Crisis Over?

I am amazed at all of the cheerleaders that want to declare this economic crisis over. We are now hearing speculation that the DOW will hit 10,000 before year end and the S&P could get into the 1200 range. We won't fight the tape--but don't share the overall economic optimism. The government deficits will play a role in running up interest rates and people seem to be forgetting that rates going up will not be great for growth and expansion.

Monsanto (MON) is down in premarket trading as they see earnings in the lower end of the range. These markets seem to be discounting the fact that while certain economic indicators look improved--we still have the possibility of dismal earnings coming from some of these companies. There is money on the sidelines and it may get suckered into these markets and make them go higher. I ask the following questions when deciding if we are on the road to total recovery:

Are interest rates going to be stable?
Are the government deficits going to cause higher taxes?
Are energy prices going to be stable?
Are jobs going to improve within the next six months?

Just something to think about as all of these points will impact consumer behavior. Consumer Confidence was great according to reports yesterday. The strange thing about this recession was that it was a pocketed recession. There were pockets of strength around the country and likewise there were pockets of weakness.


I still have a good deal of my portfolio in cash and because I am worried that we could see another leg down. The futures are strengthening right now---I got short a few minutes ago and am about to get stopped out. This run is tough to fight, but you just have to keep your losses under control.

I sold FCX put spreads yesterday as I really like that stock. I have never really utilized spreads in the past, but intend to do so in the coming months as it can help reduce my risk.

WE HAD A GREAT INTERVIEW WITH JONATHAN HOENIG THAT WILL BE POSTED LATE TONIGHT!

CHOPPY MARKETS

The futures are well off of the lows of the morning and point to what has become somewhat of my "theme" for these markets. CHOPPINESS I will say that I am planning to sell options in this type market. I am selling some puts on FCX. I like the company and can get some decent premiums on the options. I am also considering selling some calls on Caterpillar CAT. Even if the market rallies, I just don't see CAT jumping over the summer.

This morning gold and other commodities are down and we are hearing some of the talking heads talks about deflation again. I look at deflation talk as a great way to find what I want at cheaper prices. I don't see deflation as a problem at all. The North Korea nuclear test seemed to shake the markets for a short while, but not as much as I would have expected. As I am typing the futures are getting stronger and even though I am surprised---you can't fight the tape.

I won't make up things to say and while this is a much shorter post than normal---the market visibility is less for me. As we get more clarity, we will have more to say.

Asian Markets Head Higher---Commodities Drive

Check out this Article from Bloomberg as Asian Markets head higher tonight driven by oil and gold stocks. Click here to read the Article

Here what legendary investor Jim Rogers said on 5/17/2009 Part One of The Interview
Jim talks about how we must start living within our means and our current policy of spending to counter defecits is INSANITY. Jim says politicans are doing what they have to do to get re-elected and it is wrong for them to ignore the needs of 300 million Americans. WE ARE DESTROYING THE VALUE OF THE DOLLAR AND ARE THE LARGEST DEBTOR NATION IN THE HISTORY OF THE WORLD!!!! He says the Bureau of Labor Statistics has been lying to us for years about inflation. Hear him talk about the ANTI-CAPITALIST ATTITUDE. IS THE GOVERNMENT TRYING TO CONTROL THE BOND MARKET? If you are looking for a low APR credit card--check out low rate credit cards



And Part 2 of The Interview
Hear Jim talk about why he is not selling his gold and wheter or nor he is buying more.
The IMF is working to get permission to sell some of their gold and if they do, it may be a good buying opportunity. Is Farming going to be the occupation of the future?

Are you looking for low rate credit cards? Check out low APR credit cards


We are going to do a show soon on CAPITALISM VS. SOCIALISM.

CHOPPY ACTION

I think we continue to see choppy action and I believe that one of the greatest disciplines in trading is to know when to stay OUT!!!! I have lost a lot of money in the past by forcing trades.

That said, I am more convinced than ever that we are going to see increasing oil prices. Natural gas will follow. Inventories showed that oil demand is at least stabilizing and will grow in the long term. The dollar is going to continue to be choppy but weakening and this will push oil prices upward. That combination is worrisome. Oil prices acted like a tax on the American consumer and I believe had a lot to do with consumer confidence numbers last year. I will detail the plays that I like in the oil and natural gas space in our post this weekend.

Don't get emotional about this market---it is easy to see a good run in one direction and believe that we are off to the races in that direction. Look at the overall picture and you see price action that would lead you to believe that this market could go higher. Listen to what is going on with the dollar, housing, oil, and other commodities and you know that this economy faces headwinds. My recipe for staying cautious and waiting for more clarity before putting my money at risk.

Caution

I am exercising extreme caution here. These markets are going to be choppy. Those of you that have followed our blog for a while know that I won't make a trade just for the sake of making a trade. The housing numbers have confused the markets and I am in wait and see mode. I hate to play the waiting game but I hate worse to be wrong and lose money.

We have some great interviews next week and if the markets continue to be choppy, we will continue our exploration of trading psychology.

I am convinced that we will have rampant inflation but am trying to figure the "when". I will have more on that subject in the next few days.

Headed Higher

These markets are determined to head higher. You can't fight the tape and my analysis yesterday of when all of the talking heads are in agreement---go the other way. We could see 1100 on the S&P before another major correction. The money on the sidelines must be coming in out of fear of missing the buying opportunity of a lifetime.

I still contend that we are going to see inflation and the market rise will contribute to it. The markets will make individuals more confident to spend as they will feel wealthier. I have said over and over that the money multiplier will not remain at these low levels for long and when it moves up inflation will take off.

The housing market still appears to be lagging and will have to stabilize before we see the hyperinflation scenario that we have been fearing. Notice I said stabilize not grow. It only has to stop falling to be the final ingredient in the inflation mixture.

Some of our guest have contended that the Fed can pull in the liquidity faster than ever before because they can just not renew some of the troubled assets they have gotten through the discount window. I don't know that I subscribe to that theory.

I still like FCX but wouldn't chase it here. Natural Gas through the UNG is worth a look but I wouldn't chase it either.

Everyone Calling For Correction

Every talking head in the media is calling for a correction. Could the professionals take this market up in hopes that they can sucker some of the money on the sidelines? You rarely see things happen when all of the talking heads agree. I think we may head up, but at some point we are going to get a quick correction. I am preparing a short list and a list of calls that I would like to sell. STAY CAUTIOUS!!!

We have been traveling the last few weeks, but are off of the road and will be bringing more interviews soon.

Major Correction Ahead?????

The Bulls have fought a great fight lately and I think that we could be headed higher---BUT WE HAVE SOME MAJOR ROADBLOCKS. It appears that we are headed to the land of more government programs like nationalized healthcare. There are only 2 ways to pay for it 1) Raise Taxes 2)Monetize the Debt. Raising taxes at this juncture could put our economy into a tailspin from which we might never recover. Monetizing the debt will certainly---as if it is not already certain--cause inflation to spike out of control.

So what do investors and traders do? Right now we have to watch the tape. The market is acting as if it wants to hold up and I think until we see some signs of weakness we should be careful about shorting. If we ever turn around and reverse below 790 on the S&P this thing could get ugly.

See what David Tice had to say a couple of weeks ago.


The massive government spending was designed to kick-start the economy. It may kick start inflation and give a false sense of security to many. We tend to have short memories as consumers and if we crank up the spending again at the first sign of recovery, we are going to create another bubble that we be mega-painful when we finally see it burst--and it will. Quantitative easing has created many a bubble and Alan Greenspan used more of it each time a bubble burst. We are now down to the last chance in my opinion. We must bite the bullet and let the capitalistic system run. Yes it will be painful, Yes there will be bankruptcies, Yes times will be hard for many... But if we don't do the right things now we are going to see our markets crash. If we raise taxes and hamstring the job creators we may not see these levels in our equity markets for many many years. If we aren't careful, the street will be full of bears and they will change the name of Wall Street to Bear Street.

So what happens? I will stay tuned and watch for the bulls as long as we stay above 790 on the S&P and as long as we don't hear of a plan to hike taxes---but if either occur, I am running for cover. FCX has pulled back nicely and just as I said you are able to buy it cheaper. I am hoping it will pull back to about $37. I am still watching ICE and hope they can close over $103.

I love natural gas right here and I think I might even be able to get it a little cheaper. There is no massive rush to push it up right now, but it sure presents a great long term opportunity if it pulls back a little more.

RANGEBOUND?

I was unimpressed with yesterday's rally except for the simple fact that we did find stability after Wednesday's decline. JCPenny beat quarterly estimates, but lowered full year guidance. Those calling for recovery by the end of the year may be very disappointed. Now many may argue that without recovery my inflation thesis may be out the window. I disagree as there are pockets of strength around the world such as China that will recover and put pressure on prices. I stand by my inflation thesis and am long July corn at the moment.

The futures are down at this time and I am just sitting by and waiting on FCX to fall a little more. It has been volatile and should get another push to the downside. I have also been watching ICE. It wants to move up but needs to close above $103 before I can really get excited and it is one that is subject to news risk and the position must be monitored at all times.

The bad economic news is not over and it is just a matter of how much has been "baked into the cake". Today is options expiration day and it could get volatile.

Deflation Chatter Resumes

With all of the worse than expected reports out of China and the Euro Zone, the talking heads are all screaming deflation again. The simple fact is that we will see the money multiplier rise again soon and it will cause inflation. The deflation talk presents a great opportunity to buy commodities. I bought some corn yesterday and am loving the pullback in FCX.

Deflation will be a short term price movement, and inflation will be the long term phenomenon. I expect to see the dollar continue to fall and that will catch the deflation crowd off guard when the multiplier actually grows.

Am having technical difficulties and will have longer post later.

Correction Coming??

The futures are pointing to a lower open and the 900 level on the S&P is key. A close below 892 and we will be headed much higher. The bulls came out in force and defended the 900 level yesterday and I hope they can do it again. I will look to buy FCX if those levels hold, if not I will be in wait and see mode. If the bears appear to be winning the day, I will look to short some of the restaurants like CMG.

I still believe that the most tradeable theme is the falling dollar. It will be volatile, but appears that it has started its decline. Oil, Natural Gas, Corn, and other commodities are on my radar screen.

7:30am THE FUTURES ARE NOW GETTING HAMMERED---THEY ARE TRADING RIGHT AT THE KEY 892 LEVEL.

Today could change the trend---will update throughout the day.

GOING HIGHER OR RANGEBOUND??

These markets are determined to try to go higher. Last night every effort was made to push the futures lower and it just couldn't be done. FCX provided a buying opportunity yesterday as it pulled back in the first few hours of trading. The tech stocks continue to lead the charge--surprising many. I wouldn't be surprised to see this market challenge 950 on the S&P this week. You are hearing too many "experts" in the mainstream media calling for some massive correction. That generally signals that we are headed a little higher.

China had disappointing export numbers last night--much worse than expected---but that didn't deter the U.S. futures from rebounding after a little drop in "sympathy" for China. It seems that investors have baked a lot of bad news out of the U.S (and the China export numbers were really a reflection on the U.S. economy) into the cake and are determined to move higher.

Natural gas prices are moving higher this morning and I think you will see that trend continue. This is a ridiculous level for natural gas and it almost assumes deflation for years. That is not happening. UNG is a good way to play that if you prefer the ETF. I see natural gas prices higher than most of the forecasts out of the nat gas companies. They have to be somewhat conservative in their projections, but I have seen how the drilling has stopped and it is only a matter of time until we get a strong trend on the back of some "declining reserve" report.

I am watching SEIC and will look to buy only if it trades over $16.39. It may not get there this week,but this one is worth watching when it finally decides to break that level.

The China story may cause copper prices to pull back---and then again it may not. If it does it will be another good buying opportunity in FCX. Some of you have said I am beating the same drum with this one, but it has doubled while I have been pounding that drum and I expect it to move up to $75 this year.

I will be interested to see how the bonds trade today. I think the bonds are setting up for a great short. I am only watching them for right now.

INFLATION, INFLATION AND MORE INFLATION--IT WILL BE HYPER

Here is yet another case for hyperinflation. While we are spending as fast as we can---we are destroying the value of our currency. How are we going to afford the interest on continued debt when interest rates are sky high? MORE TAXES ANYONE? There will be a move to raise taxes which will only deepen the problem as it will cause job loss and more dependence on "big brother". We must stop spending NOW.





John Williams of Shadow Stats has been calling for hyperinflation for quite some time.


And this could be the scariest of them all....

All About the Stress Test

The markets look to open higher today as traders seem to be pleased with what they are hearing from the stress test. While it sounds as though some banks will require additional capital down the road, all indications appear to be pointing to the immediate crisis being over. You have heard me say many times that I did not buy the fact that we would not have inflation because all the money was going to build the banks balance sheets. Inflation is closer on the horizon than many would like to believe because improving banks will lend and the money multiplier will increase rapidly.

My FCX play continues to roll and I am now looking at natural gas. Yesterday I heard Chesapeake's CEO discuss the reduction in drilling that has taken place as we knew it would. I have said many times that production can be taken off line faster than it can be put on line. Many of the natural gas companies have had a decent run lately and I will try to wait for a pull back before making an entry.

The markets look poised to move higher still and S&P 1100 is certainly not out of the question in the near term. Longer term, I think we have to keep a watchful eye on the possibility of stagflation and the value of the US dollar. I must admit that many of the traders that I have talked to have been expecting a pullback and I think that is what caused the shorts to take a beating recently. When we get a down day, it will be interesting to see if the S&P can hold the 900 level.

Great Interview

See this great interview with Nick Santiago of inthemoneystocks.com

Taking Some Profits

One thing volatile markets will teach you is to take profits. We have seen some nice gains in the past few sessions and one would be crazy not to cash in on some of those and reassess things. Currently the futures markets are down slightly and we could have a pullback in the near future.

I had a great interview last night with Nick who is the Chief Strategist at inthemoneystocks.com. The full interview will be posted tonight. He thinks this rally is making gold an awesome buy and I agree. I had been content to wait on the gold trade, but when you hear Nick talk you will understand why I am re-evaluating the gold trade.

Did you see Natural Gas and Coal prices yesterday? I think my inflation ideas are about to come to pass. Many will argue that the banks are headed right back down and that will have such and impact on consumer confidence that we will see the entire market tank again and then we will get caught in another deflationary spiral. I am not sure about either, but do know that the money multiplier has been below 1 and when it rises we will have inflation. The banks haven't been lending and this stress test may cause that streak to extend for a while, but at some point they will want to lend again.

I plan to watch the market today. If we break 889 on the S&P we could have a down day to about 873. The Nasdaq has been the leading market this year and if the averages weaken this morning, I would consider buying the QID. These markets appear to be overbought in the short term and QID is a great way to play the downside.

Futures seem to be getting weaker as I type. Full interview with Nick will be posted late tonight.

What are the BONDS saying about INFLATION?

Unless this is your first visit to our site, you know that we have been debating the inflation/deflation arguments here. I have been early (which I admit is tantamount to being wrong) on my inflation call. But is my prediction about to come true? If it is how do we profit from it? We all know that some of the best traders reside in the bond pit. These guys have been driving down the price of bonds which sends yields up. I say if the best and the brightest think rates are going up, then we can assume that inflation is on the horizon. Yes I know that the prices of commodities have been falling as of late, but with the stabilization in the economy and the markets, consumer confidence is bound to rise and drive the money multiplier above one and then lookout.

I like FCX and again, this call has been made on this site numerous times, but I think this one will catch on fire as the bond yields climb. China will have an impact on demand and their economy is recovering faster than ours. Demand for copper is returning and FCX will be a great hedge against inflation. Not to mention that these guys have nice gold reserves.

I also like SLB. If inflation rears its ugly head, the oilfield will be booming again and SLB will profit. We must drill domestically, and while these guys are international, more drilling on the domestic front will drive their margins higher.

If you like to take a ride on the wild side--check out MEE. Coal is going to be in demand and these guys will definitely profit. Now expect some choppy trade, they were up around 10% Friday and it will continue to be volatile.

This market is poised to go higher, possibly much higher. Jim Rogers once told me that when inflation takes hold and the dollar falls, the markets could rise--even though real wealth would be lost. Now the dollar is holding up very nicely but I think we may see the S&P break 1000. No I am not crazy. So many have been expecting these markets to fall out of bed, but if you look at the numbers, we seem to be destined to go higher. How many times have you heard me say that you can't fight the market and I think now is the time that some of the shorts are going to get hurt. It seemed so logical to try to push this market lower, but the BEARS just couldn't get the job done. While I still think we may have another leg down, right now I am definitely BULLISH. I think you can stay away from gold during the next several months---even though I really like it over the long term---I think you can buy it cheaper in a few months.

BULLS ARE IN CONTROL!!!!

Market Go Higher UNLESS THE PIGS KILL IT

This market is destined to go higher, unless we get some bad news. If you look at the numbers, there seems to be no doubt that we are going to test 900 on the S&P. The news is all over the swine flu. People are being encouraged to stay at home by government and that will hurt the economy if it lasts long.

Why do I think the markets will rise? The market overcame worse that expected news this week and how many times have you heard me say that you can't fight the tape. This market has factored in a lot of bad news and is showing you that it intends to move higher. Now that does not mean that we are not going to retest the lows at some point---but right now the trend(and a rather strong one) shows you that it goes up.

Send us an email and give us suggestions as to who you would like to see on our show. We want to deliver the guests that you want to hear. We have some new guests scheduled very soon and are looking to book more shows a week in the late summer when the traders get done "vacationing".

My FCX had a great day yesterday and I am learning that it is better to trade less and make more quality trades. Overtrading only benefits your brokerage firm and can frustrate you faster than most anything. In the end, this game is won or lost on discipline---self discipline. If you are looking to blame your computer, your stockpicking service, or anything other than the person in the mirror---then you will ultimately fail in this business. If you are willing to accept responsibility and try to learn from the experience then you are definitely on the right track.

We are going to have a series on psychology in this business coming very soon. Stock Shotz is expanding and we are going to have more updates than ever before---I know it has looked just the opposite lately as we have been busy traveling and working on our new website---but we are expanding and you will like what we have in store for you. Thanks for your participation.