Blog for December 2, 2009 [See ADDENDUM]

The U.S. economy is still shedding jobs.

ADP Says U.S. Companies Cut Estimated 169,000 Jobs in November

That's would be below the number from last month when we lost 190K jobs, but above the consensus range for non-farm job losses that will be reported by the government on Friday.

Job loss report

Also, the Challenger count of planned layoffs dipped a bit from previous months.

Challenger Report

Futures have pulled back on the ADP report, and we're at key resistance levels on the major indexes. Do we head back down to retest (yet again) the bottom of the range? Or does the market shrug this off and make new highs?

We are just running out of people to layoff.

As Bill noted, the financials haven't been pacing the movement in the broader market. I've attached an hourly and daily chart of the the 3X Bear Financial ETF, FAZ. It tested support yesterday, but held its ground. I've also noted the MACD (not pictured) on the hourly has bottomed and turned up. The MACD on the daily still shows bearish momentum.

Obviously, ETFs are not for the faint of heart.

I'm long FAZ.

... to the concept discussed yesterday. Take a look at ATHR. 30 is two day's resistance and annual high - and there are huge offers at that level. If broken, promises to be a nice trade. There are a few other variables involved (market help, support formed prior to break) so use it for observation please, not a trading call.

Don't fight the Feds...after Japan's announcement yesterday

ATHR trade is resolved at 1:4 risk/reward (40 cents of profit vs. initial 10 cents risk), let me throw quick chart is so it's easy to see the idea of the trade later. Entry trigger is $30 break, stop under 29.90. Huge offers at $30 is an additional consideration for the trade - aside of chart in two time frames, intraday and daily, those offers reinforce the notion of big resistance being taken, thus nice move likely to be launched.

leont,

Exactly right. You can't field a baseball team with fewer than nine.

Also, around here the hours are being cut with the remaining staff. My son was cut to 32 hours a couple weeks ago and last week lost his vacation time. Family health care was cut to employee only. Still better than going out of business.

We have one very sick country and a bunch of quacks pretending they know how to cure it.

Now thats what I call Progress!

kaimu -

wrong article link? "Weak dollar forces Mercedes to build more in U.S."

ALOHA!!

How do you know it was "wrong"? HA!!

Well look at that! Look what happens to jobs with a crumbling dollar! Manufacturers move production to the USA. But then look what happens back in Germany! The unions get mad.

This floating currency stuff sure makes the World a lot more spicy! Its fun trying to run a business on the fiscal instability of shifting sands ...

ALOHA !!

Okay here is the LINK!

Scroll down to "LINK:"

See below ...

LINK: http://tinyurl.com/yzkbgk6

"I am amazed at all the negative press Bernanke amd the US FED is getting in the media."

The media, like the Congress, play to their support — lobbyists or sponsors — it's where the money comes from that calls the shots.

The American public has been increasingly vocal... the sponsors take note... the media adjusts their sights.

yes, I agree with you. The key element to interpret certain price move with high probability is to understand what is the current trend, or if it is moving in trending.
My biggest gain from reading Bill's blog is to read it less, and I have stopped reading any other market comments for long time. Bill taught me how to think and trade independently. Market is there, prices are there, if we care enough to check them every day after close. we will have our own conclusion,and if we are wrong, prices or the PNL of our positions will tell us.
And another thing is always to remind myself I know nothing about market/trading, to keep the ego in check. I understand it is going to be very hard for me to correct a trading mistake if I do not admit I made a mistake in the first place.
I am not very good yet. But this mind game is fascinating.
Good luck.

Submitted by number2son (437 comments) on Wed, 12/02/2009 - 11:27 #53573

Yep, and I thought I had given the trade enough room to account for stops getting hit early. Turns out I was off by the smallest of margins.

There's still a chance the market goes higher -- especially if we get a close above yesterday's high.

And yes, it is frustrating to see prices reverse according to expectations. The key is to try and be dispassionate about it and to continue to learn from your mistakes. One thing I have learned is that it is better to trade a plan and manage risk and not try to force a trade. So I accept the loss, and try to learn from it so I can do better next time. Thanks for sharing your thoughts.

(US) Fed's Lacker: US fiscal deficit is a huge challenge, Fed will not allow inflation to rise in order to reduce deficit

"(US) Fed's Lacker: US fiscal deficit is a huge challenge, Fed will not allow inflation to rise in order to reduce deficit"

Thanks, I needed a good laugh today :-)

I came across these ETCs today ,I havent traded any yet, but I am looking to do so in the near future if they track reasonably well and as long as I dont find any hidden problems with them i.e. DYODD.Just passing info. on to anyone that trades on the london stock exchange.

"The first 18 Currency ETCs were listed on the LSE on the 12th November and track MSFX Currency IndicesSM. Since listing, the Currency ETCs have rapidly generated interest with seven liquidity providers signing up to provide investors access to these new securities. Specialist market-making firms Flow Traders, Nyenburgh, Bluefin Europe and IMC will provide "on screen" liquidity and two way prices while Morgan Stanley, Merrill Lynch and Fortis have signed up as Authorised Participants.
The 18 initial Currency ETCs provide long or short passive exposure to G10 currencies versus the US Dollar and include AUD, CAD, CHF, EUR, GBP, JPY, NOK, NZK and SEK. The ETCs also provide exposure to local interest rates in addition to FX movements. For example the implied interest rate incorporated into the MSFX Long Australian Dollar IndexSM averaged approximately 5% p.a. over the past five years."

http://tinyurl.com/yggvelp

I sympathize with you 100%. I went long on BGU on Friday in AM and still managed to lose some small money.
How? My stop was triggered at 37.99 on Monday before zooming to 52 today.

In the old days I did not use stops and lost. Now, I use stops and still end up shaken out. The stop levels is the tricky point.

Unfortunately, the big boys see the stops. It's a loosing game. The only account that made me big money is the retirement one in which I do swing trades between miners and cash. Unfortunately currently in cash (big mistake).

bobbyo,

trailing: yes, standard procedure for usual day trade is selling 1/2 around 1:1, 1/4 around 1:2 and last portion around 1:4, or trail stop. After each partial out stop is being trailed under previous support - under breakeven on first partial, under 1:1 after second etc. Some variations can be applied depending on market and stock strength, but above is a most frequent routine. If you track this trade through today's log, exactly this was done.

Time stop - no, I don't normally use those. The only case when I incorporate time is bounce plays - when those trigger after harsh selloff, I usually want the bounce to develop fast. When a dropping stock stalls for too long after initial strengthening, it's more often then not a sign of bounce failing.

5:20:33 PM
Bank of America Corp Confirms plans to repay entire $45B TARP funds (about 33% of market cap)
- Under terms of the authorization from the U.S. Treasury and banking regulators to repay the $45 billion investment made under TARP, Bank of America will repurchase all 600,000 shares of the company''s Fixed Rate Cumulative Perpetual Preferred Stock, Series N; all 400,000 shares of the company''s Fixed Rate Cumulative Perpetual Preferred Stock, Series Q; and all 800,000 shares of the company''s Fixed Rate Cumulative Perpetual Preferred Stock, Series R. The shares were issued to the U.S. Treasury as part of TARP. Bank of America is not exercising its right to repurchase the related warrants at this time.
- Bank of America plans to repay the $45 billion in TARP funds using $26.2 billion in excess liquidity and $18.8 billion in proceeds from the sale of "common equivalent securities.
- The $18.8 billion issuance of "common equivalent securities" would be treated as Tier 1 Common capital.
- Shareholders would be asked at a special meeting to be held within 105 days of issuance to approve an increase in the authorized shares outstanding in order to allow the "common equivalent securities" to be converted into common stock.
- The "common equivalent securities" carry warrants to buy a total of 60 million shares of common stock at $0.01 per share and other benefits if shareholders do not approve an increase in authorized common shares.
- In addition, Bank of America agreed to increase equity by $4 billion through asset sales to be approved by the Board of Governors of the Federal Reserve and contracted for by June 30, 2010. To the extent those asset sales are not completed by the end of 2010, the company agreed it would raise a commensurate amount of common equity.
- Bank of America also agreed to raise up to approximately $1.7 billion through the issuance of restricted stock in lieu of a portion of incentive cash compensation to certain Bank of America associates as part of their normal year-end incentive payments.
- After the TARP repayment and these initiatives, the company's Tier 1 Capital ratio would be 11.0 percent, pro forma based on the September 30, 2009 ratio of 12.5 percent. The Tier 1 Common capital ratio would be 8.5 percent, pro forma based on the September 30, 2009 ratio of 7.3 percent. The company will continue to have strong liquidity.
- Repurchase of TARP preferred stock is expected to reduce income available to common shareholders in the fourth quarter by $4.1 billion, as the book value of the preferred is less than the amount paid.
- Repaying TARP will save the company approximately $3.6 billion in annual dividend costs from the TARP investment.

Kaimu,

I was thinking...so we take the Fed out of the equation and give it back to the Treasury...I wonder how much that will change if the politicians can still just print more money.

I know my idea is a stretch but to me its a perception thing. Gold has made a parabolic move up, no matter how you describe it. Any chink in its armor can knock it down 5 to 10% quickly.

So what I did was I went out and bought GLL on this thesis. It's likely to be wrong but I suspect it could work out in a week or so.

FD:
Long GLL at $9.48.

ALOHA !!

As it stands Nemo WE THE PEOPLE are not even allowed inside a FOMC meeting and the earliest we can view the "meeting minutes" is five years later after the fact.

At least we are allowed into Congress!

However without any meaningful change in our monetary system we are still left with corrupt money. But wouldn't you at least rather see WE THE PEOPLE get more benefit from corrupt money than JPM and GS? Why should your mortgage interest fund the BAC CEOs bonus? Why not put that money back into your own pockets and keep those funds working in your local community building your own local economy rather that shipping your interest payments to Wall Street and North Carolina.

The second part of the equation is INCOME TAXES. The more money that you earn and can keep in your own pockets then the more money can be used in your local community and not shipped to DC to run the special interest gauntlet.

KEEP IT AND KEEP IT LOCAL!

S&P 500 closed today at almost exactly the same level now as on November 16, but the number of NYSE issues making a new 52-week high today was 228 vs. 303 on November 16. So while the small caps and the financials were not confirming the recent S&P highs since mid-October, lately the internal divergences have also appeared within S&P 500 itself. So I am still operating on the assumption that the market is topping out, and I placed another buy limit order for TWM at $27 for 100 shares (a buy limit order at $28 was hit today for 100 shares), as well as a buy limit order for SKF at $23 for 100 shares.

TOF you often ask interesting questions. Let's see now, why are people buying gold in the first place?

1) treasuries return nothing
2) central banks worldwide have now decided to diversify into gold
3) rich individuals have had their tax havens removed - no off-shore place to store wealth
4) people still don't trust banks
5) with intervention dead for now, hedge funds probably have declared open season

You might say that BAC news has helped to address #4, but there is always the rest of the list to drive the price higher.

Having said that, I'm certain when the correction comes, it will be exciting to watch.

This reminds me of crazy dotcom stocks in the late 90s. You know things will blow up, but between now and then, shorting just isn't an option.

Kaimu, if I may add... third part is, when it comes to Congress - at least we vote for them. It's not a perfect form of control as we all know, but it's some kind of control, and as we saw lately it does influence their thinking. None of that exists with Fed.

OK, I am very tempted to ask what "Ukanuck" is but I realize this will come back to bite me, considering my own pitiful typing (Grin)

So, I'll limit it to "it was generic WE" :)

Holy flipping bejeebers (sp?), teamonfuego. We both were interested in Japan a few days ago. How 'bout them apples since then? Hot money's rushing around the M.A.S.H. unit putting out fires left and right, as far as I can fathom... (apologies for the atrocious metaphor-mixing).

Gold now up to $1,227.

TOF, I like your style and your verve.

FD, I sold my PMPIX on the close today. I was hoping for a tripple but a double plus unnerves me a bit. Not bragging. I have many death stars in my trading accounts. I'm just a simple trend trader looking for inflection points. I like your GLL idea and will begin to scale in. It may take a few weeks or months but the dollar is one of the most crowded short trades I have seen in a long while. Don't misunderstand, I hate being negative on commodities and yes, to my mind Gold is a commodity. I think the fact that Gold pays no interest is a relative positive since my money markets do not pay acceptable rent either. What a hoax we must deal with. International assignants are being printed at will and there is no hue and cry from the shepple. Social backstops seem to work, until they don't.

Some trading wag once said "you can take the first 20% of a move. I'll even give you the last 20%. All I want is the 60% in the middle."

That said, I "only keep as much physical gold in order to bribe a border guard during a civil upheaval." Black cows propagate. That's my dividend.

Good trading..........

Bill weren't you expecting, at one point last Summer, for Gold and the $ to advance? So, even if there is a dollar correction/rally, what is your opinion on gold continuing to advance?

ALOHA !!

Exactly Vad ... and look how many of them jumped on board the AUDIT THE FED Bill so they could look good at home! Our CONGRESS can feel the heat but the US FED is impervious and proud of it! Our representatives know they can't get to bat and grab all the free flowing money and bribes in DC if they do not get elected, so they are force to bend. My guess is that not even the unions like the US FED at this point. NO JOBS NO UNION!

I realized that I am making too many transactions in my ETrade global trading account, which charges CAD$19.99 for each HNU.TO trade. So instead of buying 200 shares at $8 and then 200 more at $7.5, I decided to combine them into a single buy limit order for 400 shares at $7.5. Also, I decided to bunch up my sell limit orders at $9.5 and $9.76 (for the shares I bought at $8.5 and $8.76) into a single sell limit order at $9.7 for 400 shares.

For the "Can't make this stuff up" file.

http://www.bloomberg.com/apps/news?pid=20601110&si...

"FD: Long GLL at $9.48."

i think you are crazy too, but only because you didnt decide to sell well in the money calls and thereby reap the ETF decay for yourself.

It will not change if Congress gets full control of the purse strings, it will get much worse. It is a sad indictment of the American public that it usually votes for the person who promises the world, not for the person who tells the grim truth. Unelected regulators and tenured judges are far more likely to tell the grim truth than are politicians, especially when the regulator or judge is not being pressured by the politican. What politician will be elected if he tells the public that the 'free lunch' does not exist, that we are handing the bill for today's programs to our kids in an amount that will destroy them, that this must be reversed. Lets face it, most of the public wants more programs, not less. This includes the rich, the middle and the poor (in my view the rich benefit the most from government policies and programs). Everyone has a vested interest, and no one wants their share cut. I've been watching this for a while, and I'm astonished by the fact that even so called 'conservative' politicans rarely phrase the debate in this way. They do not explain to the public that future generations are being crippled while we enjoy a relative largess today. The public needs to be told that it must endure two decades of pain to pay for the unfunded wars and for whatever domestic programs we keep in order to put us on a sustainable fiscal track for our children. It won't happen until there is a collapse. To my knowledge, history shows that congress rarely makes tough decisions that ensure the long term health of the nation. They are expedient, seeking reelection and seeking to pacify the electorate. I just don't see it changing. Woe to children.

fjd10595,

"It is a sad indictment of the American public that it usually votes for the person who promises the world, not for the person who tells the grim truth."

Unfortunately individual citizens have little or no clout.

Corporations get legislative candy. Whole segments of the population have their special interest treats.

As more people get stimulus gifts, welfare checks and food stamps, Social Security and Medicare, government health care, jobs within the government (the largest current hiring) and generational and ethnic preferences — those in power will gain even MORE power.

Isn't this why Obama's campaign had Acorn doing a voter registration roundup?

Well, it works!

Here we are now at 17.6% (admitted) unemployment. No mention of the underemployment which has occurred since the garage sale of our manufacturing jobs.

When a person has no job or too little income to maintain a mortgage, can't sell because everyone else is trying to sell, can't even go afford to another city to interview and is a new "entrepreneur" (doing odd jobs)... There is little time left to protest to his Congressman until all else is hopeless.

This is the equivalent of being "barefoot and pregnant".

What we need for starters is:
• a ban on former elected people joining the army of lobbyist
• an actual limit on terms in office (incumbents are too hard to evict)
• a pay and benefits program which does NOT encourage making Congress a lifetime career (based on the constituents' pay and benefits)