That's getting to be a serious line – especially on Tuesdays and Wednesdays. Last Tuesday it was a floor, as the IMF made calls for a Global Recession, the Tuesday before that, we started and finished there and it was Wednesday's post (Oct 3rd) which I titled "Will We Hold It Wednesday – S&P 1,440 Edition – Again" because that had also been the title of the previous Wednesday's post and the previous day we had done a brilliant study of the Dow components where we determined that 13,600 was not likely to be broken until we got earnings to support it. NOW it's earnings season…
As you can see from Dave Fry's intraday chart of the SPY, it was indeed time to rally yesterday but we did have a nice little dip at the open, which allowed us to buy back our AAPL short callers in Member Chat. At 10:43, we also went bullish on Oil off the $90 line, playing the Futures (/CL) as well as USO $32 calls for $1.53 and $31.50 calls for $2.02. Oil topped out at $92 for a nice $2,000 per contract gain in the Futures while we took $2.05 and ran on the USO $32s for a 35% gain and $3.05 on the $31.50s for a 50% gain on the day. Now we're more likely to wait for tomorrow's inventory report (10:30) and we'll be looking for an opportunity to go short – hopefully back around $93.
Other than that, we added a long-term play on FTR and discussed adjusting HPQ in our Income Portfolio but, generally, we're already bullish so there wasn't much to do but watch and wait. There was nothing about the close to make us change our mind so we stayed very bullish into the close as the progress yesterday was as good as we could have hoped for with our bullish premise.
Hopefully the Russell will continue it's bullish trajectory (828 at the close) as we need about 5 more points to put our TNA calls in the money and, of course, XLF is doing nicely for us (also discussed in yesterday's post) and should be even better today as both STT and GS had nice beats. Even C popped 5% yesterday so the only bank we're still worried about is BAC and then we can go off to the races towards our $16.50 target.
Speaking of C – CEO Vikram Pandit mysteriously resigned this morning and that's knocking back half of yesterday's gains in pre-market trading. It's too early to say what this means – perhaps yesterday's earnings were simply "mission accomplished" after Pandit came in to save the bank from disaster 5 years ago but the suddenness of the resignation and the fact that COO John Havens is also stepping down and that Pandit is "immediately" off the board as well – raises enough questions to let the rumor mill run wild for a while.
"There has been a sea change in market sentiment since June when policy makers acknowledged the need for fiscal unity," said Richard McGuire, senior fixed-income strategist at Rabobank International, adding that investors "are now trading from a euro-makeup bias rather than a euro-breakup stance."
The yield on the bond maturing in 2023—the closest Greece has to a 10-year benchmark-fell by roughly two-thirds of a percentage point to 17.2%, according to Tradeweb. The fall means yields are now at their lowest level since the restructuring, falling past the 17.6% reached in late March. Still, with volumes light and yields in unsustainably high territory, analysts said Greece faces a long hard slog before it wins the trust of long-term investors.
As Zero Hedge puts it:
Since the Fed desperately needs inexperienced, "weak-hand" shorts to reenter stocks to facilitate its "transmission mechanisms" (all of which can be summarized in two words: "stock ramps"), and since the only time shorts re-enter the market, even against their and everyone else's better judgment, is just after major market tumbles, expect the Fed to prepare for some more stock market acrobatics whose sole purpose is to get a fresh batch of shorts in, just so the squeeze trap can be replayed over and over, as it has been for the past 4 years.
But, for today, we're still hopeful. China's Golden Week Retail Sales were up 15%, less than last year's 17.5% but much better than expected. Germany's ZEW Index rose to -11.5 from -15 and -18.2 in previous reports. ZEW is more of a forward-looking survey so things are not quite so dire as they are being painted by the press.
This morning we had in-line earnings by KO (which we expected as they are over 50% International) with beats by DPZ, FRX, GS, IRWD, JNJ, MAT, OMC, PMC, STT and UNH, who also raised guidance. GWW and WWW missed but only by a bit and PKG, one of yesterday's misses, also guided up but will still open down on the headline penny miss. Our Industrial Production is up 0.4% and that's double expectations so good for Corporate America and Capacity Utilization was up 0.3% to 78.3. The 40-year average is 80.3 so we're that far from getting back to "normal" from that perspective and that of course would be about 5.6% unemployment as well.
We need to find some AAPL buyers to get this market over the hump and, of course, we need not to fall back to 1,440 on the S&P – if we do, we'll have to add some short plays – like the TZA spreads we already have (see last week's post).