Tight stops – cash out – have a nice weekend… – – That’s it, really! Until we get the ISM report to counter a very scary Philadelphia Fed Manufacturing Index, which went negative for the first time since April 2003. Scary huh? Not if you look at the S&P chart from April 2003 it isn’t! Shhhhh. This will be our little secret – let everyone else panic while we sit on our cash and get ready to BUY BUY BUY! http://www.phil.frb.org/files/bos/bos0906chart.jpg Again we are back in a situation where leading economists are not as good at statistics as drunken bowlers – who know that last month’s measure of 18.5 may have been a little out of whack against our one-year average of 10 (and the July number of 6) and a correction to the downside was to be expected. Also, new orders fell as pricing remained high, as savvy buyers are waiting for manufacturers to reduce their “energy surcharges” before whipping out their charge cards. The Index of Leading Indicators is trending down as well, showing the economy slowing to 2.9% GDP in Q3 vs. 5.6% in Q2. Sounds pretty dire right? NO! The predictions were for a 2.8% third quarter, we have a 3% beat! The employment index actually improved, up 3 points from the August level with 20% reporting increased employment vs. 10% reporting layoffs in addition to total number of hours worked increasing. Wow! Sounds like a heck of a crisis! Prices paid index (cost of manufacturing) fell from 45 to 38 (that’s 20% folks!) but prices received increased. So they are getting lower costs but charging more and the buyers are resisting the increases by cutting back on orders – Shocking!!! Someone exhume Adam Smith, the world has gone crazy! It is just not that bad! This will not stop a parade of analysts predicting the end of the world as we know it based on a wiggle on a graph. ANY number above zero indicates expansion, -0.4 down in a single month (lowest ever was –10) vs. highs that have been in the 50s and 60s this decade is hardly a reason to panic. Nonetheless, we take our stops and go home for the weekend, as it will take new information to get the sheep herded off into another direction. FDX profits were up 40%, somebody’s buying something somewhere! “I’m very confident through peak [season] and through the rest of this calendar year,” said FedEx Chief Financial Officer Alan B. Graf Jr. FedEx, which carried an average of 6.1 million packages and 70,000 trucking shipments a day in the quarter, and rival United Parcel Service Inc. are widely regarded as broad economic indicators. Mr. Graf said the U.S. economy is “slowing but nothing I would characterize at this point as a headwind.” The company said it believes that by the end of its fiscal year on May 31, gross domestic product would post a 3.1% improvement from the year earlier.” Who are you going to believe – leading economists or the guys who actually carry the stuff the economists are trying to survey? Asia was down as a stronger Yuan led to a weaker dollar and panicked exporters. Sony is cutting Playstation prices 20%, that can’t be good for company profits but, since they aren’t available anyway, it won’t hurt as much as it could. SNE $40 puts are just .55 and make a nice play today. Europe definitely doesn’t like what it sees and is trading down a point this morning. Sadly, we are back to watching lower support levels today and let’s see if we can hold them:
- Dow 11,500 with 11,400 being a point you don’t even want to test!
- S&P 1,310 but 1,300 is the line we dare not cross.
- NYSE will give us our first sign of trouble as it breaks 8,350 and a failure at 8,300 is a real sign to pack it in (even our leaps).
- The Nasdaq is, ironically, very strong – with probable support at 2,200 – a level that would help establish the exact sort of leadership change we need for a real rally.
The oil traders seem to think the global economy is just fine as oil prices are driven up .37 to just shy of $62 in Europe but it is likely on continued dollar weakness. We are out of our oil puts and not going back in unless we get a huge Valero Rule move. We got the 20% down from $77 ($61.50) and we certainly didn’t expect another 5% leg to $57.75 this week. http://stockcharts.com/gallery/?%24wtic So there is a natural bounce after going below the 20% rule (5% rule 4 times) and a bounce all the way back to $65.45 (15% down) would be a very weak retracement. A 1/3 bounce, still weak, would take us to $66 where momentum would likely force an upside test of the 200 dma at $68 where we will short with abandon! Earlier in the week I talked about Russia’s desire to keep a firm reign on oil companies and today it is XOM’s turn to feel Putin’s wrath as the Kremlin just says no to cost overruns. This is the very definition of a totally foreign concept to our own VP and President, who never saw an overrun they didn’t approve (or at least cover up). Speaking of cover-ups – here’s one that will make you sick: The Interior Department is going to forego $1.3Bn in royalties it was supposed to collect from energy companies since “it would be very hard to recoup.” Let’s not work too hard there boys! I guess they are too busy with the lawsuit from their own auditors who claim the Interior Department has consistently suppressed their efforts to recover money from oil companies that were cheating the government. Companies like KMG (now part of ADP), RDS.A and TXT are linked in a series of fraud charges that go beyond simple overcharging. During the Clinton years (again, not being political, just using a time-frame) the auditing department averaged $176M in collections from cheating oil companies at an average barrel cost of under $20. From 2002 through 2005 with prices climbing into the $60s, collections dropped to $46M. Happily, this left the oil companies with plenty of money for campaign contributions! In fact, only this year have royalty revenues paid to the government finally climbed back to the $10Bn level that was collected from oil companies in 2000! http://www.mrm.mms.gov/Stats/statsrm.htm We’ll watch oil in comments but it would have to have a very unreasonable run for me to want to short into the weekend, even though Iran is making concessions and Palestine recognized Israel for the first time. Gold is picking up where it left off yesterday and we may get a chance to see how US traders feel about the $600 mark today. This is why we stopped shorting gold last week after our great run on the ABX and NEM puts! Has anyone noticed the 10-year note is down at 4.6%? Could it be that my theory about money coming out of commodities (including housing) and flooding the markets is actually going to be my third Nobel Prize of the year? Since I am usually ignored when I say these things I will urge my critics to surf away as I predict that a flood of dollars + declining commodities markets + lower bond and note yields = a rush to equities. So let’s watch and wait… Here’s a guy with a great take on the Fed. ===================================== Don’t waste your time looking for new trades today, worry more about taking things off the table if the markets fail even our higher technicals. The quarter is ending next week, it is very, very dangerous and I want to get through Monday before getting all bullish again. GM and Nissan are making no progress after Nissan got a look at the books! After losing $10.5Bn last year on $192Bn in sales, the company has “only” lost $3Bn in the first half, a real turn-around story! Nissan made $500M last year on $8Bn in sales – expect NSANY to take off as talks break down and they get away from this mess. I love MCD’s new idea to serve breakfast all day – now if they will just make you a hamburger and fries at 10:55 I will be happy! SBUX raising prices yet again – gotta love this stock! They are just daring you to not buy it! Speaking of junk food, CKR is still rockin’ and rolling since our August bottom call. I’ll be looking for a DIA/QQQQ/SPY spread into Monday, we’ll figure it out in comments – we should get a big move one way or the other next week. An HP spread will be fun into today’s press conference and next week’s congressional testimony. Interesting to note that the whole HP scandal is just a proxy for what the Bush Administration is doing with everyone’s phone records… Speaking of scandals – CVC came up with a whole new take on backdating, which I will trademark as Second Coming Options – the practice of granting options to people who are no longer alive. “”The company’s board of directors and senior management believe that the practices…are contrary to the high ethical standards they believe should apply,” the filing stated” Gee, ya think? CVC $22.50 puts are .55. Domino #3 may be Citigroup! In-house Hedge manager, Tanya Beder resigned “after a string of poor monthly performances and mounting costs.” C $50 puts are .80! There will be some serious fireworks at noon as Amaranth speaks to investors, supposedly to answer questions like: “How screwed are we?” Answer: “Very…” Game on for the CAT Nov $70s for .90 as Man ups it’s offer for Scania. I told you this sector is underpriced! Watch VOLV for confirmation but, like I said yesterday, I take 2/10 this month, 4/10 next and 8/10 the next until my ship comes in! BSX Guides down, more bad news for JNJ! Be careful out there!
