| | Rally Time | | 
The media would have you believe that Wednesday’s rally was due to a pending home sales report. Really? Although “pending home sales” reports are important in the overall picture of the economy’s strength or weakness, it isn’t nearly significant enough to make all of the indices soar the way they did (the Dow closed +175). Moreover, the indices were strongly moving higher long before the report was released.
No, I think the rally was once again due to the two main pillars of this market: Hopium and central planning.
To be sure, several recent reports have been better than expected, which is clearly a good sign, but this type of reversal needs more than that. What took the market lower Monday were the election results of Italy and that showed how fragile the stock markets truly are: If just one part of the central planning scheme goes wrong, the house of cards will come crumbling down.
Many folks were SURE that Monday’s sell-off was the beginning of a 5% correction – it had to be, they said – and shorted it with abandon. Tuesday’s trade found buyers at a slightly lower low then caught a weak bid. No big deal – yet. Tuesday evening’s Globex session, however, did not resume the downside move…and shorts began to cover at the open.
The initial surge led to more buying as stops were hit higher thanks to the market’s best friend of all time: Ben Bernanke. On Day-2 of his Congressional testimony he made it very clear that if must, he would NEVER take away the stimulus. If needed he said, the Fed would hold its 30-YR bond portfolio all thirty years and just let them “run off,” thereby assuaging Wall Street’s fears of the Fed actually selling those bonds, which would force interest rates higher. So QEternity really means 4evva!
Later in the morning (surely after lots of payoffs, arm twisting, and threats) Italy found plenty of buyers for its latest bond auction. It was able to sell $8.5 billion worth of Euro denominated 5 and 10-year bonds, which also quelled the anxiety felt from the Italian election.
So I guess it’s all fixed in Italy…and France…and Spain…and Ireland…and – oh whatever, as long as the central planners are on top of it, we will all be just fine.
Thursday morning’s GDP report should be interesting, right? The consensus is for a puny +0.5% gain following a pathetic -0.1% reading last quarter. Oh wait, it won’t be interesting at all because these outrageously pitiful data will be swallowed up by the Hopium emitted from Bernanke’s QE-4evva policy.
Who needs real economic growth when we can fake it with $1TRILLION annual “stimulus” (read: deficit) and debt monetization by the central bank but is called by a much fancier name of Quantitative Easing. Ah yes, that sounds so awesome and elaborate that I just forget all the bad stuff when I say QE.
QEternity baby! Trade well and follow the trend, not the perma-bull OR perma-bear "experts." | ---Larry Levin
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 | | Congratulations to John Jensen, JB inNC, Victor Assuncao and Seroj Avedian! Results: [01:43 pm] John Jensen: $1654 CL
[02:05 pm] JB inNC: $3347
vitor assuncao+$ 335 [02:06 pm] seroj avedian: $409.00
| | 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 Dan Obrien: The Educator of The Day today is Dan Obrien in the S&P Signal Classroom after posting ANOTHER positive day and valuable trading lesson! As the market was in a steady uptrend the entire day, Dan showed great discipline and limited himself to long signals. Out of the five signals that Dan generated, based on his methodology, all five were profitable! The total for the day was +4 points which equals 200.00 dollars potential profit. The theme for the day was not to attempt to pick highs and lows but instead to follow the trend.
From the students:
Dan, is good at what he does!
Pony up.. Study and make money
Nice trade, D!!! |
OPTIONS: Volatility Commentary ---Steven Lee / Michael Shorr
| We had the release of December Durable Goods this morning. The headline number was -5.2% versus an expected decline of -4.0%. Last month's figure was revised down to a positive 3.7%. The market seemed to key on the Durable Goods Ex-transport which was +1.9% versus and expectation of +0.2%. The prior release was +1.3%. US Equities reacted quite positively to this report. Apple is holding its annual investor meeting today. There are a couple of key issues that investors want addressed by Apple Chairman Tim Cook. One is, what is Apple planning on doing with their massive cash holdings of $137.1B? Very little disclosed on that front. The second, what potential new products are in the near-term future for Apple? "Obviously we're looking at new categories -- we don't talk about them, but we're looking at them." Also, there were some rumors swirling around of a potential stock split, dividend or buy back that turned out to be unfounded. Today, we had an educational session in class to discuss the formation of synthetic option positions and potential hedging strategies using options. As an example, we used the ETF for Gold, GLD. The discussion was prompted by a theoretical position of being long 100 shares of the ETF. What are the options available to us to "hedge" this position? We identified three main options. 1) Covered call strategy... selling OTM call against long stock. This will give you small protection to the downside, some upside profits, but over the long-run, consistent profits if a stock goes up slowly. 2) If one was concerned about a significant price fall, then buying ATM put would probably be best protection. We also showed how this risk profile is exactly that of a "naked" long call strategy. We have defined loss if we go down with the ability to profit in the event of an upside move. Lastly, we discussed the scenario where one is concerned about a significant price fall but wanted some price appreciation in case stock rose... AND options price are expensive. Then a "Collar" strategy of selling OTM call, buying OTMput for close to zero premium could be appropriate. |
FOREX: Currency Spotlight ---Ed Moya
| | Yesterday the dollar lost the battle to its major trading partners with the exception of the Japanese yen. The story was pretty much the same with Ben Bernanke's second day of testimony to Congress, with the exception that he sounded more upbeat on the U.S. economy, with the exception that stimulus may stay in place a lot longer as unemployment may stay above 6.0% for a few years. The rebound in the Canadian dollar was triggered as risk appetite remained strong during the U.S. session. The rally however, may not have much follow through as economic growth is expected to be hampered by the overvalued housing market in Canada. A 10% overvaluation is the start of a nice bubble, which will eventually hurt economic growth and prevent the central bank from any rate hikes in the second half of the year. On the other side of the Atlantic, ECB President, Mario Draghi reminded us that the central bank will continue to try to bolster the economy with low interest rates. They however, are not expanding their balance sheet in the same manner as the US, China and Japan. With 1.30 holding on EURUSD, shorts will be squeezed potentially a little further. The euro did also get a little boost with a very good Italian bond auction on longer-term debt. With the ECB able to buy the short-term debt, this auction was pretty significant. Over the next couple of days, the outcome of the Italian elections will once again hamper the euro rally. It is starting to become less likely we will see a coalition with Bersani and Grillo. The hopes for the Italian parliament does not bold well for Bersani and Berlusconi teaming up. The euro may be stuck in the 1.30 -1.3250 range for a bit longer. |
STOCKS: Watch List ---Charles Moon
| The Bulls are in total control of this market and there is no end in sight. Big gains today as stocks surged on good data coming out early. Better then expected housing numbers again have helped fuel the rally. Stocks have launched with this news as we saw strong moves in stocks. This was followed by sustained support climbing higher as the price of the stock went up. That is a very bullish sign and if this continues, we can have a strong push here leading into the end of the week where we face the Sequester deadline.
Ben Bernanke spoke again and reiterated his stance on Quantitative Easing and the market flew up. As long as he is in favor of QE, the market will still trudge higher as there is no fear of a sell off. With 85 Billion funneled into the market on a monthly basis, why should there be fear? This can't go on forever and I assure you, if they announce that they will be ending QE, that is when we see a correction for the ages. Watch out below as the market will tumble severely. He did hint at 2016 to when it "may" end, but again if this is tied into the unemployment rate, then with our leadership in the Oval Office then 2016 will be the very earliest this will end.
I still maintain my stance to keep a short term mentality to investing in the market leading up to the deadline. We do not know how the market will truly act, and you do not want to be caught on the wrong side if the market reacts violently. It is never a good thing to get caught with your pants around your ankles, no matter what the situation maybe. I do think there will be resistance at 14k in the Dow, and historically this year, anytime we have closed above 14k we sold off the following day. Lets see if history can maintain the fight against the FED rally. Open Position: ABT X Stocks to Watch: AAPL GOOG IBM AMZN PCLN BBRY FB CTXS BAC C GS CMI CAT NFLX WDC LULU LNKD DIS KORS FOSL X QCOM STZ NKE CHKP JNPR POT GMCR HLF ABT LOW HD LEN TO
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FUTURES: Technical Data
| | Value Areas: ES 1516.25 / 1500.25
POC… 1516.00
YM 14061 / 13929
NQ 2754.00 / 2720.50 | NOTES FROM THE PIT
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| COMMODITIES: Play of the Day ---Patrick Assalone | U.S. crude stockpiles rose on higher imports last week while oil
product inventories fell, according to data from the American
Petroleum Institute. The point of control for the contract was lower
on Wednesday than the previous trading session signaling a downward
intermediate trend. Based on our teaching methods, we would be looking
for short signals below the contract low or up near the top of the
current high volume area. View Video Here
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