Let’s hope we can keep this party going with a benign CPI.
There is a lot of data today including oil inventories and critical housing data but we can afford a small pullback as long as we don’t break back down.
Asia is, of course up, as it is almost every time we rally. The EWJ (Japan ETF) has options and it seems people do take advantage of it as the US markets rally. I’m going to start watching this one to see if there’s a way to play but I think others must play this as it is so obvious. I’m also not happy that it is just $13.84.
The Nikkei was up, breaking out of a serious range it has held since May and flew up to 16,071 – possibly on the way to a huge breakout. Europe is totally without direction and waiting for our CPI report at 8:30, a sign that bears are very, very scared and that bulls remain non-commital. There is a lot of money on the sidelines and there is a lot more available fuel to spark a major rally than most people think.
Now we can watch for signs of a healthy pullback, although no pullback would be nice too!
- I would like to see the Dow hold 11,200, almost any positive move will be a nice breakout.
- The S&P is well above 1,280 and 1,293 is the mark to beat.
- The NYSE is right at 8,300 and should guide our trades today. Another 100 points and we can buy with abandon. Consolidation above 8,260 would be OK but I will be taking things off the table below that.
- The Nasdaq popped over the “death cross” 50 dma for the first time since May 10th but has a long hard road ahead of it to get to the 200. Just be happy if it holds 2,100.
Please note: As with yesterday I write these things very far ahead of the CPI and I prefer to leave my original thoughts in, despite any changes in direction the data may cause.
In a desperate attempt to pump oil, they are now throwing out numbers like “BP’s shutdown will lock in 50M barrels of oil.” This is a worst case scenario based on a total shutdown of 4 months, which already is not going to happen but that doesn’t stop it from being shouted from the rooftops. Perspective: 50M barrels (the worst case) equals 1/600th of total annual global production!
Hopefully you lightened up in oil on yesterday morning’s call and we can hope for another chance to short the usual suspects. Obviously there will be a large draw down of crude, probably over 2M barrels – anything less would mean demand fell off a cliff – so let’s keep an eye on gasoline, which should also draw down 2M barrels. Now that we’ve seen that the EIA data is +/- 4M barrels in any given week (see weekend blog) we really need to take anything they say with a huge grain of salt.
We need to see if this BS can push oil over $73.50 or if that is becoming a very firm ceiling. I think we may get a nice little collapse today but we have to let the Valero Rule override any emotional trading that may be very tempting.
Gold is holding steady in Europe at $625 but the 10 year dropped to 4.92% and if oil goes below $72 the miners may be in for a very rough ride.
The CPI data is a measuring trick (Google “Lies, Damn Lies and Statistics“). As Steven Wright says: “47.3% of all statistics are made up on the spot.” The CPI measures the change in prices OVER LAST MONTH – this is how the PPI can suddenly go negative. Prices, like stocks, can spike and pull back so the month to month changes can fluctuate wildly.
http://www.dir.ca.gov/DLSR/CPI/faqs.htm#q6
My thinking, 2 hours ahead of the data, is that consumers are not as savvy as corporate buyers and tend to keep paying higher prices for longer than they have to (how fast does your gas station raise prices vs. how fast do they lower them) so I will be surprised if we get as dramatic a dip as we did in the PPI and again, that pesky rounding issue may stop it from going down at all!
Still the market will react as if whatever number comes across the tape is written on stone tablets and we have to be ready to go with the flow!
“Think about how stupid the average person is; now realize half of them are dumber than that.” – George Carlin
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OMG! I lost my Blog for today – it crashed! Total disaster….
Well it’s 8:30 and I have to go but the CPI was nuetral so keep an eye on the NYSE, AAPL, GE and TXN for direction.
I was liking the teen retailers if ANF keeps going up.
I’m rolling the BA $75 into the safer Sept $90.
Hoping to short the usual oil suspects if they run up. One bracket out of the money puts following the valero rule.
PRU looked good on a terrible insurance ruling that told these poor people that Katrina damage was water and not wind damage so not covered by hurricane insurance.
I stand behind my builder calls but there are regional issues.
FRK looks good.
Generally we can still look to pick up laggards from the weekend update or this week’s picks.
Arrg, I’m so angry, I had a ton of picks too.
Sorry all, this is why I need to upgrade this blog site.
– Phil
