Bouncy, bouncy markets!
We had a heck of a time yesterday – going bullish on 2 DIA plays in the morning for very nice gains (35% and 14%) and then flipping bearish in the afternoon for another 20% gain on the day. You have to be quick on your feet and NOT GREEDY to make money in this crazy market. We set up some long-term bullish plays but very well hedged because we still don’t trust the market but all cash is no fun at all so we are beginning to pick up a couple of key stocks that we REALLY want to accumulate over the long haul.
As you can see from the Fallond Stock Chart on the right, we are still challenging our key 5% Rule bounce level that we predicted BEFORE the crash and we’re not at all impressed by the S&P holding 1,155 yesterday but at least it kept us from being bearish into the close. In my morning Alert to Members yesterday at 9:48 I said: "Still all about that 1,155 line on the S&P. It kept us out of trouble yesterday, especially giving them to the bounce zone at 1,166, which is right where they topped out."
My morning post was aptly titled "It’s Deja Vu All Over Again" as that’s EXACTLY what happened yesterday and we even doubled down on the spike over 1,166 because we were fairly confident the move was nonsense and also confident that 1,170 would not break for the day. TODAY, on the other hand, we should get a proper test. We’ve gone 2 full days without the World ending and that should be enough to get the bulls back on TV telling us how great things are again and that will bring all the itchy investors back off the sidelines as their money is burning a hole in their pocket AND EVERYTHING LOOKS SO CHEAP!
But is it cheap? Certainly not compared to Thursday. In fact, I think 5% higher than Thursday’s sale prices is outrageous – especially considering it was only a 15-minute sale and, when we all rushed into the store, the shelves were pretty bare so we hardly got a chance to buy anything (although we did get a few good deals on Friday). Now that they’ve suckered the people into the store, the salespeople will surround them and try to not let them leave without buying SOMETHING. There will never be another opportunity like this, they will tell you. The time to act is now, they will tell you. You don’t want to miss out, they will warn you.
"But gee," you may say "didn’t you guys just have your second massive drop of the year and wasn’t May to June last year a bad time to buy stocks and May to June of 2008 about the stupidest time ever to buy stocks and May to June of 2007 also a bad idea as that July and August we fell 1,500 points?" Oh hey, they answer – that was "fat fingered Fred" – we fired that guy. Now, give us your money…
I said last Thursday that "We Won’t Get Fooled Again?" and I put the question mark at the end of the title because I know investors WILL be fooled again – it’s kind of the whole point of the market. If you think that Goldman Sachs and JP Morgan can both pull perfect quarters without having fooled someone, then you do need to get on your knees and pray – because Lloyd is doing God’s work and you’d better repent! I was doing Nostradamus’ work on Thursday as I closed that post with a picture of David Cameron under "Meet the New Boss" and it’s already official that Brown is down in the UK (I told you I was very influential in Europe!) – can anarchy be far behind? As Bill Murray said in Ghostbusters: "Conservatives and Liberal Democrats sharing power in the UK – mass hysteria!"
We are still watching and waiting for the most part. There are plenty of fish just swimming into our nets so we don’t have to wade in too deep to feast of this market carnage. There’s a 10-year note auction at 1pm today and that will make or break the day’s action and we can expect some positive Fed speak to both boost and spin those results this afternoon. Gold hit a record $1,245 in overnight trading so somebody, somewhere is worried about something but not the EU, where the DAX is up 2% and the CAC is up 1% and the FTSE is up half a point, even with this insane coalition they’ve slapped together today. Keep in mind that the UK’s triple-A credit rating hangs in the balance.
Europe is all excited about – what else – MORE FREE MONEY, as the ECB begins buying up Euro-zone government debts at face value. Sure it worked for the Fed as they bought over $1Tn of our own Treasury notes last year so why not let Trichet have some fun as well? The ECB is already buying government bonds of Portugal, Italy, Ireland, Greece and Spain, according to the Association for Financial Markets in Europe. Gee, that’s funny – didn’t they just say that Spain, Ireland and Italy didn’t need any help?
Buying debt is itself a risky proposition for central banks. If purchases continue while the euro-zone recovery strengthens, it could lead to inflation. Purchasing assets also puts central-bank balance sheets at risk if securities lose value. And there’s also the risk that if governments think the ECB will save them from the consequences of high deficits, they may balk at taking unpopular steps to bring their budget into balance.
Asia was mixed this morning and more or less flat as they are simply confused at this point by what’s going on in the US and Europe. We often talk about how China and Japan have lent about a Trillion each to the US but they are equally tied to Europe and now it looks like both of their big investments are teetering on the brink. The problem is that the combined economies of Japan and China are still less than the GDP of either the US or the EU and, funny joke on China, Japan is far worse off then either of them! ROFL – that’s a good one isn’t it? Well, not if you are China, who has pretty much tied up all the profits they’ve made for the last 20 years in the "First World Nations" – LOL, what suckers!!!
Chinese economic data showed that inflation picked up in April and that property prices continue to rise at record speed and another guy went nuts and started stabbing school children today. Welcome to the G7 boys – isn’t it great to have a seat at the table. There’s an old saying that if you sit down to play poker and you look around and you’re not sure who the sucker is – it’s probably you or, in this case – Hu…
For goodness sakes – be careful out there!
