Well that was a very low volume rally and I didn't buy it for a second.
Rather than rehash it here I decided to post my day's commentary to members on the free site as I always get a lot of questions about what goes on behind the curtain at PSW and today was a good example.
The short story is that we spent the day rolling our puts up, doubling down on our puts and taking new puts, generally going against the crowd… Happy made no new entries (1 roll) on his site either and that guy is WAY MORE optimistic than I am, so that should tell you something!
Painful though it was, I made very few moves of my own taking my lumps on the bearish side of the virtual portfolio and letting myself stop out of profitable calls that slipped as the risk/reward ahead of the Fed became too skewed up at 13,450. Sure we'd love to see a breakout and a rally but it has to be based on some fundamental changes in the underlying economic situation, not based on traders and the media telling us the magical Fed is going to wave their wand and give us reasons to move up to new all-time highs.
I came closest to capitulation at 11:27, when I said: "I’m watching GOOG here as a lead indicator, if it can get over the $527 mark, it’s time to put on a rally cap. Apple needs to hold $138 and Goldman needs to hold $187 with the Nas in general holding 2,600 but now the RUS is positive." but I followed with: "If the brokers have good earnings and the market is at 13,400 – what exactly is the premise for emergency Fed tightening? Oh well, I need to turn that part of my brain off!"
That pretty much sums it up for me – a mindless, baseless rally that looked more like market manipulation than legitimate buying and I simply couldn't pull the trigger, especially coming into the weekend with retail sales ahead of us and oil up at $80. The only good thing about $80 oil is we haven't had a Nigerian kidnapping since oil got back over $65 – what a happy coincidence!
Tomorrow is a very heavy data day with the Current Account Deficit, Import/Export Prices, Retail Sales, Industrial Production and Cap Utilization, all before the market opens followed by Business Inventories and Michigan Consumer Sentiment. As I've been saying on the member site: No news is good news and any news is bad news because most of the news is bad and the news that isn't that bad is generally not good enough to give us a better outlook. That's why a rally on what is effectively a no news day (and a holiday at that) on very low volume just strikes me as suspicious.
We'll see if I'm crazy or not in the morning but my bottom call (interim) on the dollar held up today as it close up 0.2% at 79.53 while fell 0.39% to $717. Oil was, as usual, pumped up into the close to finish at $80.09 but, other than the current 12-month strip, the rest of the NYMEX fell into heavy backwardation with prices plunging as much as .85 on longer contracts.
Crimes continue to be perpetrated on the American people as 302M barrels exchanged hands on the October contracts yet there was a net change of just 1Mb added to the open interest. In other words 249Mb were trader 302M times and NOTHING HAPPENED. Oh I'm sorry, something did happen, they NYMEX traders put millions of dollars of trading fees into their pockets – just another one of the hidden energy costs that gets passed on to you every day,
Once agains I will point out that the NYMEX traders, who bought and sold 302M October contracts today, have NO INTENTION of accepting delivery of more than 40M of them. The same people who tell you that there is a shortage of oil are currently holding 249,619 contracts that guarantee delivery to Cushing, OK during the month of October of 249,619,000 barrels of oil, enough oil to add 10 full days to US inventory, contracts that have already been paid for – AND THEY ARE GOING TO CANCEL THEM!
I urge you to print this chart and print it every day as it's the best evidence you will get of this scam in progress. These people may as well be cutting off our oxygen for their own financial gain but they get away with it month after month after month while the administration looks the other way – it's shameful! Shameful that they do it but just as shameful that you allow yourself to be treated that way by these crooks!
In addition to the ridiculous action in October, we had 174Mb traded in November for a net change of 17Mb added, now 289Mb. These are the barrels that were cancelled from October yesterday as the traders think we won't notice if they shuffle the barrels a day later but I have a spreadsheet for that! December gained 1Mb to finish with 206Mb on order and it only took 70Mb worth of trading to add 1 Million actual barrels. So that's 744M barrels of oil that are currently scheduled for delivery between now and the end of December – just for fun, let's see how many of those barrels we pay for actually show up!
There are just 5 trading days on the NYMEX so we'll see if I'm right about the fate of those 249M open barrels. Will we get them or will the traders (and their masters) decide the US doesn't need 50M barrels a week during October, so they can shove the "demand" off to another month and churn November ($78.78), December ($77.63), January ($76.75) and February ($76.05) higher? I would also ask if we are going to let them get away with it but – why rock the boat?
We'll also find out in short order whether I was overly cautious today – sometimes I envy those guys who make vague, long-term calls on the market!
