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August 2006 Archives
Crude oil prices fell more than 1% to $69 on news that supplies of crude oil, gasoline, and distillate all rose in the latest week, contrary to expectations for a decline.
Also, a slightly smaller than expected upward revision to second-quarter U.S. economic growth as measured by GDP (gross domestic product) reinforced hopes that the Federal Reserve may have ended its interest rate raising cycle.
Stock prices turned higher on this news, but I doubt that the gains can be sustained.
Unless a surprising employment report gives the market some direction on Friday morning, choppy, directionless market behavior may continue. Many traders are on vacation this week, and so a truer reading of the market intentions may be postponed until next week.
I still see potential downside risks outweighing potential upside rewards.
Oil is down on news that the latest tropical storm will miss the Gulf of Mexico energy installations.
Stocks and bonds are having a relief rally.
This is not the last of the storms, however, and there are plenty of other potential problems to put a lid on the markets.
I am neutral at the moment and waiting for the right time to place aggressive bearish bets.
Today at 10 a.m. EDT, the markets may react to any hints given by Fed Chairman Ben Bernanke when he speaks about global economic integration at the Federal Reserve annual symposium in Jackson Hole. Ben has some history of saying odd things, and he could be capable of saying anything today.
Crude oil is up more than $1 on signs of a tropical depression gaining strength near Puerto Rico. This is potentially bearish for the stock market.
Downside risks seem to far outweigh any imaginable upside rewards, so I am selling short.
"Time is working against those who would like to see this resolution applied…We are now in the most sensitive and explosive position." -- Tzipi Livni, Israel's foreign minister.
A British think tank declares Iran the big winner in Bush’s “war on terror”.
Iran brags that it is a “nuclear country.”
American Pulitzer Prize winning investigative journalist, Seymour Hersh “wildly speculates” that the Bush Administration plans an air strike within Iran, possibly including a nuclear first strike to eliminate underground Iranian uranium enrichment facilities.
Existing-home sales plunge to a two-year low. The housing industry is obviously in trouble, and its decline will ripple through the whole economy.
Inflation is higher than the Fed is comfortable with, and so the Fed may raise interest rates again.
How long can stock prices defy the laws of gravity?
The big risks all seem to be skewed to the downside. The only problem I see is that this is all too obvious. So, I want to be prepared for surprises. Like the path behind, the road ahead may be full of twists, turns, and major potholes.
This "news" from Chicago Federal Reserve President Michael Moskow seems to be spooking traders.
Naturally, since history clearly shows that rising interest rates are bearish for stocks and bonds.
The pre-opening call is for lower prices for stocks and higher prices for oil, gold, and commodities.
The news seems to suggest that the Middle East might not be a safe place.
Last week’s correction (upside for stocks and downside for oil, gold, and commodities) may be over.
8/18/06
Correction
All the financial markets turned corrective this past week.
Prices of financial instruments of all kinds have been moving opposite to their major trends over most of the past week.
Counter-trend corrections opposite to and against major trends are not reliable. The extent and duration of such moves are usually limited, although frequently quite unpredictable.
Nevertheless, I would guess that these corrections are over.
The opening call is a bit lower for stocks.
Sure, running with the Bulls can be fun--while it lasts.
Just don't stumble and fall under hooves.
There are still plenty of potential risks, and so this rally may not be on the most solid foundation.
I am trying for a very flexible trading attitude, trying to be ready to roll with whatever comes my way.
The market seems more reactive than goal oriented at this time.
A return to two-way, trading-range action would not come as much of a surprise.
I underestimated the impact of the smaller than expected PPI and had to cut short sale losses repeatedly in the persistent rally on Tuesday. Ouch!
On Wednesday before the open, the July CPI consensus is +0.4%, up from +0.2% in June. Core CPI consensus is +0.3%, unchanged from +0.3% in June.
If CPI is lower than consensus, the rally might have legs. But if the CPI is higher than consensus, still another big reversal, this time to the downside.
too many actual and potential worries at this time…
why take the risk of holding longs?
Shorts look like the better bet.
…on news of analysts’ downgrades, FDA rejections, and terrorist plots.
The financial markets are in disarray. There are just too many unknowns and risks at this time.
The news has been full of contradictions. So, the markets have been very jumpy, with many whipsaw reversals. I assume that the markets probably will continue their recent very choppy trend with a downward bias.
Lately I have noted that seeing and, more importantly, acting on the obvious market patterns can be profitable. Selling rallies on good news has been a winning strategy. That may be the main trend to emphasize at this time.
Pity the poor investors. Stocks have gone nowhere this year.
More power to the good traders! Stocks have had great ups and downs in a trading range this year.
The pre-opening call is higher on news of good earnings reports from Cisco Systems (CSCO), Walt Disney (DIS), Federated Department Stores (FD).
I continue to view good news as selling opportunities. Reversals dominate trends.
A lot of nonsense has been written and spoken about Fed Chairman Bernanke's recent so-called “dovish” testimony to Congress probably indicating that the Fed would skip an interest rate increase on 8/8/06. (What he actually said was not so clear, in my opinion.) So, such a pause in the Fed’s campaign to raise interest rates is probably already discounted.
Therefore, it seems possible that if the Fed actually does pause, the markets might initially rally for a minute or so before selling off.
But if the Fed raises interest rates again, the markets might really fall.
Most likely, the Fed’s accompanying policy directive could be so cryptic and contradictory as to cause wicked whipsaws in both directions. That happens with remarkable frequency around such completely artificial “events” manufactured and served by your helpful and friendly unelected Monetary Authority.
Billions are made and lost. Ever ask yourself, what is the purpose of such an event, and who benefits from it?
Both, actually.
Stock prices are indicated to gap sharply higher on the open. The July employment report is encouraging speculation that the Fed might not raise interest rates next week. That is far from certain, however.
This news provides an excellent set up for selling short today. We want to short at high prices, and this news provides the opportunity.
Today, the Bank of England hiked its key interest rate to 4.75% from 4.50%, catching the markets by "surprise", according to our friends in the media.
This is only a surprise to those not paying attention because, quite obviously, inflation and interest rates are trending higher globally.
Therefore, global bear markets for equities and fixed income instruments are likely to follow.
News that the Fed's key inflation measure is rising at its fastest pace in more than a decade keeps upward pressure on interest rates.
The core-PCE deflator is rising at a 2.4% annual rate, above the Fed's target. This dashes widespread hopes for a pause in interest rates at the FOMC meeting next Tuesday.
War usually results in inflation, of course. What WERE they thinking?
Copyright © 2007 TradingEducation.com, LLC. All rights reserved
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 About Me:
Almost nothing is known about the Mystery Trader. If there were anything much known, he or she would not be such a mystery, would he or she?
We can say only this: the Mystery Trader has been trading for a long time, has learned a few things, mostly the hard way, has traded all kinds of crazy financial instruments, has made AND LOST an awful lot of money, and has not died broke well, not YET anyhow, but there is still time for that.
The Mystery Trader writes these impressions and thoughts as a kind of an uncensored stream of consciousness journal or diary, largely for his or her own amusement, but also hoping these thoughts might help readers somehow, perhaps occasionally, prevent them from doing something stupid.
The Mystery Trader hopes that his or her thoughts might help YOU keep from losing YOUR shirt in the world's biggest casino. The financial markets are notoriously tricky and have ALWAYS been loaded with disinformation, deception, raw deals, chicanery, and outright criminal theft. Unfortunately, little of this bad behavior is caught and punished because the financial markets are too big and chaotic.
The Mystery Trader certainly and explicitly does NOT recommend that you blindly accept any ideas presented here or take anything expressed here at face value as actual fact. On the contrary, if anything, the Mystery Trader hopes that this blog might encourage you to think entirely for yourself and develop your own UNcommon sense. Be careful, have fun, and good luck!
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