Bill Cara’s Blog for Nov 30, 2011
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
The sun, the moon, the planets, the stars, the equities, the commodities, gold and silver all rose in the east this morning — at exactly 6am ET thanks to the People’s Bank of China. The reserve ratio required of the lending banks was lowered, instantly making more capital available to those individuals and companies interested in taking on more debt, all in the hope they would invest it in the economy.
China, it seems, is the economic engine of the world, and the power that lifts markets.
Good morning, Geoff here.
S&P futures were down last night, only to turn around this morning after China cut its reserve ratio. In other words, banks can loan out more capital which will help the Chinese economy from slowing further. This news is putting a bid under the market and especially Cara 100 stocks like; BHP, FCX, POT, BIDU, TCK, GGB, etc. This will continue squeezing the shorts out of their positions today and rally the market further to our benefit.
If the rally continues into the open, it looks like the S&P 500 may hit my first target of 1230ish which I calculated simply because of all of the trading activity at that level over the past few months. So, the question is; where do we go from there?
The big question is the EU. As you have read here and in Bill’s Week in Review, we believe that the monetary authorities will find a solution to avoid another situation like we had in 2008 and China’s actions today add foundation to that view. However, I can’t get the vision out of my head of the leaders in the EU bickering among themselves for their own short term gain, failing to find a real solution until the markets force them to do so.
So, where does that leave us?
For portfolio management purposes – we anticipated and have benefited from the short squeeze. Short squeezes will rally the market in violent fashion and sometimes that is all the rally is about and it will fail when the shorts are out of their positions. But, sometimes other factors kick in and the rally continues to new highs. Today, those other factors would be a solution to the EU sovereign debt issue that traders view as positive enough to pull stocks higher. Since we don’t know what the end result will be, we can use the rally to purchase puts that have dropped dramatically in price from just a few short days ago. This will allow us to keep our positions, yet have a safety net underneath us should everything fall apart due to political infighting in both Europe and the United States. We shall see how the market reacts after the open, but let’s hope that it will allow us to buy insurance cheap this morning and over the next few days.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||4.70 (0.27%)||Components, Chart, More|
||6.72 (0.33%)||Components, Chart, More|
||28.22 (0.93%)||Components, Chart, More|
||104.35 (1.80%)||Components, Chart, More|
||2.76 (1.02%)||Components, Chart, More|
|^OSEAX||OSE All Share||422.34
||2.13 (0.51%)||Components, Chart, More|
||2.89 (1.00%)||Components, Chart, More|
||22.80 (0.41%)||Components, Chart, More|
||61.87 (1.16%)||Components, Chart, More|
||7.00 (0.83%)||Chart, More|
||5.49 (0.67%)||Components, Chart, More|
||23.18 (1.59%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||663.23
||1.71 (0.26%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
Vad’s Catch of the Day
Kaimu’s Sound Money
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report
Jeff Borsato’s Hidden Truth
Lather, Rinse, Repeat: The Myth of the 2 Party System in America
A fantastic piece in Origins Magazine summarizes quite nicely why there is no fundamental difference between democrats and republicans. Especially in areas of welfare and government mandated benefits to the people that are often called “support” by the party in power and “socialism” by the opposition:
Every Republican President to serve since World War II presided over an extension of federal unemployment benefits, belying the notion that offering government aid to the unemployed is a step on the road to socialism.
The second President Bush extended general unemployment benefits four times during his years in office. When the economy sagged after the September 11 attacks, Bush II signed a bill that temporarily increased the number of weeks that the unemployed could receive benefits from thirteen to thirty-nine. Every single Republican in the House of Representatives voted for the measure.
Opponents of the Obama administration have taken to calling his response to the current economic crisis “radical.” At least in the case of stimulus spending and especially providing aid to the unemployed, they are wrong. Instead, the Obama administration has merely extended the nation’s remarkably long history of government-sponsored unemployment relief as well as its well-established albeit shorter history of using government spending to resurrect the economy.
Real radicalism would be to abandon these traditions and instead leave ailing private markets to nurse themselves back to health while jobless Americans needlessly suffer without government aid.
Whatever one’s views on the morality of government aid, it’s always entertaining for one party to accuse the other of leading the nation down a particular path to hell for doing exactly what they would while in power.
I was unaware Bush extended unemployment benefits so often and for so long. Little is said of this fact and I suspect few know of it simply because it fails to fit in with the narrative of a warmongering president. This is the ultimate irony: The man who sent thousands to their deaths in an ill-conceived war and was the architect of an increasingly hostile police state also oversaw some of the biggest increases in unemployment benefits since WW2.
I tend to steer clear of sweeping generalizations about “democrats”, “republicans” and the broad actions of the America Presidency in general. The media is saturated with baseless conjecture about things they have no tangible evidence for. Lather, rinse, repeat.