What a terrible rally week this was for me!
It's a funny thing, while I am very proud not to lose money in a big downturn, I do tend to feel really silly when I don't make money in a spike – human nature I guess but it's the same strategy and it works very well on those rare seemingly rare occasions where we do neither.
One of our members congratulated me for the gains on the positions we took off the table but I pointed out that those were the winners, there are some very large unrealized losses on the put side that, for the most part, balance them out quite nicely. This was our worst option period in the LTP all year and the STP was saved by DIA calls I didn't believe in and gold plays that made massive gains – on the whole I'm not proud of the performance this week.
In last night's post I gave the last of my bearish statements (yeah, right!) as I resolve to start next week in full rally mode as we get ready to retest 14,000, just another 1% decline in the dollar away!
I still want to see what really happens next week but starting Monday, we'll have to play the momentum but turning a virtual portfolio around is a painful thing. Today is quadruple witching for options and futures plus the end of quarter for funds so there may be a "window" dressing component to this as funds pull out all the stops in order to get a good print for the quarterly report.
Once we get past a retest of 14,000, there is nothing stopping the dollar from slipping to 75, a 5% drop from here, which means we can see Dow 14,500 before the general rally turns back to a stock picker's market. 14,500 would mean oil at $86, but at that point we'll be conditioned to be happy it isn't $90 and our refining cartel is doing their best to keep gas prices low so the people don't complain while oil prices go through the roof.
Happy Trading sees the S&P and the Nasdaq holding up nicely but we still need to crack the critical 1,530 and 2,675 marks.
We're keeping an eye on the QQQQs at $50.50, the breakout level I identified when we took the December $50s as a cover play. Over this mark and we may see a 5% gain on the Nasdaq (2,800) in short order there is still a chance of a breakdown next week so let's keep an eye on gold as an early warning sign.
We are rallying on the weakness of the US currency. The underlying assumptions are that our economy will not slip that badly into recession and that US corporations will put in a very strong Q3 and that inflation is relatively under control. The 10-year note is rising, not falling – so there is no relief for the homeowners yet. Perhaps another rate cut is in order? Rates had dropped to 4.3% PRIOR to the Fed action but are now sitting at 4.68, ALMOST 10% higher in the past 5 sessions. If we are going to get bullish, we need to get in Cramer's camp and scream for even more rate cuts or how is XOM going to maintain a $510Bn market cap?
Over in Asia, the Nikkei pulled back a bit as exporters suffered the declining dollar while the Hang Seng had another slow day, rising just 142 points to a record 25,842. MAT is getting into the swing of things in the new World order as THEY APOLOGIZE TO CHINA for their "defective designs" adding that they had recalled more toys than was necessary. The "vast majority of those products that were recalled were the result of a design flaw in Mattel's design, not through a manufacturing flaw in China's manufacturers," Mattel's CEO Debrowski said. Lead-tainted toys accounted for only a small percentage of all toys recalled, he said. "We understand and appreciate deeply the issues that this has caused for the reputation of Chinese manufacturers."
Wow! Well we'd better get used to it – it's pretty clear who's in charge now so US companies had better learn how to "assume the position" if you want to do business in the global economy.
Europe is giving us another as the Euro rose another point, closing above $1.41 with no particular signs of stopping. EU markets are looking strong this morning, up about half a point after a tentative open. 1/3 of the LSE has just been sold to Opec member Qatar as the oil-rich nations look to turn their dollars into hard assets as quickly as possible, something that may spark another round of M&A as the best way to get rid of Trillions of worthless dollars is to buy stuff with them. Middle Eastern firms and funds have spent $64Bn so far this year, compared to $30Bn all of last year but it is far from over as the Abu Dhabi Investment Authority alone has $875Bn that we were kind enough to send them so we could ride, not walk, to the 7-11.
"The deep pools of capital in the Middle East are increasingly affecting all aspects of global financial markets, both private and public," says Monte Brem, chief executive officer of StepStone Group LLC, La Jolla, Calif., which advises Middle Eastern institutions on their international investments.
Let's keep an eye on our breakout levels today. I'm not ready to buy yet, plenty of time for that next week once we see there isn't going to be a quick reverse. A real rally today will be led by the financials, not the commodities and we absolutely need the Nasdaq to take charge.
Oil did not go down overnight, they rolled to the November contract, closing out October at $83.32 but someone (don't ask me who) bought a few barrels over at the NYMEX AND ACCEPTED DELIVERY, leaving 47M barrels open at the contract close. I'll summarize that BS over the weekend but I was only off by 7M barrels from a start of 420M for the month. There was, at last count, 362M barrels on for November and 221Mb for December and January has jumped up to 82Mb for a whopping Q4 total of 665 Million barrels THAT WILL NEVER BE DELIVERED TO YOU!
Have a great weekend!
