The Builders: Trump, China and the Depot (HD,XLP,XLY,XOM,USO)

When the FBI demanded access to Apple’s encryption technology to unlock the iPhones of the San Bernardino terrorists, we were disturbed.  As far as we were concerned, Apple’s refusal to empower an already intrusive surveillance state was commendable. But others saw it differently.   Donald Trump, for one.   Trump went on the offensive, saying we ought to use ‘common sense’ and give the government what they need to fight the bad guys, to know if there were accomplices, etc. And that would be a great thing – to catch the bad guys. All of them. And lock them up.   But there was something unsavory about Trump’s appeal and his further suggestion that we boycott Apple products until they comply with the government’s dictate. To our minds, there’s something resolutely hollow about a government’s claim that privacy must be sacrificed for the sake of criminal justice.   In our experience, there’s always a larger, unaddressed problem that necessitates the need to pursue this type of ‘justice’. Somewhere, there’s a faulty policy, a bad practice, poorly conceived laws or just plain wrongheadedness that sets us up for intrusions of this sort, that allow, for instance, the state to listen to…

Read More

Short Squeezes and Nipple Piercings (USO,FAS,BAC,GLD)

Oh, my!   We’re pushing the bullish story here, not – as some have averred – because we’re perma-bulls; we’re patently not. We’re not perma-anything.   We’re chart watchers. When the charts say buy, we buy; when they sell, we sell. And when the underlying monetary and fiscal reality is pushing the same story as the charts, then we have absolutely no problem piling on and encouraging one and all to join us.   Today, dear friends, the charts are bullish, the sea of money floating into the investment arena is bullish, and – one more important detail – we’re now experiencing a tremendous short covering rush that will only add to the momentum.   New highs? Dow 25,000?   We don’t know. But it’s clear from the sheer number of traders who are short, that this particular cog in the bullish engine could gun the indexes higher for weeks, at least.   Consider –   Back in the summer of 2008, before the financial meltdown of that year was in full swing, short interest on the NYSE hit a record high. That means that a whole lot of very smart investors made one chicken-skin boatload of cash betting on…

Read More

Taking a Stab at Oil (XOM,USO,HD)

We’re in the middle of a bounce.   We don’t know how long or how high it will carry, so until we see genuine technical signs of a continued bull, we have to be guarded.   That said, we bulls still have a few key indicators on our side.   The first is sentiment, which is dreadful. No one is happy, the world looks increasingly dangerous, protest candidates are surging, and the last thing on the minds of Main Street investors is shoveling more of their savings into equities.   Fair enough. We track AAII sentiment numbers precisely for moments like these. We’re now in the pit of sentiment hell. It can’t get any worse.   And that’s a plus from a contrarian standpoint. Simply put, it means nearly everyone who wants to sell has already done so and is expecting calamity. And that’s precisely the point at which the smart money buys. But what if it’s just a temporary bounce that fizzles?   Then so be it. We’ll see what happens to sentiment as the indexes do advance. If they remain painfully pessimistic, we’ll remain chuckle-dee-do.   Another Plus   Consider also, the market has done little to nothing…

Read More

A Watched Pot Never Boils (USO)

Not just another useless piece of proverbial folk wisdom, friends; this one has some real cachet – and for market watchers, too.   In fact, consider it an iron-clad rule of investing for all traders at all times that when everyone is looking in one direction, right behind their backs something big is about to happen.   And not only that…   The very thing they’re so intent on gazing at… won’t do anything at all. That’s just the way it goes, Lilja.   And so it is today, when every broker’s trading screen has been configured to feature oil and China prominently. We can’t, in fact, remember a time in the last decade, when every man Jack was so fixated on just two aspects of the global economy. But that’s where we’re at. Not even time to peek at an old episode of the Flintstones.   It’s that bad.   And again, it’s for precisely that reason that both oil and China will muddle about at their current levels and move not a whit for the next month at least. Until all the blowhards and strategists and other assorted rapscallion weasel know-it-alls have exhausted us with their wisdom and…

Read More

Playing a Near Term Bounce (UPS,HD,USO,XLE,DIA,UCO,EWJ,HYT)

Before we look at a number of trades that came due with the January options expiration, just a quick word on the stealthy manner in which the market operates.   We say ‘stealthy’ as if the market actually had a mind of its own and some sort of character or personality, but it’s not actually the case. Well…   What is true, is that at any given moment the market takes on the personality of its participants, morphing into a being completely different than it was an hour or day or week before as the collective inputs of traders large and small, all their fears and desires and greed and loves and hates are amalgamated into what we call ‘today’s market’.   It’s a monster of our own making, really, and somehow (don’t ask exactly how this works) the beast always knows better than any con man or thief how to separate us from our hard earned cash. That’s in fact the job of the stock market – to reach deep into your pocket and wrench from you whatever it finds there. So Vulgar!   It’s actually quite a sophisticated and smooth operation, which is why we use the term…

Read More

Closing an Oil Winner (FCX)

Before we dive into the cheesecake, a quick word on oil. We’re of the opinion that this week will tell the tale for oil for the next four to six months, at least. The charts show that both the United States Oil Fund (NYSE:USO) and the Select Sector SPDR Energy ETF (NYSE:XLE), the first a proxy for crude, the second a measure of big cap oil producers and marketers, are presently at tipping points, moments in their investment trajectories that could just as easily bring them into a deep swan dives – bear markets the likes of which we haven’t seen in the oil patch for seven years – or pull them higher into rallies that jolt the oil bears out of their languor like a metal spike in the shin. What’s most interesting about these two wildly divergent possibilities, is that the technicals are pointing toward lower prices for oil and the oil producers, while fundamental considerations – including the possibility of a widespread war that engulfs the entire Arabian peninsula – are militating toward much higher prices. Hmm… Let’s begin our analysis with a gander at the technical picture – This is the Select Sector SPDR Energy ETF…

Read More

Oil Back On The Rise

With last Friday’s options expiry we have six trades to report, a few of which put blockbuster gumbo in our pockets. We run them down for you now, one by one. Our first report is from our September 30th trade. The letter was called How to Profit as America Goes to Hell, and in it we recommended you buy CALLs on fast expanding restaurateur BJ’s Restaurants, Inc. (NASDAQ:BJRI), a company with a market cap in excess of a billion dollars that operates 150 restaurants focusing on deep-dish pizza and beer. Our argument at the time was that an entire cohort of unmarried twenty somethings were living at home, making a reasonable living and therefore had more funds to spend on slightly upscale fast food. BJ’s, we figured, was as good a bet as any. So we bought BJRI April 45 CALLs for $1.75 and sold the April 30 PUTs for $0.85 to offset the cost. Our total debit on the trade was $0.90 per pair traded. A month later, on October 28th, the stock popped, and as we reported in Making a Quick Killing, we sold the CALLs for $3.00. Last Friday the PUTs expired worthless, so our total take…

Read More

Three Mysteries of the Market Examined (DJTA)

We’ve got a few troubling questions that need answering, and if you can give us a hand, we’d be much obliged. To start, oil prices have dropped from near $100 a barrel last June to a low of just $45 a few weeks back. Transportation accounts for roughly 30% of the nation’s energy usage.  So it stands to reason that the transport sector should have thrived during this last blast lower in crude, no? Lower costs, higher profits. It’s gotta be… So what’s this? – This chart is a paste-up that compares the Dow Jones Transportation Average (DJTA) with the United States Oil Fund ETF (NYSE:USO), a proxy for NYMEX Crude Oil Futures. And it shows that something is quite clearly amiss. While oil fell some 43% over the period in question, the Transports rose … only 4.5%!? And nearly all of that gain came in the first three weeks (far left side of chart) of the time frame examined. Hard to figure what happened, but the DJTA have essentially flatlined while the oil world plunged. DJTA Should Have Surged… So What Happened? It’s a riddle.  And here’s another from our friends overseas. We know that in light of ongoing sluggish growth, the Eurozone central…

Read More

Overreactions and Oil (USO) Prices

Does it look like war? Sure smells like it. We’ll see how things shape up in the days and weeks ahead, but we have to warn readers that any kind of unexpected conflagration or a raising of the stakes in the Middle East or Ukraine could send an unwanted spook through the financial system. There’s an anxiousness in the air on Wall Street today that makes the market ripe for an overreaction. Stay tuned. In the meantime – until we see the whites of their eyes – we’re sticking with our story – This market is a bull market. It’s a liquidity driven market. It cares increasingly little for economics or corporate earnings, and As time wears on, we expect to see a winnowing in the number of issues that benefit from the growing inflow into equities. Now let’s look at some specifics. We’ve commented over the last few weeks on how dearly the market wants to see oil price stability before it begins to trek higher again. We’ve also stated that we believe that longed-for stability is at hand. Indeed, a look at the chart of the United States Oil Fund ETF (NYSE:USO) shows that we are in the midst…

Read More

Can Oil (USO) Overcome The Dollar?

Everyone’s talking about the US Dollar and Oil (NYSE:USO).  First, the greenback is subject to our musings. As you know, lots of people are asking a lot of questions about the USD. Will it ever stop appreciating? Will it soon correct? What’s behind the recent rise? Can Asia survive a strong USD? Could it derail the bull market? When is the time to flee dollar-denominated investments? A recent survey by Bank of America/Merrill Lynch of its best clients showed that by far the biggest concern of the company’s high net worth cohort was the strong U.S. buck. So we ask – Is there anything to this? Have a look at action on the Euro/Dollar since New Year’s – Impressive, no? Of course, much of the greenback’s gains against the Euro have come as the Greek predicament drew headlines, and the European Central Bank decided to go Full Monty with its own brand of Quantitative Easing (QE). The result was vast sums of European loot searching for a haven, and finding it in good ole’ US of A. But the truth is this – USO and the American greenback is but a side show in the great carnival that marks our times….

Read More

Powered by WishList Member - Membership Software
GET YOUR FREE SPECIAL REPORT:
"THE SEVEN DEADLY SECRETS OF CHINA"

GET YOUR FREE SPECIAL REPORT:

"THE SEVEN DEADLY SECRETS OF CHINA"

Enter your e-mail address to claim your FREE Special Report “The Seven Deadly Secrets of China”

You have Successfully Subscribed!