BP'd Again?

Alot of similarities to last Wednesday when I had the post BP'd. Market looked like death at the end of the day before with all the news on BP. Just like today.

Last Wednesday I wrote:

Part of the problem for the bears is yesterday we were going down for the wrong reasons for the drop to be actually legitimate. Yesterday it was all about BP and the oil trade. Oil companies (basically all of them) got slaughtered. This weighed on the markets until it finally drug the entire market down. The market got BP'd. It isn't about BP though. If the news is all about BP that is bullish because fundamentally BP doesn't matter to the broader market. Europe has very quietly dropped from the financial headlines. BP is everywhere. That is bullish because it is Europe and the financial system which is going ruin the system.

And here we are again. Today was largely about BP. Where we BP'd? I could be wrong but I am going to guess no. I think the probabilities set up where tomorrow we will make a run at and this time break 1040. It may not happen but the odds favor it.

First, this was a massive sell off at the end of the day which is never good. We fell 150 points to close near the lows. The market cannot catch a bid. Investors just are not interested in buying. Volume picked up as the market was selling off. This sell off looked very ugly.

Two, more rumblings out of Spain with banks supposedly cut off from the capital markets. This can't go on for long. The more ignored it today? Will it be able to continue?

Three and probably most important is that at 2:30 p.m. Central European Time Trichet and the ECB Vice President will explain the Governing Councils monetary policy decisions and answer journalist questions. So far everytime Trichet opens his mouth it has been very bad for the markets. Unlike Bernanke who is the market whipping boy Trichet almost seems to have a vendetta against the markets. I think if the markets are not down within an hour or two of this speech, than I will reverse course in thinking a 1040 break is imminent. So what time is 2:30 p.m. Central European Time? From what I can tell it is 7:30 a.m. central time here in the U.S. The risk of course is that this time Trichet does change his tune and the market spikes. You should know before the market opens. If we bounce we have no business going back above 1070 for this scenario to play out.

So what happens if we break 1040? HA!!! I have no idea. We could quickly go to 950 (over a few days or a week) we could bounce off of say 1000 to 1020, you had so much selling to get through 1040 that you have selling exhaustion and now you bounce back to 1100. Maybe it picks up steam and we are headed to the 800s by the end of June. It seems the likelihood is we have some sort of mini crash of several percentage points before coiling up for a big bounce since we it would be adding extreme oversold conditions to already oversold conditions. I have no idea though.

Europe was up today fairly strong after being down 3 days in a row. Those three days were vicious as France lost 5%. It would seem Europe would need another day or two to bounce. Maybe it bounces into the afternoon until Trichet starts talking and sells off like the U.S. did today going into the open for the United States markets?

I was shorting today as I said I would once we got above 1070. As we started selling off I started adding even more. Tomorrow if my scenario doesn't play out quickly I will look to take some of this off (go from more short to just less short). I don't think we have any business going back above 1070.

I am dealing with probabilities. This break of 1040 isn't a "call" by me but just trying to say the probabilities for tomorrow and Friday are very high. I will make the call (and this I think is the key) if we break 1048 that we will break 1040 this time. I don't think the bulls can hold it a third time.

China Real Estate Coming to A Screeching Halt

I have been giving alot of short term thoughts lately because when the markets go down it is alot more tradeable than when the markets go up (moves are magnified). However, lets not lose the forest among the trees. Fundamentally, things are deteriorating and that is what I am basing my investment thoughts on. These numbers out of China are just jaw dropping. Sales volume 50% from the previous month? Prices down 10% from the previous month? WOW!!

From The China Daily.

Property sales in China's major cities of Beijing, Shanghai and Shenzhen dropped in May, with house prices declining as well, the Economic Information Daily reported Tuesday, citing data from a real estate brokerage.

Sales volume of new properties in Beijing in May fell by 50 percent from the previous month to 9,639 units, while the number of properties resold hit 14,501, a decrease of 58.5 percent, according to the real estate brokerage Century 21 and bjfdc.gov.cn.

Sales volume of the city's new residential properties fell by 47.8 percent to 6,360 units in May, while the number of homes resold dropped 58.8 percent to 13,545 units.

Shanghai witnessed its secondhand home transactions dive 69 percent from April, and decrease in this sector in Shenzhen was 24.1 percent month-on-month, according to Century 21.

Meanwhile, statistics from China Index Academy show that among the 30 cities it tracks, 29 met a decline from April, and house prices fell in most of the cities, with Beijing and Shanghai declining more than 10 percent.

More Churning

It was as I speculated yesterday, the markets were to oversold to muster enough juice to get through 1040. We went down twice and amidst some heavy thrashing bounced both times. Going down the second time threw me for a loop because once we bounced I figured that was it. I was covering quite a bit at the open though looking back I obviously wish I would have done more but it gives me some room to look at adding short exposure between 1070 and 1100.

Besides some outright crash the best scenario for the bears is to bounce around here for a day or two staying below 1070 and especially 1080 working through some of the oversold conditions building up energy to really bust downward.

I passingly glance at technicals and my technical friends are being very vocal that the technicals are saying to buy for a decent bounce. Makes it very tough because we are coiled up to the extent where the wrong piece of fundamental news sends us crashing down. I would say technicals over and over again had sell spots during the 2009 rally and the market just kept powering higher. Why it is easier to be a fundamental person because if you get your timing wrong but are still fundamentally right you can just sit awhile.

There isn't much economic news this week though you do have some numbers coming out Thursday with the jobless claims and Friday with retail sales and consumer sentiment. With no real economic numbers tomorrow, unless something develops out of Europe we should continue upward tomorrow I would suspect.

Grinding Lower

Alot I could write about. This past weekend the news was very bearish for equities and the world economies. The G20 ended up a disaster with no one being able to agree on anything and indication that governments were going to tighten anymore. This means less stimulus elixar moving forward. Supposedly there was heated debate in South Korea at the meeting. Than reports of a German court considering an injuction against the EU rescue package. The futures were way down over night only to bounce back with the markets actually opening up before rolling over and giving it all back.

Just like last week when we were up at 1105 and I said we really had not gone anywhere, this week we are right back to where we were two weeks ago. Around that 1140 to 1160 area. The markets really continue to go nowhere though I am sure bulls and bears are feeling huge moments of exhilarition followed by worry. We are still very oversold. In fact one could make an argument that we are even more oversold than when we were here last time a couple of weeks ago. I know that doesn't make much sense but the day was so bearish on Friday with so much selling that it put a large dent in selling potential while only getting us back to where we were two weeks ago.

The line in the sand is still 1040 for the bears. Unfortunately for the bears, I am not sure there is enough dry selling powder to power through it on the downside without first bouncing. It would take a massive selling event to break through and despite the end of the day today it doesn't necessarily look like there is massive selling available without some major news.

Ahh but major news we could get. Just from a bears perspective it is hard to bet on the timing of such news. There is alot of debt being issued in Europe this week by the likes of Belguim, France, Germany, Austria, and Spain. Problems in those bond auctions could definitely cause the next batch of selling.

On the upside I would start getting nervous if we were able to power back up above 1070 and than 1080. That is 20 to 30 points away so somewhat of a cushion where the markets could sort of move up or bounce around for a day or two.

Fundamentally, the world is being roamed by grizzlies. Deflationary pressures is back with a vengence, world credit problems is once again showing its ugly head, and governments are starting to realize they can't spend their way to prosperity.

In the short term I don't have much of an opinion though I think at least for the next day or two it favors the bulls unless some major news out of Europe once again dominates the headlines.

A Tribute to John Wooden

Today, America lost one of its greatest minds, one of its greatest teachers, and one of its greatest heroes. I have always had an obsession with those who lived wisdom, who were truly exceptional in an understanding outside of themselves. Benjamin Franklin, Warren Buffett, Charlie Munger, and Albert Einstein would be part of this very small list. Maybe above all of them was a man named John Wooden. A truly remarkable individual who became the undisputed symbol of excellence in his field of coaching as the UCLA head basketball coach. He became known as the Wizard of Westwood. He won 620 games in 27 seasons and ten NCAA championships during his last twelve seasons including seven in a row. He had four perfect season and a record winning 88 games in a row. He was the first person to be added to the basketball hall of fame as a coach and a player and was named the Greatest Coach of All time in 2009 by The Sporting News.

But he never defined success as winning. He never discussed winning with his players. He took teaching his players about life as more important than teaching them about basketball. He was as quickly to quote Plato or Sacrotes as he was to discuss basketball strategy. He put the highest emphasis on love, faith, and family.

Rest in Peace John Wooden. You were truly an amazing individual.




To hear John Wooden speak is to get lost in another realm of wisdom, of understanding. There are many videos out there about John Wooden. Below are just a few. Here is John Wooden's official website which has many other videos of him.

John Wooden Introduction



John Wooden on Success and Life



John Wooden Love Letter



John Wooden (1910 - 2010) The Final Tribute

Europe CDS - Lights OUT

Sorry - Can't get this to format correctly. You will get the point. Look at the percentage change!!!!

Entity 5 Yr Spread Change (%)Change(bps)

Austria 95.44 +23.33 +18.05
France 102.11 +22.19 +18.54
Germany 52.04 +18.70 +8.20
Belgium 130.33 +18.27 +20.13
Sweden 43.32 +15.89 +5.94
Spain 295.47 +15.25 +39.09
Ireland 297.60 +14.51 +37.70
Finland3 4.28 +13.87 +4.17

Horrific Jobs Number

Compared to what the market was hoping for, pricing in, counting on to save the world this is a freaking HORRIBLE jobs number. Increase of 431,000 (there were rumors of 700,000. Huge consensus miss!!. Even more important is that U.S. private sector (so ex census workers) only up 45,000.

Market will be down over 3% today. Futures TANKING!!!!!

Europe is Back ALL Over the Headlines

No more BP. Europe in the headlines is everywhere this morning as Hungary is falling apart spreading to Austria, Spain bonds are blowing out, along with cds from some of the major countries (i.e. Germany and France), and Euro approaching 1.20. We are 15 minutes from the NFP report. It doesn't matter. Futures down but holding in there compared to news flow ahead of this report. If this number does manage to get the market positive you sell it.

BP'd

The last few days have been terribly frustrating for investors - bulls and bears I am sure. A drop yesterday that looked deathly which mauled the bulls followed by a day today that took a chunk out of bears. Today was even worse because it looked like we were rolling over I am sure catching alot of people off guard on the wrong side of the trade. It has alot of investors/traders doing the wrong thing at the wrong time.

Part of the problem for the bears is yesterday we were going down for the wrong reasons for the drop to be actually legitimate. Yesterday it was all about BP and the oil trade. Oil companies (basically all of them) got slaughtered. This weighed on the markets until it finally drug the entire market down. The market got BP'd. It isn't about BP though. If the news is all about BP that is bullish because fundamentally BP doesn't matter to the broader market. Europe has very quietly dropped from the financial headlines. BP is everywhere. That is bullish because it is Europe and the financial system which is going ruin the system. As I talked about several days ago, Spain is a major shoe to drop. Is it now or is it like Greece in February and it can be ignored for awhile?

Rumors started floating around during the day about how unbelievable the jobs numbers is going to be on Friday. Rumors ranging from 700,000 to 1,000,000. Vice President Biden and President Obama mentioned the number today also very likely adding to the probability of what an eye popping headline number it will be. Of course jobless claims have stayed above 400,000 and really over 450,000 for months now. Most of those jobs will be added census workers which will be a negative starting in July. I fully expect this to be a buy the rumor sell the news type of number. That makes tomorrow being up a high probability and even a gap up on Friday. If you get that you sell into it. Easy trade.

What the market is doing helps the bears if it doesn't get out of hand. We got way way oversold and we are working off the oversold nature with the markets going nowhere. We are right back to where we were a week ago. The danger for the bears is Europe starts quieting down and we have a month or two before this whole thing starts really turning. The world economies do seem to have peaked out and slowing but it takes time and the markets may have gotten ahead of themselves. 1105 now is the 200 day moving average. Heavy resistance around 1110 to 1115. You break that in a meaningful way and it seems 1140 to 1150 becomes likely. On the downside 1070 followed by 1040 seem to be the lines drawn in the sand.

If your trading it and we open down tomorrow for any reason I think you do lighten up on the shorts expecting a reversal rallying into Friday mornings number. If your more like me sitting tight isn't bad either seeing if 1110 ish holds.

One other note of interest. Yesterday the Prime Minister of Japan resigned. This started greatly weakening the yen because the new candidate supposedly is in favor of quantitative easing and a weaker yen. The important indicator the last month or two has been the yen/euro cross. If the yen strengthened the markets went down as derisking was occurring. Well now you have the yen weakening. I think the decline in the Euro may becoming to an end for awhile though another low towards 1.20 is decent odds. Everyone is on one side of the trade and it is the game of the ugliest pig. The Yen could be chosen as that pig for a little while. I just think you could see a move towards 1.40 for the Eur before long. This could mean one of a few things. One, the market will settle down and make a trek for 1140 as the carry trade is back in favor. Two, Japan could become a systemic issue for markets after many years of pushing off the piper. Three - the entire correlation of the Yen/Euro cross may break down.

Goldline - Stay Away

My respect for Glenn Beck has dropped alot after getting caught up with the whole Goldline thing. Cogressman Weiner has polticized it but Beck shouldn't have gotten involved the way he has. I have only passively followed the whole thing but this video by Peter Schiff does a great job explaining why goldline is the last place you want to buy gold from.