Well Tuesday will certainly be the last time I ask if we can get fooled again.
Apparently, we can get fooled every single morning! Monday morning the Dow opened at 8,759, fell 150 points but recovered to 8,668 by 2:45. In the next 1 hour and 15 minutes, the Dow rocketed to 8,832 (almost 300 points off the bottom) but closed at 8,764. Tuesday I warned not to be fooled by the strong pre-market and we fell 80 points to 8,688 by 11:15 before the stick fairy took us back to 8,763 at the close – just ONE point below the previous day – that is some VERY impressive market control! Yesterday the futures took us all the way to 8,835 (again) and we opened at 8,763, which I warned would be a train wreck and, just ahead of the Beige Book at 1:59, we had tumbled all the way to 8,625 before the miraculous save that took us back to 8,739.
Are you sensing a pattern here? We certainly sensed one in Member Chat and we made money both ways on our DIA plays. My first comment to members at 9:36 was "Lame so far, looking like Friday," which alluded to my 4:12am alert where I had mentioned the pre-market action looked like last Friday, where we had a big, ridiculous pump led by oil, which quickly collapsed. It turned out to be far worse than Friday, where we only dropped 100 points from the open but we finished at the magic number anyway. We got out of our last round of oil shorts on the pullback and re-targeted for shorting at $72, which the pre-markets have been kind enough to provide this morning.
The market is getting predictable enough to scare me. Despite our generally bearish outlook here (we just don't see our upper levels getting broken), I was able to call almost the exact top on our QID $30s as we took our 50% profit and ran at 1:13. At 1:57, I reminded our Members: "Keep in mind we could fly 150 points so fast your head will spin in 5 mins so be careful!" That was at the day's low of 8,625 and we closed almost exactly 150 points higher!
We didn not think much of the Beige Book but Mr. Stick sure liked it (I think Mr. Stick would buy if an asteroid was about to strike the Earth). Nonetheless, we shorted our old pals POT into the close, taking the $105 puts, now .85 and we still like them as a speculative play if the inflation bubble starts to burst. I wrote an article this morning on hyperinflation that most people don't realize is happening RIGHT NOW, in the US.
As we expected, we lost another 600,000 jobs this morning, slightly better than expected, but continuing claims rose to 8.5M people, a stunning number by any measure and that's a 9.4% unemployment rate, already over the "worst case" projections of the stress tests. Retail sales were up 0.5%, better than the 0.3% expected but due ENTIRELY to gasoline sales, which rose 3.6% in a single month on the back of runaway oil prices. That led other retail sales to MISS, up just 0.2% as gas prices have gone up 28% in the past 6 weeks. Gas prices went up so fast that they led to an upward revision in April sales as well.
Even worse, auto sales were up in May as dealers who were about to lose their franchises did whatever it took to get cars off their lots. Taking out auto sales and gasoline sales, Retail Sales were up just 0.1% and that's AFTER Personal Income rose 0.5% on the last report. As I've been warning for weeks – Oil prices are sucking every last cent out of our economy. THIS IS ECONOMIC WAR and this administration needs to fight back before we begin to suffer heavy casualties in the form of bankrupt retail chains (who's fuel costs are also rising), bankrupt trucking companies, bankrupt manufacturers and bankrupt REITs (who own the land these people rent), which will bankrupt another round of banks and PRESTO – we'll be right back on the way to another crisis that everyone will tell you they couldn't have seen coming.
Today oil is getting yet another boost from the IEA, who have revised their global demand forecast for 2009 to 83.3M barrels a day, that is up 130,000 barrels per day or 0.16% and is 2.5M barrels per day (2.9%) lower than 2008 but it was enough to send oil flying back to $72 in pre-market trading (where we are shorting it). Gold, interestingly, is going the other way at $947 but I guess oil is in and gold is out as Russia's Alexei Miller of Gazprom is predicting $250 a barrel for oil and BPs CEO Hayward said $90 could be the "right" price for a barrel. So, oil up another 50% from here – I hope Obama has a plan to boost salaries another 10% to compensate or we're going to start seeing those retail numbers turn very red. THIS IS THE ROAD TO HYPERINFLATION FOLKS!
Meanwhile, also on the Russian front, Deputy Central Bank Chairman Alexei Ulyukayev led another attack on the dollar saying: ""We plan to cut the share of U.S. Treasuries since the window of opportunity to work with other instruments is opening." Russia holds around $400 billion in gold and foreign exchange reserves, the world's third-biggest stash behind China and Japan. The central banker's remarks pressured the dollar in Wednesday currency markets. Shortly after publication, the euro rose to $1.4140 from around $1.4100, and the British pound climbed to the day's high of $1.6473. Ulyukayev said reserves are just over 30%-invested in U.S. Treasuries at present. He didn't specify by how much that figure would fall. Ulyukayev said Russia would shift some into bonds issued by the International Monetary Fund and deposits at commercial banks.
I put up some charts in the hyperinflation article showing just how ugly our markets look to foreigners. Above is David Fry's chart on the Dollar, not too pretty either is it? Our attackers are working very hard to knock the dollar below that 78 line so oil can get above its own $78 line. For Russia it's a home run – they sell the oil and collect more dollars and the Ruble goes up while our currency is crushed. Don't look for Europe to defend us, the Euro and the Pound are holding up so oil is NOT getting more expensive for them. Also, they happen to sell a lot of it (did you know Norway is the 3rd largest exporter of oil in the world?). So it's up to poor Asia to defend the dollar and, as we discussed yesterday, they have problems of their own.
Asia and Europe were both flat this morning ahead of our open so we'll just have to see what how the day shakes out. We're still looking for our levels to be taken out without a massive retracement but getting past this jobs and retail data is actually a good thing as there's not much left that is likely to undermine a bull rally – not that the data seems to matter anyway…
