Thursday, June 30, 2011
Cliff of Worry
It's not a wall. It's a cliff. The worrywarts got blasted for 50 handles in less than 4 days. It is shocking how quickly we've gone up but I underestimated the amount that fund managers were underinvested in this market. The contents of the cliff include: Greece. Unemployment numbers. Bad economic data. etc. That stuff is history. All in the past. It is always dangerous hoping for the crowd to panic when they are already fearful. Sometimes the crowd panics, but usually they don't.
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The planned coordination of the centralized global economy was performed perfectly this week. I have learned to not fight these powerful men and the tapes they paint. And if lower crude is in their agenda, that only crowd that will be panicking any time soon are the crude oil longs.
True. You can't fight the power. They were never going to let Greece default no matter what. There will be a time when the whole ball of wax self implodes. I don't think its anytime soon.
It will be when too many people are prosperous and they for whatever reasons need to stop that too.
I have to disagree. Until we see real growth in unemployment numbers. I call that a negative.
If the bulk of the recent decline was Greece related....guess what we do it again in 3 months. With higher risks of defaulting that time.
And unless a deal is reached with the debt ceiling before say the 15th. I think this market is going right back down.
Too much emotional trading.
I just can't see the Republicans giving in that quickly. It would make Obama look like a hero again. They don't want that.
I missed most of this leg up. I'm fairly confidant we go back down in a few weeks. I will get long then. I'm too chicken to short. This market has been possessed.
I think we're on a straight shot to 1370. The way we thrusted higher these past 4 days usually means the start of at least a 1 month uptrend. Expect another 60 points higher over the next month. By then, you will have the trend followers and optimists back out in droves and then we collapse back down.
Thats a ballsy call. A new high with horrible housing and 9+ % unemployment. Anemic 2% GDP.
Dave Fry:
In 37 years of being in the business, I've never seen such a transparent end of a reporting period window dressing effort. But that's the way it goes. News?
No, there wasn't much throughout the week to account for a rally. We were oversold entering the week so that could account for some buying. Yes, the Greece situation was taken care of for now. Consumer Confidence and Jobless Claims data were horrible but Thursday's surprisingly good PMI (Chicago Purchasing Managers) report was cherry-picked to support ongoing buying. Friday's start of the new quarter will feature the all-important ISM (Institute of Supply Management) report. This should either confirm or reject the current rally.
Earnings news will follow all through July and into early August and must support bulls since QE2 is over. Then there's that debt ceiling situation and accompanying tension and brinksmanship. Word just has come in that Turbo-Tim Geithner is heading for the exits. Maybe he'll get a job with a Wall Street bank, become a tax auditor or even represent China as an emissary to the U.S.
Stocks that comprised the largest long positions for hedge funds and institutions (MSFT, AAPL, AMZN, BAC, MCD, CAT, V, WMT and so forth) were the targets of price mark-ups all week.
The previous bullish theme of a weak dollar, rising commodity prices and more or less stable bond markets reasserted itself.
The widespread monthly DeMark 9 readings from May did their job in suggesting trend exhaustion was at hand. This reading only strongly suggests markets will "react" and save for this last week markets did.
Volume picked-up on Wednesday but markets are still dominated by HFTs as retail continues to abandon stocks. Volume Thursday was higher than recent averages while breadth per the WSJ was quite positive. We're now short-term at least overbought.
amazing how in a matter of days the herd goes from end of world to bullish. it's like a high frequency everything. truly mesmerizing
but great trading environment i must admit....
Not anymore. Once you have the uptrend established the trading becomes terrible. Investors win. Traders lose. Might as well hold long in that case.
doubt we have an uptrend wave like we had last fall. this market most likely in an congestion pattern into sept/oct with big squeezes and big short term weakness off the open interest imbalances.
we went straight up last year off a flash crash low which priced in economic collapse + qe3 which at the time of the low was a bargain. 1315 s&p is not a bargain and the risk for larger weekly falls are much greater.
i believe particpants are highly leveraged which leads to juicy trading
Nice call Owl. Looks (to me) like 1345 could be slight point of resistance.
I was expecting rocket moves higher in the fall not June!
I missed out. I would expect pullbacks this month will be bought heavy?
Have a nice fourth!
people look for pullbacks after a small correction off the 52 week high until the market is down 2% again in a day and then suddenly they aren't looking for pullbacks
Well the move up last year on Qe2 was at snail pace with <10 handle range for the most part/day. we are rising here at high velocity with 15-25 s&p intraday range. Trading will continue to be good and I do not think it is a buy & hold.
I'd be watching crude oil prices. The SPR release is a symbolic move and end of OPEC influence and I believe the powers that be in the west have figured out a way to manipulate fuel prices thru the matrix as they've done via s&p and QE. Depressing crude oil and other staple commodity prices via FX may be the hidden QE3.
Well, the intraday volatility just dies out in a rising market. QE2 or not. Once we get to more fully valued levels with more bullish sentiment, watch the daily range shrink like a raisin. You'll be lucky to see 12 point ranges.
I don't think they can manipulate crude oil prices down for long. There is just not enough crude oil in the SPR to manipulate the market lower for more than a few months.
Crude oil is a very tight market, with demand growing due to Chindia. How else can you explain $110 Brent oil even after the SPR release? The only way to put supply and demand at equilibrium is through higher prices. There is no significant supply coming into the oil market anytime soon.
They can manipulate crude prices via the currency market. Crude prices have not traded off supply/demand for years and central banks know it. It has risen on weaker dollar policy and mid east friction. These are very manipulatable. I agree SPR won't have much influence but it is symbolic of his endeavor. Gov't can't simply say they are going to manipulate currencies to affect asset prices. They NEVER say that tho they do it all the time
Crude fell like a rock in 2008 not because people stopped driving or China stopped consuming. Those variables stayed relatively constant. It is because in 2008, the dollar index RIPPED.
btw, WTI crude is historically oversuppled according to the DOE.
Actually in 2008, crude plunged because industrial demand for crude oil fell off a cliff. Crude oil bottomed in December despite the euro shooting higher off its bottom in November 08.
I am still amazed that people are brainwashed into believing CNBC's drivel about high oil prices being due to speculation. The reason supply and demand are in balance is because we are at 110. If we were at 80, we'd have more demand than supply!
And as far as WTI being well supplied, it is a landlocked market with too much tars sand oil flowing in without enough pipelines flowing out of Cushing. That is why you have high inventories.
China GDP grew at double digits in 08 while crude fell 70%+. It has little to do with Chinese consumption or industrial usage or people driving. These variables don't rise and fall 70%. Factories didn't stop during the credit crunch. Peopl were still driving as well. It has more to do with how the super overleveraged crude futures contract act as a derivative to the matrix of currencies and other macro instruments..
Also US admitting currency manipulation would be the pot calling the kettle black when it comes to foreign policy, namely china.
it also has alot to do warmongers selling the idea that if a tiny nation like libya run by qadafi which supplies <2% of world oil, then we all run out of oil. this can also be manipulated or removed.. ie bin laden.
You forget that commodities are priced at the margin. Crude oil prices are very sensitive to economic conditions and small changes in supply and demand. A 5% decrease in demand doesn't equal a 5% decrease in price. It is more like 30-40%. Likewise, a 5% increase in demand usually equals about a 30-40% increase in price. Same goes for most other commodities but oil in particular because supply isn't easily increased these days.
IEA and DOE stats show falling domestic world demand in crude past 12 months and supply is high so crude should be down 50% according to that logic.
Where do you get your numbers? Do you have link to those numbers? All the data I have seen has shown that demand has been greater than supply as world inventories have been shrunk over the past year. This is while prices were rising, meaning there was no demand destruction despite the higher prices.
Crude oil stock levels via EIA.
Stock Normal Range for Chart
Level Low High Range
Dec 2010 332.0 301.6 334.3 32.7
Jan 2011 347.4 306.6 339.3 32.7
Feb 2011 350.3 317.7 350.4 32.7
Mar 2011 362.6 327.6 360.3 32.7
Apr 2011 367.6 335.3 367.9 32.6
May 2011 372.5 331.0 363.7 32.7
Jun 2011 366.2 323.2 355.8 32.6
No matter how fed wants to paint the picture, world is slowing consumption.
http://www.bloomberg.com/news/2011-07-01/crude-oil-falls-first-time-in-four-days-on-slowing-growth-in-china-u-s-.html
Crude based on pure supply/demand should be at $40-$50
Those are not world stocks! Those are US numbers, and yes, US domestic demand has been stagnant. Tell me where all that floating storage has gone. Give me the supply for world inventories. There were ships loaded with crude in 2010, that is no longer the case right now.
Here is worldwide OECD inventory:
http://gregor.us/fossil-fuels/2010-oil-story-drawing-down-the-inventories/
Crude at $40-50 based on supply and demand? You have to be joking. Why don't you go short crude at $110 if you think there is a $60 premium based on speculation and the weak dollar.
Because CRUDE DOES NOT TRADE OFF SUPPLY & DEMAND WHICH IS THE POINT OF MY ORIGINAL COMMENT
OECD data you presented is from 2010. We are in year 2011 my friend.
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