| | Fortune Cookie Economics | | 
If we think the government data revisions and “missed” estimates here in the United States are at times egregious, Chinese economic reporting takes it to a whole new level. So how do we deal with the world’s second largest economy when we can’t even remotely trust their statistics? Which is why recent market optimism driven by "hope" that China is recovering and Chinese reports of a surge in Exports last week, are very much suspect. From Bloomberg: China’s unexpected surge in exports last month renewed concern from analysts at Goldman Sachs Group Inc., UBS AG and Australia & New Zealand Banking Group Ltd. (ANZ) that statistics from the nation can be unreliable. The 14.1 percent jump from a year earlier was the biggest positive surprise since March 2011, according to data compiled by Bloomberg. The increase didn’t match goods movements through ports and imports by trading partners according to UBS, while Goldman Sachs and Mizuho Securities Asia Ltd. cited a divergence from overseas orders in a manufacturing index. Smaller trade gains could signal a less robust recovery from a seven-quarter slowdown just as Australian Treasurer Wayne Swan says the economic rebound is a sign of improving global demand. Accurate statistics from the world’s second-biggest economy are increasingly important for domestic and foreign investors and for China’s government, ANZ’s Liu Li-Gang says. Great, so we can trust Chinese economic data about as much as Peking duck really being duck when it’s sold out of a back alley cart for $2.99. All we can do is hope that the fortune cookies say global economic recovery. Trade well and follow the trend, not the perma-bill OR perma-bear "experts." | | Behold the age of infinite moral hazard! On April 2nd, 2009 Congress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | ---Larry Levin
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 | | Congratulations to Richard Blanchard Results: [09:44 am] Richard Blanchard: Those HVAs work really well was down $140 and now up $345 for the day. That's my day I am done!!! | | NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial. |
| | Congratulations to Patrick Assalone: Patrick Assalone is a Master of rules and discipline. He does a great job teaching this to his students and making sure that each and every one of these students practices this every day. |
OPTIONS: Volatility Commentary ---Steven Lee
| The oil futures market is not something we normally look at in our Options/Volatility classroom, but we do like "Relative Value" strategies. I analyzed in the classroom how the price spread between Brent Oil futures price & WTI Oil futures price has been narrowing for the past several weeks. The price spread was as high as $23 on November 22, 2012. Even as of the beginning of 2013, the price spread was close to $20. Today, the price spread close under $17 and could very well move lower for the rest of 2013. US oil production are setting new records, and this increase in supply has put downward pressure on WTI (domestic) oil prices. Brent oil prices, however, is the one of the benchmark prices for global oil. Due to imbalance in US refinery capacity and inability to easily and cheaply transport WTI oil from areas of production to the various refineries spread out geographically throughout the US, the price differential between WTI and Brent Crude has been expanding since the beginning of 2011, whereas prior to that the two benchmark oil prices were trading close to par. News reports over the past few weeks have highlighted a surge in the transportation of oil along railways, and today Reuters reported "The Seaway pipeline expansion start-up is continuing as planned, and crude oil is flowing through the line, a spokesman at Enbridge said on Friday. The expanded 400,000-barrel-per day line, more than twice the 150,000 bpd previously, started up Friday." Anticipation of this pipeline capacity has probably been the catalyst for the Brent/WTI oil spread dropping. The expansion of WTI transport capacity would allow the US to import less of the more expensive oil and expand consumption of the cheaper WTI oil. The Brent/WTI oil price spread remains wide and is definitely worth paying attention to because it is expected to narrow, albeit the time to which is uncertain. |
FOREX: Currency Spotlight ---Ed Moya
| | Yen weakness persists and so far everything out of Japan suggests it may continue. Last week, we saw the first major policy move from the new Prime Minister Shinzo Abe: A 10.3 trillion yen Stimulus package is aimed at triggering inflation, supporting economic growth, and funding reconstruction and disaster prevention. The hope is that this first small step will help create 600,000 jobs. The other big question mark is whether Governor Shirakawa will attach any conditions to monetary policy if he goes along with raising the inflation target to 2.0%. The two-day meeting begins on January 21st and this will clarify whether or not we see another new easing initiative. This could potentially be the last major Japanese fundamental hurdle before further significant yen weakness continues. Japan is going on all-in on ending deflation and getting the current account deficit out of the red. If the BOJ does act again on a new policy, this will be the first time the central bank has had consecutive months of new stimulus since 2003. If the BOJ resists or puts too many conditions on the next step in easing, the markets could be tremendously disappointed and we could see a decent pullback in the yen trade. With BOJ Governor Masaaki Shirakawa’s term ending in April, Abe is fully focused on finding someone who is on the same page with his spirited agenda. Yesterday, the prime minister said, “We want someone who can push through bold monetary policy.” For traders, this really just means that if we see a pause in yen weakness, it may only last until April. |
STOCKS: Watch List ---Charles Moon
| Well if you were looking for strong market conditions to trade in....today was NOT the day you were looking for. It was as boring as it gets, with a very small range and just absolutely no volume in the market. I wish I can say it was like watching paint dry, but it was much worse then that. Very limited opportunities to make money in the market, and the best opportunity came early on when we hit the lows shortly after the open. The markets then just scratched and clawed its way up one penny at a time into the close. Just very weak conditions to be in. Well the earnings for the Financial sector kicked off today with Wells Fargo(WFC) reporting early this morning before the market open. While they did well with profit earning and easily meeting expectations with record numbers, the stock price fell due to their net interest margin. This was a big reason as to why they had floundered off their previous earnings report, and while they had recovered from the drop, it still shows that WFC still has a bit to go before investor confidence jumps back in. Now I will say the stock price did not drop that far back, and with the earnings numbers they had posted, it bodes quite well for the other banks that have lower net interest margins. Watch for Bank of America(BAC) and Citibank(C) to really jump if they post strong numbers next week. Those two banks alone can lift the entire sector and really sustain a nice run for the bulls. We shall see how the market conditions are next week. Getting into the swing of earnings season, I still think we will face flat market conditions as investors are still staying away. Now of course news from Asia(particularly China) and Europe(Spain, Greece, Germany, Italy) can shake up the markets for a short period, but I think we stay flat until at least February. Open Position: CHKP Stocks to Watch: AAPL GOOG AMZN IBM RIMM FB CHKP PCLN CTXS STX HPQ INTC WDC NFLX FSLR ANR CAT CMI BAC C GS |
FUTURES: Technical Data
| | Value Areas: ES 1466.75 / 1463.25
POC… 1464.50
YM 13422 / 13388
NQ 2741.75 / 2734.75 | NOTES FROM THE PIT
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| COMMODITIES: Play of the Day ---Patrick Assalone | Oil prices fell in heavy trading on Friday, pulled lower by a drop in gasoline on expectations that a large number of European cargoes could hit U.S. shores, while a key spread narrowed sharply on news of the start-up of a major Midwest pipeline. Potential breakout opportunities abound as we are still near the contract high and can break out of a large High Volume Area and continue the intermediate downward trend.
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