After shrieking that the homebuilders had bottomed on the Tuesday edition of his Mad Money TV show, Jim Cramer told his audience not to buy them on Wednesday. Crazy.
Cramer also said that the Fed was out to destroy the economy 1930′s-style with high interest rates. Two percent is high?
Picking on Cramer is too easy, but the man is so bizarre at times, that I just can’t help it.
But the most bizarre thing that I heard on Wednesday was on Fast Money. Quint Tatro admonished traders to conserve their “mental capital” so that they will be rested-up when the market starts “running.”
That’s a curious position to have after a sharp bear-market rally. And when you look out at the sea of weakening economic, financial, and geopolitical factors, you really have to wonder what kind of thought process goes into generating a worry that the market is on the verge of running away to the upside.
Watch the comments section for updates throughout the day.
Whoa tomorrow could get really injteresting with the employment report and…….By midday Wednesday weather forecasters were saying the storm could, as did Katrina and Rita, become a catastrophic category 5 hurricane with winds over 155 mph as it crosses the Gulf, which provides a quarter of U.S. crude oil production and 15 percent of the nation’s natural gas output.
“We do believe Gustav is going to emerge into the Gulf as a major hurricane, category 3 or better,” said AccuWeather Inc Forecasting Director Ken Reeves. “It has a chance for a brief period to be a category 5.”
A lot of big dumb money are spinning the media for a category 5 hurricane straight into the oil and gas fields.
Look for some hedgies to cash in before Monday and for Gustav to miss or come in at a lower category.
Futures soar on GDP 3.3
At these prices, a straddle on UNG may be the best way to play Gustav.
Qunit Tatro: I can’t belive that he is a money manager. His motto seems to be “buy the peaks.” Classic late-to-the party bull (or should I say sheep).
Nov 12: look at banks
http://www.minyanville.com/articles/C-jpm-bac-wm-wfc/index/a/14840
May 12:
EJ: down 50%
drys: down 25% (near the vey peak of a huge runup)
adbe: up 10% (finally…)
amd: down 16%
http://www.minyanville.com/articles/CHINA-AMD-drys-adbe-house-systems/index/a/17119
May 16:
GLW: -23.4% (the very peak of huge runup!)
FCX: -24.5% (near end of huge runup)
BBD: -22%
http://www.minyanville.com/articles/fcx-BIG-GLW-Derby-bbd-brown/index/a/17193
June 26:
MVL: – 16% (near peak)
STRA: break even
JASO: -8.4% (1 week after it peaked)
http://www.minyanville.com/articles/solar-JASO-MRVL-crash-technology-education/index/a/17755
His bi-monthly Minyanville articles have stopped. I would be too embarassed to show my face around there after stickers like these.
Jobless claims at 425k vs 427k expectations
1st quarter GDP increase: $119.6 billion
2nd quarter GDP increased: $161.7 billion
Stimulus checks total: $110 billion
Not impressed.
Hey guys,
XLF approching $21 resistance. Gradually entering in shorts at this time via SKF might be a good idea. Currently at $20.80 pre-market.
Thoughts?
I’ll probably get some XLF puts or SKF at $21, and then wait for the end of the day to see how it plays out: I think that there will be a morning spike and then a selloff, but you never know.
Just picked up a small position of SKF myself right now.
I just bought some SPY puts.
Waiting until until 11:00 to buy puts to what direction this market is going.Hate to get caught in a 250+ day
rut not participating today
I bot SKF 500 shares at 130. Tight stop below low.
CORRECTION – I’m sorry…I bot 500 shares at 123.30.!!!
George,
SKF is trading at 122-124.
I’ve got my mind on too many things. lol
bought a few DIA 110 oct poots @ 1.40
Matt, will time errode the value of SPY puts more than usual over the wknd or is that priced into the option? Do options lose value more over the wknd compared to overnight? thx
Double top intraday on SSO. If it holds, down she goes.
Charlie
SKF
You may want to wait to see if the SPX takes out 1292 and the oil report at 7:35 coming up to add to your position. If it does clear, look at 1294 as next resistance.
The 20 MA is 122.93, so my stop may be 122.73 if I get in above that.
waiting to see if spx breaks 1293; if it does then it is likely to re-test previous highs.
Does charting work on Ultras and Inverses? I figure that investors buy and sell based on the main Index/ETFS(SP500, QQQQ, xlf, etc.) and then use the ultras and inverses for position. A trend line hit on an index could look like a trend line break-out on an ultra – especially with gaps – because of the non linear realtionship.
10:30 volume and price spike on XLF
Any fundamental reason, or was it just someone spiking the punch?
Hi Paul
Personally, I would look at the Index itself; the others are a derivative of the movement of the Index and therefore subsidiary to it, only my opinion though.
Alex,
That’s what I was thinking as well. That’s part of the same reasoning I had behind not applying technical charting to VIX. However, I think that you can chart major components of indexes (GOOG/QQQQ, JPM/XLF) to forecast where the main index and its ultras and inverseses may go.
trying for a few more of my above mentioned DIA puts @ 1.25
My SKF Profits are wiped. argh mayteee lol
Hi Paul F
I think there is a subtle difference in what you are proposing: basically you are looking for coming strength/weakness in significant components and then translating that in to a judgement call in the direction of the overall market (of which the component is a significant part). Given enough components forcasting similar moves, I can see how it would work but, as you look at more and more of the components, you eventually end up with the Index!
The other proposal was looking at an Index versus its ultras; in that case the Index is prob better for technical analysis.
Dow seems to have very weak volume.
let’s see if it’s true by the end of the day. if so am going short on a few things. i just woke up haha
As oil nose-dived this morning, SPY remained relatively flat. This is the same pattern that we saw at the end of last week. It likely indicates that stocks are putting in a short-term peak.
Are financials done with their downtrend and now in a trading range? This is amazing.
Zen,
The sharp sell-off that began on August 12th put the XLF into an oversold condition. If you draw a Fibonacci retracement on your chart, you will see that XLF has retraced less than 50% of that drop on declining volume.
Maybe it will rocket straight up from here, but I doubt it. I think we are seeing an old-fashioned oil-to-banks sector rotation today.
Matt
Does anybody know the effect of weekend days on theta? basically, will theta decrease the value of an options more over the weekend than overnight during the trading week?
Jason Goepfert, who called the July bottom and went long with almost perfect timing, said this morning that he would be looking to go short if the S&P hit 1300. Jason’s site is:
http://www.sentimentrader.com
I agree with Jason, though instead of looking for a price target, I am waiting for the tape to roll over. I like to see the advancers vs. decliners deteriorate before getting very aggressive on the short side. That might be starting to happen now, though it is still too early to tell.
The call volume on XLF today is huge
Hi Tony G,
I don’t know the answer to your question, though Paul probably does.
Matt
anyone stepping in or adding skf ? i figured i’d jump < 120 but i don’t seem to be jumping !
after
Not SKF, but SRS is my financial/housing trade. Now looking to enter another poition when the $djr index hits 255, the 200 MA. That would relate to an entry at $86 for SRS. Initial entry was at $87.5
UNG’s volume has already exceeded yesterday’s and is very heavy. This throws into question the “light August volume” argument. The big dogs are on vacation and can’t trade stocks, but they can trade UNG?
Yeah Eli,
I knew I would be away from my comp so I had to buy early to establish an initial position. I might have been a bit early, but it wasn’t a full position so I’m ok waiting. Got in for $123.35 so not a terrible, but a bit under water now.
$TRIN doesn’t seem to indicate that we are too overbought yet. $VIX hasn’t dropped too much given the huge move today either.
$CPC (Put to Call ratio) is also low so market isn’t overly bearish yet. That puts us in prime territory for a pullback.
Going for lunch.. might come back and add more to my SKF position or via a SDS position. Want to watch it play out.. not too anxious to dip in for more.
XLF broke $21. Wonder if it will pull back and test? Volume seems pretty high right now.
Seems my call on SOLF call earlier in the week was spot on. Too bad I was too chicken to take a position
Tony G,
Well, the answer: it depends who’s doing the math. A lot of programs (including Ameritrade) do the math wrong. Just as 20-day averages are averages of the last 20 trading days, the days to expiration of an option should be trading days to expiration. For example, September options do not have 23 days until expiration. They have 15.
So the way you should calculate option values is by using trading days to expiration. Therefore, if you correctly priced the option on a Friday, there should only be 1 trading day of theta lost to Monday. Also, the problem is reduced if you have a spread trade (long one call and short another call, for example): the option with the strike price closest to the underlying security price will always have a higher theta and lose time value faster.
Of course, if you are talking a weekend, then usually the price move of the security will have a much larger influence than the time value lost, unless you buy current-month out-of-the-money options (which I never do).
Another way to think about it: do you calculate volatility by including two 0% moves every week? Of course not.
I got stopped out of the SKF trade, naturally. But just think how juicy it is going to be when it does turn around.
I did note there was a gap on the daily with some of the ETFs. They seem to always play out sooner or later.
Patiently Waiting George
SPY has pushed up out of its bearish ascending-triangle pattern. So now, the pattern has improved to a neutral rectangle with a range roughly between $126-$130. However, we haven’t been seeing many rectangles in this market, which prefers to shoot up and crash down. So, I don’t think that SPY will remain range-bound for long. I think that it will break down early next week and am betting that way.
I haven’t been following UNG much, but I’m surprised by the magnitude and volume of the UNG drop. Personally, I was also surprised that it hit $40 yesterday. I guess Gustav isn’t scaring anyone. A few days ago, I had planned to buy at $35 and sell at $40, but there’s too much volume on this down move for me to get involved. I’m sure a big chunk of it is computers trading the momentum.
okay i’ll compromise and go for SKF, 1/4 of what i was thinking for a full position for now…should be filled approx 119.00
have a great day people…
The fundamentals don’t favor the move up in either XLF or SPY. However, I’m shorting via the ultras instead of time-limited Put options just in case.
One thing that’s bothering me: I haven’t been following it for long, but 13-month treasury rates have shot up today, indicating a rotation from treasuries to the stock market.
In terms of Gustav, its only a tropical storm now. If it does poer-up and do some destruction over the weekend, it will be a “perfect storm” for the market.
SPY, XLF, and IWM are all above Friday’s high. However, the Q’s are not. Until the Q’s confirm, this rally is suspect.
by year-end i think the dow blows below 10k but this gdp print could bring out the suckers that bought into the sucker rally when the PPT and all the cnbc fools were pushing the “2nd half recovery”. 3.1% of the 3.3% GDP print was related to exports which makes sense considerint the record low in the dollar during 2Q. since 2Q, the rest of the world has slowed and the dollar has strengthened. so taking out exports, growth was only 0.2% even with stimulus checks. hmmmm, sounds pretty awful to me. wait until Q4 gdp comes out but i’m sure there will be another round of stimulus by then. i’d like to short here but i can smell the suckers coming out to buy stocks. NFP is next friday but without an awful number, the mkt could continue to rally. i really F’d up today’s trading. had some healthy gains from long positions but took them off too early and went the other way when spy was near .50. sometimes you just need to know when to call it a day and take profits.
Paul,
How do the treasuries look now? The TLT is making a sharp intra-day reversal.
Matt
The Q’s are trying to push into the gap from Monday morning. If they can fill that gap, that would be a potential end-point for this rally.
XLE, USO, and UNG have bounced off of support and should be able to at least retrace upward a bit before the close.
Matt,
did you add more to your shorts today? Playing SKF & SDS? Q’s still below high from last Friday, but that is the only lagging index.
Does anyone have a good view of volume for today?
Tony G,
My views exactly GDP: exports + stimulus. Also, imports were down, despite the stimulus. I guess some people feel that consumer’s importance to the economy only matters when they are spending.
The XLF call volume that Zen pointed to is significant. It also goes out to October. It is hard to say who is buying and who is selling though. The most important information would be if the large block trades occured at the current bid or at the ask price, and I don’t have access to that information. If there was a 100k sale at the bid price, then the big money is selling the call which would be bearish. If it occured on at the ask price, then big money is buying.
XLF bears have BAC’s dividend date to look forward to next week. The BAC options market is already pricing in a drop: Sep call options have implied volatility in the 40s, while puts are in the 60s.
Matt,
The chart I’m looking at hasn’t really changed. It moved up at 11:30 from 1.66% to 1.7% and hasn’t really moved since. It is 2-month treasuries and TLT is 30-year, right? Thinking about the big picture on 3mnth treasuries, 1.7% is still an awful low number and below where it was the two weeks back 8last time we saw SPY 130). I haven’t really looked into how reliable the day-to-day treasury rates change is an indicator, so maybe I should stop mentioning it for now…but it would be nice if it kept moving down.
As for the gap in QQQQ, it sure looks like AAPL doesn’t want to help out.
WTG Matt! Nice call on Q’s bot QID. Smokin.
George,
It’s not over yet. Gaps are like magnets, so I wouldn’t be surprised to see the Q’s fill it today. However, many gap traders will be shorting as it approaches $47.50.
Matt
Paul,
Apple is indeed a major red flag for this rally.
Matt
Okay. Gotcha.
Charlie,
I bought two tranches of SPY puts so far. The tape is still strong, so I will wait until it weakens to buy more.
Matt
Thanks Matt…
I’ll be watching too. SKF under $119 right now. Tempted to add more.. but.. market is very strong as you say.
Looking at the 6-month charts for major resistance levels:
DIA: 117-118
SPY: 130-132
QQQQ: 47.5-48.5
IWM: 76.27-76.35
Is this what others are seeing?
Chalie
Started a small SKF position at $119.05. My stop is the XLF breaking above $21.40 TLR
Hey Eli,
good luck with that trade. I’m a bit underwater on my $123 fill. Didn’t put a stop on, but it was a small position. Might decide to add more myself. Right now @ $118+ or so.
Good idea with the tight stop, but be aware a high of $21.64 was made 2 friday’s ago before the drop. Fakeout above that level might occur. SPX resistance is anywhere between 1299 and 1302 so there is a bit more room for it to go up.
XLF is showing overbought on the 60 min right now though.
owwwwwwwwwwwwwwwww SKF lol
Hey K,
did you sell your SKF?
SPX starting to show some signs of weakness.
Wow, ABK and MBIA are up 30% today.
Also, XHB up 4.75%. So yesterday, I bought puts in today’s best performing sector. I love it when a plan comes together.
Charlie,
Yes, and the Q’s still can’t hit Monday’s gap.
Matt
Bought some SPY puts right now. 130 strike.
Durable goods, GDP, falling oil – the market is enjoying a rare streak of good news. What are the odds that that will continue? Especially since Toyota slashed its global sales-growth forecast today.
Is this a potential double top I see on the XLF?
Hmm….
And look.. it’s 3:30 pm…schools over. All the kids go home now and make room for the big boys to come out and play.
The tape is still strong. If it is just Apple holding the Q’s back, I suppose that can change in a hurry.
ok.. that hurt.
Eli,
it is getting very close to your stop on the XLF.
or rather your SKF stop based on XLF @ 21.40.
Matt.. any views on the market levels? Still seems to be not overbought just yet.
Matt, when the market gets in a good mood it tends to just brush off bad news as fools say “its already built into the mkt”.
Any of you folks planning on making any “before the close” moves?
I just bought a nice slug of SDS.
It doesn’t look like the Q’s are going to fill Monday’s gap. Everybody was rejoicing on CNBC today over how the global economy was saving the USA via exports. But if that’s the case, why can’t the Q’s fill a lousy gap when the rest of the market is running?
Maybe the Q’s will fill the gap tomorrow, but until they do, we have serious red flag on this rally.
You gotta love this volatility though. Great for scalps all day long.
Added another 1/2 position of SKF.
Tony G,
That’s true; so lets see how the market reacts when the next piece of bad news hits. I don’t expect that we will have long to wait.
Matt
Well, that didn’t take long – the wait for bad news. Now we know why the Q’s were lagging today. Dell dropped a major bomb on IT spending and the Q’s are taking a dive in the after-market. The NDX futures are also taking a hit.
lol.. Bull Trap!!!!
Matt, do you do this full-time for yourself or do you work for a firm? I’d like to explore the option of doing this full-time.
Dude, nobody’s getting a Dell. Down 10% aftermarket. Matt, looks like the cycle’s are procedding as scheduled (IT spending)
Well, I guess the bulls’ plan to get things going while the big boys were on vacation is ruined.
$176 was little high for AAPL (on a technical basis), but $175 should have been easy today. I guess I know why it wasn’t. Yesterday, it was GOOG holding down the Qs. I expect IBM will bring down the DOW tomorrow in sympathy, especially with it’s strong (but likely disappearing) foreign sales.
OK, GDP is up because of exports. So which stocks profit the most? MBIA +34%, just scroll down the list, exporters everywhere. Quite a few bank and real estate exporters. Ludicrous. Who’s down most? Commodities. That’s because the strong global economy does not need inputs anymore…
Why is the GDP calculated with an inflation rate of 1.2% and what impact would a realistic rate on the growth (and the strength of the global economy) have?
Tony G,
I just trade my own account. While I am doing it full-time, you never know how long that will last, right? I’m up over 40% so far this year, so maybe I will be able to keep going for a while.
Matt
Paul, yes, and IT spending was the killer during the last recession. This Dell news is going to shock a lot of bulls. The Q’s have given back all of today’s gains in the after-market. That’s pretty dramatic.
Yerk, the way GDP is deflated, it’s a marvel that anybody takes it seriously. But just watch, Larry Kudlow will be shouting “THE ECONOMY IS BOOMING!!!” on his show tonight. Comical…
Matt
Paul made reference to the upward trend from the March low to mid-May, which looks somewhat similar to the current uptrend that began at the beginning of July. the spy traded below the trend for a few days, but resumed its upward trendign line for several more weeks. the same pattern could be developing here.
I think its worth looking at the % retracement from the prior high and low. In the post Bear Stearns rally, we retraced 68% of the prior peak. Since the beg of July we have retraced approximately 43% of the prior peak…….so i think this rally still has some room to run, however, i still think the indexes break prior lows by the end of the year.
Kudlow and his King Dollar. I hope the dollar is at a 52-week high when we see Dow 10k.
Yerk,
“Why is the GDP calculated with an inflation rate of 1.2%?” To show a higher GDP, of course
i don’t know who i want to punch in the face more — Kudlow or Cramer.
Matt,
I have a TRIN of 0.80 and the 3-day sma of 0.72. I had to create the formula for the TRIN with my software, so you’re numbers may be different, but this looks dramatically overbought. Is that you’re take?
Cramer, definitely.
I think that Kudlow is delusional, misinformed, and overly optimistic.
Cramer is a nutjob, a liar, and a con-artist who wields way too much power simply because he is entertaining to watch.
Tony G,
You may be right about SPY being able to retrace higher, but what about IWM and QQQQ? They have already made full retracements.
Matt
Timer,
The exact numbers will vary depending on where you get your quotes. My TRIN shows 0.84 with a three-day average of 0.91. So mine isn’t quite as overbought as it was last Friday. How does yours compare to last Friday?
In any case, we are definitely overbought short-term. The model I use has the S&P 500 more overbought than it has been since the peak on August 11th. The same is true for the McClellan Oscillator.
Even if the market were to move higher from here, the odds of it eventually falling back to this level are very high. So, I regard shorting here to be low risk.
Maybe the improperly-deflated GDP number will bring the public stampeding in over the weekend, but that seems unlikely.
Matt
Cramer is dedicating his latest show to “how to watch his show.” He must be nervous about pumping stocks and getting in trouble with the SEC.
He told people not to expect to make money if they simply buy all his (non-lighning round) “Buy!Buy!Buy! ” picks and sell all his (non-lighning round) “Sell!Sell!Sell” picks. I have to agree with that.
Matt,
Actually, I don’t have my final numbers yet so I spoke too soon. I’ll report back later this evening (here) on the TRIN. Hopefully my CRS won’t do me in on that promise. lol
This may be a smidge off-topic for this techno fest locale but since somebody mentioned GDP let me chime in with some fundamentalist perspective. My preference is to use YoY% changes because the trends, patterns and turning points are much clearer than looking at QtQ noise. When you do that you’ll find that Q108, for real GDP btw, was up 2.5% while Q2 was up only 2.2%. What big surge – the economy continues to slow. The good news is that the commentariat noticed we have a domestic recession, pointed to net exports and told everybody the future will be weaker. In fact when you add up the cumulative net increase across Consumption (Durables, Non-dur, Service) and Investment (Capex, RI, Inventories) it was about as close to zero as you get. The only major positive factor was trade. If you want to see that laid out in chart form try this post: http://tinyurl.com/5ela5n
An earlier post on the Tech Industry outlook de-constructed similar mis-interpretations of Durable Goods btw. FWIW. Hope it helps wrap some big picture context around the discussion.
Speaking of using the right deflator for GDP that’s actually not an error. Seem to recall Econbrowser have a past post that explains it. As it happens Menzies Chin dissected GDP and included a quick skim of the issue here:
http://tinyurl.com/5z2js6
As I’d interpret too the CPI measures the prices of the consumer’s basket while the GDP deflators capture a much larger collection; in other words it’s very definitely not apples to apples. The BEA is using the correct deflator for what’s it’s trying to do. But that real difference has serious consequences. See Menzies for a pass on why.
Matt,
My final numbers for the TRIN & Trin 3-day sma are 0.87 & 0.92, resp. Quite a difference from my numbers earlier today.