Morning Call [6:21am ET] In the Friday Morning Call, I gave a heads-up as to a currency market being put in play to try to stimulate economies and capital markets.
As I see it, currency traders will likely pull the US Dollar down for a few days, lifting the Pound Sterling, Euro (remember Germany’s economy is growing at a record rate as well), the Loonie and Aussie. That ought to be a positive for global equities, and the futures market is reflecting it right now even though in the past couple hours the $USD has lifted a tad. Crude Oil and Precious Metals have remained subdued, but following a recovery from S&P 1040’s, the risk takers will return and bid them higher as well.
Right on cue, just 90 minutes after I published that piece, and 30 minutes after the market opened at 9:30am ET, the currency markets exploded, lifting the Pound Sterling, Euro, Loonie and Aussie, and (as seen in the chart below of Friday's action) the S&P 500 lifted from a low of 1039.70 to a close of 1065.59, which is about where the futures have put the S&P as I write this morning.
Today, everybody is looking to the Bank of Japan. Will they or won’t they stop talking and start doing what the Ministry of Finance wants, which is for the BOJ to crank up the carry trade again, flooding Yen into global markets, depreciating its value so that foreigners will find Japan’s exported products less costly.
After the first reports of an emergency meeting at BOJ with the usual fanfare about increased lending yada yada, the equity markets zoomed in Japan and through the region. Cheap money does that. But then prices started to settle back as traders are looking for confirmation. You see, without cheap money, the risks to capital are very high at present and traders have mostly been interested in the safety of bonds despite getting a ridiculous yield. Return of capital rather than return on capital is the intent.
Econoday published this succinct summary on the weekend.
The BOJ did in fact hold that emergency meeting and decided to take some action. After the initial market reaction, the Yen did weaken more, along with continued expectations the BOJ would follow through with quantitative easing. At least for a couple hours...
Now traders are waiting for a second shoe to drop – and you might say getting tired waiting – where banks could borrow from BOJ at zero cost – down from 0.1% -- and where BOJ increases its purchases of Japanese government bonds.
The afternoon session at the Tokyo Stock Exchange did not fare as well as the earlier one. At mid-day, the Nikkei 225 had rocketed to a high of 9280.7 from Friday’s close at 8991.1, but then fell off to a close of 9149.3, up +1.76%. That was a big gain, but the jury is still out because the Yen is now soaring again.
This next chart shows the intensity of the action in the currency market. Last week, the Yen hit a 15 year high of 83.58 to the US Dollar. Leading up to and immediately following this emergency BOJ meeting, the Yen weakened. This chart shows the abrupt strengthening at mid-day.
When the pair is charted (as it is traded) as USD/JPY and the line is rising, it means the USD is strengthening and the Yen weakening. When the line falls, the USD is weakening and the Yen strengthening. This chart shows that the Yen is soaring at this point, putting even more pressure on BOJ.
In other words, the global equity Bulls are trying to pressure BOJ to support equity prices right now or possibly face a crash.
As I wrote in the WIR yesterday; things are getting more interesting in capital markets.
Have a good day.
CTA Trading Desk Post-Close Report
After the outside day up-reversal Friday, it appeared key support at S&P 1040 had been successfully defended. Sadly no one showed up for the Bull celebration as sellers were in control from the opening bell on Monday (S&P-1.47%).
Although volume was significantly below average (one of the slowest sessions of the year), bullishly inclined traders had to be disappointed in the lack of upside follow through, and very concerned about the relative underperformance of the financial sector (XLF-2.11%).
September is historically one of the weakest months of the year. As we have been warning seemingly forever; if 1040 is breached to the downside, selling could quickly get out of control. Nothing has changed – caution is still warranted until buyers can show some conviction by generating upside momentum on higher volume.
Two important economic reports are to be released this week; the ISM and the US unemployment report will likely be the major catalysts influencing trader sentiment this week. If the reports come in below analyst estimates and sellers cannot push the S&P materially under 1040 expect prices to lift up towards 1080.
By the same token, good news that draws motivated sellers into the marketplace causing supply to overwhelm demand may signal that a new impulse wave down has begun. Keep a close eye on the Treasury market (TLT+2.01%) as it has been an excellent tell for daily stock market direction. If bonds are well bid, equities are vulnerable to increased selling squalls as investors run from risk into the safety of fixed income instruments.
This is no time to be a hero. Manage your risk appropriately with prudent money management procedures.
Have a great evening.
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Comments
CS views on China Consumer Stocks - Finally cracking?
China consumption 36% of GDP, but ... While the structural growth story in China consumption remains an attractive theme, our concern has been whether this is more than reflected in share prices. The good news for valuation believers like ourselves is that these stocks are finally starting to underperform. MSCI China consumer cyclicals have been underperforming MXASJ (MSCI Asia ex. Japan) since 22 March. More importantly, MSCI China consumer staples have started to underperform since 1 July 2010. Despite this recent underperformance, we reiterate our UNDERWEIGHT call in a regional context. We believe Indian staples may be the next to underperform.
Premiums still range from 80% for China Mengniu to 259% for Hengan: On our price-to-book versus ROE valuation model, premiums range from 83% for China Mengniu to 140% for Li Ning, 160% for Belle, 243% for Tingyi, 244% for Want Want and 259% for Hengan International. We estimate that these stocks are all priced for ROE to double from here.
Switch to Chinese banks: With Credit Suisse banks analyst Sanjay Jain highlighting that exposure to local government lending was less than we thought (9-12% versus 18% estimated), we again highlight the 39% discount that Chinese banks are trading at. At a 39% discount, we estimate implied ROE to be 14.5% versus the current ROE of 19.6%. We believe the sector is likely to outperform, as the share overhang and UDIC issues are resolved.
Cara 100 Ratings Changes
Good morning.
As expected, INTC downgrades (after the fact) fill this morning's report:
INTC - Intel downgraded to Hold from Buy at Lazard Capital based on deteriorating PC fundamentals, likely Q4 ASP pressure, and a potential enterprise spending slowdown.
INTC - Downgraded to Market Perform @ Charter Equity.
INTC - PT Lowered from $30 to $26 @ RBC. Outperform
INTC - PT Lowered from $29 to $25 @ Wedbush. Outperform
TXN - Texas Instruments downgraded to Neutral from Positive at Susquehanna. The firm cites the macro slowdown for the downgrade.
------
Moves From The Bullpen:
After a long period of inactivity, I jumped back in the market right before the close on Friday, buying the VIX short, (VXX) @ $21.51. Ideally, I'd prefer to purchase this in the $15 to $20 range but am not sure we'll see these levels anytime soon in this scary economic environment. I'm not a daytrader and am willing to hold this until the next panic. IMHO there is much upside potential for VXX and not much downside. Trying not to be over confident, Vad. ;>)
Cara 100 Ratings Changes
Duplicate post. Deleted
Cara 100 Ratings Changes
You've got a problem with this website.
Re: Cara 100 Ratings Changes
BH,
The techies are trying to resolve the problems. Sorry.
When you post a comment, the screen goes blank. So, assume the posting was made and close the window. A new window will show that everything went through.
Re: Cara 100 Ratings Changes
"Trying not to be over confident, Vad. ;>)"
You can trust the market to help you with that :)
U.S. Total Debt and Japan Debt Service
Hard to imagine how these two countries can service their debt...
United States:
$13.5 trillion in household sector debt
$10.9 trillion in business sector debt
$8.2 trillion of Federal debt
$14.9 trillion in financial sector debt
http://www.federalreserve.gov/releases/z1/current/
[Debt growth, borrowing and debt outstanding tables, see bottom of page 3]
Japanese debt service:
1 quadrillion yen in total credit market debt
Tax receipts: 40 trillion yen
Expenses: 97 trillion yen.
Every 100 basis points costs Japan 25% of revenue for debt service.
Kyle Bass on Japan (starts at 02:20 mark)
http://tinyurl.com/2aykyqq
http://tinyurl.com/23m99qf
Re: Cara 100 Ratings Changes
Bull I am probably misunderstanding you, But the VXX does not short the VIX. It tries to emulate it. You probably know this, but the VXX goes down in both flat and rising markets. The only time it goes up is in spikes down. I believe the market has to go down at least 1/2 percent to get any gains in VXX.
Good Luck,
Bob
Intc
wow, that was a spike in volume and price just now.
Potential market mover:
(US) Preview: Aug Dallas Fed Manufacturing due out at 10:30ET
**Consensus expectation: -10%e v -21% prior
- Prior reading of -21% was worst since July 2009.
Re: Potential market mover:
(US) DALLAS FED MANUFACTURIG ACTIVITY: -13.5% V -10%E
- No revisions
**Components
- Production -0.1 v 4.9 prior
- New orders -9.3 v -9.6 prior
- Raw materials prices paid 24.3 v 12.3 prior
- Wages and benefits +7.1 v 8.0 prior
- Employment -5.1 v 5.1 prior
Looks like a yawner
Re: Potential market mover:
Vad,it appears that the mkt is going dn anyway. Bounce over $RUT moving leading the decline presently %wise.
Re: Potential market mover:
Vad,it appears that the mkt is going dn anyway. Bounce over $RUT leading the decline presently %wise.
Re: Potential market mover:
Vad, it appears the mkt is going down anyway led by $RUT %wise.
Re: Potential market mover:
Triple post due to error posting - forgive me.
Royal Bank of Canada
Hi Bill,
I was wondering if you had an opinion on RY after the recent sell off that might kindly share with us
best
piazzi
Royal Bank of Canada
Hi Bill,
I was wondering if you had an opinion on RY after the recent sell off that might kindly share with us
best
piazzi
Royal Bank of Canada
Hi Bill,
I was wondering if you had an opinion on RY after the recent sell off that might kindly share with us
best
piazzi
Royal Bank of Canada
Hi Bill,
I was wondering if you had an opinion on RY after the recent sell off that might kindly share with us
best
piazzi
Re: Royal Bank of Canada
I am not sure why this is posted three times, may be a browser error on my part, my apologies
Re: Royal Bank of Canada
I am not sure why this is posted three times, may be a browser error on my part, my apologies
THE MONEY MALL
ALOHA!!
This was posted by gyglass yesterday ...
Matthews Asia Funds have a reason to encourage more Asian investment, but they put out a thought-provoking article recently that suggests the wisdom of equity allocation by country/region GDP rather than the pervasive market-cap allocation.
I take a different tact ... While many here and others follow the saying DONT FIGHT THE FED I say don't FIGHT THE FX. Currency(aka:money) is my trading compass.
Instead of looking at "arbitrage" in terms of "country/region GDP" or "market-cap allocation" I base my strategy on "FX". I look at the various stock exchanges around the World as stores in a MONEY MALL. I take my USD and I go "shopping" for the best PP&E bargains I can find ... those BLUE LIGHT SPECIALS where my money gets the most bang for its buck.
It just so happened during the last crash in Q4/2008 and Q1/2009 I was in the AUD store at the MONEY MALL loading up at 65 then while in the AUD store I went over to the ASX DEPT and bought some SLR. So for me what works is a combination of currency arbitrage with stock picking based on monetary fundamentals and company fundamentals. I did the exact same thing with the TSX, then the ASX. That is what I like about a "crash", especially since the World still perceives the USD as a "safe haven" during such cataclysmic events. That will not always be the case in the future, but it was in 2008 and if another crash came tomorrow I still believe there would be a run up in the USD, although somewhat more diluted by gold. I think its a safe bet so long as you stick to the top ten global exchanges. I bought nothing at the Euro Store or the Pound Store as they were way too expensive for a USD, so no DAX, no CAC.
I always have used currency as leverage, even when I started my first business in Australia, in the early 1970s, but oddly enough back then an AUD was worth more than a USD, so instead of stocks, as I was too young only 17, I bought "rock albums" like John MayalL, Van Morrison, Moody Blues, etc at Licorice Pizza in Fullerton, California for $3USD each and shipped them to Perth, West Australia and sold them for $14AUD each. About a 20% gain on the currency arbitrage and a 400% gain on the "rock album exchange". If it were not for the bloody Australian Postal blokes stopping me from shipping by threatening me with import duties I think I would have put Aussie record stores out of business, because that was where I was headed with this idea. My downfall was getting too big ... too fast and not understanding government imposed limitations on imports and taxation! At 17 I thought you could do anything you wanted in the World so long as you had a good idea and worked hard. "No you cannot!" I was told. That was my first eye opening experience with government and its limitation on supposedly "free markets" and the concept of taxation of a "good idea"! I had no clue as to the trouble I was getting into with "governments". All I knew was that my good idea was making a heck of a lot of money. Even my parents were getting suspicious as to why there was always a large crowd of people at the house when they got off work. At 17 I came away with this belief ... "Governments can't stand to see you make a lot of money and not get some." Its followed me ever since and been in my face every where I go ... Its a global Mafia. Really what is the difference between government and the Mafia? They both extort money from you, as it matters not whether one is legal and one is not.
My point is "currency" tells me what exchange to invest in not GDP or MARKET CAP. Once I find an exchange, I pick a monetary stock. So do not fear a market crash as those are your best buying opportunities. Just make sure you have some ammo at the bottom.
Here is a list of global stock exchanges simply divided by UP or DOWN in terms of their trend this year.
UP
BSESN
JKSE
KS11
DOWN
SSEC
HSI
AORD
NZ50
Out of those I see the best USD arbitrage in Asia and New Zealand, however you have to look at the currency charts for each. As in the case of the NZD/USD it was down at 65 in June and now it is at 70, so a small missed opportunity and on a five year chart 70 doesn't look so great, as 76 was the peak and in Q1/2009 50 was the low. Same goes for a AUD/USD chart only the AUD is more par than a NZD. Even with a NZD/USD at 70 it means you can buy property in New Zealand at a 30% discount with a USD. In Q1/2009 you could have bought at a 50% discount.
In the Asia markets the CNY/USD is a loser as the Yuan is running at all time highs against the USD. Out of those currencies I see the best arbitrage potential at the INR/USD as the Rupee which is going sideways over the past year but substantially down, based on a five year chart. With an exchange rate of 02 and the projected growth in India fundamentally it could prove to be a longer term winner. All those currency charts you look at the best buys were at the Q1/2009 crash.
Just some thoughts to keep in mind on the next crash, that is if you want to "shop" currency and exchanges. There always is a "next" crash when money has no value, because there is no stability in no value. What did you think "floating" meant? Although "sinking" would be more accurate! Once again when you have a "monopoly" you always get the "lesser evil" to chose from, not the best ... whether it is currency or politics.
Re: Royal Bank of Canada
There is a posting problem. The comments post but Explorer indicates otherwise so I and you piazzi tried again only to find out later that the first post was already there. IT requested.
Re: Potential market mover:
Nah, no conviction. Just another range day so far. It's still summer slumber, until after the Labor Day, I suspect:
Market Internals update at 10:30ET
- NYSE volume 140M shares, about 40% below its three-month average; decliners lead advancers by 2.4:1.
- NASDAQ volume 350M shares, about 24% below its three-month average; decliners lead advancers by 2.3:1.
Re: Potential market mover:
George,
Forgive me. There is a bug in the blog software that happened over the weekend as the techie's upgraded things. they'll get it sorted. Bear with us. Thanks.
Chinese Central Banker Goes Missing ...
Rumored punishment for buying U.S. bonds is DEATH! Off with his head for such a bad trade decision. Obviously, China won't be buying more U.S. debt unless only to pump and DUMP.
http://www.stratfor.com/analysis/20100830_china_ru...
Who's gonna fill those shoes? Who's gonna fill thooose shoooes?
Starting to add positions on the down side
QID 18.50 this morning. nibbling here.
Re: Chinese Central Banker Goes Missing ...
There is no way the decision of this scale would have been made by a single person, without prior policy coordination with Politburo. That's not how things work in totalitarian regimes. He may have been chosen as a scapegoat of course, but the suggestion by whoever constructed the rumor that he "made the trade and is being punished for it" is disingenuous if not outright deceptive.
Re: Chinese Central Banker Goes Missing ...
When China comes up for discussion among my friends I have always said simply...
"I don't trust our government data why would I trust China's?"
Whether true or not, this kind of thing would, IMO, not make investing there worth the risk.
blog software bug
A temp patch has been installed. Tell me if you have problems from here on. Thx.
blog software bug
A temp patch has been installed. Tell me if you have problems from here on. Thx.
hahaha. Must still be a problem.
RIG
Showing relative strength, not to splash the water in the shallow end, as in unless we stop using oil they need to string um and bring um plus its trading below it 600 day moving average. They say buy low and sell high...doing that of course is the challenge. No position in them. Some drip in XOM however.
REXX also showing relative strength:
from Ga, Ga, Google:
Rex Energy Corporation (Rex) is an independent oil and gas company operating in the Appalachian Basin and the Illinois Basin. In the Appalachian Basin, the Company is focused on the Marcellus Shale drilling projects. In the Illinois Basin, in addition to the developmental conventional oil drilling, Rex is focused on the implementation of improved oil recovery on the properties. At December 31, 2009, the Company operated 2134 wells. During the year ended December 31, 2009, the average net production for the Company in the Illinois Basin was 1971 barrels of oil per day. During 2009, Rex averaged net daily production of approximately 4.3 million cubic feet equivalent (MMcfe) per day of natural gas and natural gas liquids (NGLs). As of December 31, 2009, Rex controlled approximately 90,000 gross (58,000 net) acres in the areas of Pennsylvania.
I wonder if this has to do with NG?
$SPX rallies
These sharp rallies as we experienced on Friday happen in Bear markets. We had a 3 day rally that ended August 18. Another 3 day that ended the last week of July and a strong 6 day upmove that started from the July lows. Some short on down days and then get scared at the bounce and cover adding fuel to the sharp upturns. Simply stated this is a Bear Market.
Re: Chinese Central Banker Goes Missing ...
Vad -
The rumor is that he's sought asylum and he's a CENTRAL BANKER. He must have been the happy idiot pushing hard to buy those U.S. treasuries ... probably all B.S. but it could also be interpreted that the Politburo is not happy with its central bank's consumption in U.S. Treasuries to the extent that one of its own is running for his life.
Visual aid:
http://tinyurl.com/29qyb6v
Cheers.
Re: Chinese Central Banker Goes Missing ...
Thanks, but visual aid is not really needed. I am afraid you missed my point. As juicy as the rumor is, central banker in this kind of regimes does NOT make this kind of decisions on his own. Suggestion that "the Politburo is not happy with its central bank's consumption in U.S. Treasuries" makes no sense - central bank wouldn't have bought $1 worth of those without Politburo directive.
UNG thoughts
Just saw the following article on Yahoo today:
****
Put Sellers See Bottom in UNG
U.S. Natural Gas Fund traded heavily on Friday, with investors selling-to-open 6 strike puts. The October 6 contract was the most active. More than 75,000 traded and 92% traded on the bid, suggesting sellers were dominating the action. Open interest increased by more than 60,000 to 113,000 contracts, and is now the largest position in the gas fund. ...
****
Here are my own observations about UNG that I made this weekend:
The average 3-day volume in UNG is the highest it has been since early June, which suggests that we are getting close to capitulation in NG. Maybe we have seen it already this week. After all, most of the smart traders have probably realized that this year is going to be a repeat of the last year, and so it pays to sell their UNG in August and then to start scaling in right after the Labor Day (last year, the UNG rally started right after the Labor Day). Since no one wanted to be the last stupid guy selling before the rally, I would bet that most (if not all) of the selling has already been done, and so UNG has a high probability of rallying next week, one week earlier than last year.
FD: long UNG and ready to keep scaling in much further if the price keeps declining.
Re: UNG thoughts
I've been burned by UNG. Not saying it can't be played for a bounce but take a look at the attached chart. Plus the tax handling of it is a hassle because it requires handling it like a partnership (same applies to USO, DBA and others).
Just some thoughts. GL with your trading.
KC
INTC support at 18
Interesting intraday chart for INTC - good support at 18 today. Perhaps someone big has an order to buy all they can get at that price.
Re: UNG thoughts
I would echo knifecatchers comments. If you feel inclined to trade UNG, I would suggest you get a firm grasp on how the NYMEX Natural Gas forward curve is traded as well as how the fund operates (rolling contracts). There is great potential to be right about direction of natural gas prices and still manage to lose on UNG because of how gains/losses compound as the fund rolls its contracts. If you don't understand how a commodities forward curve works (and are simply basing trades on whether you are bullish on the spot price) you will probably get thrown for a loop.
Re: INTC support at 18
It was my order for 50 shares at 9 AM something. lol
tax treatment in UNG
Last year, tax treatment in UNG has been a saving grace for me. Since UNG lost money last year as a partnership, part of those losses were awarded to me, and so I got a reduction of around $1500 in my total tax liability, despite the fact that I never held more than 1000 shares of UNG! I suspect that UNG will lose money this year once again, and I expect to get a nice tax cut again. :)
As for the monthly rollover of UNG/HNU.TO, I am fully aware of how it works and so I agree that long-term, holding UNG is a losing proposition. However, when one starts scaling in an oversold condition when prices are already low (the total extraction cost for NG is around $5 per Mcf and the futures closed on Friday at $3.75 per Mcf) and keeps scaling in as it becomes more and more oversold (and undervalued), the chances of ultimately making money are very nice, IMO.
Oversold...
... gets oversolder until it becomes oversoldest, and then sells some more - remember the concept? Have a look at DGIT for an illustration.
Re: Oversold...
It's very tempting to jump in ... an RSI-7d of 5.26 according to stockcharts ...
Re: Oversold...
I am not tempted at all... there is no slightest sign of recovery yet. Can change of course but until it does... I am not buying just because "it's too low". It can always get lower yet.
These below are all signs of disaster in the making:
"it can't possibly go any lower"
a.k.a. "if it was good at 25, it must be even better at 15"
a.k.a. "I'll just put it in long term account"
a.k.a. "they won't get it from me this cheap"
Re: Chinese Central Banker Goes Missing ...
Seems to me this is nearly a universal truth...
"As juicy as the rumor is, central banker in this kind of regimes does NOT make this kind of decisions on his own."
What is the first thing any government official or agency at any level does when a problem arises? Appoint a task force, set up a committee or for the best possible cover — get a team of "experts".
Harry Truman may have been the last elected person to accept responsibility.
"The buck stops here." Nobody else ran interference between him and a problem. If he had a Chief of staff or press secretary he evades my memory.
To his dying day Truman took the responsibility for debts resulting from the bankruptcy of his clothing store partnership, for investigation of military spending when a senator, for dropping the A-bomb, for firing MacArthur, etc. He went against his party if he thought it in the best interests of the nation. I give him higher marks than any other elected individual in my lifetime for leadership.
the selloff today
I guess it was predictable to give away 50% of profits from Friday. But disappointing nevertheless. GDX holding well today. AAPL actually up, isn't it a leader?
LOL, i noticed DGIT this AM, what a dog!
According to Cobra's market view (or rather sentimentrader), today was typical for week before the holiday:
http://lh3.ggpht.com/_APmrYvpA45s/THraJ__V0vI/AAAA...
Re: INTC support at 18
I do not know what to make of the big volume at the close approximately...any opinions?
Re: the selloff today
Jack,
to me "today was typical" for a market that is ready to go lower.
Re: INTC support at 18
Yeah. I bailed out on my INTC position. :) I didn't like the close on SPX at all. Additionally, bonds recovered almost all the losses from Friday. I'm reducing my risk.
Re: UNG thoughts
In September of last year natural gas contango was running at 25% on the front month contracts (October and November) and 50% for contracts 5 months down the road (March contracts).
Today these numbers are 7% and 19% respectively, quite a drop (http://shockedinvestor.blogspot.com/2010/08/natura... posted earlier today)
NG front month prices could well drop to the $2s, but I did go fully long last Friday on HNU, as well as using UNG straddles.
Previous posters warnings on UNG are very valid, it is the dog of dogs of ETFs and investors should protect/hedge themselves. It's a money making machine for the sellers (much like all leveraged ETFs, even though UNG is not leveraged); Billions of dollars are made at the expense of mom and pop investors. Odds are stacked against them. Play the odds... Selling puts on UNG was indeed probably the best option (re. UNG).
Water draining from a bathtub
I was at a show put on by Joe Granville in 1978 or 1979. He was talking about the market, of course, and relayed the analogy about water draining out of a bathtub. For the longest time, the surface doesn’t show much disruption. As the level gets lower, the surface movement starts to increase. By the time the water is about gone the surface is swirling rapidly.
This is what is happening in the market. The water started leaving the tub August 9th in an “orderly selloff” as noted by many on the site. Now the orderly selloff seems to be gathering momentum and it does appear that there will be a violent ending.
Advice from Twigg
End of the third quarter is a bearish time of the year, with many major crashes (1929, 1987) occuring in October. We are likely to see further consolidation in September followed by a breach of support. The breach, however, may either resolve into a primary down-trend or rally sharply to complete a bear trap. All we can do is remain vigilant and stick to objective signals.
Advice from Twigg
End of the third quarter is a bearish time of the year, with many major crashes (1929, 1987) occuring in October. We are likely to see further consolidation in September followed by a breach of support. The breach, however, may either resolve into a primary down-trend or rally sharply to complete a bear trap. All we can do is remain vigilant and stick to objective signals.
Re: Water draining from a bathtub/ Doing Time
George- Holding positions beyond an intraday time frame (after months of day trading) can seem like doing time. I moved 50% of the portfolio into FSRBX/FSELX/FSENX (choices in the retirement account at work limited to funds, and I'm actually fortunate to have a fairly wide selection) at Thursday's close for (at least) a medium term trade- today's sell-off means Friday's gains were given back and then some.
Also now underwater on assorted positions in the financial/technology/energy sectors, which total another 10% of the portfolio- AA/AMAT/BAC/CSCO/INTC/WFC/XOM.
As Vad points out, oversold can become more oversold.
Trading unfolds one day at a time. Tomorrow I may decide to take action, or I may elect to hold. Of course, I try to keep emotions out of the decision-making.
Water draining from a bathtub / Doing Time
This begs the question: Where is the liquidity draining to? Bonds? Cash? Foreign markets (who's currencies stink to high heaven, too)? I think not.
I think the market is bottoming and 1040 will hold like a rock. I'm not basing this on any charts. I'm basing this purerly on valuations, which are RIDICULOUS. If corporate america is buying in August (of all times!!), then what is everyone waiting for. We have seen a decided spike in merger activity and it all looks pretty darn opportunistic to me. Sometimes the shortest distace between two points is really a straight line, fellas.
I couldn't be more bullish. GL to all.
Re: Water draining from a bathtub / Doing Time
nebish- One thing I've noticed about this board has been the transition to wider divergences in opinion, which can only add to the value of the discourse.
I have a certain amount of faith in relative strength measures, which derives from my faith in human nature. So I'm fairly confident that my buypoints (and yours, if you've acted on your sentiments) will ultimate prove to be quite attractive. It sounds kind of hollow to make statements like that at times like these- but that's just the way it is.
Re: Water draining from a bathtub / Doing Time
Re: Being bullish
Gosh who knows. I value both sides of the debate and appreciate your post because I have no conviction right now.
Perhaps I'm overly simplistic in what and how it influences me, but we've just seen a tremendous bounce off the lows with no real change for the better. Just the ongoing elimination of the middle class. Higher taxes, high unemployment, more and more intrusion and banksters bailed out.
Then you have the likes of MSNBC issuing propaganda pieces such as this (the same network that hid the race of a protestor to misrepresent the issue and create unwarranted and inappropriate racial tension.) A contrarian sell or short signal if I've ever seen one...
http://www.msnbc.msn.com/id/38905293/ns/business-e...
edit: another take on PE ratio and "dirt-cheap" stocks
http://myprops.org/content/The-PE-Ratio-RIP-And-Go...
I bought INTC sub $18 in pm because I like the Infineon deal
4 downgrades on INTC today. That would be the very last straw for a lot of folks. Gotta take risks sometimes.
The deal will make them top player in those ipad communication chips and I bet we see it integrated in their other chipsets as well, thus reducing size, cost, and power consumption. Might take them a year, but they are capable of it, and will do it.
Even if the rest of the world ends, Intel will survive, because computers are here for at least as long as I live, and computers need chipsets.
Re: I bought INTC sub $18 in pm because I like the Infineon deal
GL with the trade. Another option (no pun intended) would be to write some puts. Just a cursory glance shows 1/2012 $10s going for $0.50 a contract. Even if your bearish on the market in general, seems like a nice way to hedge against a "recovery." Plus you have the options decay working in your favor (i.e. one of the main reasons most people lose money trading options). I also note the 10/2010 $17s @ 0.46. Just something to consider. Not trading advice as I'm a novice still learning the ropes.
I credit Bill for introducing me to the valuable strategy of writing puts when appropriate. (Credit to Bill not to be construed as an endorsement in any way for writing puts on INTC here) though I would be keenly interested in his thoughts on the matter.
KC
Re: Water draining from a bathtub
What about the opposite scenario- bears intent on covering when the tub empties find themselves splashing over each other when central banks turn on the spigots?
It's just not easy making money in the markets. Rewards are generally commensurate with risk.
Re: Water draining from a bathtub
2nd_ave,
per Worden volume on ETF's, I count 35 that trade huge volume from SPY all the way down to GDX per their 90 day sort volume. Unlike years ago, there is no end to choices that have liquidity for even large traders whether it be stocks or etfs etc. What about INTC it traded over 7 million shares today?
Re: Water draining from a bathtub
George-
(a) The volume March 9, 2009 wasn't much higher. The question is who's buying, and who's selling?
(b) Had a trader sold INTC at 15 in October 2008, he would undoubtedly have felt pretty good the first week of March 2009. Hopefully, he would then have bought. What are the odds he would have bought at the absolute low? If not, where exactly during the spike from 12 to 15 would he have reopened a position? Or might he have waited for the spike from 16 to 19 in July 2009?
(c) What about the trader who bought INTC at 15 in October 2008, and sold at 20 a year later- or at 24 a year and a half later?
(d) At some point, one has to make a decision. I don't think it's ever an easy decision.
Re: Water draining from a bathtub
2nd_ave,
Relative to (c), I made mine some time ago and even last Friday I was okay with it. This sell-off is going to get cayote ugly! It might be best to gnaw off both arms cause you know she'll be looking for a one arm guy.
Re: Water draining from a bathtub
My apologies for inserting another point, which bumped the original (c) entry to (d). That is, if I read you correctly.
Re: Water draining from a bathtub
yes it is now (d) and I didn't spell coyote correctly but couldn't edit it.
Re: Water draining from a bathtub
When it comes to 'coyotes,' the uglier the better. I love sell-offs- without them, we're all just part of the crowd.
Re: Water draining from a bathtub
get ready 2nd_ave cause it's coming to get you http://tiny.cc/6u34r
Re: Water draining from a bathtub
I'm just waiting for Vad to weigh in on INTC with 'But she was so much uglier then, she's prettier than that now.' Or 'beautifuler than that now.' ')
Re: Water draining from a bathtub
Yeah it's hard to believe this all started with a Joe Granville analogy about water draining from a bathtub.
Grapes of Wrath
http://video.google.com/videoplay?docid=8791505451...
Re: Grapes of Wrath
Mac -
August 30, 2010
Richard Russell:
"Bear markets exist for the purpose of exposing and eliminating the greed, the corruption and the fraud that thrived in the preceding primary bull market.
To my mind, the biggest fraud of the last fifty years has been the rise and acceptance of fiat "money." For that reason, I expect fiat money to meet its end before this bear market breathes its last. Judging by the size of the top, this could be the biggest bear market since the '30s. I believe this bear market means to take us back to basics and truth. That alone implies the end of central bank-created money and the rise of gold and probably silver. It may also end that immoral inflation machine, the Federal Reserve. Wall Street and its bankers now run the nation. That too will end.
The history of money in the US is a legend of lies, manipulation, immorality and greed. I think this bear market will end those lies, one way or another."
Mr. Russell has been writing that newsletter longer than we've been alive. The man has perspective just like the profound words of Steinbeck's "Ma" but more to the point of what we're in fur.
Cheers.
Re: Chinese Central Banker Goes Missing ...
Grym,
I beg to disagree about the legacy of Harry the haberdasher. He was a tool and paid tribune of Tom Pendergast. Sure he paid off his creditors with 'Boss Tom's' money. He aspired to politics and bankruptcy would have been a heavy albatross to wear.
During lunch one day in 1970 at the Kansas City club, a very close relative of Tom Pendergast said that Truman was known as 'shoe box Harry.' because a shoe box was his preferred method of receiving cash....donations. Look up his Senate election in 1934.
My grandfather on my mother's side was a dyed in the wool straight ticket Democrat that loved FDR. He was also the circulation manager for the St. Joseph News Gazette. Such was his contempt for Truman and the 'party' that he voted for Ike in 52. He considered that a sin but took it to his grave...
Truman had decent qualities after escaping Missouri machine politics. I admire him for integrating the military and many other noble endeavors but I cannot forgive him for sitting on his duff for four years after Hiroshima and allowing the Red Army to occupy Eastern Europe. We had the Nukes and he had the means to kick Russia back to their own borders where they belonged...
Exactly 10 months after Russia detonated their first nuke, North Korea invaded the South. No co-incidence there! From then it was a slippery slide for the next 40 years. Harry squandered the greatest military advantage in the history of the world just as the Fed, Treasury and congress is squandering the greatest opportunity to right the financial malfeasance of the last 40 years.
Altrustic American heroes are sometimes those that we least expect or who have lacked an effective publicist. John Nance Garner, a two time Veep under FDR is one of those. He thought of his boss as a priggish nin-com-poop.
Investment wise, tomorrow the markets will open at 9:30am, fluctuate and close promptly at 4:30pm.
testing?
testing?
Re: testing?
I *think* everything is working again with the comments...let me know if anyone has problems from this point on...
i like INTC
I like INTC too, but I'm going to let someone else figure out if 1040 will hold over the next few days. Those gap down opens can be unpleasant, and I only want to own it (and some other things) once the trend has been confirmed by someone else's money. :) Had price action today been different, I would have held.
Given the close was terrible, I look at the risks: it is almost september, a bad month, economy is not so happy, news is likely to continue to be not so good, who knows how HB&B will paint things. Tomorrow we have Case Shiller HPI, and retail sales numbers which (according to my watching of consumer metrics data) will probably not surprise to the upside. Also, even though TLT has a triple RSI sell signal on it now, it gained back almost all it lost on Friday, and it closed at its high. These all add up to a great deal of risk for me.
Lastly, I'm not seeing too many triple RSI accumulation zones flagged in the RSI tool. I'm happy to let things get "more oversold". If the market rallies tomorrow, I will applaud and think those who took the risk of holding overnight deserve the money they got.
I did buy some natgas yesterday after seeing what I thought was a capitulation low RSI of 10, and intraday it seemed to have found a bottom. Trade has worked out so far, but I'm not sure how much conviction there is. Well, that's what stops are for. Since they trade 24/7, futures let me use stops effectively, which is one reason I really like them.
Monetary History
Entertaining movie for those interested in currencies and banking history here in the US.. lots of great quotes and interesting hypothesis.
"The Secret of Oz"
http://tinyurl.com/38uotee
Monetary History
repeat
Re: Monetary History
Off Topic:
MtnGntx, I was at a Tennant Bio modulator seminar and training for the last three days using scenar. While there I had an opportunity to have a session with "Tesla Lights."
While I already knew the value of scenar for improving one's health, the Tesla session was remarkable. I went with absolutely no expectation of anything. After a ten minute session having this energy pass through me, I had the most calm and peaceful feeling I have ever encountered. Remarkable!
Have you heard of this before?
http://www.teslalightsystems.com/index.html
Re: Water draining from a bathtub / Doing Time
Nebish said, "I'm basing this purerly on valuations, which are RIDICULOUS."
Compared to what? We keep hearing on TV and blogs that multiples are cheap and valuations are well cheap. Well again, I say compared to what? Can't multiples just continue to compress creating even greater values going forward?
This current environment is much different than the leveraged go go years of decades past, thanks to the permissiveness of Greenspan and lax regulation. I'm not suggesting your are wrong, just asking you to consider that we are still in a de-leveraging stage, the go go years of 50:1 leverage are not coming back anytime soon and that the era of leverage is what led to such high multiples in the first place. Perhaps that was what was the true aberration.
futures 2:30am - Shanghai yet to give up all of yesterdays gains
S&P -6.00 / -0.57%
Level 1,039.10
Fair Value 1,047.81
Difference -8.71
Nasdaq -5.75 / -0.33%
Level 1,763.00
Fair Value 1,771.84
Difference -8.84
Dow -51.00 / -0.51%
Level 9,928.00
Despite US markets' performance Monday, Asia yet to give up its gains.
Looking like a gap down day
Re: testing?
Korvus, page reloads fine now. Just continues to flash big red windows with lots of gobbledygook that the geeks here perhaps enjoy :). see attached.
Re: Monetary History
I know about the technology, and I have seen it work. Unfortunately, despite great results... results that in repeated french studies indicate a significantly higher rate of accurate diagnosis using scenar technology as compared to traditional clinical diagnostics (goodness knows we cant have anything upstaging our state-trained physicians), it remains repressed.
I am sure snopes and the like have elaborate hit pieces describing in great detail how this stuff is a scam. US medical schools will label you a heretic for considering it. Classically trained physicists will look down their noses at you in pity for considering it. And code enforcement will jail a practitioner who claims anything that is not FDA sanctioned and approved... you can have a verified 100% cure ratio of infection or cancer with unsanctioned techniques and technologies and be jailed if you proclaim it. Such was the history of Rife. Sigh.
I am tired of these ridiculous battles. I wish our controllers would grow up and quit trying so darned hard to oppress the masses. I am convinced that this will not happen until humanity reaches some form of mass consciousness about how we are continuously exploited and enslaved. WAKE UP FOLKS.... jump in the water is fine!...lol....
Sorry for the rant.
Happy trading
futures 6am
S&P -2.40 / -0.23%
Level 1,042.70
Fair Value 1,047.81
Difference -5.11
Nasdaq -6.50 / -0.37%
Level 1,762.25
Fair Value 1,771.84
Difference -9.59
Dow -32.00 / -0.32%
Level 9,947.00
Europe mostly up. EUR/USD playin up again. $GOLD looks ready for a smackdown
edit: sorry my mistake. the WSJ page hadn't refreshed and I hadn't noticed. Europe definitely red.
Korvus - we are unable to delete attached files
I cannot make heads or tails of the window with which we attach files. Thanks in advance.
Re: Water draining from a bathtub
Bulls vs Bears, Up vs Down, Equities vs Bonds? All Either, Or choices forgetting Neither, Nor.
"If corporate america is buying in August (of all times!!), then what is everyone waiting for?"
Perhaps the better thing to ask what is contributing to this merging?
An example: Locally, and I suspect wherever you live, we have had many mergers of real estate firms. This is due to the survival instinct. Cost savings in office space (bad for landlords), reduction in secretarial staff, etc. — overall a cut in jobs. This is not a "bullish" outcome.
We humans seem too intent on keeping choices at to possibilities. Two teams, two political parties, two computer frames PC. Mac, two temperatures—too hot, too cold.
In reality the choices are usually multiple, perhaps infinite when the blending of any two becomes an alternative.
We are in a whole new era, IMO. This is what the Black Swan idea is all about.
As Taleb cautions, don't be too quick to draw any conclusions.
Re: Grapes of Wrath
Thanks for the Russell perspective.
We all get older, but some seem to pick up more insight along the way.
Re: Chinese Central Banker Goes Missing ...
Ross,
My understanding of Missouri politics of the day (and Chicago all the time) is the only way to enter was with the backing of the "bosses". Wherever he got the money, he paid his creditors.
I by no means see him as perfect. In fact coming from a straight Republican family, if I had been old enough I doubt if I would have voted for him. Over the years I have come to realize neither party is for 'us", but rather for themselves first and foremost.
I'm not sure what I would have done immediately post WW2. The Soviets had massive forces and totalitarian control. We were tired of war and to stand against Stalin militarily would have require a nuke response there too. Think of it. We had just seen what terrible collateral damage these bombs produced. Europe was starving and Great Britain was not much better off.
I would say his Korea "mistake" was not asking for a declaration of war from congress. This set a precedent we are still suffering from today.
What I like most was his willingness to decide without testing the wind or covering his ass first.