Following the historic bombing of Iran over the weekend, the reaction to which was an over 600 point drop on the Dow according to the Weekend markets, some cynics began to write “It’ll be green by the open!” Yeah, yeah, you silly boys. Give me a break. Not this time. It’s WW3, after all! And yet………
It’s true. Not only was the opening gap down relatively modest, but the moment it was over, the bulls were back into buying mode. The /NQ, as an example, went up almost 500 points from its opening low.
Thus, ZH is doing what they do best.
Just as equity bears (if I dare use the plural) are surely disappointed to be looking at the pre-open quotes here on Monday morning, surely too the energy bulls must be pulling their hair out.
After all, the big investment banks are running around shrieking about $150 oil, and yet current quotes are HALF that price, and anything related to oil, such as XOP, XLE, or /CL (below) spiked and then have been withering away all night long. Incredibly, crude oil is DOWN right now, which I strongly suspect approximately no one would have guessed twenty-four hours ago.
But let’s get to those silver linings I mentioned, since I’m actually feeling pretty good right now.
First off, the Russell 2000 is, bless it, still down. It’s not down hard, mind you, but it’s still off by 0.3%, which I will cheerfully take instead of a green quote. I remind you that I’ve got a truckload of September $220 IWM puts, and this is the one and only general index where I’m banking on a fall.
I would also mention, as an aside, and the three energy shorts I’m already short (COP, EOG, HAL) which I was certainly would be stopped out the moment the market opened, are all looking fine, and I might even expand my energy shorts. I’m actually quite fond of shorting energy, and this complete dud for the energy bulls is interesting.
As for the second silver lining, it isn’t actually silver, but palladium.
There’s one Sloper who has been beating the PALL drum for a while, and I finally decided to give it a shot. I’ve never bought a molecule of palladium in my life, but I went ahead and put in a fairly substantial long position in PALL, even though the bid/ask pretty much stinks and it’s a rather thinly traded instrument, Still, it’s kind of the only game in town.
When the market opened on Sunday, I was bummed to see /PA drop by over a full percentage point, but it began the healing process soon thereafter, and as of right now it’s up about 2.5%.
Looking at the much longer-term chart for /PA, I want to highlight what could be a very exciting bullish base. It isn’t done yet, but we’re getting close!
Admittedly, palladium has really missed the party when it comes to the precious metals rally we’ve seen for so many months. Here is the PA/GC ratio (palladium versus gold), and “under-performer” would be a gentle way of putting it. I’m hoping that it’ll go into catch-up mode.
In closing, I’m still keep a very close eye on the Russell futures. It has been meandering for literally weeks now, and as a person who grew up just a few miles from the Mississippi River, I know what meandering looks like. I’m still keep my fingers crossed for a breakdown beneath this range.
As I wrap up this post, I see the /ES and /NQ have pulsed even higher, so this has already turned out to be a surprising day. Good luck out there, and if nothing else, let’s celebrate the absence of any silly holidays.
