The Futures are bouncing already (8am).
We'll see how this pans out but it's been a crappy week and we'll yet again be watching our strong and weak bounce lines on the Big Chart, which I laid out for our Members in Wednesday's Chat, which prevented us from falling for the weak bounce that day and yesterday's lame pump job at the open – both of which ended up failing.
Today, we're back to the weak bounce lines in the Futures, kicked off by a weak Dollar (80.35), which will go up fast (and take down the markets) if more than 250,000 jobs are added – so good news likely to be bad news again today. The bounce lines we're going to be watching are:
- Dow 15,910 (weak) and 15,970 (strong)
- S&P 1,794 (weak) and 1,800 (strong)
- Nas 4,030 (weak) and 4,040 (strong).
- NYSE 10,060 (weak) and 10,100 (strong).
- RUT 1,125 (weak) and 1,130 (strong).
As you can see from our Big Chart, we have some serious tests at 4,040 on the Nasdaq, 10,000 on the NYSE and 1,120 on the Russell – all of which we should be above this morning. Let's say that failing 2 of 3 of those lines would be a very bearish indicator and the quick money can be made by shorting the Nasdaq, who haven't come down much, at 3,490 in the Futures (/NQ) or below the $85.50 line on QQQ, where we should be able to buy the Dec $84 puts for .50 or less and a $1 move down in the Qs (1.2%) to approximately 3,990, should net us a quck 50% gain.
We had a lot of excitement in the oil pits yesterday with oil rising all the way to $98 at 10am but it was rejected there and back to as low as $97.20, before settling between $97.25 and $97.50, where we were able to play for nickels and dimes since.
As promised, I sent out a tweet letting our followers know that we were shoring oil at 1:42 at $97.76 and that price held through 2pm, after which it was a very profitable WHEEEE!!!!, back to $97.25 for a $500 per contract gain. Thse are the kind of trade ideas we discuss every day at PSW – feel free to join us inside!
Our big shorts on oil are still on, but there's plenty to be made day-trading while we wait. This morning we went back to shorting at $97.25 as we anticipated that there was no NFP reading that could make oil happy since a lot of jobs would boost the Dollar and weaken oil while a lack of jobs would mean a lack of demand and weaken oil. We like to bet on "no win" situations when we can bet the outcome will be a loss, right?
8:30 Update: As we expected, Oil is down already ($97.10 for a $150 per contract gain) on 203,000 jobs added in the month of November, so we take that money and run and wait for the opening pump to short at $98 again. Unemployment dropped from 7.3 to 7%, which is not good for the Bulls, as it puts the Fed ever-closer to the point at which they said they would taper (6.5%) and, even worse, we're doing it through people leaving the workforce – not by creating many more jobs.
Still, like yesterday "bullish" reaction to the GDP, we're going to get a nice pump into the open. Speaking of GDP, the well-respected report from Consumer Metrics Institute (thanks Dave) sums up conditions in the excerpt below:
Nearly half of the headline number came from growing inventories. Conventional wisdom has this component reversing itself in future quarters — reverting to a long term net zero gain or loss. In fact, since 2006 the average annualized real contribution from inventories has been essentially zero (-0.02%). Bloated inventories have a tendency to normalize, and in coming quarters we can expect production cuts to accomplish just that. If during the next quarter the inventory number reversed while everything else stayed the same, the headline number would be less than 0.25%.
Employment numbers still provide no "cover" for Fed tapering or tightening.
Contributions to the headline number from consumer spending on goods, consumer spending on services and exports all weakened.
Personal Income is down 0.1% vs + 0.3% expected by clueless Economorons, reversing the trend of up 0.5% in October. I'm sorry, what I meant to say was: PERSONAL INCOME IS DOWN 0.1%!!! There, that's better… Personal Spending, however, was up 0.3% as Consumers pounded on the debt into the Holidays.
So, we're not creating jobs, people who are working are earning less money and Thanksgiving shopping was a disappointment to kick of an unusually short Holiday Shopping Season but the S&P went from 1,650 on Oct 10th to 1,813 at the end of November to 1,800 this morning, which is still up 9 in 60 days – a pace for 54% annualized returns. And this doesn't bother you? We cashed out, this doesn't bother us at all except the part where we have to figure out why it doesn't bother you…
Barry Ritholtz points to an article that says we're just not as smart as we think we are, which would be food for thought if it didn't require thought to process. There's also an article that explains why our not-so-bright brains are so drawn to lists (check out this list of the greatest people who ever lived) and assign them way more authority than we should – becuase they trigger all the right buttons to make our overloaded brains happy and complacent. That's why I don't make lists, although it's the number one tool to attract clicks on the web – they are simply not the kind of clicks I want to attract.
Anyway, back to the market, which is up 1% ahead of the bell as the weak economic data puts us in "game on" mode for the Fed. Oil did hit $98 for another great short entry and already back to $97.60 for another $400 per contract gain and now the Nasdaq is making a very attractive-looking short at 3,500, for a better entry than we hoped for above – we'll have to play it by ear in Member Chat but I think we'll also get a crack at shorting the Dow Futures (/YM) at the 16,000 line, also a fantastic place to make a play.
Have a great weekend,
– Phil
