Gasoline Sales were up 10.3% and please, please, PLEASE forget the FACT that, Electronics and Appliances FELL 0.6% - let's just focus on the fact that expectations were for 0.3% DESPITE the exceptionally warm month that historically leads to more sales.  

And, whatever we do, let us not be tempted to look at the April (more recent) Empire State Manufacturing Survey as that one MISSED by 60% with a 6.6 reading vs 18 expected and 20.21 prior.  The general business conditions index dropped fourteen points, suggesting that while growth continued, the pace slowed over the month. The new orders index was little changed at 6.5, indicating a modest increase in orders, and the shipments index fell twelve points to 6.4, indicating a slower pace of growth for shipments. 

Input price increases remained significant. After rising sharply last month, the prices paid index fell five points to 45.8. Though somewhat lower than in March, this reading was well above the index’s level in the preceding several months. Selling prices also rose noticeably, with the prices received index climbing six points to 19.3.  Ah, inflation - I wonder if that might have been a factor in increased retail sales as well?  For instance - we're buying 20% less gas than last year, but we're paying 30% more for it:

Nonetheless, the Bulls have the sign they were looking for (there's always a sign if you look for one) but you'll have to forgive me if I want PROOF!  I want to see 3 of our 5 major indexes over those 50% lines and hold them for a day.  

If we do catch our 3 of 5 lines, then we can add a few upside hedges like DDM (ultra-Dow) May $67/70 bull call spreads at $1, selling something like BTU May $26 puts for $0.90.  That puts you in the $3 spread for net .10 with a 2,900% upside if DDM gets back to just $70 (it topped out at $71.43 in March). We don't need a lot of faith to risk a dime to make $3 - other than our faith in owning BTU at its 2009 lows as a long-term hold.

[Note: if the BTU put ($0.90) is sold to offset the price of the bull call spread ($1), there is also risk that BTU will drop in price and the stock will get put to the seller. This would result in owning BTU at $26. It is currently trading at $27.94. A potential loss on BTU could be way more than the .10 cents at risk not counting a long position in BTU.]

Me, I'm still waiting for a sign.  

 

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Tue, 04/17/2012 - 05:27 | Link to Comment Platypus
Platypus's picture

LOL! Thats why fundamentals are also known as FUNNYMENTALS among professional traders.

Trade the charts and you will NEVER det cot with your pants down pissing against the wind ;) 

Tue, 04/17/2012 - 02:37 | Link to Comment jmk
jmk's picture

Don't lose sight of the fact that Obama needs to go. Focus your energy on getting that message across to everyone you encounter between today and Election Day. Someone else won't do it -- you, me, everyone has to explain to whomever will listen why he cannot remain in office. If he isn't voted out, then all this other stuff is irrelevant. And, perhaps we are irrelevant as well. Most important election since 1860. Maybe, just maybe it will prove to be be more important than 1860.

Tue, 04/17/2012 - 03:33 | Link to Comment BeetleBailey
BeetleBailey's picture

If Obama was a white man, you'd not have to type that missive in terms of fear.....and you must be, based on your post.

Strange days indeed when a black man can hold onto office JUST because he is black. ("cool" " "a good talker"..."race...shall we say.....baiter")

In Obama's case, he's not even fully "black".....which makes it even lousier...

IF the Framers and Founding Fathers have the celestial capability of looking down at today, my wager is the murmurings would be something akin to;

 

What the fuck.....?

 

The out and out IGNORANCE of today's typical man/woman on the street IS why Obama has any chance at all.....

Underestimating the MSM and it's ability to mollify is the Conservatives big head scratcher.....they've done a great job at that.

Tue, 04/17/2012 - 02:16 | Link to Comment Night Owl Trader
Night Owl Trader's picture

"(before he died just days after Cramer got him to taste test Soda Stream!)."

So what are you saying? That Soda Stream killed Mark Haines? I got a Soda Stream myself - just days before I signed up for ZH.

Tue, 04/17/2012 - 01:55 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

http://www.youtube.com/watch?v=sJmnWOl1Kdg&feature=results_main&playnext=1&list=PLD1B419CA20722832

...the article is the revelation of the The Suicide Vampire Squid Fish Finger on the trigger. Lol.  http://www.youtube.com/watch?v=RIBn7LYG_GA   

The Russian Roulette Casino Wheel of Fortune is a pathetic ''you die first'' confrimation call on a bet in a, eh hum, rigged death game, lol, without any mercy. LMAO. Is there an ounce, lol, of faith in the invitation? Hey lets play this waiting game of ''you die first''. Lol. http://www.youtube.com/watch?v=angi1vwUkQc

Tue, 04/17/2012 - 00:29 | Link to Comment mathdock
mathdock's picture

I thought Phil's rant was pretty funny, actually--I'm not a fan of any comedian, even Steve, who can't bring conviction to his role while slamming fringe aspects of someone's faith, but, hey, it's not my blog.

The 3 of  5 lines has to do with the five major indices most folks track, and when 3 of 5 lines are up over the mid-value of a 20% range, the odds favor a short-term run to the upside of a few percent.  He's talking about a sub-5% bull spread on DDM, which would move 5% if DIA moves 2.5, and DIA DOESN'T have AAPL and DOES have banks.  Betting on a 3-year low as support for BTU feels a little dicey to me, too.  So, risk a buck instead of a dime.  still pretty good risk/reward.

yagotta tone down your rhetoric.  It's an opinion, and huffing it with intensity doesn't make it any more certain.

Regards to all.

 

Tue, 04/17/2012 - 00:28 | Link to Comment smb12321
smb12321's picture

Does Ilene desire more State control since he/she is always bitching about the social net while 70% of the budget consists of "social payments"?  Why the harping on the greatness of more taxes?  Does anyone actually think that transferring wealth from the private to the public sector will create prosperity or is that another idea we've thrown by the wayside?  Is it just survival instead of aspiration?

Tue, 04/17/2012 - 02:09 | Link to Comment lasvegaspersona
lasvegaspersona's picture

smb

I think Phil is a rare socialist among the Finance Advice world.

I find his lack of concern with the confiscatory nature of taxes concerning...especially considering were they go. Like many libs the intentions start out good but the cumulative consequences of all the laws and taxes and growth of the State gets lost.

Tue, 04/17/2012 - 01:37 | Link to Comment ilene
ilene's picture

Speaking for myself: Not so much more or less, but different. I like the idea of better, more appropriate regulation, and this requires getting rid of layers of corruption and related legislation, but yet real enforcement of other laws and regulations. So I'd say LESS total control - as measured in numbers of regulations. But more real enforcement of the laws that make sense. The control that there was would be effective, enforced, and not influenced by special interests so much as the interest of society as a whole. 

Tue, 04/17/2012 - 03:02 | Link to Comment Ghordius
Ghordius's picture

+1 - it two words: smart regulation

glass-steagall was one of them, three dozen pages instead of the many 20'000 pagers of our times

 

one of the great accomplishments of the Roman Plebs in our species' endeavor for republics based on democratic principles was to force the printing of the laws - so that every citizen would know what the law is.

with the new laws we are going back to square one - printing is useless if it's simply too much to read for one citizen

Tue, 04/17/2012 - 04:14 | Link to Comment Nukular Freedum
Nukular Freedum's picture

Or how bout no regulation?

http://pearlsforswine.wordpress.com/2011/12/04/a-dilemma-how-to-reform-t...

And also:

http://pearlsforswine.wordpress.com/2011/12/01/how-to-reform-simply-ever...

Crikey, then we might actually have a free society at last. But what would the politicos do? Vote for self-immolation? Not bloody likely!

Tue, 04/17/2012 - 06:26 | Link to Comment Ghordius
Ghordius's picture

"no regulation at all" is a dream that could only apply to low-density areas. look at cities over the last 3000 years, they need regulations and public works just not to be deep in shit - literally.

50% of the world population lives in cities. how many "nuclear freedom" proponents live in high-density cities? do you?

and the worst enemy of the individual (freedom) is a gang of other individuals - from migrating hordes to our beloved TBTF banks

Tue, 04/17/2012 - 11:25 | Link to Comment ilene
ilene's picture

Agreed, Ghordius. No regulation at all co-existing with freedom is delusional. 

Tue, 04/17/2012 - 00:06 | Link to Comment HD
HD's picture

Wait. So if Spanish yields hit 6.5% (and they likely will) LTRO 3 is coming? Yes, I know the default answer is "of course, the CB will just hit print" - but it's no longer that easy. First, I doubt Germany would let it happen being that they are the only ones left on the hook - but even if they roll over, whats the point? LTRO 2 bought them a grand total of two months.

Come on. Central bankers are lying, manipulative scum - but they are not stupid. They have to know whats coming.

Mon, 04/16/2012 - 23:59 | Link to Comment bjfish
bjfish's picture

Is that last pic of Phil jumping the shark?   What a lunatic rant.  Yes, dumba$$, Grover knows his stuff - why don't you look it up yourself on IRS.gov/stats.  I have and yes, the top 1% pay 40% of all taxes.

And whats more, O'blamer's "Buffett rule tax" is not going to raise $40 B/year ... but less than $4 B/year.  He has spent more $$ flying around on Air Force One to give speeches about it. Thats a fact jack.  What a worth-less POS he is.

The repubs fail to see a need for a U.S. Dept. of Education, when all K-12 education is funded and controlled at the local level.  Talk about redundancy and useless bureacracy (or is that redundant?). 

Wanna know why U.S education sucks ... look no further than the teachers union.

crazyeconprof

 

 

Tue, 04/17/2012 - 00:07 | Link to Comment vxpatel
vxpatel's picture

you are right dipshite...we should cut the taxes for the rich more, increase defense spending, bailout banks and we should ban abortion and gay marriage and while we are at it, let's toss math completely and study the bible...

 

sound good?

Tue, 04/17/2012 - 02:47 | Link to Comment ebworthen
ebworthen's picture

Politics is the distraction.

The Two-Headed Hydra must be denied food, starved into weakness, then beheaded.

It feeds on Republicrat/Demican arguments that go in circles and end in a bi-partisan committee and a bill with a budget line.

Tue, 04/17/2012 - 03:42 | Link to Comment vxpatel
vxpatel's picture

whoa brother, i wasn't saying left is right, i was just saying that current policies are fubar...

 

and obummer has proven to be as effective as Palin would have been...

 

Palin / Quayle 2012.

Mon, 04/16/2012 - 23:55 | Link to Comment Augustus
Augustus's picture

What is the purpose of inserting the nutty claim that the Republicans continually vote to cut education? 

It is the Dems who made the $40B claim, demonstrating the insignifigance of the "plan".

Three lines above 50% of what?

Oh, another question.  How is selling BTU $26 Puts limited to only the risk of losing $0.10? 

The Whitney Tilson logic on taxes is comming to the fore.

Tue, 04/17/2012 - 01:10 | Link to Comment ilene
ilene's picture

Augustus - thanks, that's a good point. I think Phil is not accounting for the BTU put going up in value if BTU drops. He's probably thinking, but didn't specifically say, that he would be happy to buy BTU at $26 if the stock gets put to him. I'll try to clarify that in the post. 

Mon, 04/16/2012 - 23:54 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Inflation is a wonderful thing.  The GDP always grows no matter how little is produced and shipped!

Tue, 04/17/2012 - 02:50 | Link to Comment ebworthen
ebworthen's picture

Exactly.

And always french fries in the frier, and endless soup (and people serving them).

Wow, look at all those jobs!  What a recovery!  What a country!  Makes me want to pat old Jamie Dimon on the back! (/sarc).

Mon, 04/16/2012 - 23:26 | Link to Comment ebworthen
ebworthen's picture

Gas sales down, career employment down, tax revenues down, spending up, liquidity debt pump on high, vapid societal distractions (bread and circuses) on overdrive.

If you can't see the iceberg, at least grab a life vest and head for a lifeboat.

Mon, 04/16/2012 - 23:32 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Gun sales down..? Smith and Wesson stock has doubled (4 to 8) over the past 5 months.

Tue, 04/17/2012 - 02:44 | Link to Comment ebworthen
ebworthen's picture

Retired police issue S&W .38's of fine quality are $269.

Ruger can't keep up with the demand for the LCP.

Soviet Bloc AK's are flying off the shelf.

Mon, 04/16/2012 - 23:23 | Link to Comment Rastadamus
Rastadamus's picture

Bullshit indeed....

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