2011 04 25 - philly fed and housing price misses fail to derail holiday-shortened rally ahead of...

8/7/2019 2011 04 25 - Philly Fed and Housing Price Misses Fail to Derail Holiday-shortened Rally Ahead of Easter Weekend

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Naufal Sanaullah

[email protected]

www.shadowcapitalism.com

PhillyFedandhousingpricemissesfailtoderailholiday-

shortenedrallyaheadofEasterweekend

Amacro-dataintensiveThursdayaheadoftheGoodFridayholidayshowedmixeddata,butthe

resultsfailtoputthebrakesonthecontinuedrallyinrisk.USinitialjoblessclaimsbrokethe400k

markonceagain,clockinginat403kvs390kexpected,followedbyAprilsPhillyFedfallingdown

to18.5vs36.8consensusvs43.4prior.USFebruaryhousingpricedataalsoshowedadrop,witha

1.6%declineMoMvsexpectationsofamuted0.3%fall.Ontheothersideofthepond,Germa

IFOsawabeatincurrentassessment(116.3vs115.5consensus),butasmallmissinexpectations

(104.7vs 105.5consensus)dueto risingperipheryconcerns.UKretail salesalsobeat,showinga

0.2%MoMgrowthinMarchagainstexpectationsofa0.5%decline.

TheS&Prallied0.53%onThursday,closingnearitsHODandapproachingabreakoutintofresh52

week highs, as the inverse head & shoulders pattern Ive been posting in recent pieces look

poised to resolve successfully to the upside. This is definitely a bullish development and the

pattern suggests another 100 points in the S&P is imminent. Earnings are coming up for the

majorityofAmericanfirms,sothereareplentyofcatalystsforthemarkettomoveeitherway.

Margin compression will definitelybe the name of the game as investors watchfor inflation

impactoncorporateresults.

EURUSD has been trading sidewaysin the last couple sessions, asa weakening dollar helpsto

mitigateeuro-relatedconcernsthatarehurtingothereurocrosses.Peripheryspreadscontinueto

widen,andSpanishyieldsaretestinghighsonanumberoftenors.Spanish10yrpaperyielding6%

Shadow CapitalismMarket Commentary by Naufal Sanaullah


2/10

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willnotbeagoodsigngoingforwardfortheEurozone,andwhetherPortugalsissues(whichledi

toseekabailout)willleadtocontagioneffectsinSpainisgoingtobeavitalissue.Iamturning

morebearish on the euroonce again, against only strong risk crosses fornow (I especially like

EURSGD short here), butremainlong EURUSD becauseof moreUSD-specific factors. Below are

10yrSpanishspreadstoBunds(courtesyofGoldmanSachssJohnNoyce)andtheEURUSD.

USDJPYhastakenabeatinginrecentweeks,asanexpectedcorrectionfromthemassivepost-BoJ

surgeturnedintoasharperselloffduetoUSDweakeningacrosstheboard.Thecrossnowsitsat


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significantsupportaround81.50,however,whichalsomarkedlateFebruarylows.Riskdefinitely

looksback on, with the S&P sittingrightat highs, and that should continueto weighon JPY.A

fallingyencouldsteertheNikkeibackhigherasexportersregainabitoftradeadvantage,butthe

biggerissueisthemassiveJapanesedebtburden.AndwithJapanspublicpensionfundliquidatin

JGBholdingstofinancepayments,theremaybemorereasonstobesellingJGBsthanbuyingat

thispoint.Iamexpectinga risein inflationinJapan,whichiscountertomostanalystsopinions

and a new bear market in Japanese government debt within to begin within the next twelve

months.InFXspace(andinthemorenearterm),however,NZDJPY,CADJPY,andCHFJPYalllook

likegreatbuysatcurrentlevels.

As oil prices rise, natural gas continues looking increasingly bullish. China is the second larges

energyconsumer,aftertheUnitedStates,andisdistancingitselffromnuclearpowerafterJapan

catastrophe,whilehavingtodealwithincreasinggeopoliticalcatalystsforhigheroilprices.Natura

gasistheobviousalternative.Thechartisalsobullishwiththelargetrianglelookingtoresolveinto


4/10

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abreakoutthatwouldcarrynatgaspricesto$6/MMBtuinthenear-termand$8.50-9.00/MMBtu

overthenextseveralmonths.Naturalgasequityplaysarealreadyonthemoveandhavebeen

sinceJacksonHolelastsummer.

Silverpricesareupdramaticallyinthelastfewmonths,havingralliedmorethan60%YTD.The

chart looks very unsustainable, and the lack of participation from gold, palladium, or precious

metals equity plays (including silverminers)adds credence to thatthesis. Contributor Jonathan

Sheetsaddssomegreatcolor:

Itshouldbenotedthatthefundamentals(orlackthereof)ofthesilversurgefromFeb

midMarchwasthespeculationonthatComexwoulddefaultonthelargerpositionof

openinterests.Justlikeinmid-NovembertoearlyDec.Nowthecommoditiestradersare

pickingupthepatternandwithMaybeingadeliverymonth, andmorerumorsof silve

shortages,theearlierthisrunuphasstartedandthemorefierce.

Given the silver-specific nature of this massive parabolic run, it appears Sheets may be on tosomething.MayCOMEXdeliveryislessthanaweekaway,andwithsilverbarelybelow$50/oz,the

time to top-call may be fast approaching. In the meantime, silver prices are up another 6.5%

overnightasIwritethis.


5/10

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Moving onto equity, coal stocks look terrific here,withPCX and WLT seeing some niceupside

volumecomingin.Bothlookpoisedtobreakoutoftheirconstructivebasepatternsandontonew

highs.

SemiconductormanufacturerNovellusSystemsisshowingabullishbounceoffits155dandlooks

poisedto restartitsuptrend. Itis notablethatRayDaliosBridgewaterAssociates(whichhadan

absolutelymonsteryearin2010)owns25millionsharesofNVLS.

Pharmasarelookingbullishagain,andEXELisshowingpromiseasitcompletesaverytightsix

weekbaseandbouncesoffits55d.Thisis definitelyoneofthemorebullishchartsaroundand

would not be surprised to see this stock double from current levels in the next few months

especiallyifearningsonMay3beatestimates.


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RoundingthingsoffarethreetechstockswhosechartsIwillletdothetalking:


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Tomorrowbrings:

MarchUSnewhomesales(10:00am:+12.0%consensusvs-16.9%priorMoM)

AprilDallasFed(10:30am:13.4consensusvs11.5prior)


8/10

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Open

Trades&Positions

Long/Short Ticker Entry Stop Performance

L /ZC 550.00 541.90 +36.91%

L OIH 150.00 138.50 +7.82%

L TITN 21.30 20.45 +46.75%

L NE 37.65 36.50 +14.15%

L /CL 86.30 83.80 +30.41%L UA 57.55 51.55 +36.32%

L MEE 55.55 51.00 +19.01%

L CRR 114.33 105.00 +21.51%

L SOHU 80.04 73.00 +19.41%

L SINA 87.55 72.60 +51.98%

L BIDU 118.30 109.30 +26.21%

L AMRN 8.85 6.75 +91.19%

L DECK 79.92 76.90 +20.21%

L LULU 75.15 71.45 +35.95%

L CMG 240.67 232.40 +15.22%

L DNR 21.60 20.10 +5.83%L PCLN 440.72 409.10 +23.37%

L WLL 63.02 60.00 +14.82%

L MRCY 18.70 17.75 +12.60%

L PRGO 72.76 71.20 +22.32%

L CHK 30.65 28.50 +6.59%

L CTXS 69.61 65.05 +9.71%

S SCCO 41.25 42.65 +10.39%

L USD/JPY 78.85 77.70 +335pips

L EUR/JPY 116.60 114.90 +340pips

L CAD/JPY 81.30 79.70 +510pips

L SGD/JPY 62.55 60.10 +400pipsL EUR/USD 1.4230 1.4085 +335pips

L RAX 35.55 33.45 +25.54%

L TSLA 26.15 21.70 +2.29%

L NFLX 220.40 202.15 +14.55%

L SD 10.35 9.15 +21.48%

L SHS 44.95 40.45 +29.30%

L EQIX 85.70 82.10 +8.78%

L VHC 21.12 18.65 +19.12%

L MSFT 26.05 24.60 2.22%

L MO 25.90 25.30 +0.57%

L NZD/JPY 66.10 64.00 30pips

L WES 34.95 32.90 +2.22%

L SGMO 7.59 6.90 +1.98%

L N 29.04 26.75 +2.77%

L AMZN 178.38 169.90 +4.18%

L POT 55.38 50.20 +4.53%

L DHX 16.91 14.95 +4.97%


9/10

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Open

Closed

New

Trades&Positions(contd)

Long/Short Ticker Entry Stop PerformanceL LLNW 7.22 6.45 3.92%

L EMC 26.44 25.25 +7.60%

S GS 154.05 158.50 +0.38%

L KOG 7.05 5.65 +2.63%

L CRM 131.91 115.60 +6.11%S EJ 12.00 13.60 4.75%

L QLIK 27.93 25.25 +7.08%

S DAL 9.27 10.30 +2.36%

S UYG 66.63 74.00 2.43%

S FXI 45.40 47.05 1.30%

S SCHN 58.36 61.05 4.95%

L IMAX 30.10 28.55 +6.72%

L MRCY 19.95 17.20 +4.61%

L GOOG 521.10 499.90 +1.59%

L EUR/CHF 1.2820 1.2720 +80pips

S USD/CAD 0.9655 0.9715 +135pipsL TBT 36.35 34.95 +0.89%

L FFIV 98.83 89.85 +8.14%

L JKS 24.00 19.60 +3.08%

L DNDN 41.20 39.15 0.75%

L JDSU 18.96 17.55 +5.49%

L RHT 47.70 43.80 0.23%

L GLNG 30.10 25.00 +0.66%

L VRTX 48.05 45.65 +2.75%

L BORN 9.35 8.45 2.99%


S AUD/CAD 1.0135 1.0260 125pips


L APKT 78.70 67.20

L BSFT 45.90 43.80

L NTAP 50.40 48.75

L PCX 26.05 23.05

L WLT 132.85 125.80

L XOM 86.25 81.80

S EUR/SGD 1.7995 1.8150

L EXEL 11.70 10.60

L NVLS 35.15 33.00

S /SI 48.80 51.50


10/10

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2011 04 25 - philly fed and housing price misses fail to derail holiday-shortened rally ahead of...

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