Stock market analysis and commentary from a trader's perspective

Friday, May 6, 2016

Friday -- NFP Miss, Treasury's New Toy, Wave Count Update

S&P E-mini Futures:
Moderately down.

News:
NFP number 160K versus 200K expected. Weak. Takes some pressure off the Fed. Wage inflation creeping in though, up 2.5%, a continuation of the previous month's 2.3% reading.

Wage inflation coupled with still-weak job growth after this much stimulus is pretty lame, and a dangerous spot for a crew of die-hard Keynesians to be attempting to navigate without running aground.

U.S. Treasury Department officials launched a new liquidity gauge, Bloomberg reported. "The world’s largest debt market is sound and traders’ ability to transact remains robust," will be posted in a blog on the government’s website. Something feels weird here. Gauge or no gauge, the bond market is not a toy, and could soon remind the markets why.

China had a rough night, and Europe is looking red so far.

Today is the new moon. So given the choppy decline thus far, perhaps a wash 'n' rinse reversal could materialize.

FX:
AUD and CAD weaker. JPY stronger stronger. EUR loved NFP. See if it holds. (So far it's not)

Treasuries:
Higher post-NFP.

Energy:
WTI crude blew its big rally yesterday. Down along with NG.

And no, it's not an electric car company's fault.


Metals:
Metals woke up post-NFP.

S&P Outlook:
Posted this chart a while back. Time for a revisit and a clean up.


Voila. See notes. Can easily travel higher and lower than shown. (Can also do something completely different.)


Thursday, May 5, 2016

Thursday -- Back To Back BS, Initial Jobless Claims

S&P E-mini Futures:
Modestly higher.

News:
Back-to-back bullshit from Marketwatch.com:



Mixed picture overnight in Asia and Europe. Fits this editorial mess perfectly.

A friend at the Socionomics Institute sent me this article -- check it out:



Some tech guy boldly states, “If you don’t have a ping-pong table, you’re not a tech company."

To that I would add: Dude, if your company doesn't have a business model, you're not a company.

Elsewhere in tech, at what end of the business cycle would you expect the following news?


"Tesla just took the most ambitious automotive production timeline since the Ford Model T 
and moved it up two years."

Tesla's wild forecast is coincident with the highest level of automotive debt ever. Wild.

Initial Jobless Claims today. Up 17,000 to 240,000.

FX:
Weird and rare. USD up, AUD up, CAD up. Oil (& Albertan wildfires) helping Oz and Canada today

Treasuries:
Prices coming in just a bit across the curve.

Energy:
WTI crude is ripping, currently up 4%. NG looking good for now too.

Metals:
Gold, silver, platinum, and palladium looking good while copper is sitting out.

S&P Outlook:
The current pullback is becoming more and more problematic for bulls and bears alike. Feels like it may have further to go but that a bounce is in order.

Will try shorts in the 2100 area. Will try longs down to the 2000 area.

Wednesday, May 4, 2016

Wednesday -- It's Not Politics, It's FX

S&P E-mini Futures:
Down sharply, again.

News:
Red all over. And it's not Trump. It's FX.*

Spent more time studying yesterday's 'Burning Man for the 1%' -- what a treasure trove of social mood.

Some of my favorite verbage with the usual random comments and emphasis added:

The word unapologetic was used twice. It seems to be an apt description on the new tech-elite.

Alphabet's (Google) CEO Eric Schmidt describes festival goers as "the cream of the Burning Man crop." (only the best people)

“Unabashed luxury”

Nobu hosted a $250-a-seat dinner on the first night of the festival. (in the middle of the desert)

There was even an entourage concierge – “a personal, dedicated lifestyle manager and assistant ready to help you with any requirements or desires you may have. No request is ever unattainable.” (the Stones wrote a song about this. it's called Slave)

Kiteboarding is the new golf.” (higher and higher)

"Justin Shaffer, an early Facebook employee and now an investor, says he wants Further Future to answer a new set of questions: 'What happens post-capitalism? Even post-democracy? What about post-employment, when we have universal basic income?'" (the future seems rather certain. note where the kid worked)

We’re so privileged to come to these spiritual places – Further Future, Tulum – but not everyone can,” an audience member says, asking Piorkowski [the event promoter] how he should reconcile that.

“It’s all about balance. We are the ones meant to be the air, not the earth,” Piorkowski said.

These people, floating ever higher on the lofty social mood that propels them, are waaaay up in the air. So was Icarus.

FX:
*China devalued the yuan the most in 9 months last night.

JPY strengthened more than twice as much as any other major currency in the past week.

And commodities don't like that USD ripped nearly 1.5% from its recent lows.

Nothing to do with politics.

Treasuries:
Prices higher yet again, in defiance of recent Fed speak.

Energy:
WTI crude and NG bucking the strong-dollar-weak-commodity narrative, both higher.

Metals:
Metals down, dollar up. Enough said.

S&P Outlook:
Prices could test the 23.6% Fib retracement at 2040 with the 50dma currently at 2037.94 and the 200dma just below.

The market would have to strongly break below this important area for it to convince me that the rally from February's 1810.10 was over.

Tuesday, May 3, 2016

Tuesday -- Aussie Surprise, Further Future, Guess Work

S&P E-mini Futures:
Down sharply but firming.

News:
Surprise rate cut by Australia's central bank. Markets hate surprises. Note that Aussie CPI is in deflation.

Elsewhere, this is just the sort of exclusive behavior that I want to see near market highs:



Love the name Further Future which sounds like social mood may finally be getting further along the scale to expansiveness and euphoria. 

Things ought to be pretty upbeat for Amazon, Alphabet, and the Facebook at Bilderberg in June.

FX:
All about AUD and JPY throwing a wrench into what has recently been the global Risk On machine. CHF stronger too, along with the USD bouncing hard after breaking 92.62. All adds up to caution.

Treasuries:
Prices higher from 2s-30s.

Energy:
WTI crude slipping, and NG higher.

Metals:
Gold, platinum, and palladium have more convincing wave structures than either silver or copper at the moment. This may be because of the industrial component of silver and copper vs the more currency aspect of the others. Hard to tell. Just a comment.

S&P Outlook:
The wave count is currently far more ambiguous than usual. Would be a buyer in the 1950-2000 zone and a seller above 2011.05.

Current levels feel like way too much guess work for me. 


Monday, May 2, 2016

Monday -- Thawing Out Just In Time For The Freeze

S&P E-mini Futures:
Modest follow through from Friday afternoon's bounce.

News:
Bloomberg gets the latest accidental subtext award.



Accidental subtext is unintended communication that is at odds with the writer's intent. That said, perhaps the art stock market is thawing out just in time for the Frieze freeze.

Yet even with value hunting hitting the art market, there still seems to be a need for a higher high in the financial markets at some point to complete the mood swing from February's low, but that might not preclude lower prices first.*

Here in Puerto Rico the mood swing is all about the local government's efforts to paint its debt problems as a humanitarian crisis. Meanwhile the malls are flooded with people, getting a parking space there is a challenge, restaurants are brimming with people and getting a table is often a challenge, streets and highways all over the island are clogged with expensive cars and SUVs, and avoiding traffic is becoming more and more of a challenge.

The Constitution of the Commonwealth of Puerto Rico explicitly states, twice, that:

1) "interest on the public debt and amortization thereof shall first be paid" and,

2) "The Secretary of the Treasury may be required to apply the available revenues including surplus to the payment of interest on the public debt and the amortization thereof in any case provided for by Section 8 of this Article VI at the suit of any holder of bonds or notes issued in evidence thereof. (emphasis added)

Contrast this with Governor Padilla's remarks on television last night as his administration was defaulting on a $270 million payment: "In light of Congress’s inaction, we were forced to enact Act 21 to protect the education, health and public safety and other essential services of our citizens from creditors,” the governor said.

To "protect the citizens" from the very same creditors that he and his predecessors actively courted. Congress didn't force anyone to borrow.

The real humanitarian crisis will occur when Puerto Rico's underfunded pensions come due in a few short years, estimated by some sources to be underfunded as much as $80 billion. That will be a crisis. A self-inflicted one that PR's politicians can't blame on creditors.

Puerto Rico's embrace of socialism (while enjoying the largesse of the municipal bond market and billions in annual US aid) might soon cause it to resemble Venezuela.


Decades of lack of infrastructure spending have left Venezuela with a severe water crisis (blamed on El Nino). Concurrently, the plunge in the price of crude oil (blamed on Right Wing politicians) has left it with an economic crisis. As a result, President Nicolas Maduro has instituted a two-day work week for government employees to save electricity and just hiked the minimum wage 30%.

Meanwhile, both Puerto Rico's water and electrical monopolies are bankrupt after years of hiring well-paid middle managers rather than invest in infrastructure. As a native businessman told me, "who the hell can screw up a monopoly, let alone two of them?"

Needless to say there are periodic water and electrical shortages on the island.

Former UK Prime Minister Margaret Thatcher said it best: "The trouble with socialism is you eventually run out of other people's money."

I love Puerto Rico. I'm sure I'd love the people of Venezuela. But they're being played as pawns by their own leaders.

FX:
JPY coming off fresh highs. USD looks weak and threatens its 92.62 swing point.

Treasuries:
Little net progress higher in prices.

Energy:
WTI crude digesting Friday's high. NG settling too.

Metals:
Gold broke out and volume did appear. 1300 was exceeded. Volume does still appear to be waning in silver, platinum, palladium, and copper, yet each followed gold.

S&P Outlook:
*Regardless of whether the market corrects back to 1750 in a more complex pattern, there is one simple indicator that suggest new highs will come at some point.


Markets don't usually end with a strong breakout of leadership. So what is needed is probably some more backing and filling and then a slow, labored grind higher that allows for divergence.

As far as the backing and filling goes, it's hard to tell if it's run its course. But I must admit I like the idea of the market having thawed out just in time for another freeze.

Friday, April 29, 2016

Friday -- Uncle Carl, The Facebook, Big Oil

S&P E-mini Futures:
Drifting lower after yesterday afternoon's Uncle Carl rout.

News:
Carl Icahn mentioned he didn't own Apple shares anymore and the market tanked.

Downtown Josh Brown termed the Facebook "The New Religion" which basically meant that it's different this time and you should own it because so many people use it, or something.

Who needs reasons when you could have anticipated that the S&P was going to test lower anyway -- see yesterday's post.

Europe is very red this morning, and it seems to be muting futures here.

22 S&P companies report earnings today, including Exxon (beat) and Chevron (missed) (along with the Baker Hughes Rig Count at 1pm). So oil could be interesting.

Amazon blew doors on earnings last night. Prediction: it's going to be Bezos vs Zuckerberg moving forward. My money's on Bezos.

Turns out one of the dudes behind Zero Hedge is credit guy Tim Backshall whom I follow on Twitter (though I have him on mute because he rants too much). I knew there was at least one guy there that had enough connections on the Street to pull in all the research they get.

However, today's Bloomberg article comes as no surprise that there were some odd ducks doing some extrapolation shall we say.


And in their own words:


FX:
JPY still messing up things by strengthening. And after days of relative firmness, USD rolled over to new correction lows.

Treasuries:
Prices came down on volume and have rebounded on volume. Feels like a big move coming soon, direction uncertain, but perhaps the Fed may be losing its grip on the bond market and may need to counter with jawboning or policy change (no hikes).

Energy:
WTI crude and NG both looking good currently. Baker Hughes Rig Count at 1pm and Exxon/Chevron earnings might be newsworthy (Chevron's miss may have already dented oil's rally).

Metals:
Metals ripping higher across the board on USD weakness -- but where's the volume.

S&P Outlook:
R.N. Elliott said, "At best, news is the tardy recognition of forces that have been building for some time."

Been posting this for days, long before Uncle Carl flipped out everyone.


Futures are looking shaky along with heavy losses occurring across Europe, so 2060.63 becomes important. If broken, yesterday's rout could continue a lot further.

Regarding the Facebook, shared this yesterday intraday.



Thursday, April 28, 2016

Thursday -- The BOJ, The JPY, The Facebook

S&P E-mini Futures:
Down sharply but firming.

News:
It's the BOJ. It's the JPY. It's a mess.



We are very likely entering an era when it will pay to bet against central banks. As in fight the Fed 'til its dead.

Meanwhile, over at the Facebook, things are a bit different today.

If your business runs on an ad model, the Facebook is a great example of how lucrative it can be to hit the target, which is every media buyer's dream. The Facebook lets them get about as granular as they can.

But it also sounds like the Facebook will soon be a great example of why CEO's should stick to their company's core competence -- Zuckerberg wants a different class of stock to be used for big bets, much like Google has done with Alphabet, get it?

This smells like a recipe for eventual hubris-induced malinvestment to me.

Bot FB 115 calls (weeklies) yesterday with the Facebook trading around 107 -- purely as an earnings play based on a rising wedge chart pattern and super cheap OTM options (max loss $105 per contract). Pre-market indicates $121. Will dump them at the open -- hit & run.

FX:
JPY soars by 3%.

Treasuries:
Higher prices across the board. A bit of volume too.

Energy:
WTI crude higher. NG down over 2%.

Metals:
Gold, silver, platinum, and palladium seem to like the BOJ madness, but not as much as one would think. Copper sitting out, basically flat at the moment.

S&P Outlook:
Looks like the S&P wanted the down road. 2073.65 should at least get tested. Who knows if it breaks or not, but I will look to be a buyer sometime today if things line up -- yet much below 2060.63 would not be one of them. If that were to occur, this count would be immediately called into question.