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Technical Tuesday – S&P 1,200 or Bust Yet Again
Will patterns repeat? Phil is placing a bet on it. For another perspective, that comes to the same conclusion, read also Allan's Conflict in the Model. ~ Ilene
Technical Tuesday – S&P 1,200 or Bust Yet Again
Oh no, not again.
It's already time to hedge to the downside (actually, it was yesterday and we did) as we once again test our Must Hold levels at Dow 11,590, S&P 1,235 and Nasdaq 2,603 but it's that 1,200 line on the S&P that has given us our first sign of trouble - again and again and again this summer.
You know what they say: "Fool me once betting the S&P keeps rallying over 1,200, shame on you - fool me 5 times since August first and just call me a perpetual bag-holder." Our choice of hedge in our Live from Las Vegas Member Chat yesterday was my 2:12 comment:
SDS Oct $22/23 bull call spread is .87 in the money at net .42. That makes 150% if the S&P doesn’t hold up here. Of course stop out if S&P makes 1,200 but otherwise good weekend protection with stop at .22 so $420, risks $200 to make $580.
We spent much of the weekend at our first annual (and it's going to be at least annual as it was too much fun not to do again) PSW Investing Conference talking about balance and hedging and trading our ranges - there's a really nice dynamic of having the group discussions...
Anyway, the short story is that, after seeing the S&P fail at the 1,200 level 5 times in 8 weeks, we take the opportunity of another run-up to take a short position that should pay 138% if the S&P does what it did the last 5 times and heads to the bottom of its range again, where we will be happy to go long while others are panicking - again for the 6th time!
As you can see from Doug Short's S&P chart above, we're in a very critical resistance zone for the S&P 500 as it tries to break out of the downtrending channel we've been tracking since the collapse began in late July, when we fell from 1,350 on July 22nd to 1,100 on August 8th (25.9%) while the Dollar rose from 73.50 to 79.80 (8.8%). So, in order to get a clearer picture of the technicals - we need to give the S&P at least an 8.8% upward adjustment to compensate for the Dollar weighting. That puts the S&P at exactly 1,300 price adjusted to the July 22nd high, down just 3.7% for the Summer.
I know this sounds strange as "expert" analysts completely ignore the Dollar's effect on the PRICE (not VALUE) of equities but that's mostly because the concept can't be put into a sound-byte and packaged for your financial entertainment Dollar and never forget that's all it is - the networks, the newsletters (even ours), the magazines, the funds - they are competing for your attention and your money, whether through commercials or subscription fees and, just like McDonald's doesn't make the most delicious hamburger - quality has nothing to do with success in mass financial entertainment.
We joke about it a lot and, in fact, having CNBC on at Cafe Moda (and thanks to LV Moda once again for arranging the space as well as Savi for organizing the event) was like nails on a chalkboard and we ended up muting the now Cramer-heavy morning show. I have it on, but I mostly tune it out with my ears trained to perk up in case something ACTUALLY happens but, watching CNBC with a group of very sharp actual investors makes you realize how useless it is - at least McDonald's has good french fries!
As the "Occupy Wall Street" movement spreads around the nation - it is no longer possible for Wall Street's PR arm to ignore it but they still don't know how to report on it as they can feel the winds changing as their polls begin to show them that, in fact, 99% of the people are beginning to realize they ARE in the bottom 99% and that being in the bottom 99% in America kind of sucks.
We're in Las Vegas and we have a $100 dinner here and a $100 dinner there and see a $200 show and we pay $6 for a bottle of water and $20 for a 10 minute taxi ride (and ironically, there are ads inside the cab for hookers who charge less per hour) but then you literally drive 4 blocks off the strip and you are in a horribly depressed town with some of the highest unemployment and THE most depressed real estate market in the country (Miami is coming back). THAT'S THE 99% - saving money on their electric bills by reading off the neon spillover from the buildings the top 1% occupy.
It's a microcasm of what America has become - sure some of the top 10% and even some of the top 20% are allowed to come visit and, of course, work for us here but they sure can't live here, can they? The reason the masses have been "content" to be on the outside looking in for all these years is because they truly believed (and we'be been brain-washing them since Horatio Alger stories in the 1800s) that if they worked hard and didn't cause any trouble, that either they or their children would have a chance to be "one of THEM".
What Occupy Wall Street is doing is only illustrating the growing realization of the bottom 99% that all that is BS, and has been for quite some time. The US has less than 1% relative mobility from class to class - that's 1 out of 100 people improving their lot in life within our system. Not that other countries are much better in the "free market economies" but being the worst of the group is SHAMEFUL and that's what this movement is about - the other 99 people are finally "Mad as Hell, and they are not going to take it anymore."
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Only 1% chance of improving their lot ... This is stupid. Almost everyone I know is doing much, much better than their parents, so then what does '1 out of 100 people improving their lot in life within our system' mean?
Have I arrived at the top?
I live in a 5500 sqft home, I go out to eat at least 3 times a week, I can travel anywhere in the world at any time I want, I need nothing, I even have everything I want (ipods, ipads, computers, big screen tvs, warm in the winter, cool in the summer, swimming pool, gardner,etc). I even live in Vegas. (I guess I do want something ... ES at 1080, would be great)
Have I arrived at the top?
All of the Dems and Repugnicans I talk to are mad about the Massive Bailouts the Wall Street CEOs handed themselves while telling the other 99% to starve. Almost everyone understands some action was needed to "save the finncial system" but that does not entail giving Billions to the very people who caused it. OWS is not a partisan issue...it is an American issue that involves the 99% of Main Street Dems and Reps.
That's the crux of OWS imo (or it should be if it isn't).BTW, ilene, thanks for mentioning the Dollar effect. I also beleive anal-ists ignore the effect of a strong (or weak) dollar on the economy.
Larry Summers had it right when he said there is no way out this recession unless the USA boosts exports (with a cheaper dollar).
Thx Palau, you put that well.
we are stuck in a micro-chasm. with know way out. what are oui to do?
http://www.youtube.com/watch?v=KvzlEfBYKVw&feature=player_detailpage
So, in order to get a clearer picture of the technicals - we need to give the S&P at least an 8.8% upward adjustment to compensate for the Dollar weighting.
Why do we "need" to make this adjustment? We need to realize that correlation does not equal causation.
You apparently haven't done the math, Charlie. How many Mark Cubans does it take to make up 1% of the 150 million working Americans? Phil says, quite clearly, that the US is the worst of all the developed markets for vertical mobility; the barriers set up by the moneyed elite to preserve their rent seeking are among the best ever devised, and will stay that way until the current system is dismantled. The important part of Phil's commentary is the simultaneous hollowing out of US industry, by the continuous destruction of capital, while the cartel supports the stock market's "apparent value" with continuous money printing. The cartel has set up the market as a perfect traders heaven, where volatility allows traders, using HFT computer bots, to skim all the money would-be investors put into the market (because ZIRP forces them to speculate to gain any return). So if you put $1000 into the S&P in 2000, your nominal value today is still about $1000, but your buying power has been hollowed out about 80% (say versus gold). Congratulations on being part of the mobile 1%. But unless you want to live in a gated, armed compound, and travel with guards in a bullet-roof limo, you had better hope that the OWS protest generates some fear in our Congresscritters, otherwise all the "change" Obama promised will be forced on the establishment by complete failure of the financial Tower of Babel now being worshipped.
Fishhawk
Alcoa just laid a royal egg in its EPS announcement:
http://blogs.wsj.com/marketbeat/2011/10/11/alcoa-badly-misses-earnings-e...
Then again, since when do fundamentals matter. Rumors of bailouts lead this crazy market.
Phil is very interesting. His market analysis is worth reading. He has been very much right about the trading range for some time now.
But when it comes to his politics, oh my. His latest drivel here, which claims there is no chance to be "one of them", is such BS. He is saying that the American Dream of hitting big is dead. Yeah, tell that to the long list of entreprenuers I can name that are hitting home runs with their high tech companies. I mentor entrepreneurs in a program started in Silicon Valley and is now global. These entrepreneurs aren't sitting around whining about the top 1%. They aren't whining that the government isn't providing them . . . whatever. They will create cool new companies and maybe a lot of jobs.
I'm a serial entrepreneur. I grew up in a very low income environment (I won't call it poverty), which made me hungry to achieve, not whiny about the gov't not providing for me. I achieved in the business world, in sports, in life. And Phil claims there is almost no mobility in the U.S. I've been to a lot of other countries (competing as a member of a National Team) and I haven't seen in any of them the same kind of entrepreneurial spirit that we have here in the U.S. But that kind of story doesn't fit with the political narrative that he wants to espouse. So be it. He is simply wrong.
BTW, I'm not disdainful of the protesters. I hope we see more of this, with coherent messages that the cronyism and buying off of our politicians has to stop. I think on this Phil and I would agree wholeheartedly.
Yes lots of drivel posted by ilene. Not sure why they cant just leave their political points of view out of their financial analysis. Phil and ilene have their agenda which is always the big government progressive track basically far left, which is certainly not any better than the ridiculous far right. That is what suprised me the other day when ilene posted 'i stand with the protestors' It sounded to me like populist pandering on her part, given that she consistently pushes for central planning solutions. I will say the protestors are doing a necessary job and sincerely hope that the can achieve a positive effect.Hopefully I can swing down there and check it out in person. A lot of people are just waiting for the cause/movement that feels right to them. Something that is not slanted to the left or right, but simply wants the pursuit of the truth, transparency, and equitability.
Anyways, why bother to play in these markets, rigged as they are, I hardly find economic/financial commentary interesting anymore regarding equitities, derivatives. I am enjoying following the broad strokes though. What an amazingly pathetic drama/trajedy. All of this is right out of the history books. Humans sure are dumb a shit when it comes to breaking out of dysfunctional cyclical patterns. Except instead of one defunct empire there will quite a few this time around, how many failed Romes will we see in the near future.
g, this is simply untrue (speaking for myself): Phil and ilene have their agenda which is always the big government progressive track basically far left, which is certainly not any better than the ridiculous far right. That is what surprised me the other day when ilene posted 'i stand with the protestors' It sounded to me like populist pandering on her part, given that she consistently pushes for central planning solutions.
Before the big meltdown, I was more of a libertarian than now, but never have I "pushed for central planning solutions". I'd like the old concept of having laws (is that central planning in your mind?) and enforcing them. If the massive bailouts and continued interference by the Fed and government is not central planning - I don't know what is. Anyway your criticisms of my thinking are inaccurate.
the occupiers are paid by the corporates to "protest", part of election rigging. watch the wealthies 1% and their covert market influences.
http://expose2.wordpress.com
http://covert3.wordpress.com
Charlie I applaud your achievement but success is much much harder for those without the background (You say you were'nt rich but was your father an entrepreneur, did you learn from him?). One of the biggest factors associated with success in college isn't intelligence, test scores or high school grades, it's whether you have a parent who went to college. If you didn't grow up with the expectation of college, hearing the stories, seeing the way things are done then even if you are really smart (Steve Jobs) you are likely to quit. Yes you can succeed in other ways but it's harder to forge through new territory than grow up in an empowered background and be given access to success through other's aid (Bill Gates, whose father is one of the richest lawers in the US). I admire those who truly built success on their own because it is much harder than cruising in on your family's coattails.
Just look at the chart, Charlie. Is that a pretty picture to you?
Phil said nothing about upward mobility being halted or impossible. He said America is no longer holds it's place at the top of the heap. We have been slipping badly, and I would venture to guess that the slippage is accelerating.
There are always some nice success stories, but not nearly as many as there used to be. What we hear more of todayu is stories of failures or past succeses stompted out and crushed by the big boot. The opportunities for most become more rare every day. Wake up and look around somewhere other than Silicone Valley.
Charlie, the older you get the more you will realize timing and chance (luck) plays a bigger role than hard work and ambition. That is unless you are born into the 1% category, then all rules change.
that's a fine and great story. one problem: due to something called math, not all of the people that are equally "hungry to achieve" are able to achieve at the level that you describe. for those unfortunate souls, they have watched their real incomes and purchase power do nothing but decline for decades, all the while excerting at least the same, if not more effort for their troubles.
your solution to this systemic, structural problem in our economy is to tell these people "tough shit, become an entrepreneur"? Hilarious.