Friday, November 21, 2014

11/21/14 Night Moves

https://www.youtube.com/watch?v=bgOA24hAe60

China surprises with its first interest rate cut in two years.  Europe lifts as Mario Draghi vows again to put the pedal to the metal.  The cross currents are multilayered and (in some cases) counter-intuitive:

The $USD soars +0.6%.  The Euro plunges -1%.  Regardless, both crude and gold spike +1.7% (presumably on expectations for higher demand as stimulus kicks in).  DJIA +150.  EEM +2%.  XLE +1.7%.  Miners +3%.  Bonds marginally higher.

Had I held all positions into Friday, my gains would have doubled.  But that's water under the bridge.



46 comments:

  1. MADRID (MarketWatch) -- The European Central Bank said Friday that it has begun buying asset-backed securities, as seeks to get banks to lend and revive the economy. "Following publication of legal act on the implementation of the ABS purchasing program, the Eurosystem has started the purchases on 21/11/2014," the ECB said on its Twitter feed. The purchases are expected to last for two years, Draghi said at a press conference in early October. Earlier in the year, the central bank laid out plans to buy asset-backed securities and covered bonds, dubbed private or mini QE. Investors have had the general idea that the ECB was looking to boost the bank's balance sheet by around a trillion euros ($1.24 trillion). At a banking conference in Frankfurt on Friday, Draghi said the central bank will "do what it must" on asset buying to lift inflation.

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  2. Europe and Japan racing to devalue their currencies. Just amazing.

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  3. The economic 'reality' driving the overnight stimulus announcements? China is slowing, and Europe is in recession. A stark reminder that stock markets and economies are two different animals. Stock ownership is concentrated (only 50% of Americans own stock, and I would guess 80% of assets are held by 20% of investors), and Wall Street earns while Main Street burns.

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    1. I think the way this cycle is playing out is the US took the hard hits first and now is on its way to full recovery. Demand from the US will help Europe and China who will follow to recovery in the next few years.

      Long cycle this time, but the market doing well with it.

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  4. I worry about the %US squeezing those who owe debt in $US, LOL.

    ING - BB's are rather tight, looks like the result will be another leg up if stimulus actually succeeds?

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    1. ING had a great run more than doubling from mid-2012 into 2013 and has spent 2014 range bound working this off. Not sure when, but I expect this to resolve to the upside due to fundamentals and valuation.

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  5. My brokers site is down now, sheesh...

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  6. Reopening a small position in HDGE @ 11.34, now trading at its all-time low.

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  7. Can't recall if I mentioned we placed a small order for silver Canadian Maple Leafs earlier this month (spot silver was 15.4x at the time). Based on this morning's listed price, they've appreciated +11.2%.

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  8. AEG - Closed today's gap up obligation and immediately lifted from there, looking good.

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  9. Opening a small position in EEV (ProShares -2x Emerging Markets) @ 17.83 (-5.3%). Small b/c it's dangerous to short into a short squeeze, and with only an intraday time frame.

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  10. MAT - Ho, ho, ho, whoa, what? No Christmas?

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  11. With the first hour of trading well behind us, let's take a look at 'real' pricing:

    (a) XLE well off its earlier highs, now +1.1%.
    (b) Crude also well off earlier highs, now +0.7%.
    (c) No change in bids for the $USD or the Euro. If anything, earlier moves have extended (+0.69% and -1.13%, respectively). Not really surprising, as currency and bond traders represent the 'smartest' (and least emotional) in the room.
    (d) TLT (the long bond) is actually trading higher by +0.3%.
    (e) Miners (usually negatively correlated with the market) holding @ +2.6%.

    Mornings like this are 'an easy sell,' but 'a difficult buy.' It's dangerous to chase (never my strategy), and pointless to become emotionally engaged. Patience is the correct stance.

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    1. (a) XLE now just +0.5%, OIH (Oil services +1.3% versus earlier highs of +%).
      (b) USO (Crude) now FLAT!
      (c) TLT +0.33%.
      (d) Miners RED!
      (e) EEV now 18.

      Preparing to take an intraday position in miners...

      (I'm on vacation this week, which explains the real time play-by-play).

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    2. GDX/SLW/Goldcorp @ 19.7x/21.2x/20.5x...

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  12. Sold out MDW for small loss, stock just trades to thin and I was tired of seeing it up/down 12-14% every few hours/days.

    Plus I think tax loss selling is still to come. Production should start 1Q 15

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  13. Thank you government, for allowing us to pay you to keep from tearing our families apart.

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  14. (a) GDX/SLW/Goldcorp off @ 19.82/21.42/20.54 for minimal gains,
    (b) EEV off @ 18.01 (+1%).
    (c) TLT now bidding +0.45%. Still looks like 'the real deal' to me, although I now plan to close RYGBX (Rydex 1.2x Government Long Bond) end of day.
    (d) DJIA +63, SPX +6> both giving up >half of earlier gains.

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  15. From a common sense perspective, what's really going on today?

    (a) China and Europe have effectively signaled further stimulus.
    (b) This has resulted in a stronger dollar.
    (c) A stronger dollar SHOULD result in lower prices for commodities (including crude) and precious metals.
    (d) A stronger dollar is usually positive for US bonds as well.
    (e) A stronger dollar usually supports foreign export markets, a positive for export economies in the Emerging Markets.
    (f) On the other hand, Emerging Market economies often export commodities as well. Those commodities are under pressure.

    I understand the bid under Emerging Markets today, and the bid under US bonds. Apart from short-covering, it's more difficult to 'buy' the bid under commodities, precious metals, and US stocks.

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    1. Could be gold and other hard assets are higher even with the higher dollar due to more money printing around the world.

      I know my gold bug friends think that all this printing end is the destruction of all currencies and gold being the ultimate winner.

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    2. The problem is that gold is priced in dollars, and (a) the US has effectively ended QE + (b) it's the $USD that is lifting today against the Euro.

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    3. Don't let facts get in the way of a good goldbug conspiracy theory

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    4. Dollar might stall here at resistance of 10yr channel, Euro might actually rally on euro stimulus (as capital rushes into Europe)? Gold could rally a bit but why play that angle against the $US when commodities should be in demand?

      There's no real reason to suspect Armageddon but commodities demand should have a tailwind?

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  16. Reopened EEV @ 17.67 (sized down, of course).
    Closing RYGBX (Rydex 1.2x Government Long Bond) end of day.

    I could open RYWYX (Rydex 2x Inverse Emerging Markets) as well, but the twice daily trading window is too restrictive for a position that could move against me at any time.

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  17. Some comments from a Market Profile trader ...
    https://twitter.com/verniman

    $ES_F Today's high has requirements for temporary top: All time high made at RTH and excess (single prints-big tail)
    http://stks.co/i1KnZ

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  18. FCAU- Is this pig halted or something? My eyes are bleeding.

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  19. PCRX, re-bought 88.78, another one that's hard to buy on B/A spread.

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  20. Maramba woke up Brasil.

    https://www.youtube.com/watch?v=F0_4iOK1Xbk

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  21. RYGBX closed up +0.88%, much better than expected!

    Of all the positions I closed yesterday, the only one that inspires regret is RYWVX. Even with just 12.5% of the portfolio invested, today's +7.69%! gain would have added another percentage point to YTD performance.

    Things could be worse. Despite the global rally, ATACX closed up just +0.16% (a beat higher than my gains today). HSGFX (Hussman Strategic Growth Fund)? Down -0.22% and a penny above it's all-time low.












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  22. Iran - Hmm, lifting sanctions on Iran will allow them to ship oil legally....

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  23. Who will build the pipeline (general contractors)?
    FLR - There's a gap down from ~$77
    PWR - Moving up slowly as well

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