Relax, it's only $106Bn but still, a nice boost from the PBOC this morning as the dropped reserve requirements by another 0.5%, freeing up 700Bn Yuan of reserves. China's economy is (supposedly) half the size of ours so that''s like dropping a $200Bn stimulus on our economy - similar to what Bush did back in the day - it was good for a couple of months and then - CRASH!!! The stimulus shot covered up even weaker than usual PMI numbers (49, down from 49.4 and below 50 is contracting), the worst since Jan, 2009. Crash indeed.
The services gauge slipped to 52.7 in Feb, from 53.5 in Jan. Measures of new orders, selling prices, employment, backlogs and inventories were below the 50 dividing line between improving and worsening conditions. On the official manufacturing measure, the new orders, employment and purchasing quantity components slipped. A separate manufacturing reading from Caixin Media and Markit Economics fell to 48 in Feb, from 48.4 in Jan.
"Early signs suggest stimulus has yet to gain significant traction, pointing to the need for continued and expanded policy support," Bloomberg News economists Tom Orlik and Fielding Chen/people/profile/18385223","email":"firstname.lastname@example.org","telephone":"+852-2977-4830","uuid":"12355526","pepl":"18385223","role":"reporter","name":"Fielding Chen"}" style="box-sizing: border-box; -webkit-font-smoothing: antialiased; color: rgb(60, 60, 60); font-family: TiemposTextWeb-Regular, Georgia, serif; font-size: 18px; line-height: 29.124px;"> wrote in a note. "In the near term, that likely means the announcement of a larger fiscal deficit target at the National People’s Congress on Saturday, plus stealth moves to guide lending rates lower."
Before the stimulus was announced this morning, the Shanghai Composite was down 4.6% but the MORE FREE MONEY announcement got us back over the critical 2,700 mark to close positive at 2,733. So yay, I guess - all is ??well?? in China once again and we can get back to worrying about the rest of the World, which is also popping on this "great" news out of China.
Japan had their first successful sale of 10-year NEGATIVE 0.06% bonds this morning. Investors paid 101.25 Yen in order to get 100 Yen back in two years and 2.2 TRILLION Yen were sold this morning ($19.5Bn) with 3.2 times more bids than there were bonds available.
Of course, keep in mind that Japanese investors have seen 20 years of deflation, so it's sort of expected by them that the same money can buy more goods in the future. The country's population is also in decline AND aging - not a good combination but still they want no part of the Syrian refugees that would love to farm rice in the north country and support their social security system. Italy, no the other hand, has welcomed refugees to revitalize abandoned towns in their countryside.
That's how people should be looking at the Syrian refugee issue - we have two million youngish people willing to go anywhere and do any sort of work - they could replace all 2M WalMart workers so the current ones could go get better-paying jobs or they could fill up the abandoned shale towns in North Dakota or we could double the population of Alaska and still you could walk around all day and not see another person. It amazes me that no one looks at this as an economic opportunity - especially with all these low birth-rate countries (and we are becoming one) in need of younger workers.
Yesterday, in the morning post, we talked about bullish plays on Lumber Liquidators (LL), which did exactly what we predicted and sold off sharply on the earnings report, only to gain it all back and more as buyers (like us) stepped in and picked up the bargain (as low as $10.01). The stock closed over 10% higher than that, at 11.33 and is up again this morning. Remember, I can only tell you what a stock is going to do and how to make money trading it - the rest is up to you!
Our other earnings play was TASR but they gapped up at the open so you would have had to have one of our Members' plays to take advantage of the 10% pop we expected. Of course Friday's TZA trade idea went very well as the markets continued to trade off while our bullish TNA trade that it's offsetting (locking in the profits) is STILL in the money.
We've stuck with our TNA trade so that means we think the Russell can hold 1,020 for another 2 weeks but we've stuck with TZA as well because we're very worried that it won't. All of our indexes face very serious tests of their 50-day moving averages but, as you can see from the Big Chart, the Nasdaq has made a bullish break for it and AAPL has an event coming up so conditions are right for a little short-term rally:
We need to see the Dow pop that 16,720 line (-5%) before we can relax a bit and, if it does, then the Russell is the lagging index and very playable in the Futures (/TF) over the 1,140 line, with tight stops below. That's right where it's opening today so watch it closely.