Floyd's Trading Blog -
Insightful Rational for an Irrational Market
The following blog is compiled from the daily OEX commentary sent out by our lead trader and mentor, Floyd. This will give you a good idea for the type of information you will receive everyday along with our specific trading recommendations.
February 29, 2008
In March 2001 the NASDAQ moved down over 14.5%, after a 22.4% drop in February. Much of what is happening now is what happened then. This time it's a real estate bubble, and simply frighteningly stupid decisions on the part the financial sector and our Government. After several days of good false hopes rising, and hitting Dow tops long enough to make us profitable on all calls out, we were able to profit on open puts yesterday as the market declined on more simply awful business news. The March 630P hit highs of 14.00 in early trading, and many subscribers day traded this position as it moved from 11.00 to 12.90 regularly during range moves intraday.
The market is likely to surprise everyone by rebounding, dropping, and giving us some classic whipsaw, with the bias we continue to believe to bottoms as noted below in our Dow projections.
Many emails from subscribers yesterday had comments and questions on what analysts, talking heads, and general financial savants on the radio and TV had to say on things.
Do NOT be misled. They don't know, have never known, and continue to falsely influence our intellect as a nation, just as "soundbites" have us believing we are fighting a war on terror more than any actual war may be. This is not the liberal press, or the conservative press, but the "medium is the message" where America is influenced more in soundbites than in educated scrutiny. Most facts are false.
As the politicians babble, the economists analyze, Gold and Oil are at all time highs, the dollar at all time lows, and our nation has debt beyond comprehension, as do our citizens. It's relatively obvious.
February 28, 2008
· Chairman Bernanke testified on the economy and monetary policy
· OFHEO removes portfolio growth caps for Fannie and Freddie
· Dollar falls to record lows, gold rises to record nominal highs
· January durable good orders declined more than expected; January new home sales declined more than expected
Feb. 27 (Bloomberg) -- The dollar fell below $1.51 per euro for the first time after Federal Reserve Chairman Ben S. Bernanke signaled he's ready to lower interest rates again to support the weakening U.S. economy.
An index that tracks the currency against six major counterparts dropped to the lowest since the gauge started in 1973, as European Central Bank policy maker Axel Weber said investors expecting rate cuts in the region are underestimating inflation. The U.S. currency fell to an all-time low against the Swiss franc and to 23-year lows versus the Australian and New Zealand dollars.
Thus started the day yesterday, allowing profits to be made in whipsaw on both put and call, for traders that held inventories from the prior day, or day traders that watched the bias take the market to 12,797 highs, and 12,569 lows.
Bernanke said "yes", interest rates will potentially be lowered, and this excited the nauseously stupid and the market bumped up, only to have a bit of reality hit on what this does to the USD, and Bernanke actually began trying to explain that there is "no simple solution". Yesterday was very clearly NOT a follow through day in the market.
Hesitancy and reality may have set in.
New home sales hit 1995 lows, oil hit new highs, economists are now beginning to grasp that we may have "stagflation", a combination of inflation in prices and recessionary economics.
There is nothing new here. It's a market to make a few smart Blue Chip Option buys, as we've been doing (www.bluechiptoptions.com) and to successfully trade whipsaw.
We've been profitable 6 for 7 trades this week. Study our Dow projections carefully.
"Thanks Floyd: Made some nice trades today. Holding from yesterday's inventory of:
610 Puts @ $5, sold 1/3 at $6 in the am
600 Puts @ $3.4 sold 1/3 at $4.2 in the am
Today purchased 630 Puts @ $10 - sold entire lot at $11 at the close as the ask moved up after the close they gobbled ‘em up. I understand taking quick profits, but I'm considering holding the remaining puts for potential move down to Projected Lows, considering the Dow looks like its topping. Yes/No? “ - BD
“Nice on the 630P. Got it at 10.20, and sold it at 12.50, and just bought it again. Hit 6 now this week, Floyd" - LD
February 27, 2008
IBM burst the market a bit on its 15 billion dollar stock repurchase, but the market was ready anyway, and hit a 12,774 theoretical Dow top, struggling at 635. Good news will perhaps still inspire optimism, but we think not for long, with new market projections from our tops to potential lows again of 12,340 to 12,160.
Calls were very profitable again:
“Floyd, the calls were the profitable trade again today; if you bought the March 660 calls around the lows for $1.80 you could unload them now for $2.50. I still have those March 560 puts – wow they have lost a lot of value. Looks like the DOW is starting to hit the top resistance levels again. What trades are you looking at?"-Oklahoma
“Hi Floyd, wow I am 4 for 4 so far on my trades. Played 2 puts and 2 calls. Past 4 days. I am now looking to enter put again. We have hit our 1st top and now heading for 2nd top. I have an order in on the 600 put at about 2.20 it’s at 3.10 now. What do you think about that position” -Arizona
“Nice email talk with me on the March630P today, Floyd, bought it at 10.20 and sold to 11.90 within an hour, just watching your Dow tops.”- Michigan
Here's what we said yesterday: "Two way trades may be likely. Further upside to a 12,690 top, and up to 12,820 area has possibility, as the market WANTS upside. Upside may be short lived."
Traders reported success on day trading the March630P yesterday, and selling the OTM calls profitably. It's likely now for a bit more topping, and a short term 100+ plus move up is not out of the question, but would surprise. Something is sure to spoil the optimism :)
Heating oil and crude hit all time highs. Moody downgraded the bonds on MBIA. Consumer gloom showed in the index reporting.
By the way, President Bush explained to us yesterday that the economy is fine, and there will be no recession.
Elect smartly.
February 26, 2008
The market topped at 12,630 yesterday. Morning buys on the March 640C had traders profiting as high as 3.00 a contract, with most happy to lock in 25% and 30% returns in intraday trading. This was a follow through day. Many traders were also trading the March660C available from 1.45 buys to 1.70 sells.
NEW YORK (MarketWatch) -- U.S. stocks rallied Monday as investors found relief after Standard & Poor's affirmed its triple-A ratings for MBIA Inc. and Ambac Financial Group Inc., easing worries about the troubled bond insurers.
With any luck in economic data and news there is more room for upside, to a potential topping at 12,820. Further bull moves are possible, with some chartists calling for just shy of 13,000. Nothing has really changed in the market, all the financial news is seriously bad, but the market is overdue for a bit of "relief" and false promises. Today will tell, as a reactive gap could easily occur.
There is now a clear bias, and perhaps even a topping. 630 and 635 are strong resistance areas.
Read this news, which was also announced yesterday:
(Reuters) - "Goldman Sachs said it expects additional writedowns of about $1 billion to $12 billion each for several major U.S. brokers in the first quarter, with Citigroup (C) estimated to record the highest amount of about $12 billion.
Goldman expects these writedowns to be spread across residential mortgage-backed securities, commercial mortgage-backed securities and leveraged loans."
February 25, 2008
Friday was yet again a day to smile, as the talking heads analyzed, the economists theorized, the poor went hungry, and Wall Street followed Floyd's projections. We said Friday a.m:
12,690/12,050.
Downside has a 45% chance to continue to the 12,140 area, or down to 12,050. Yesterday another bottom was hit at 12,207. Upside potential, whenever several days of commitment can occur, can lead the market to 12,690 and potential larger highs.
The market moved to a low of 12,155, before ending the day with a gap up, to close at 12,397. This allowed traders profits on open March640 calls to 7.70, and for any traders still holding puts, or playing the projections to also profit.
As subscribers said:
"K last email for the day --Sold all oeycl at the close for 25% profit after second buy. You are really helping me understand how things flow through this market despite all the crazy volatility. I appreciate this greatly and keep up the good work! Im literally chuckling to myself as I watch the Dow bounce off your low projection for the day!” -PP
"Floyd: Love the Dow Projections. Profited yesterday and today with puts, jumped on the trend and followed the projections, sold at the Dow lows of the day and turned around and purchased 660 calls for a $1.10. Holding throughout the weekend. Let’s hope for follow through on Monday.” -BD
"Wild last 30 minutes of trading today – have you noticed over the last month how the last 30 minutes of each Friday the DOW and OEX have moved higher. It looks like the shorts want to go home without any big positions and they seem to cover many of their short positions in the last hour?" - RC
"Man, Floyd - if you nail one of these dow bottoms with your projections again, I may have to personally fly out to Florida to treat you to Ruth's Chris. Alright, not really. But I am very appreciative of how these calls turned out. First buy at 8.00 and second buy at 5.00. Sold partials at 6.90 and 7.50 and still holding some. I was talking with some other traders during the day who were telling me I was crazy for holding these calls and that the dow hadn't reached a temporary bottom. They insisted we were going to sub 12,000, trying to convince themselves that the dow moves in a straight line. All of these traders were so focused on this so-called "wedge" that had been broken (and which has been discussed incessantly by the know-it-alls on Wall Street). Needless to say, I begged to differ with their ramblings. I have been trading with you for too long to know that these projections are spot on the majority of the time. Fellow traders (who don't trade the OEX) who were up huge at 3:30 with all of their puts saw their profits vanish in literally seconds. Meanwhile, I was rolling in green. Lesson for the day: Stay patient, put your sell orders in, walk away, and ignore everyone. Great way to start the weekend. Thanks so much” - SK
Friday's rally proved our Dow projections, and yet again, we'll suggest that downside MAY be possible to 12,050 area, and that although no real bias shows to the market today (2 count to call) news will again lead bias.
Mike Gibbons said it well:
"Friday's action showed again how difficult it is for the non-professional trader to profit in this market. Massive intra-day swings in just a few minutes like we saw on Friday, and have seen several times in the last few months, bring suspicions of market manipulation and a loss of confidence that the markets are indeed 'free'.
Friday's recovery was sparked by a speculative report on CNBC that a bailout of bond insurer AMBAC was possible early next week. The plan is similar to others floated previously that separates the profitable municipal bond business from the risky, and loss making, securitization business. While this is potentially beneficial to the municipal borrowers who will be able to get more reasonable rates on the bond issues, it is problematic for the securitization component because unless enough liquidity becomes available to back the insurance obligations, financial institutions face more writedowns because the insurance on their mortgage-backed bonds become less valuable. Other bond insurers are expected to adopt a similar restructuring. If a resolution is not achieved early next week, then we can expect another sharp sell-off. Even if a restructuring is achieved, it seems unlikely to resolve the underlying insolvency of the mortgage-backed insurance business. The New York Times reports that AMBAC hopes to raise $3 billion but Bloomberg reports that AMBAC faces losses on $566 Billion in debt and the banks risk losing $70 Billion if AMBAC loses its AAA rating."
February 22, 2008
Societe Generale had record losses, blamed their rogue trader, and will possibly now be sold off. Gold hit new highs at 955.00. Oil hit $100.00 and retreated.
George Bush has the same birthday as Rambo, Sylvester Stallone. Does this mean anything?
With oil at $100 we think it likely that there may be a hesitancy, a retreat, and that the market is SOON ripe for rebound. Early yesterday morning we issued an alert noting that market conditions might need to still allow more downside, and commented:
"Futures at 5 a.m. EST are only slightly up. Economic and world news is mixed. It is now a 45% potentiality that downside could occur yet again, moving to our 12,140 to 12,050 (worst condition) bottom. Because the market did not quite bottom deep enough yesterday, and with a "light" futures traders that want to two way trade could consider the March 560P. "
Traders were able to take inventory on this position right at our recommended 1.70, selling to a high of 2.50. The call was also available as a best first buy, and now remains an open signal. There MAY still be a need for the market to bottom, again to our Dow projections, but any positive news can also now provide catalyst for upside.
The Treasury may now have some type of a home refinancing program, yet again a nice bail out for banks that made the errors, and homeowners taking credit beyond their means. GM may soon bankrupt, unless Toyota buys them, and the government could bail them out. Do not laugh. It's this thinking that leads to our economic woes each time.
February 21, 2008
The market followed our Dow projections and discussion on whipsaw almost perfectly. The Dow may have short term potentially bottomed at 12,187, allowing put traders that bought UP only to profit. The call, however, was available as low as 6.70 and sold to 10.00 highs all in intraday trading, as the market then moved to theoretical Dow tops at 12,504.
"Nice profits on the call, Floyd. Got in/out quickly at 6.90 buy, 8.90 sell, 2.00 quick bucks"--EW
"20% profits"-PP
"Dow projections that you do amaze me. It is truly something to watch the Dow come within 40 or 50 points of your numbers, and movements, day after day. I'm learning to make my living off the Dow projections!"-KCB
Fear of inflation began the day, but good earnings on Hewlett Packard, and Fed minutes leading to potential additional interest rate cuts helped the market move to new highs again. As you read our Dow projections, note a bias shift MAY be occurring, with the potential for more upside. It will depend fully on the catalyst of news, and what the government could now do to "help us".
Be suspicious and wary. Trust no analysts. Listen to all facts presented with a smile. Societe Generale was the best performing bank in Europe for years, yet now is writing off 7.2 billion in fraudulent trades, and blaming a "rogue trader". If you believe this, you also believe in weapons of mass destruction in Iraq :) Yet again lack of financial controls lead financial statements, cause investors to "buy" safety, only to find out the true fraud is in those that run the businesses.
It is with the precedent here that "facts are manipulated" and in Floydian logic, typically "changed and adjusted" that you should read this:
"[BRIEFING.COM] Readers may recall that the stock market flip-flopped on Tuesday, rallying in the early-going and then selling off into the close. On Wednesday it was just the opposite. Stocks languished in the early-going amid concerns about credit market liquidity and a worse-than-expected January CPI report, but eventually turned things around and advanced in the afternoon trade.
The performance was remarkable as there seemed to be some legitimate reasons for participants to assume a bearish view of matters and to maintain that view throughout the session.
News that KKR Financial Holdings, the publicly traded credit fund of Kohlberg Kravis Roberts & Co., had delayed repayment of its asset-backed commercial paper debt for a second time, and was involved in restructuring talks with creditors, sparked concerns about liquidity in the credit market that took a heavy toll on foreign markets.
This news, however, soon took a backseat to the CPI report, which revealed a 0.4% increase in total CPI for January and a 0.3% increase in core-CPI, which excludes food and energy. Both numbers were slightly ahead of expectations that called for increases of 0.3% and 0.2%, yet the year-over-year increases of 4.3% and 2.5%, respectively, are what really grabbed the market's attention.
The initial reaction was understandably negative as the report fueled inflation concerns and suggested the FOMC might not be as aggressive with future rate cuts as had been previously anticipated.
On a related note, the FOMC Minutes from the January 29-30 meeting indicated that members felt inflation expectations would remain reasonably well anchored. Still, it was not lost on the market, which saw oil prices top $100 again in Wednesday's trading, that the Fed raised its core inflation forecast for 2008 to 2.0% to 2.2% from 1.7% to 1.9%. The Fed also cut its 2008 GDP forecast to 1.3% to 2.0% from 1.8% to 2.5%.
The takeaway for the market was that the updated forecasts continue to support the view that further rate cuts remain likely. Accordingly, the stock market pressed higher following the release of the minutes.
In a separate release, it was reported that Housing Starts rose 0.8% in January. That seemingly good news was offset by the realization that starts had dropped 21% over the prior two quarters and that building permits slipped 3.0% to a 16-year low of 1.04 million units on an annualized basis.
After digesting the economic data, the stock market found a bullish stride that was helped along by the outperformance of the financial and technology sectors, which rose 1.6% and 1.7%. At the same time, the lack of follow through selling pressure after the negative open led to some bargain hunting activity that, in turn, forced some short covering that aided in the market's turnaround."
Short selling is KEY here. Part of the turnaround was based on the shorts. Only if we see a second day of higher volume upside will we commit to a call bias, and recommend again prudent risk. Whipsaw MAY be slowing.
February 20, 2008
Despite a myriad of bad news reported yesterday morning the market wanted optimism and moved up to 12,545, with a nice 100 point plus jump that allowed our traders to profit 32% up on the open March 660C, which sold to 4.70. Promptly, the market hit "reality mode" and fell to 12,264 on the theoretical Dow, to finally close 10 points down.
What happened here is quite relevant, as it's likely to continue. We believe we are now in a "range" for the market that will be "struggle", with a potential downturn to just above 12,000 yet again likely.
With this said, trading two ways is dangerous right now, as a simple 100 point move can take place (as we saw yesterday) with a breathtaking speed.
The Bell Curve count shows no bias. Futures will be the key to buys, and we will list bi-directional trades noting the high risk to the market.
[BRIEFING.COM] The major indices opened sharply higher on Tuesday without a specific catalyst, but eventually ended the day with modest losses due to weakness in financials and tech as inflation concerns weighed on sentiment. Although the declines are slight, when compared to this session's highs they are more significant. The Dow, Nasdaq and S&P fell 1.3%, 2.0% and 1.0%, respectively, from their session highs to their closing levels.
Strong: Platinum & precious metals; nonferrous metals; coal; steel; gold mining
Weak: fixed line telecom; internet; investment services; mortgage finance; asset managers
Lastly, I'd like to share an email from Advanced Mentoring client SK, written to me on 2/19:
"Floyd,
Man, this is completely frustrating. Got out of my OEX calls for a decent profit - Thanks! However, this market continues to frustrate me. I find myself wanting to trade and looking for clean setups, but there is nothing. Everything I have been learning through AM seems to be out the window (with the exception of - Don't trade in a market as irrational as this). I suppose I am just looking for some reassurance as to the future. I want so bad to start making money, but I am being patient and waiting.
Nobody knows what is going on. I have watched and listened to other traders for some time now, and none of them know what's going on and are getting killed. Are you continuing to sit out of the market? What sort of time frame do you think we are dealing with before things simmer down? Any suggestions for what I can be doing in the mean time would be great. I will continue to remain in defensive mode.
Thanks,SK"
SK asks a question that I can clearly answer, for both our Blue Chip Option subscribers, and OEX traders. NO ONE KNOWS WHAT THEY ARE DOING, AND NO CHARTIST will be right longer than a few days. The market is clearly fighting to hold its own, and to "listen" to the economic stimulus package, interest rate games, etc.
My advise for this market: TRADE LESS OFTEN. DO NOT look for TRADES. DO NOT TRY to make money off the downturn, thinking you'll play the market for profits.
Right now the market is showing us exactly how sick our economy is, while the politicians and economists continue to analyze if we are in a recession (will be over October, 2008, says Floyd, and people will stupidly think it is because of tax cuts, which will have NOTHING to do with the cycle of a recession)
We are recommending new stocks in our other service, but are not recommending stock options. When we trade the OEX, we are advising on certain days the risk we see to a trade, and the potentiality and necessity for second buys.
What to do in a market like this: SIT on your hands. If history proves accurate we'll begin to see a more defined market (good or bad) by summer.
February 19, 2008
Day after Presidents’ Day; a mixed bag, 7 of last 8 S&P losses down >1%
We enter the market Tuesday without any new trades recommended in either Blue Chip or OEX Options. Bias is too flat to establish any movement beyond whipsaw. Open calls should be held strictly to stop loss timelines, and with execution orders always in place.
As economists actively debate whether the U.S. is in a recession or not, there is true evidence materializing that factories are in retreat, and consumers are losing some of their optimism.
The N.Y.Fed Manufacturing Index fell 11.72% in February, the lowest since April 2003. What is important about this "fact" is that typically it predicts upcoming cycles, and often shows how the next few months will fare.
Energy costs, rising food prices, lower stock prices, homes falling in value. Some optimism indexes actually show a consumer nation trying to be optimists, but hit so hard now it's hard for even the big spending middle class to accept what is going on. Economically, high energy costs and a weaker dollar could fuel inflation, while other economists think the weak economy will keep things controlled. Wal-Mart, Floyd's indicator, is lowering prices to counter weak consumer demand. Starbucks , tanning and nail salons, and electronics sales are all off. These are the true indicators.
Whipsaw remains highly likely, with new tops being reached on any good economic data, and bottom lows to near 12,000 more than likely to be triggered again. Although massive whipsaw like we've been seeing allows traders fast and larger profits, bear in mind it also requires often second buys on the opposing hedge signal in the whipsaw, and higher potential of stop loss being reached. There are no charts that will predict the "next hour" of trading well in a market like this, and having execution orders in at all times is CRITICAL. The best success testimonials OEX Options has been receiving in the past 30 day so trading has been where traders have quick, tight buy/sell orders in at all times, and take tighter profits, or sell profits in partials.
This IS NOT a predictable market. What has been wrought is finally catching up with us, and the confusion is likely to continue.
At 7.34 a.m. futures are up over 100 points. Have sell orders IN place prior to market opening and lock call profits.
Actual "news" is not good:
1. Feb. 19 (Bloomberg) -- Credit Suisse Group discovered pricing errors on bonds that will cut first-quarter profit by about $1 billion, prompting the biggest share decline in more than five years.
Switzerland's second-largest bank said an internal review found ``mismarkings'' by an unidentified group of traders that contributed to $2.85 billion of writedowns on asset-backed securities. The bank said in a statement today that it's assessing whether 2007 earnings were also affected.
(Floyd: yet again, false financials from BANKS, blaming employees NOT themselves)
2. Feb. 19 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said fourth-quarter profit rose more than analysts estimated after it stepped up holiday discounts and added more brands of computers and flat-screen televisions.
Full-year earnings will be at most $3.43 a share, Wal-Mart said, less than analysts' projections.
(Floyd: LESS than projections)
3. The economic calendar for Tuesday features the NAHB housing market index for February, ahead of more high-profile releases on Wednesday on inflation and housing starts.
Oil is up, but a long week-end ends, and euphoria is likely to build up the market. Two way trades may well be very possible, with whipsaw surprises, but we'll hold to exit open calls profitably first.
If an intraday trade appears realistic an alert will be issued. Because we consider the market even higher risk than normal, and now potentially caught in a trading range, take caution as we watch the market assimilate news.
February 15, 2008
2/15/08 – February Expiration Day, S&P Down 10 of Last 14
Day Before Presidents’ Day, S&P Down 14 of Last 16
Read this carefully:
1 Feldstein, who heads the National Bureau of Economic Research, the group that sets the dates for U.S. economic cycles, said the chance of a recession is “close to 50-50.”
2. Traders now see a 100 percent chance of at least a half- point reduction at or before the Federal Open Market Committee's March 18 meeting, up from 68 percent on Jan. 31, when the Fed cited tighter credit conditions as a reason for lowering rates. Futures show 20 percent odds of a three-quarter point move.
This was pre-market Thursday. As the charmers still discuss whether we have a recession (Floyd note: We have been in one since October 2007 and it's likely to end by October 2008), and discuss rate cuts, our friend Bernanke was ready. His comments Thursday that the economy was "in a period of sluggish growth, and will likely have a stronger growth later this year" led the market to a bit of FEAR, that rate cuts might not be so automatic, and could be "watched".
It was just enough to begin downside, and the market fell to a low of 12,361. Floyd projected 12,340:)
The March 620P was available just below prior day close, and sold to highs of 17.60, for some great 30% plus returns. Our more OTM put was sold at up to 1.25, at break even for most subscribers. We're left now (risk traders took entry) to a first buy on the March660C, which in classic whipsaw could now rebound. Today and tomorrow show high seismic activity, and "irrational behavior". For those that believe in moon swings, etc. take note. Can't be any worse than economists predicting recession:)
February 14, 2008
Retail sales (all FALSE DATA in Floyd's mind) were the next catalyst for upside, and the market opened so aggressively only traders that paid above prior day close were able to profit on the March call recommended. Here’s the "scope" of the retail data. I repeat: Almost ALL government financial facts are false. I'm constantly proven right, as typically these reports are "adjusted" months later. Study what Reuters and Bloomberg state:
WASHINGTON (Reuters) - An unexpected rise in retail sales during January boosted hopes the United States might avoid recession despite the pressure that a weakening housing market is putting on consumers' pocketbooks.
The Commerce Department said on Wednesday that sales at U.S. retailers rose 0.3 percent in January to $382.91 billion on higher sales of new cars, gasoline and clothing.
That was sharply contrary to Wall Street analysts' forecasts for a 0.2 percent drop and helped soothe economic worries that had been driven in part by a surprise 0.4 percent fall in December sales announced a month ago.
The data gave a lift to stock prices. Government bond prices initially dropped as trader scaled back bets for further interest-rate cuts by the Federal Reserve but had turned mixed by midday.
Analysts were skeptical about some portions of the report, especially its indication of stronger new-car sales, but said it nonetheless showed consumers still were willing to buy.
"As the consumer goes, so goes the economy," said economist Joel Naroff of Narofff Economic Advisors in Holland, Pennsylvania. "It appears the consumer may have slowed down, but not left the field of battle."
SUSPICION ON DATA
The department said car sales rose 0.6 percent last month -- a figure some private-sector analysts regarded as suspect and said might be revised in coming months.
"This is completely at odds with auto industry data, which reported a 5.6 percent drop in overall unit sales in January," said Brian Bethune, an economist with Global Insight in Lexington, Massachusetts.
Excluding autos, sales were still up 0.3 percent, reversing a 0.3 percent fall in December. Wall Street analysts were expecting a 0.2 percent gain in sales excluding autos.
"The data is clearly a surprise to the upside," said Omer Esiner, a market analyst with Ruesch International in Washington. "In the near term, it does ease some recession concerns."
Despite the higher headline number for sales, there were declines in many categories, which implied consumer spending was being pinched. Furniture sales fell 0.5 percent, building material sales were down 1.7 percent and department store sales declined by 1.1 percent.
The retail sales report showed gasoline sales up 2 percent in January after being flat in December, but analysts said that likely reflected higher prices, not stronger demand. Excluding gasoline, sales rose 0.1 percent.
Many analysts think the slowing U.S. economy is at risk of tumbling into recession and are closely watching for signs that consumers, who fuel 70 percent of national economic activity, will keep scaling back spending.
A separate report from the Commerce Department showed that inventories at U.S. factories, wholesalers and retailers climbed by a higher-than-forecast 0.6 percent in December as sales fell 0.5 percent, the biggest decrease in nearly a year.
The worst housing slump in a quarter century and shrinking access to credit threatens to hurt spending this quarter. The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, the longest losing streak since 2003, eroding households' investment portfolios.
Consumers are increasingly limiting expenses to those they can't avoid. The amount Americans must spend each month on debt service, housing, medical costs, and food and energy bills rose to 66.9 percent of their total spending in December, the highest since records began in 1980, according to Bloomberg figures.
A U.S. recession over the next 12 months is now an even bet, according to a Bloomberg survey of economists taken from Jan. 30 to Feb. 7. The odds of a recession rose from 40 percent in January." (Floyd-we are in a recession now, and it will be over about October 2008)
With this said, it's now likely for a bit more euphoria, with the market ready to "trick us" that all is good. Read our Dow projections carefully, as after topping, more downside is very likely. Reversals could begin when we least expect it.
February 13, 2008
Since October 31st, 2007 the market has declined over 2500 points. Yesterday's moves showed a beginning and healthy bias to the upside, and did exceed our 100+ requirements for a potential turnaround, IF the market can hold it. Bernanke speaks Thursday.
The upside will be watched, however, as much took place because of a very shrewd bail out by Warren Buffett. This was effectively a psychological boost as it provided some liquidity to bond insurers. Buffets re-insurance bail out was well orchestrated, and the market took the news as the catalyst needed to trigger upside.
The market moves yesterday allowed good tight profits on the March680C, right to the tight profit tops we anticipated.
There's little else to say. Let's see if the market can now prove itself, not with a catalyst like Buffett's move yesterday, but with a renewed commitment. The NASDAQ did NOT move up yesterday, it was the Dow that led the game.
Excited as we may be for upside, we'll remain vigilant to the true risk to the market.
This is a favorite for Floyd. This company (GM) deserves outright bankruptcy. We suggest it will be bought by Toyota by year end.
"In a fresh sign that its turnaround plan is sputtering, General Motors Corp. yesterday reported a $722 million fourth-quarter loss, to end the year a staggering $38.7 billion in the red -- believed to be the largest annual loss ever by an auto maker.In the past three years the company has lost nearly $50 billion, more than all the profit it made in the preceding decade."
Due to inept business management our largest manufacturing company is now losing more money than imaginable.
February 12, 2008
[BRIEFING.COM] “It was a Dow day on Monday. That's not a typo by the way. The Dow Jones Industrial Average was the center of attention after the managing editor for The Wall Street Journal announced changes to the composition of the average. At the same time, Dow components AIG (AIG 44.74, -5.94), Microsoft(MSFT 28.21, -0.35) and ExxonMobil (XOM 83.22, +1.51) made headlines of their own that moved the market.
With respect to the impending changes, Bank of America (BAC 42.14, -0.02) and Chevron (CVX 80.43, +1.17) will be added to the Dow Jones Industrial Average, effective February 19. To make room for the new components, Altria Group (MO 72.42, -0.67) and Honeywell (HON 57.64, -0.19) are being removed.
The inclusion of the new components was predicated on the view that the financial services and oil & gas industries are playing an increasingly important role in the world economy, and hence, the added representation in the blue chip average that is looking less and less industrial was necessary."
GM, Yahoo..... and the market was happy. Market moves allowed a buy to the recommended put at 2.20 to 2.80, and it remains an open position. Some traders reported tight .50 profit sales on this issue. The market moved from highs of 12,292 on the theoretical Dow to lows of 12, 019, right at our first Dow bottom. The market appeared to shrug off terrible news on large insurer AIG (AIG fronted blue-chip losses, its stock down 11.7%. after it pointed to possible valuation difficulties in a regulatory filing earlier Monday), and awaits Bernanke Thursday in more FED babbles.
This is a market without a strong bias, and because of this, we will list signals, but emphasize that the bell curve bias we utilize does NOT yet establish a strong upside, or the end to downside.
As so many traders wrote today with "What are you doing? Floyd's answer is simple...NOT trading. When a bias is at "tight" as we are seeing it the "bet" of the market takes over any detail on the "count" itself, and traders begin to "want to trade".
We had good profits last week, and will continue to list a put and call in our open signals, without a new signal. Read our Dow projections carefully.
And Floyd's favorite, more on AIG, defines more proof to the theory that most blue chippers have FALSE financial statements:
"Feb. 11 (Bloomberg) -- American International Group Inc., the world's largest insurer by assets, fell the most in 20 years in New York trading after its auditor found faulty accounting may have understated losses on some holdings.
So-called credit-default swaps issued by AIG, which protect fixed-income investors against losses, declined by $4.88 billion in value in October and November, four times more than previously disclosed, the company said today in a regulatory filing. AIG's auditors found “material weakness” in its accounting for the contracts, and the firm doesn't know what they were worth at the end of 2007, the filing said."
Material weakness is accounting speak, by the way, for the falsification of financials. Hmm, makes you wonder about Government data, doesn't it?
February 11, 2008
Here's what we wrote last Friday: "If the market can HOLD a 100+ increase "the dark road" may be short term avoided.
If this were to take place there could be a two step shift upward, to our first Dow projected high, and with any "luck" on to 12,630 area. Remember as you trade we see a 51% of more bottoms, and the market itself could stop trends again as the numbers hit 12,000. All market moves show tremendous sensitivity and hesitancy around 000's"
The market complied well to our open and new signals, allowing good profits on the March530Put.
When a bear market begins most investors panic. Amidst it typically politicians offer panaceas to "help" the market, rather than allow free enterprise to sort itself out.
And....there are often many rally's during a bear market. This is the mob psychology the stock market leads so well with, helping to make the investing world public believe it is all okay.
We've experienced a few of these rally's recently. Go back and chart out January 22nd-23rd, 2008, a rally amidst a bear market.
Using cognitive psychology in Floyd's consulting business has helped our other company to help companies "restructure" and organize around what psychiatry calls "collective subconscious".
The market, in recent rally's, and longer term bear thinking, has perfectly followed the herd methodology that collective subconscious Jungian psychology teaches.
It is likely that February will allow some excellent HIGHS, to trick the market to the "good, it's over and things are better" thinking, and some highly volatile and more frightening "LOWS" where the GREED of subslime, of the massive mergers/acquisitions and stock buybacks led by corporations and Wall Street in 2007 (what kept the market aloft).
Study our Presidential candidates well. Do NOT be caught up in the stupid logic of "I will make tax cuts long term" thinking, as without a logic of how to pay for these tax cuts, and without actually cutting government spending, tax cuts only allow other countries to own us. If I fault Bush for any one thing most (it's hard) it's the pervading attitude that "tax cuts are right" (they are), but balancing the budget is always "going to happen", but does not. Historically conservative Republican administrations RAISE debt while cutting taxes, and stock markets decline.
This FACT no one ever wants to believe. Prove me wrong.
"Floyd, I was first annoyed with your soapbox ranting on politics, but some of your information really did surprise me, and has opened my mind. It's true that historically the market does not do well under Republican administrations, and it's true that recent Republican administrations HAVE left massive deficits. It's also now obviously true to most that the Iraqi war was both manipulated to act before thought, was not well thought out at all, and has been poorly executed. Your recent comments on Buffett also showed me that a number of "real investors" see beyond this Republican rhetoric. I’ve voted Republican for over 30 years. Your comments have me thinking. Ben J, Colorado"
"Nice profits on the OEBOF Put. Got .80 profits within a few short hours, second day running"-Meredith, London
A Democratic President is not necessarily the answer. It's not that simple. One thing former President Clinton, a Rhodes Scholar, clearly understood was HOW ECONOMICS WORKS.
There is a REASON our dollar has lost so much value, and REASON our deficit is so large. Are the reasons justifiable and what have they accomplished? Do we have a plan to change this?
If not, it's our next subprime scare in the marking.
We could have funded nationwide health insurance, Government paid, with the idiocy of our recent direction.
The deficit was balanced, even in inflation and recession, under Clinton. It stayed balanced. Greenspan, one of the great economic minds of all times, and advisor to many Presidents, said it best:
"Of all the Presidents I was honored to work for Bill Clinton clearly understood economic principles perfectly. At times I was stunned how little some of our Presidents understood economics, and the longer term repercussions of what they did".
All Floyd is pontificating about is STUDY FACTS, don't get caught up rhetoric of "cutting taxes", "fiscal conservatism", "Democrats will raise taxes", or Rush Limbaugh trash, or "Clinton was a cheat". Think this out.
Elect smartly.
Upside is more likely, on any trigger that can be seen. Downside, meanwhile, may have a long way to go.
February 08, 2008
The market reached Dow highs at 12,332 in whipsaw trading, allowing tight .50 profits on the March680C. Whipsaw, as expected, took the market to a 12,120 low, and profits were also profitable on the March530P. :)
We will continue to hold an inventory to the March530P, and recommend a new position. We will also day trade the same March680C, noting that higher moves may take place short term.
Until we see a market move that holds 130 points up, and stays, the possibility of downturn to below 12,000, and to "dark days" possibility remains very likely.
Nothing in this market yet shows us that anyone has figured out how deep this mess is.
The OEX historically correlates very well with the Dow Jones Industrial Average. We consider it long term even more bearish that both the Dow and S&P 500 made new, all time highs in October of 2007, the OEX did NOT come in at a new all time high.
The OEX made it's all time high in 2000, and has never retested that 2000 high. Hmmm...October 11th, 2007 is now an obvious critical market "shift", as historically the OEX diverges from the patterns of following the Dow (and the S &P 500) at critical times.
In 2007 Floyd was very bearish, but recommending calls and upswing, and we profited well. Many of our alerts led Floyd soapbox logic on DEBT, the USD, and all the subjects that I repeat ad nauseum. Market euphoria amazed Floyd during this time period and the lack of logic in the reaction to our aptly named "subslime" mortgages is beginning to show.
We missed the market downturn of early January completely, as the year opened with so much catalytic news even trader optimists began to feel the fear.
This is a man that understands economics. The world's greatest investor, Warren Buffet. Read carefully (bold highlights ours)
"Feb. 6 (Bloomberg) -- Billionaire Warren Buffett, chairman of Berkshire Hathaway Inc., said a credit crunch isn't under way and he forecast that the dollar's value is likely to decline.
Funds are available and can be borrowed inexpensively, Buffett said during an appearance in Toronto today as he took questions from the audience. The U.S. dollar is likely to fall during the next decade if policies don't change, he said.
Buffett “wouldn't quite call it a credit crunch”' when asked to comment on global credit markets. “Money is available and it's really quite cheap,” he said.
The U.S. Federal Reserve said Feb. 4 that lenders made it tougher for companies and consumers to get loans in the past three months. About 80 percent of banks raised standards on commercial-property loans, a record, while a majority tightened terms on prime home mortgages, according to the Fed's survey of senior loan officers.
Fed Chairman Ben S. Bernanke warned Jan. 10 there was “considerable evidence that banks have become more restrictive in their lending to firms and households.”
Buffett's company has the highest possible AAA credit rating and had more than $40 billion in cash available as of Sept. 30. He ranks among the world's richest people.
The only currency Berkshire directly owns now is the Brazilian real, Buffett said. He blamed the declining dollar on the current account deficit, with the U.S. trade imbalance playing the largest role.
“If something is unsustainable, it's going to have consequences; so far the consequences have been a general decline in the dollar against major currencies,” Buffett said. “If we continue the same policies, we're going to get the same results in the next five or 10 years.”
Buffett has said he was looking for acquisitions outside the U.S., in part to hedge against long-term declines in the dollar. The company made its first non-U.S. acquisition in 2006, when it paid $4 billion for 80 percent of Israel-based Iscar Metalworking Cos., a family-owned maker of industrial tools.
Inflation has been in “remission'” and is likely to be more prevalent in the next 10 years, Buffett said.
Buffett, 77, built Berkshire Hathaway over four decades, turning a failing textile maker into a $200 billion investment and holding company with businesses ranging from brick-making to corporate jet leasing. The Omaha, Nebraska-based company gets about half its profit from insurance units, which include Geico.
Buffett said “he's likely to support either of the Democratic candidates, Barack Obama or Hillary Clinton, for the U.S. presidential election in November."
We are mob psychology driven. Just remember our mass patriotism after 9/11. Much of the U.S. bought cute little American Flags (made in China) to proudly flap on our Japanese and German cars. We KNEW we must do something. 8 years later we SHOULD know we had no forethought to what we DID, and the debts we have are not yet even understood.
Cheney continues to tell us "deficits are irrelevant" and Keynesian and supply side economists and politicians continue to pontificate. Be careful as you think out your vote, as the "thinking" of "invade the enemy" is indicative of much of our ills.
But, it is this, and that WE allowed brokers and bankers to GREED up the American market, allowed interest rate games to be played, and actually believed the classic panacea of "tax cuts" was just a "way to get our money back". As always, we let the horse out of the barn, and locked the barn door.
Floyd FACT: Singapore has a major stake in the Swiss Bank, UBS, over 330 billion is invested.
February 07, 2008
We are again combining alerts for both www.bluechipoptions.com and OEX for a simple reason. The dark side may not yet be over. Our Dow projections listed below are critical in understanding the market.
In August of 2007 the market began a 10% correction, ending a 77 week cycle as a new "low". Many at this time predicted a greater downfall, and chartists were convinced of the beginning of the end. The market promptly smiled, surprised all, and the investing public closed their eyes of logic, rallied sharply, only to open their eyes in fear, sell off again dramatically, and decline again mid December, closing the year with a Santa Claus rally.
We believe the market itself, playing the psychology of the public, did its level best to fool much of the trading public into believing in "buy the dips". Chartists are now retroactively analyzing what they see as a topping pattern, a "head and shoulders top". This is an effective of way of "seeing what happened afterwards :)"
The bad news for the market is that a firm "stop" to a head/shoulders chartists point of view would have been at 12, 850. January 22-23rd the market actually plunged below 12,000.
Technically this has caused some severe damage, and psychologically the market has been starved for any reason to "hope". Economic stimulus packages, silly as you truly think of them, and interest rate cuts only act as short term panaceas. Even the American public and Wall Street may now be seeing thru this sham.
We hesitated on entry to any position to the market yesterday, and "fished" as the market moved up 100+ points, moved down 45 below prior day, and began a pure whipsaw again. In other words, GAINS did not hold.
Any news will act as a catalyst to the market, both directions. Bulls will want to find any opportunity to "buy on dips", and bears will continue to "fear" that the market run is over.
A bear plunge, we believe, could very easily continue, for the SHORT term (perhaps ending this week), but a strong enough drop to truly show world reaction.
Will this happen? 51% chance, Floyd says, and why I wanted a day to watch this market unfold it's news and how we react before our next Dow projections.
With this said, I've again combined alerts to help all of our traders understand the true risk to the market.
For Blue Chip Stock option traders: We continue to suggest a strong building position in BOOZE, GOLD, RAILROADS and U.S. Treasury TIPS. We have open signals within our portfolios on all of these issues.
We also will now advise our thoughts on GOOG's recent fall from grace, as Microsoft makes its bid for Yahoo.
1. Yahoo will sell to Microsoft.
2. The people are Microsoft run a giant ape lumbering down the road with inferior software. It's too big to kill them, but they are NOT a customer friendly company, and have not yet understood web search. Floyd predicts they could easily have underestimated what they are doing. If you have used MSN as a search engine, you'll see what I mean. It's not half of GOOG, or a 1/3 of Yahoo...and they have all the money.
3. GOOG is smart people with good concept. They will prevail. We will continue to add to our GOOG positions on all downward moves.
For Blue Chip Option Traders: Consider a MARCH OTM PUT on the DJX. Buy a deeply discounted trade, and hold for 100 to 150% returns, using the whipsaw methodology stop loss, and noting the high risk.
For OEX traders: The market remains massively high risk, and we will suggest a higher risk trade, noted below, with a March put expiry. We will not trade calls, although there is high likelihood of a two way trade capability.
Floyd FACT: China holds more U.S. Treasury Securities, $200 billion, than any other country, except Japan.
February 06, 2008
The Feb620P was profitable to a high of 12.70. Most traders were able to profit out to our tops by early afternoon, for some great short term profits.
Following futures it was obvious the market would open with a bang on Super Tuesday, and it did.
"Stocks fell sharply Tuesday after a key service sector gauge contracted in January -- possibly signaling that the U.S. economy is already in recession."
This was Floyd's favorite line. Please make note that I've been advising, and no one obviously listening:), that the U.S. economy has been in recession since early October 2007. By the time our politicians and economists can agree we are in one, and typical of this, we will be out, typically in a one year period.
Thusly the Bushy tax cuts which will arrive in July (with luck) may be seen as short term effective, when in actuality recession will be diminishing by time, as it always does, and we'll be left with the trillions in deficits to cover the additional war costs, tax cuts, and numerous increased government programs.
My harping has logic. We continue to REACT, just as the market did yesterday, and this time we were ready, allowing some great profits.
Yesterday we listed the following in our Dow projections:
Downside potential still remains highly possible, on any data or news of "negative surprise". Second lows are highly possible, with downturn potential remaining to just above 12,000, or on shocking news, below. Market first lows of 12,287.
Yesterday the market moved to a Dow low of 12,264 :)
We will not yet project a market up move, but will suggest in our Dow projections listed below that although there may be a gap up rebound, there is a distinct possibility of moving yet again to below 12,000.
"Floyd got the 620 and returned over 100% in two days. Incredible."-Jerry W, NYC
"Bought the 620 and did a second buy, and held, and made 4.00 per contract! I made money on the call the day before, and I counted up 5 successful trades on the same call in the week prior. I am truly learning how to "love an option", and more importantly, that what I read is not true. Thanks". K. Pierce, Texas
February 05, 2008
Investors trimmed positions, reports said, after the "up" week last week, especially led with financials beginning downturn again. Trading volume showed 1.3 billion shares on the NYSE, declines led 3 to 2, and the Nasdaq decliners were at 4 to 3.
Volatility we believe is likely to continue, including a potential quick upside. Our bell curve methodology will now show a reversing from Friday, and we believe a potential reversing could occur again today, or soon.
Two way trades remain likely with more downside to come.
Part of our work is always to study VOLUME around moves, to understand how the market is thinking. OEX index volume is usually portrayed on charts as the composite volume for all contracts of that market, and with some brokerages does not reflect just the contract month shown on the chart.
Volume is related to pain and volatility, but it doesn’t necessarily mean they go hand in hand. The more pain traders are in as losses mount the more likely FEAR will develop and they will jump out of positions, and this makes the market more volatile.
Simply put, ANY price move accompanied by heavy volume is a true reflection of market opinion.
Again, here's Floyd's simple rules:
Price UP/Volume UP/Open Interest UP/=Bullish
Price UP, Volume Down, Open Interest UP=No bias
Price UP/volume down/open interest down=Bearish
Price UP, Volume UP, Open Interest Down=No bias
Price DOWN/Volume UP/Open Interest UP=Bearish
Price Down/Volume UP/Open Interest Down=No bias
Open interest is a very simple definition: it’s the simple number of contracts that remain open- a buy that has not been offset by a sell, or conversely, a sell that has not been offset by a buy.
Vote Smartly. Just study this. Floyd has commented in bold. What our government has done is what is happening to us now. The situation we are in is only partly caused by housing/financial institutions.
"WASHINGTON (AP) -- President Bush introduced a $3.1 trillion budget on Monday that supports sizable increases in military spending to fight the war on terrorism and protects his signature tax cuts.11 percent
"Two key principles guided the development of my budget -- keeping America safe and ensuring our continued prosperity," Bush said in his budget message to Congress. "As commander in chief, my highest priority is the security of the American people."
Floyd: Blah blah blah. Keep America safe. Feel safer? The "kill the enemy or we will all die" is getting old even to those that fell for it before.
Prosperity? Prove it.
"Bush's final full budget is for the 2009 fiscal year, which begins on October 1. It proposes spending $3.1 trillion, up 6 percent from projected spending of $2.9 trillion in the current budget year."
What happened to our fiscal conservative Republican President?
"Part of the deficit increase this year and next reflects the cost of a $145 billion stimulus package of tax refunds for individuals and tax cuts for business investment that Bush is urging Congress to pass quickly to try to combat a threatened recession."
Silly tax cuts that benefit no one, and cost money. Prove me wrong.
"Bush projects that the deficit will decline rapidly starting in 2010 and will achieve a $48 billion balance in 2012."
How? It's nice to say, especially as he'll be gone:)
"But Democrats said that forecast was based on flawed math that only included $70 billion for the wars in Iraq and Afghanistan in 2009 and no money after that and also failed to include any provisions after this year for keeping the alternative minimum tax, originally aimed at the wealthy, from ensnaring millions of middle-class taxpayers. The Congressional Budget Office estimates that fixing the AMT in 2012 would cost $118 billion, more than double the surplus Bush is projecting for that year.
Even some Republicans faulted Bush's budget sleight of hand."
Vote for someone that UNDERSTANDS economics and has a REAL Plan, not rhetoric. It is the rhetoric that has been destroying us. Our citizens keep believing it.
"The 6 percent overall increase in spending for 2009 reflects a continued surge in spending on the government's huge benefit programs for the elderly -- Social Security and Medicare, even with the projected five-year savings of $196 billion over five years. Those savings are achieved by freezing payments to hospitals and other health care providers. A much-smaller effort by Bush in this area last year went nowhere in Congress."
Of course, they went nowhere. Congress is run by LOBBYISTS for health care and pharmaceuticals, etc. VOTE SMART, not with "party" or from rhetoric. The stakes have never been higher.
Option traders were able only to buy the new February 620P signal above prior day close. The position rose to a high of 5.50. We continue to see potential for two way trades, and a high possibility of a call turnaround. Two way trades are possible.
February 04, 2008
Calls yet again went right back up to our 5.90 top profitably, and were available at the Feb660C range level for tight profits. Second buys were made to our hedge trade, the Feb620P.
The market moved in classic whipsaw Friday, again hitting Dow projection top areas, and euphoric to have good acquisition news, even around recession data that would normally swing the market. Upside is likely to continue on any news, just enough to trick us to the upside is coming.
U.S. employment unexpectedly tumbled last month for the first time in more than four years, fueling worries that the U.S. economy which already limped into 2008 might soften further or even slip into recession in coming months. Amazing, the market did not react to this normally terrible data. Because...Microsoft bids for Yahoo. Yahoo jumps up 48% as the hostile bid comes in at 44.6 billion. Google fell 7%.
Things "appear" better. The market is "regaining strength". Or, so it appears.
Watch your economic calendars carefully, and Bloomberg News. Extreme whipsaw potential remains highly likely, although upside could continue until mid week.
Nothing is different than two weeks ago, and we've past correction mode, and entered bear mode. Everything just looks better right now. Two rate cuts in two weeks, an economic stimulus package, and even bad news on insurance bonds defaulting did not slow the market, despite no single gain day in the past week that would technically count as a follow through day.
"We continue to think that the Administration will do all in its power to avoid a market collapse this year. In 2001, the bear market could be blamed on the previous Administration. The stimulus package enacted then was no where near as powerful as the one being considered now. It was the beginning of the Bush Presidency with plenty of time to recover. Now there is no one else to blame and the legacy is at stake, as well as the election of a Republican President in the fall. The measures taken so far show a strong resolve and further measures can be expected to avoid a market collapse and recession. The jobs data reported on Friday show that a recession may be already upon us, but if the stimulus package is enacted swiftly and the bond insurers are successfully bailed out then we may have seen the bottom." -M. Gibbons
Take prudent risk.
Jan. 31 (Bloomberg) -- Democratic presidential candidate Barack Obama won the endorsement of former Federal Reserve Chairman Paul Volcker.
Floyd considers Volcker one of our smartest economists, and someone that understands market conditions. Study your history on what he accomplished against some tough economic odds. Volcker's statement assailed “partisan bickering,” ideological extremes and the “narrow” interests of lobbyists that he said have taken over American politics and eroded faith in government.
“Challenges such as shoring up Social Security, providing affordable health care and protecting the environment from global warming require a willingness to break out of the engrained habits of partisan politics,” said the former Fed chairman, who served from 1979 to 1987. “We haven't faced up to the need for coherent budget, tax and other policies that will encourage savings, innovation and investment and free the U.S. from its heavy dependence on foreign capital and maintain a stable dollar,” Volcker said. “Volcker, 80, is one of the most capable and politically courageous leaders in the Fed's 94-year history,” said Allan Meltzer, a Carnegie Mellon University economist who has written a history of the Federal Reserve. Volcker risked his reputation on a 1979 strategy to raise interest rates and crush inflation that soared to 13 percent that year. His policy produced a 16-month recession in 1981 and 1982 and a 10.8 percent unemployment rate in December 1982. But the consumer price index, which had risen to 14.8 percent in the year ending March 1980, fell to 6.8 percent two years later and 3.6 percent in March 1983. The 1979 policy “rescued our nation's economy from a dangerous path of ever-escalating inflation and instability” and was a “turning point in our nation's economic history,” former Fed Chairman Alan Greenspan said in an October 2004 speech.
February 01, 2008
Yesterday the market, which had a 0 to 3 count the prior day, went from morning downside moves to upside tops again in afternoon trading as the market absorbed what was construed as positive news by MBIA, the insurance bond giant, that they would not default on loans, and that their rating was solid.
This makes Floyd laugh, as daily we find how financials are shifted with "oops, we forgot and will now write off 15 billion, or oops, a trader lost us 7.1 billion (sure), so the euphoria of MBIA commentary truly shows a market that WANTS upside.
With this said today is the first trading day of February, and the Dow has been up 7 of the last 8 years, and the last five in a row. Rebound may well continue, for several days, and we'll recommend calls for the DJX (Blue Chip Option traders) and in this OEX alert, while at the same time maintaining our hedge buy to the put. We believe more downside, after a euphoric rebound, is quite likely, with our Dow projection lows now adjusted for what could be a several stage downturn.
In fact, downside has enough likelihood over a short time, after rebound, that the market projections we now see, opposing the bias to the moment, could bring new and stronger down moves. In the meantime, we'll suggest short term calls, and a hedge put position, first buy made yesterday. A number of traders did day trade the put yesterday for good profits, and day traders on our old favorite, the Feb660C also reported some great profits.
Read carefully the following two commentaries, as they clearly emphasize what we think the market is doing:
"A financial bubble is a market aberration manufactured by government, finance, and industry, a shared speculative hallucination and then a crash, followed by depression.
Bubbles at one time were very rare-one every 100 years was enough to motivate politicians to enact legislation that would prevent subsequent occurrences. Nowadays we barely pause between such bouts of insanity, and we NEVER take blame. The dot-come crash of the early 2000's, for example, should have been followed by decades of soul searching; instead, even before the old bubble had full deflated a new mania began to take hold on the foundation of our American faith that the wide expansion of home ownership can social harmony and national economic well being. Spurred by the actions initially of Bubbles Greenspan, long derailed by old Floyd, the Federal Reserve both promoted and then allowed exotic cash derivatives and debt securitization, mortgages to the poor and unable, and we began as a nation to compound our own troubles.
During all of this time period we with no logic or control began a spiral of massive national debt, to sponsor the "war on terror", tax cuts, and benefits to fewer rather than many. This cannot really be disputed.
Financial services (banks) paid multi millions to CEO's to manage this, and financial statements were aggressively doctored. They must have been. How else can a Bank of America or Citi financial statement of a year ago look so differently than today. Did we really just now figure out defaults would rise? Were the financial projections based on "nothing going wrong"?
Did the Federal Reserve question this? Did our government offer concerns, or tell us instead "unemployment is low", "the economy is sound".
"Call this the perfect financial storm or what you will; Wall Street has made fools of financial institutions around the world with their CMOs, CDOs, and greedy boo-boos.
At least they didn't lose as much as their customers. The stock market is in distress, bond insurers are looking for a $200 billion bailout, junk-bond markets are at risk of further losses and life-, home- and auto insurers' risk has not yet been fully assessed.
We need real ready-to-go financial leadership and we need it now. Tell the presidential candidates, Congress and economists to stay home. We need regulators with clear priorities.
Former Federal Reserve Chairman Paul Volcker, former FDIC Chairman Bill Isaacs and anyone they trust would be good choices. They beat inflation and presided over the savings and loan cleanup. Tell Ben Bernanke to go home. VOTE educated, NOT emotionally or off "false facts".
As for you personally, it's every person for themselves and their family. Study the charts: This is a bear market.
The worm turns. The Wall Street worms have made our economy rotten to the core. Combine dazed and confused credit markets with globalization, and our economy is in a bind. A Fed rate cut won't turn things around for more than a week."
To view our Blog entries for January 2008, click here.
Email us with your stock option trading questions: info@oexoptions.com
Contact: info@oexoptions.com