This Week in Barrons – 6-21-2015:
Is this raccoon grabbing a quick ride, or is the gator taking
his lunch to work?
Thoughts:
Dear Ms. Yellen:
In our lives, I think we are constantly deciding whether we are the raccoon
or the alligator. Are we just grabbing a
quick ride like the raccoon? Or are we
the alligator and simply taking our lunch to work? I remember President Nixon – one of the best at
speaking like the raccoon, but acting like the alligator:
-
He spoke like an anti-Semite, but ‘in fact’ saved Israel.
-
He constantly made racist remarks, yet de-segregated the
public schools in the South.
-
He
acted like a conservative, but signed more social welfare legislation than any
president except for LBJ and FDR.
I think of
Nixon as an alligator, and John Mitchell (his attorney general) said it best: “Watch what we do, not what we say.”
I bring this up Ms. Yellen
because in last week’s news conference following your FOMC decision, you said
that the economy was performing WELL – but then you proceeded to:
-
Lower your GDP forecast for 2015 from
2.0% to 1.8% - after you already lowered it from 2.7% in March,
-
Reiterate that there would be 2 – 0.25% rate increases
in 2015, but then lower your 2016 rate forecast from 1.875% to 1.625%, and finally
-
Reiterate that it would only be
appropriate to raise rates when you see further improvement in the labor
market, and you’re reasonably confident that inflation will move back to the 2%
long-term target.
Bottom line, doesn’t that
mean that our economy is going from bad to worse, and you probably won’t raise
rates at all? And like the raccoon, you’re
just hoping to just grab a ‘free ride’ until the next big event comes along?
And could that next big
event be a war? We all know that nothing
turns an economy around like a war. I’m listening
to the U.S. ‘claim’ that Russia
is becoming more aggressive in the Ukraine, but I’m watching us send additional
heavy military and Air Force jets into the region. Who’s being the aggressor here? And if Eastern Ukraine (backed by the U.S. and
NATO) were to successfully take back Western Ukraine, not only would tens of
thousands of Ukrainians die – but wouldn’t Putin would be forced to protect his
borders and build more missiles? In a
world where every individual economy is going in the toilet, isn’t the phrase
“Give Peace a Chance" needed more than ever? Unfortunately history has shown that it's
times like these, when banksters have instigated wars to boost their individual
economies. Today seems no
different. So (in this case) I’m betting on the individual economies
being the raccoons – just grabbing a quick ride. While the banksters are the real alligators –
just taking their lunch to work.
The Market:
The market this week:
-
Fell hard on
Monday – touching an intra-day low at 2072,
-
Bounced on
Tuesday,
-
Added to its
gains on Wednesday,
-
Went ‘bananas’
on Thursday – with the DOW up over 200 points, and
-
Rolled back over
on Friday – losing over 100 DOW points.
What we saw this week was
the market’s version of a ‘Hail Mary’ pass.
The market was perched on the edge of a cliff. If 2072 didn't hold on the S&P, we were
going down to 2050 (the 200-day moving average) in a hurry. The ONLY time the S&P has traded down to
its 200-day moving average since November of 2012 was a short period in October
of 2013 – which scared the hell out of everyone. But time after
time (when this market has gotten close to rolling over) the FED and Central
banks around the world have bought stocks, pumped money, and did all manner of
things to save the day. This time
they did more of the same. But added in
some ‘fake’ rumors on Greece, bullish talk by various talking heads, and of
course more stalling from Ms. Yellen and other banksters on interest rates.
Historically, next week is
generally a bad week for the markets.
And as Friday’s fade and last minute collapse into the close suggests, we
could see more ‘follow-thru’ to the downside on Monday. But this coming week could rely as much on
Greece as it does on past history. If a
‘kick the can’ solution is found, then we could be in rally mode. But if the Greek banks are forced to close to
prevent a ‘run’, and there is no hint of any deal – we are indeed heading much
lower. In fact, many of the weekend headlines
are about 'Monday bringing Salvation or Ruin’ to Greece. Considering that this market is based upon perception
rather than fundamentals, it will be Greek news that helps to steer the markets
next week.
The bigger picture (however)
is much cloudier. Let’s suppose Greece
is ‘saved’ (again) and our markets rally - why?
Greece is only important (a) to remain a NATO country, and (b) to keep
other failed states like Italy, Spain, and Ireland from leaving the Euro along
side it. In other words, if the EU/IMF
spend umpteen billion euros to keep Greece in the Eurozone, all they have
accomplished is keeping together an alliance of bankrupt nations. That’s hardly a success, and certainly not a
reason for U.S. stocks to rally.
However, the world is
waking up to our markets being in a massive bubble. Presidential candidates Donald Trump and Ron
Paul talk about it daily. Even a few mainstream
media outlets have questioned why the markets are so high. Maybe they all saw Caterpillar's latest financial
report? Caterpillar (for 30 straight months) has seen declining retail
sales. If there was a ‘global recovery’
in place, don’t you think that just once in 2.5 years Caterpillar would have an
experienced a sales up-tick?
Be careful this week,
because it could be absolutely news driven, and news can turn on a dime in any
direction. If you're trading, take
profits quickly as we're still in a pattern where dips are bought and rips are
sold.
TIPS:
On Friday, the Chinese
markets experienced a huge (6%) downward spike.
And going into Friday’s close, the XLF (the Exchange Traded Fund (ETF)
that tracks the financials) suddenly moved 1.6% lower. Therefore, China could take some of the
attention away from Greece this week.
I’m still looking for bonds to continue their rally, and for the XLF to
continue their downward momentum (at least early in the week). Often the tone of the overall market is
dictated by the financials; however, there has been continued strength in
healthcare (XLV) and especially the bio-techs (IBB). With banks (XLF) and energy (XLE) having
issues, and healthcare (XLV) and bio-techs (IBB) setting the pace higher – look
for the S&P (SPX) to remain ‘range bound’ – hanging around that 2100
area. 2100 has been a natural magnet for
the SPX all year, and I’m looking for that to continue into next month.
I’m watching:
-
COST, CBI and
JNJ are fundamentally set to the upside.
-
VRX, QRVO, TTWO,
and AMAZN are all poised ‘technically’ to move higher.
- I continue to sell Iron Condors (40 to 90 days out) on
the SPX around the 2100 level.
I’m currently holding:
-
AGU (Agrium) –
SOLD the July 97.5 / 100 Put Credit Spread,
-
DPZ (Domino’s
Pizza) – SOLD the July Iron Condor 95 / 100 to 125 / 130,
-
FEYE (FireEye) –
BOUGHT – June4 53.5 / 55 / 56 Broken Wing Butterfly,
o SOLD – 49 / 51 Put Credit Spread,
- IWM – SOLD the
August 112 / 114 to 132 / 134 Iron Condor,
- -
KR (Kroger) – SOLD
a July 70 / 72.5 Put Credit Spread,
- -
RH (Restoration
Hardware) – BOUGHT a July / August $95 Calendar,
- -
RUT – SOLD the
August 1140 / 1150 to 1330 / 1340 Iron Condor,
o BOUGHT the July 1180 / 1250 / 1310 Butterfly
- -
SPX:
o SOLD – Iron Condor – July2 @ 2005 / 2010 to 2180 /
2185,
o SOLD – Iron Condor – July2 @ 1985 / 1990 to 2190 /
2195,
o SOLD – Iron Condor – July2 @ 1985 / 1990 to 2160 /
2165,
o SOLD – Iron Condor – July @ 1990 / 1995 to 2180 / 2185,
o SOLD – Iron Condor – July4 @ 1860 / 1870 to 2235 /
2245,
o SOLD – Iron Condor – July4 @ 1940 / 1945 to 2175 /
2180,
o SOLD – Iron Condor – July4 @ 1955 / 1960 to 2185 /
2190,
o SOLD – Iron Condor – July4 @ 1955 / 1960 to 2175 /
2180,
o SOLD – Iron Condor – July5 @ 1870 / 1880 to 2230 /
2240,
o SOLD – Iron Condor – July5 @ 1925 / 1930 to 2195 /
2200,
o SOLD – Iron Condor – July5 @ 1935 / 1940 to 2195 /
2200,
o SOLD – Iron Condor – July5 @ 1925 / 1930 to 2185 /
2190,
o SOLD – Iron Condor – Aug1 @ 1935 / 1940 to 2225 /
2230,
o SOLD – Iron Condor – Aug2 @ 1920 / 1925 to 2230 /
2235,
o SOLD – Iron Condor – Aug @ 1840 / 1850 to 2250 /
2260,
o SOLD – Iron Condor – Aug @ 1885 / 1890 to 2180 /
2185,
o SOLD – Iron Condor – Aug4 @ 1895 / 1900 to 2195 /
2200,
o SOLD – Iron Condor – Aug4 @ 1895 / 1900 to 2240 /
2245,
o SOLD – Iron Condor – Sept1 @ 1880 / 1885 to 2215 /
2220.
To follow me on Twitter.com and on StockTwits.com to get my daily thoughts
and trades – my handle is: taylorpamm.
Please be safe out there!
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