by Larry Levin
Holy smokes! I don't know how this morning's news and economic data could have been worse, yet the markets made a mind-boggling advance from the low. After an initial drop of 12.80-points, the S&P500 staged a miraculous 22.20-point explosion from the 1305.50 nadir. Although the major market's gains did not hold up, today is yet another example of why traders simply cannot trade the fundamentals. The trend is all you need - catch a ride! The following is the terrible news that caused the initial drop, and will surely affect equities in the days, weeks, and months to come.
1) Stop me if you've heard this one before: Consumer confidence reaches a new low over such & such time period. It happened again. Today's report was the 5th worst report - EVER. Americans who took part in the survey made a gloomy assessment of their present situation and their future prospects. The present situation index dropped to 64.5 from a revised 74.2 in May. The expectations barometer slid to an all-time low of 41.0 from a revised 47.3 in May. The Conference Board also said its inflation expectations gauge matched the record-high 7.7% it hit in May, which will surely be talked about at today and tomorrow's FOMC meetings.
2) UPS was hammered today, trading down 6.0%. Shares of United Parcel Service Inc. were slammed to a nearly five-year low today after it slashed its second-quarter outlook because of soaring fuel prices and a sluggish U.S. economy. Hmmm, I thought economists and analysts said there was no inflationary spillover proof so we were to keep drinking the CPI kool-aid? Well, it sure is spilling over to UPS and FedEx, and many other places - hold tight for more.
Higher prices for its express-delivery services due to the run-up in fuel costs has helped cool demand, said investment firm Robert W. Baird & Co. in a note to investors today. The firm also downgraded UPS stock to neutral from outperform. At least W. Baird & Co. didn't wait until UPS had lost 70% of its entire market cap, but then again, this downgrade is not a sell. I guess the sell recommendation will come later - much later.
3) Iron-Ore prices DOUBLED today! I wonder if that will be inflationary? If so, I suppose the government will ignore the price hikes - problem solved! But seriously, Japanese and Chinese steel makers agreed to a full 100% increase in their iron-ore procurements from their suppliers, Rio-Tinto and BHP Billiton. And the last time I checked, the US still buys a tremendous amount of goods from Japan and China, which means those higher prices will be in a gadget you buy soon.
So how are the steel producers doing? US Steel has been on the tear of its existence trading nearly $200-share! How can US Steel be so high? Look at the symbol X. There must be, dare I say it - SPECULATORS trying to drive it higher.
Right minded people must be screaming - How dare they! These SPECULATORS must be stopped! Where is Charles Dingleberry on this? He must save us ALL from the dastardly SPECULATOR - oh my God - please save us all! He must demand that X cannot trade higher than let's say $50-share. That's preposterous right? Well, that's how stupid the oil speculation drivel sounds.
On a different note, China is buying up all the steel it can find, all the oil it can find, and owns a great deal of US debt. I wonder how the Pentagon feels these days.
4) Cocoa prices are trading at ALL-TIME highs. Poor weather and higher demand is to blame for the price increase.
5) Dow Chemical raises prices today - AGAIN. For the second time in less than a month, Dow Chemical Co. will significantly raise product prices to offset an unprecedented surge in energy and raw material costs, the company said this morning. (Food & energy prices do not matter? Yeah, right!) In order to preserve its margins, Dow said it would boost prices in July by as much as 25% and effective Aug. 1, add freight surcharges of $300 per truck shipment and $600 per rail shipment. It just raised prices by 20% on May 28th. That's right folks, Dow Chemical has hiked its prices a whopping 45% plus shipping costs in just one month.
Hmmm, higher chemical and plastic prices are on the horizon you say? Luckily that's not inflationary. (Lol)
6) Housing values keep falling. It's interesting to see all of the aforementioned inflation while housing is deflationary. According to the Case-Shiller home price index released this morning by Standard & Poor's, home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004. So much for the argument, Ya gotta' buy today pal! They aint makin' any more land ya' know - housing always goes up.
Given all of this news, it was quite interesting to see the S&P500 and Dow rocket higher off the early lows.
Now if I may put the cherry on top - the FOMC greets us with a rate decision tomorrow afternoon. I doubt it will change rates, but the important announcement that is released with the decision should finally contain significant revisions. It should be interesting.
Real Time Trading Signals*for
Trade Date: 6/24/08
E-Mini S&P Trades*
(before fees and commissions):
1) B/away sell @ 8:35am at 1313.50 = -3.00 (1 lot)
2) OTF buy @ 12:10pm at 1322.75 = b/e (1 lot)
3) Algorithm trades (8)...combined total...+2.50
E-Mini Russell Trades*
(before fees and commissions):
1) Sell @ 12:48pm at 714.7 = -.9 (1 lot)...-$90
Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!
No comments:
Post a Comment