When all else fails – crash the currency!
That's what we're seeing this morning as the Greek "fix" pops the Euro and drops the Dollar over 1%, from 97 at yesterday's close to 95.55 earlier this morning, when I called for re-shorting the Future in a Morning Alert to our Members at 6:36 am (EST). My comment on the idiocy was:
Yesterday morning and last night our shorting lines were: "Dow 17,700 (/YM), S&P 2,070 (/ES), Nasdaq 4,400 (/NQ) and Russell 1,245 (/TF) because nothing is fixed – just more cups and balls" and this morning only the RUT is over the line so, technically, they are the laggard and we can short them on a cross back below 1,240 but no conviction – tight stops over that line! /NKD is also a good short below the 20,000 line – also with very tight stops above.
This will be our 4th time back to the well this week as the Dow, for example, has moved an average of 250 points down AND 250 points up each day. This morning, we're 180 points up but the pattern is that old, familiar BS pump-job in the Futures followed by heavy selling all day as our beloved Banksters and Fund Managers dump their shares on the retail suckers who pile in to buy the f'ing dips.
And who can blame them? The Corporate Media is full of assurances that all is well with a parade of analysts making bullish predictions and brushing off events in China and Europe as if they are mere bumps in the road towards Dow 20,000.
According to Bloomberg: "While the efforts have helped boost the largest stated-owned companies—oil giant PetroChina has gained 22 percent since June 26—they have so far failed to revive overseas investors’ confidence. Dual-listed Chinese stocks traded 33 percent lower in Hong Kong than on the mainland, the biggest discount since 2009, suggesting investors abroad are more pessimistic than the locals on the valuation of the companies."
The average dual-listed stock in Hong Kong is 33% less than it's trading in China, which means the "bounce" you're seeing in the Shanghai Composite is COMPLETE BS. I mean, of course it is, with half the stocks not trading and short sellers facing arrest and the Government buying stocks and now (today's new stimulus) forcing large-cap companies to "buy on the dip" in addition to the Government buying stocks directly AND inderectly through state-controlled banks and businesses.
“With more than half of listed companies having suspended trading in their shares, it’s hard to be confident that any moves are other than transitory,” Tim Condon, an analyst at ING, wrote in a research report.
Concerns that China’s stock selloff illuminates deeper economic problems also roiled global markets this week. Some industrial commodities like copper hit multi-year lows, and the metal slipped 1.1% in trading Friday. Even gold and silver, often perceived as a haven asset, is trading near five-year lows. China is one of the world’s largest consumers of oil and metals.
This morning we got a report that slashed growth forecasts for auto sales in China by 50% after the second consecutive monthly decline in sales, with passenger car sales dropping 3.36% in June to just 1.51M vs a 23M pace that was expected (2M per month avg).
Still not worried? Well good for you but we'll be staying well-hedged and mainly in cash into the weekend. If Greece is really "fixed" on Sunday, then we'll have to consider going long (AAPL $120 looks attractive, but 16% of AAPL's sales are in China) with some of our sidelined cash, but, for now, we'll just see how things shake out and keep an eye on our bounce lines:
- Dow 17,725 (weak) and 17,850 (strong) closed at 17,549
- S&P 2,075 (weak) and 2,090 (strong) closed at 2,051
- Nasdaq 5,025 (weak) and 5,075 (strong) closed at 4,922
- NYSE 10,850 (weak) and 10,950 (strong) closed at 10,690
- Russell 1,255 (weak) and 1,270 (strong) closed at 1,234
Without taking back those weak bounce lines (and 11,250 on the Dax must hold as well) we're still in a bearish downturn heading into the weekend's uncertainty (and up 1% with the Dollar down 1% is not at all impressive at the best of times). Europe has already popped 5% off the bottom this week so Greece being "fixed" on Sunday is pretty much baked in but Greece falling apart this weekend will leave your head spinning on Sunday.
We'll discuss weekend hedges later this morning when we see how things actually open (and watch out for Yellen at 12:30!).
Have a great weekend,
– Phil
