It's all about the Dollar.
Perhaps I've mentioned that already. We finally got the sell-off we expected and we went right to our 12,500 mark on the Dow yesterday. That gave us great exits on our bearish $25,000 Virtual Portfolio positions, which had been in trouble last week as we tried to hold on as the market got truly ridiculous moving against us but is now right back on track with a virtual net of $32,555.
Our goal in our very aggressive $25,000 Virtual Portfolio is to get to $100K by the end of the year so 1/3 of the way there with 1/3 of the year gone is fine. The idea was to double up by June 30th and do it again from $50-$100K in the home stretch so lots of fun and excitement ahead. We are now net a bit bullish in that virtual portfolio heading into the weekend and dumping our bullish Dollar play with UUP as I was WRONG and it is not an ultra-ETF, which is why I misplayed it and we are lucky to get out even on that one.
Our big upside play is still FAS but, as I said to Members earlier this week, it's really like owning a ski house that we rent out every week for an outrageous amount of money. Some weeks it's empty but some weeks we make a fortune, you just have to learn to accept the ups and downs of the position, which is responsible for a good portion of our realized gains this year.
So let us take today to celebrate what Dave Fry is calling the "Most Manipulated Market in History." As Dave points out: "It’s nothing new but it seems extreme currently. A series of circumstances exist where third parties are hiding in plain sight boldly manipulating markets. A series of events has taken markets down, some fundamental and others engineered."
An obvious inflationary situation was becoming present most obviously in emerging markets (BRICs). There authorities were looking at inflation data “honestly” versus the phony data (“core” rate) US authorities were selling. Those countries started tightening using a variety of tools to cool things off. That began serious stock selling in those markets.
The exchanges implemented a draconian series of increases or 5 in the last 9 trading days. As one said, “This was like shooting the lifeboats.” The clear intent was to knock prices much lower and appeared as “piling on” even as prices started to fall. This turned ordinary selling into a panic leading to across the board commodity selling as investors scrambled to meet margin calls.
Clearly the commodity sell-off is somewhat overdone already. Not that commodities should not be lower still – just not so fast! If the Euro fails $1.45 and the Dollar breaks 74.50, we will be happy to flip right back to bearish again but, for the moment, I'm thinking a weak jobs report will put the QE3 (and 4) back on the table and that will give the bulls a chance to ditch the dollar and pop the markets again, at least for a day or two.
8:30 Update: Well this is confusing. Non-Farm payrolls are up 244,000 vs. 185,000 expected and the markets are flying anyway. We didn't get a miss because yesterday's TERRIBLE unemployment number (474,000 jobs lost) was not part of the APRIL Non-Farm Payroll Report. Unemployment is UP to 9% again and that's from 8.8% in March so I have to assume that that number, coupled with yesterday's TERRIBLE unemployment figure is what we're rallying on because it means the Fed has an excuse to keep the presses rolling with unemployment threatening double digits into the summer – especially with teenage unemployment at 24.9%!
Let's not forget that McDonald's accounted for 62,000 of those jobs with their national hiring party last month. Throughout the country, the dearth of job opportunities prompted huge numbers of people to ask Ronald McDonald for employment. In Florida, for example, 100,000 applications were submitted for about 4,300 positions. In Chicago, more than 75,000 job-seekers vied for 2,000 openings.
So let's hear it for McJobs! They still need someone to put that burger in the microwave although Japan is working on a hamburger-flipping robot and, of course, McDonalds has already been outsourcing customer drive-through people to call-centers. Still, it will be a while before they figure out how to have people in India take care of your entire order so we can count on many more McJobs to fuel our "recovery" as we give another 62,000 people just enough money to pay for the gas they need to get to work – let's hope Obama doesn't embarrass himself by getting on TV and crowing about these numbers like his predecessor did...
At least oil is $99 this morning and gasoline touched $2.98 at 4am but we're back to $3.10 (wholesale, of course) after falling from $3.41 on Monday. $3.11 is the 50 dma on gasoline so we'll be watching that line with great interest as a failure there leaves quite a gap down to the 200 dma at $2.40. So we are talking about a potential 20% drop if they can't keep it together here.
It looks like the futures will be flying this morning and that's just perfect for the way we played it yesterday. The Dollar is being slapped back down from 74.65 at 8:30 to 74.15 at the moment (9:15) so it's going to be another very exciting day in the markets and I can't wait to short this pop again!
Have a great weekend,
– Phil
