The first couple of inputs this morning make the ‘rally on’ outlook from Monday’s report even more likely as the trading for the holiday-shortened options expiration week gets underway today. Just to line up my major data points that led last week to my exiting a profitable small trade in BofA call options (perhaps prematurely) was my ‘gut’ feeling that since the market has come down hundreds of points since last month’s option expiration, that there’d be some efforts to run things up prior to Thursday’s index options expiring and Friday’s expiration of regular share options.
As my (commodity) broker JB observed “Options expirations tend to happen where they will cause the ‘most pain’…” [His daily preopening notes can be read here...]
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This being Fat Tuesday, there are all kinds of national events going on, but I’d be satisfied with just a small parade of Brinks trucks coming up our county road bringing me dough from options trades…not even a big parade. Do I seem greedy? Three or four truck’s worth is all I’m after….or one $50-million lotto ticket…whatever…
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What this rally into options expiration means is that the number of losers will usually be maximized – or near enough to it – and paying off on tons of put options (where people make money when a stock, index, or commodity goes down) just isn’t what floor brokers like to do. How to avoid paying off a lot of short-side speculators? Jam up the prices so those put options become worthless, or about balanced off with losing call (upside) options.
Fast forward to this morning’s headlines and the pieces are in place:
- Gold was up more than $10 when the coffee hit, and since there is sometimes a 10X/10-times correlation between stock prices and gold’s advance, a hundred point pop up today in the Dow certainly seems possible.
- Counterbalancing that might be the rally in the Dollar which is up as Europe is going through its pain of Greece’s “Zorba The Spendthrift” which has “hot money” reconsidering the recent trashing of the dollar.
Of course, the dollar had already turned as I explained to Peoplenomics readers on Sunday, as evidenced by something I call my “Global Index”.
It’s a very long-term chart that shows the aggregate price (in US$) of global stock prices on an equally-weighted basis. Basically, when the price of global stocks is going up, that’s the time to be long (betting foreign markets will keep rising). On the other hand, since this index has recently turned down (meaning foreign stocks may get cheaper in dollar terms) this isn’t a bad time to be in US holdings.
As neat and simple as these relationships may appear in a long-term chart, in the very short term there are bumps along the way since global market linkage is a little more ‘noisy’ than might be expected because global flight of ‘hot money’ has certain vagaries that are hard to pin down because of a whole ton of factors, not the least of which are different exchange hours as the craps game that is money rolls around the planet, and then there’s the socialization issues of how other cultures become attached to trades.
Still, a thought-process model I proposed looks something like this:
Since we still have Greece/Euro issues weighing on the Euro vs. dollar teeter-totter, we would expect gold to be up early (left teeter-totter and Eurozone currencies/bonds to decline early), but at the day rolls on and Fleet Street precious metals and markets close, then gold ought to fall back with a USD and bond rally, which could pair some of the day’s early gains in stocks.
As I said yesterday, however, “Except: Life ain’t never that easy.”
Since ‘hot money’ isn’t always hot and liquid, there is are also natural cycles that muddy this up due to a host of different reasons. Money held overnight might be though of as thin motor oil or watery in its consistency, while 30-day holdings might be akin to 40-weight oil, the 6-month notes maybe 90-weight oil and the 10-year money something like molasses.
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Understanding how international money flows hither and yon would be ever so much easier if global markets had one session time, instead of rolling around the planet and if all investments were of a fixed duration, say one-year. But, no one listens to the lone nutter in the East Texas outback on such things, so I sit out here reduced to heating and cooling motor oil to figure out where markets go next.
A couple of teeter-totters with goats on ‘em, a couple of beakers of oil and a propane torch, and a glass of el Don or three while testing various possibilities is way more fun than differential equations any day and seems to yield much more enjoyable results, although one goat (now labeled “Greece” with safe food color) keeps jumping off the teeter-totters.
It’s this kind of thinking that prevents concern about my writings at the SEC although I expect my motor oil proxy for markets may raise a few eyebrows at the EPA and somewhere a bureaucrat at the USDA is no doubt crafting rules about labeling goats with food color when used as economic forecasting tools, but I figure this kind of furry abacus system shouldn’t be regulated, although everything else in America seems to be nowadays..
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If you don’t have goats or particularly good skills in differential equations, you might want to read up on hidden pivots in trading – and as taught by my friend Rick Ackerman. Start with a Google search like this one or go read Rick Ackerman’s site.
Yes, the global economy is going to implode (since the advantage of offshoring is only temporary and as foreign labor gets pricey, there goes the incentive), but as long as it is, making a few gazillion along the way isn’t a bad thing per se.
Web Bot Run
We continue picking up snips and bits of data now that Cliff’s web bot spiders are running data which will result in a new forecast out of the ‘rickety time machine’ somewhere around March 21 (plus or minus a few days).
There’s an interesting snip or two already – about how a new book due for release shortly will reveal that about 20% of the earth’s land is owned by something like 26 people. That -<— right there – is what happens when globalists get more money than sense, but who ever said humanity had to be connected with wealth OR claims of dominance over indigenous people?
But back to point: We’ve been watching for ‘swine flu’ jitter to pop out temporally along around Winter Olympics time and look here: “Swine Flu outbreak Threatens at World Cup” says a NT Times report.
Coupled with the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) of Eurozone financial concerns and I’m beginning to wonder “Were the linguistics right and our interpretation of the data – wrong???” More insights come March. Although economic calamity is due long before then, which is why I’ll probably enter short positions this week, depending on how the rally goes.
Tourist, Maybe?
Remember how I’ve been telling you to watch for AQ fighters to show up in Pakistan (since they have nukes, manufacturing, lots of people and some resources)? Seems that a “Taliban deputy ‘seized’ in Pakistan” is being reported by al Jazeera which in turn reports on a NY Times story, which is in turn based on intel claims….
What was he doing there? Sightseeing? Suspicious-minded readers have noticed something, too…
“Hey George , Have you been following the raid of that city in Afghanistan ? Hard not to for me . I actually get footage of the battle on TV . And being that I can’t remember the last time I had actual footage on the news it got me thinking that they are going to catch a high level target in that city .Could be a component in a terrorist plan like a piece of a dirty bomb that would have been used on us or maybe it is bin laden himself hiding there . Alls I know is , when the MSM starts showing coverage of war , when they never have before it tells me something big is going down there . I could be wrong but my gut tells me it is so . Especially since they closed all of the escape routes before they went in . – Later – look forward to today’s article…”
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Speaking of news coverage: Gotta give a compliment to MHz Networks for running live (unedited video) coming off the Belgium train crash on Monday. Better than most American network coverage which is why we keep our free-to-air satellite monitoring up…
Looking Forward to Friday’s CPI
That’s when the latest update to the statistical fiction called the “Consumer Price Index” is issued by slapstick government here in The Colonies. Already, though, the Brits have announced their latest CPI and one can see price pressures building like crazy.
While some of the British moneychangers are writing up explanations, the fact of the matter is that as consumer prices go up (declining volume in consumer goods means there’s fewer units to spread excessive advertising costs over, and so forth) they will eventually be passed along to the lowest levels of the food chain – namely, you and me.
That’s why we’ve seen a short-term pullback in gold prices – and there may be more of a pullback over time, over the longer haul of history, the government has, since 1913 been diluting the purchasing power of money on average 2.3% per year.
You want to pass along something really subversive (but true)?
“Prices don’t go up. Money gets watered down. ”
The whole financial industry wants you to watch the right hand (of prices) because their left one (holding the money) is in your pocket stealing your life savings.
Bayh The Wayside
Another one bites the dust as Birch Bayh of Indiana is deciding not to go back to the trough again.
Probably a whole slew of reasons: The Obama agenda failing (although the republicorps have held up many nominations which in turn cripples the agenda). Still the ‘throw ‘em all out’ at the next election mantra is going viral.
Not without good reason, either.
Look Out Apple?
No, I have no clue why Microsoft would roll out its new Windows 7 mobile phone in Barcelona, Spain, (I’m guessing maybe that people in MSFT marketing don’t read about national budget issues…Rolex World Cup of horse jumping Vigo, Spain a key market maybe?…whatever….) nevertheless still looking pretty neat and at least something different which is more than reviews have been running on the other phoneberries.
Not that it matters out here in the “Land Cell Service Forgot”, mind you.
Maui Wowie?
Hawaii has topped Utah as the leader in the national well-being index. Could this be caused by 420 reasons?
Let’s think this through: If you weren’t so old, where would you choose to party? Salt Lake City or Honolulu…tough choice, is it?