Asian Equities Lower, Futures Lower, Commodities Lower

Give doom a chance.

Some people believe I’ve gone mad, having transformed from 200 trades per month to a handful. My prognosis for the stock’d market for the year of 2016 is one of inexorable doom. Dare I say, markets will plunge and take a decade to recover. But before that happens, we can all revel in the absurdity that you believe to be ‘bullish’ for stocks, such as 1.5% growth, mountainous amounts of sovereign debt and financial engineering like we haven’t seen since 1929.

The NIKKEI and China are both lower by 0.60-1%.

S&P futures are down, plunging, by 0.03%.

And crude oil is lower by 1.3%.

I’ll be providing some news stories throughout the night, as I deem fit. I intend to post 100 bloggeries this week, most of which will make you laugh so hard it’ll make you depressed.

In most weekly updates you will bear witness to Le Fly bragging about his almighty Exodus, laying waste to the minions of low-leveled, low-brow’d, cocaine addled stock traders. On this occasion, you get to behold Le Fly, as he’s formally addressed in France, devour some humble’d pie.

The XLE trade that I’ve partaken in has been an unmitigated disaster. I wouldn’t declare it to be of the first magnitude, or even the second, but definitely of the third magnitude.

For the record, I was only supposed to partake in systemwide oversold signals this year. The last one being a month ago.

I am going to use this occasion to show you how the system adjusts and learns new levels from which it can potentially provide profit off from.

Notice how the tech OS score for XLE has been adjusting during this gorilla run to the upside?

The technical scores are produced by ranking acceleration/dist, price performance, relative strength, volatility and volume. In addition to that, the scores are greatly influenced by real time movements in the price of crude. The oversold/overbought status of XLE is based upon a moving average that is adjusted over time, which is why we have 3,6,12mo and historical all-time algorithms. As the price of XLE moved higher, unabated, the technical score OB threshold was raised and raised and raised some more. Eventually, the score will reach a point in which it will represent a true level to pivot off from. In the future, this score will represent an albatross for the ETF and it can be readily shorted upon seeing it.

In the meantime, crude continued to short squeeze higher. My risk is mitigated by the holding period designated to each trade of just 10 days. Here is my schedule, as posted inside of Exodus.

For the week, crude was higher by 8%. Crude stocks were higher by 8.6%. However, judging by using 35 years of seasonality data for the energy sector, I strongly believe the rally in crude is very long in the tooth.

Due to Abenomics and Japan’s QE program that includes the explicit purchase of ETFs, the Bank of Japan now owns nearly 2% of all Japanese stocks and is #2 in net holdings next to Japanese pension funds.

This is manipulation of a wanton varietal.

To critics already wary of the central bank’s outsized impact on the Japanese bond market, the BOJ’s growing influence in stocks risks distorting valuations and undermining efforts to improve corporate governance. Proponents, meanwhile, say the purchases provide a much-needed boost to investor confidence. With the Nikkei 225 down 7.7 percent this year and inflation well below official targets, a majority of analysts surveyed by Bloomberg predict the BOJ will boost its ETF buying — a move that could come as soon as Thursday.

“For those who want shares to go up at any cost, it’s absolutely fantastic that the BOJ is buying so much,” said Shingo Ide, chief equity strategist at NLI Research Institute in Tokyo. “But this is clearly distorting the sanity of the stock market.”

How does this end? Does the BOJ, eventually, own 10,15 or 20% of all Japanese stocks? Every time you take note of the NIKKEI gapping higher, just know, it’s a facade.

I’m a big Ty Cobb fan. Growing up, small Fly was a yuge baseball fanatic. In the neighborhood I grew up in, we’d play ball from dusk till dawn. I was never home, always out in the streets trying to get hit by trucks. We’d play hardball surrounded by glass, in a parking lot. It taught me to hit the ball straight; otherwise, I’d break a windshield or two.

This is one of my favorite biopics. It’s a true story, based off Al Stump’s legendary book that was written during Cobb’s final days.

Truth be told, I haven’t seen this movie since I was a kid. Sometimes the stuff you watch when young doesn’t translate very well as a mature adult. The reviews on this movie are dreadful and it was a monumental flop in theatres.

Nevertheless, if you’re interested in the life and times of Cobb, this movie will certainly entertain you, if anything.

Cobb was a super crazy asshole.

Good news for Japanese exporters: your currency is in shambles.

This is the biggest story never told, the experiment of negative interest rates that must work, otherwise, the very fabric of western finance will unravel. The 2% drop in the yen is the largest decline in 17 months. The working theory is for the Bank of Japan to take action next week, in light of the plunging sovereign yields that aren’t supposed to be happening.

“The market is seeing more scope for the BOJ to do something next week,” said Daniel Katzive, head of foreign-exchange strategy for North America at BNP Paribas SA in New York. He cited recent news reports “suggesting there are discussions underway about pulling the trigger on further measures — that’s why the yen is weakening.”

Perhaps MOAR QE, or maybe a little economic stimulus spending is in order. Either way, the Bank of Japan must do something to stem the tide of deflation that is washing over its banking system. Some have even floated the idea of negative interest rate bearing loans. Could you imagine getting paid to borrow money to buy a home?

This is the upside down world we are entering in now. We are in the first inning of this new economic reality. Thus far, everything is going swimmingly.

Just one day after the stock collapsed on rumors that the FDA hated them and was going to decline their application to have their muscular dystrophy drug approved, shares are, seemingly, effervescent today–fully and without requital, offering up primordial treatment to all those saddled in a large short position.

Commiserate with the traditions of biotech hazards, the charade of equanimity within the healthcare field has once again been shattered. As such, traders have been upbraided in a Banana Republic like condition–one wrought with rusticate milk sops running in and out of bankruptcy courts–finaglers left in ruins from the theatricalities of an industry bereft of decency and decorum.

RBA notes on the SRPT spike:

RBC noes the FDA has just posted 5 voting questions and explanatory discussion points ahead of Monday’s eteplirsen panel. They view the fact that panel members will have to vote on Monday as an incremental positive for SRPT, simply because of the understandable pressure committee members will be under, in the presence of the DMD community and families. However, the questions should leave little room for interpretation: Despite that view, when they read through the actual questions and the language of the accompanying discussion, they see a document with the exact same tone and tenor as the January and April briefing documents. The questions and the discussion ask the panelists to focus on the trial conduct, the evidence for dystrophin and clinical efficacy. They expect the answer to all of these to be No.

Shares of SRPT are higher by 40%.

I don’t even know where to start with this. The Federal Reserve is supposed to be an apolitical organization, whose sole purpose is to create chicanery within the economy to ferment opportunities for the banks to acquire valuable assets cheaply. In what could only be described as a brazen statement by Fed’s Brainard in showing her allegiance to the Hillary Clinton campaign, one has to imagine what a Donald Trump candidacy will do to the Fed and their cozy relationship with the democratic elite.

Trump is on record saying he wants to audit the Fed. He’s on record saying he doesn’t like what the Fed is doing. Therefore, and it goes without saying, the Fed is actively campaigning for the Clinton campaign, a bold step that has ruined the impartiality they’ve worked so hard to maintain.

What in the hell is going on here?

I shelved a sundry of doomful news stories on this Friday, sparing you of the uncomfortable realities of living during the end of times. As you can see by today’s pin action, investors are shrugging off dire news out of SLB, whose CEO cited the oil industry as being one and the same as living through a full blown cash crisis, slashing North American spending by 50%–firing thousands of workers and sending them to the Walmart unemployment offices for new career opportunities.

Oil crested this week, higher by 8% and the ark fell the most in 5 months. Everything is pointing towards higher prices. If it weren’t for the specter of annoying earnings shortfalls, this market might take off to 20,000 by the first of May.

I’ll be covering part of my XLE short today, not out of need, but part of my 10 day holding pattern. Thus far, the trade has been an unmitigated disaster. Nevertheless, there is always hope and a chance that something truly awful will happen over the next two weeks.

It reads like a comic book tale of a gluttonous CEO gone wild. The Chief Executive of General Motors is doing very well indeed, disproportionally might I add, in spite of the indelible facts that shareholders aren’t sharing in the success she seems to be enjoying.

Over the past 12 month’s, GM’s share price has slid by 9%. At the same time, Mary Barra was granted, awarded and paid the sum of $28.6 million.

Let’s break down her splendid year.

Salary: $1.75m

Performance based bonus: $3.06m

Bonus Plan (she hit 3 of 4 goals. No word on whatever the fuck they were): $12m

Special one time grant (why the hell not?): $11.2m

Past equity awards: $2.48m

Revenues were down last year, anywhere from 2-5%, the first annual decline since 2008. Perhaps Mary Barra should give out free social security cards with the purchase of every piece of shit GM car, in order to stoke sales.

Addendum: President Dan Ammann made $11.8 million, of which $2.85 million was cash, and Chief Financial Officer Chuck Stevens was paid $8.1 million, of which $2.38 million was in cash.

Naturally, these were ‘good’ numbers for the ‘oil patch’ by SLB. See, by slashing spending by 50% in N. America, jobs will be lost and production will be hurt. After everyone goes bankrupt, they will then emerge out of bankruptcy with skeleton crews and shattered prospects. This, of course, means that oil will finally bottom and forklift up to $200 per barrel.

In other words, buy the ‘oil patch’ now, ahead of apocalyptic 50% capex budget cuts, because after everyone goes out of business oil will head to $200, maybe $300.

Notes that 1Q16 rev declined 16%, the second steepest quarterly decline within the downturn in commodity prices

Net debt increased by $1.1 bln to $6.7 bln in 1Q16

Total cash & equivalents balance of $14.8 bln in 1Q16

Co notes that job cancellations and rig count declines have weighed on revenue

Global spending reductions in 2016 are now approaching 25%, corresponding to the fall of 40%-50% in North America and around 20% in the international markets

FY16 capex budget reduced by $400 mln to $2 bln, when compared to previously announced guidance

Oh, and the CEO didn’t sound to sanguine about the industry, citing a ‘FULL SCALE FUCKING CRISIS’ is underway.

“The decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis,” Chairman and Chief Executive Officer Paal.

Notes from call, via Briefing.

Expects market conditions to worsen further in 2Q16 as customers continue to reduce activity

Excluding the additional revenue from Cameron, this market outlook together with the decision to reduce activity in Venezuela could lead to a sequential percentage fall in rev for 2Q16, similar to 1Q16

Discusses that the magnitude of the E&P investment cuts are now so severe it can only accelerate production declines & the consequent upward movement in oil price

Notes that domestic capacity reductions in the service industry will help restore a ‘large’ part of the international pricing concessions made once oil prices & activity levels start to normalize

Cameron rev is expected to be flat sequentially. In this environment co plans to continue to tailor service capacity and overhead costs to activity levels while preserving long-term operational & technical capabilities, which could represent a further burden on operating margins going forward, particularly in North America

Comments that non-OPEC production overall dropped by 930,000 barrels in 1Q16

~60% decline in North America & ~40% internationally
OPEC production expected to be reduced by 1 mln barrels/day in FY16

Believes that the current oversupply is expected to shrink to almost 0 by the end of 2016, and in Q4 this year, OPEC production is now forecasted to be down 1 mlnn barrels per day y/y, notes the oil market is in the process of balancing
Expects a significant drop in rev in 2Q16 compared to 1Q16, making it difficult to retain margins of ~30%

I give up.