Get Out Of Bonds
May 31, 2008 2:17 AM
This is a simple statement. GET OUT OF BONDS. The strength today was a bounce, nothing more. Rates are going far higher i believe. The 30 year Treasury cleared a key number, and inflation is at least twice what is reported as I mentioned FAR before anyone else. Now you have Bill gross with PIMCO saying inflation is understated, and others jumping on board. I have said the same thing for over 6 months. Now CNBC said that someone plugged in the data using the old inflation formula and inflation was 11%.
The dollar has fallen 60% against the EURO in 5 years and yet we report the same inflation data as Europe? That is a mathematical impossibility. I was wondering if someone would eventually pull out the old inflation formula and see what it is at some point. Someone did, finally. While I do believe in the concept of substitution and people do choose other products when one goes up, it still does not account for maintaining your standard of living. At some point you are simply “swapping” your standard of living for a less costly one. This does not mean that the inflation does not exist. Therefore, I believe the old formula overstated inflation and new one understates it - by a wide margin.
Whatever “real” inflation is, and that is certainly being hotly debated, it most certainly is over 6%. That means that the 10 Year Treasury trades at least 2% below inflation, probably far more. That cannot last. Sell bonds.
AIG Move Higher Is Nonsense
May 30, 2008 11:57 PM
AIG gapped a bit higher today at the open. It is an avoid. Any move higher here is nonsense, IMO. It made somewhat of a double bottom. I do not believe in double tops or bouble bottoms, unlike most, as I have I said many times. it is an avoid at best, a short under $42.12 at worst. Avoid the “value” trap, IMO. Run from strength here…
Inflation: Eliminate “Substitution Theory” And Use The Old Formula. Result? Inflation Is 11%
May 30, 2008 10:19 AM
I have been harping on the fact that the inflation data that we have been getting is wrong. I knew that eventually people were going to openly question it. Now we are getting more and more people coming out and saying the data is flat out wrong (as I have said for 6 months). Recently, Bill Gross with Pimco said that the inflation numbers were understated by at “least 1%”. Uhhh…thanks for going out on a limb there Bill..
Today there is a report on CNBC that someone used the old inflation formula where the “substitution theory” did not exist, it is real inflation on identical products. This formula was used forever until they changed it about 10 years ago I believe. The result showed that REAL inflation on identical products is running at 11%. This is the same thing that I have been saying. If this view is ever widely adopted, rates are going to skyrocket. Is inflation really 11%? Probably not as people will “subsitute” to some degree. Is it 4% or 5%? No chance.
The point being, if we used the same formula that was used in the 60’s, 70’s and 80’s the inflation number would be 11%. The new formula “magically” says it doesn’t exist. The substitution theory is only correct if everyone chooses to dramatically lower their standard of living. Instead of eating steak you choose chicken legs…etc, etc. True, if we all choose to live like third world peasants, then we have no inflation. If you want to live like you used to, then inflation is a problem.
The Market Could Break Either Way Here
May 30, 2008 10:02 AM
The market is bouncing right on top of a key SMA line this morning right around 1399. It would need to go lower and hold lower to cause some issues here. I do not like SMA bounces as you are watching a moving target. Will take a little time to know the direction here.
I think there will be an effort to close the market above 1383 today. If they cannot, I believe big trouble is brewing.
Why StockBlade Can’t Be Free Forever
May 30, 2008 12:15 AM
If StockBlade ever get’s to “Cramerlike” status, we can no longer be a free site. Is it because i want to rake it in? Well yes, I do…but that isn’t why. The reason is we give out “the game”. If we get big enough, the big players will simply take it above/below my numbers, limit us out, and go the other way. This is why Cramer and other’s similar cannot give out numbers like we do. It wouldn’t work.
For example, i said “BMC should not clear $37.02, the trade is long, it is going higher”. What would happen if I had 5 million readers? What would happen if Cramer said that? They would have traded it to $36.98 and “whipsaw” my readers. Therefore, Cramer cannot give out numbers, even if he wanted to. He has to look at broader things and hope they go his way. It is why many of his listeners get crushed severely. If things do not go according to plan, they get hammered. He is guessing based on information.
I do not guess, ever. So it isn’t fair to compare him to me - he is at a huge disadvantage. Point being, do not underestimate the value of what i am saying - while it is free.
StockBlade Recap Of Calls This Week: One Word, Bingo
May 29, 2008 11:24 PM
We made a number of calls this week. Our readers benefited once again. The only call that I missed was to be long XLF on Wednesday above Tuesday’s low. That surprised me that the financials as a group would not even follow the market. Goldman did however.
Here is a recap:
- If oil cleared $130.50 it was going lower, and should be a severe spike. Plunged today.
- IBM has not seen it’s highs, it is going higher, shorts are wrong, long above $120.78. It set a new high today.
- BMC has not seen it’s high, it is going higher, long above $37.02. This weeks low? $37.02- exactly. It hit a high of $40.87 today.
- Watch out for a market reversal above 1370.50 on the futures. It happened Tuesday.
- Long the market above Tuesdays low, it should not clear here. It didn’t and that was the low
- We should not reverse today, we should not exceed 1385 on the SP today. Today’s low was 1388.
Ok, I got lucky….once again…..maybe. My calls seem to be “lucky” a rather large percentage of the time…..
Why do i give this out for free? I plan on making this a big time site one day AND secondly I like to help out the “average Joe” that listens to all the total nonsense they hear on TV. Some guy with 3 kids trying to make it and getting punked by nonsensical advice on TV annoys me to the nth degree. if i can help them, I am glad to do it.
I think my dedicated readers have figured out my calls aren’t luck. In fact, I always advocate to avoid being the Lone Ranger and avoid risk at all costs. I know how the market works, i know how trader’s think, and I know what the market “should” do. Does the market always do what it should? No. But if you are always on the side of what it should do, you are far better off. Trust me.
You have to change the way you view the markets to be successful. It is a game played on a grand scale with billions of dollars. It is also a game that is rigged against the “average” person as they are focused on “PE’s”, “value” and other nonsense. Class dismissed.
StockBlade Call’s Oil Direction And Warned To Avoid The Hype
May 29, 2008 10:19 PM
We called the drop in oil. Considering the hype and huge traders on CNBC saying “you would be crazy to trade oil here in either direction, it could go anywhere”, we boldly said this week that “if oil clears $130.50, it is going LOWER and it should provide a severe spike down”. Hmm…oil closed down $4.42 today at $126.62. I have never traded oil and never claimed to be an expert on it, but I know how the market works and how traders think. Either way, my call was 100% correct, the “experts” on tv that had “no idea” where oil was going were either idiots or liars. Could be either, as they say “no idea” which.
SP 500: Monthly Close
May 29, 2008 10:10 PM
I had mentioned 1383 early this month a number of times and said it had significance long term. Well, the month ends tomorrow. If we close out the month weak and below 1383 I believe the market is in trouble. It already looks like June is going to be flat to down based on the long term charts. We need a strong day tomorrow to change my opinion of what “likely” will happen in June.
If you recall in march I warned early that “we have likely seen the highs for march, and long term charts suggest a very negative March”. Right on Target. We made new lows on the SP in March, but not the Dow. Regardless of what happens tomorrow, outside of a huge rally, June appears to be sideways, at best.
Oil Inventories Fall, Oil Spikes, We Have To Finish Positive Today (see comments for intraday updates)
May 29, 2008 10:41 AM
Oil Inventories fell, oil spiked off the lows and the market spiked down temporarily. We never made a reversal off the high, so i went long at 1389.75 and got out at 4 points. The key sma was right on that and once the market stopped falling for a second right on it, i went long.
Watch out for a reversal off a new high here. If we get one and it takes us negative late in the day, we may get some pressure. If we are decedidely positive late, buying should pick up, and vice versa. Unless oil goes crazy, I had posted that I do not believe we will reverse today. Tomorrow is more likely.
I added a screenshot of where I went long and exited. Obviously I should have left the initial trade long, but I was just taking a quick bounce and then see where we were going from there. I exited too early the second long also, but I am very leary in that range….
This is a 5 min chart. I pay “some” attention to it, but not as much as others.
AIG: Clears 10 Year Low
May 29, 2008 12:05 AM
AIG cleared the 10 year low today and volume spiked. it looked like $34.60 was the last gasp hope for the stock to reverse as it was the October 1998 low. Yes, 1998. If you review my Gap Trading lesson page, you would have known to avoid this stock. My rule said on this stock that if $42.12 could not clear to the upside, it was going LOWER. And it has, exactly has predicted. I know all these “numbers” seem like a bunch of nonsense to many, and perhaps it is, but that is how the market works, like it or not.
As I have mentioned many times, isn’t $42.00 a better “deal” and cheaper than $42.12? Yes. Does it matter? No. If the stock could not clear $42.12 it is going lower. Period.
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Recent Commentary
- Market Recap: Called Today’s Action On The Money Almost Literally
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- FDIC Report: 117 Financial Institutions In Trouble, One Big Problem, I Do Not Believe It
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- Market Direction: While The Chart Still Says Long….
- Market Recap: 1261 Held once Again
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- Open: 1285, 1282.75 Still Important
- Morning Call: Decision Time
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- Market Open: Watch The Gap Reaction
- Morning Call: Futures Up, Long All CheckDowns Early Should Be Play
Our Mascot Trading Goal: Ferrari 599
