Trading Desk Blog for Oct 4, 2010 [See post-close report]

10:00 US Aug Factory Orders, Aug Pending Home Sales

Events
China/Europe Summit Meeting.

Earnings
After the Close: MOS.

starting in ' cxm '...

Just saw this article. A lot of truth in this unsettling piece. http://www.marketwatch.com/story/america-on-the-br...

This is u.s.

http://bit.ly/cQlIWH

That is going to be horrific for New York City

I won't be holding that long- but if we do see 20 by the end of this week don't forget to hit the kill switch...

I'm holding for the 80-90 range.

"Let The Games Begin!"

80-90 ? My, you really are a bull (at least on VXX).
Most everything I look at on $SPX charts is rolling over and pointing down, so maybe this is the start of a correction, "maybe" being the critical term in that statement.

When dip buyers start to get screwdoodled (as our friend shark used to say), and prices drop to the point where mid-September buyers lose conviction, then the selling should begin in earnest.

A ton of window dressers departed last Friday- you could probably get away with a higher limit.

Perhaps I could make some more off it but not worth the risk. I'll take the quick 5%. I think we've just seen low of the day. POMO tomorrow. I'll be on the golf course. Thanks to TZA for the greens fees.

Congratulations on a nice trade.

Thanks 2nd. I hope we pop back up. Selling 1150 has been way too easy. If there weren't any suckers out there, we wouldn't have seen 1148 this morning and I'm sure a good amount of people have been wishing for a pull back since last week. Maybe one more hoorah for the too late.

Sometimes you have to wonder if it's really as easy as waiting for the same patterns to recur over and over again- yet that's exactly what happens in every other interactive setting in life. As far as I know, people fall in love/break up and fight/make up today in the same pattern(s) that occurred 5 years/40 years/200 years/10,000 years ago...

LOL. Good one, 2nd.

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"At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

--Ben Bernanke 3/28/2007

Visa, MasterCard, Amex drop on anti-trust concern:

http://tinyurl.com/2btqzo3

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"I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom," --Hammerin' Hank Paulson 4/20/2007

From Wall Street Journal:

What's wrong with Wall Street? I don't mean the painfully slow and dreadful new Oliver Stone movie. I mean the real Wall Street. The stock market has been on a tear this month and is up a few percentage points for the year. But the stocks of most Wall Street firms are actually down close to 15% for the year.

It wasn't supposed to be this way. The Federal Reserve's near-zero interest rate policy makes it almost impossible for Wall Street not to make money by borrowing at next to nothing and buying anything, especially Treasury bonds. This gives banks easy profits and the wiggle room to write off the toxic mortgage assets that never got cleared out.

While most firms won't release earnings for another three or four weeks, Jefferies investment bank set off air raid sirens last week by announcing disappointing earnings, which CEO Richard Handler blamed on "painfully slow trading." And there's more trouble down the road.

One obvious problem is that the yield curve has flattened. While short-term rates are near zero, Ben Bernanke's Fed, via quantitative easing, has been working furiously to lower long-term mortgage rates. In January, Wall Street could borrow in the short-term market at 0.15% and buy 10-year bonds paying close to 4%. Today they can still borrow cheap at 0.14%—but 10-year bonds are only paying 2.6%. That's a huge difference in nine months, and profits suffer.

Meanwhile, trading in equities at NYSE Euronext is off 21% from a year ago. NASDAQ is seeing lower volumes from this spring as well.

http://tinyurl.com/286kyok

BH, I like it. I would've liked your grandfather too.

Whatever happened to the sharkster? Do I dare ask?

"Whatever happened to the sharkster? Do I dare ask?"

It may be a sore point around here but one of the following answers is surely true:

1) Sharkie found religion. He is now a televangelist with his own show on the INSP Network.

2) He insulted our gracious host one too many times and was banned.

3) He took a job managing The Jonas Brothers and is busy hawking Purity Rings to adolescent girls.

Hope this helps.

2:45:44
American Express Co Responds to Govt lawsuit; have no intention of settling case
- Antitrust lawsuit filed today against the company is a significant retreat from previous Department of Justice efforts to promote competition in the payments industry. The new approach would ultimately limit consumer choice, reduce competition and curtail innovation.
- The governments lawsuit claims that terms of American Express merchant contracts, which protect cardmembers against discrimination and disruption at the point of sale, violate U.S. antitrust laws.
- The Justice Departments proposed remedy would interfere with consumer choice at the check-out counter by steering American Express cardmembers to another payment network.
- The governments new legal theory ignores a key point that the Justice Department previously made and that the courts have already decided: American Express does not have the ability to force merchants to accept its products or pricing.

- CEO: "We have no intention of settling the case We will defend the rights of our cardmembers at the point of sale and our own ability to negotiate freely with merchants. We are confident that the courts will recognize the perverse anti-competitive nature of the governments case and that we will continue providing a competitive, superior service to cardmembers and merchants.The sheer number of Visa and MasterCard credit cards, and the fact that most of their customers do not carry an American Express product, makes it virtually impossible for merchants to steer customers away from the dominant networks, even if they have the right to do so. It is difficult to understand why the same agency that fought so effectively to combat anti-competitive network conduct would now undermine their own efforts by regulating our contracts in a way that limits our ability to compete."
"The governments one-sided remedy would put more power in the hands of Visa and MasterCard, the networks that steadily increased prices for credit card transactions over the past decade, that control over 70 percent of the market and that have ten times as many cards as American Express. Anyone familiar with antitrust matters, would realize that in the real world such market power would ultimately work to the disadvantage of merchants as well as consumers."

Its Q4 already!

AAPL $430 is out there. Not as ridiculous as gold $5,000 IMHO. Shorting Gold or AAPL is a dangerous trade and with back to back POMO days plus a growing short interest. Maybe see a pop here. Not worth the risk to me.

gforce,

I've never been able to profit from insider buying/selling but this does look suspicious, especially going into earnings season.

Dave M,

For some time I have believed this is a much larger and more pervasive problem.

Paul Farrell does a complete presentation which encompasses all of my evaluations, expectations and some I'd never contemplated.

America on the brink of a Second Revolution
Commentary: 2010 elections guarantee gridlock, anti-capitalist class war

http://tiny.cc/4cs8f

Gforce,
I'm with you but selling before Friday.

http://www.telegraph.co.uk/finance/comment/ambrose...

S&P 1130 is being heavily guarded today.

A clean flush would really do some good and the recent constriction needs to resolve. Market just seems to be waiting on an event. I guess Wen's buying Greek debt lacked the eye-brow-raising factor it should have had last night for the bulls. This sidewinder market is coiling and will soon spring and lay its fangs in longs or shorts here soon.

TLT (everyone's ture north for the moment) looks weak today.

looks like seed is reaching back for that sling-shot !!

The Khan Academy is a not-for-profit 501(c)(3) with the mission of providing a world-class education to anyone, anywhere-

http://www.khanacademy.org/

Their financial videos are great for those of us on the learning curve!

http://www.khanacademy.org/video/enterprise-value?...

And less than 30 seconds after I closed out the position, the ask dropped to 17.37? Surreal.

Nebish - one-day charts certainly looks weak on S&P and ^RUT. But I would keep in mind that we are hovering just above the gaps we created on the big gap and run that occured Sept 24th.

I for one am hoping that we get a little continuation of the pullback that would close those gaps and then show us some test below and consolidation at or around the respective 200 Day Moving averages (SPY 200DMA = 112.01, IWM 200DMA = 65.08). That would be an ideal place to consider re-establishing long positions as not only would it close those gaps but also reaffirm the trend.

However, markets are rarely so cooperative. While I am being cautious in general and have moved to a more market neutral stance in the last few trading days, I wouldn't be surprised to see the market wrangle a few more bears into the bear traps for some rinsing and repeating action. It's that rinsing and repeating that really serves to dishearten those on the wrong side of the trend.....both those who bought into the rally late and getting whipsawed and those that have been stubbornly trying to pick the top..........

Moral of the story - today's action was a good sign for those of us looking for a pullback but hardly a clear signal to stick a fork in it, IMO......

The comments below from the mouth of Jim Sinclair himself, please read on..

"The following is BREAKING NEWS:

Racketeering suits (RICO), now as civil class action suits in two states, have hit the nail on the head. The civil suit says the banks do not have proper title to the homes on which they are foreclosing. This by direct inference questions if securitized debt on mortgages have real collateral behind them.

Simply stated a long time ago by Marie McDonnell and myself, THEY DO NOT.

That means legacy assets are cooked, dead, and worthless, yet are now marked up in value to cost and above. This is all thanks to FASB’s capitulation that now represents a large amount of capital for the Western world’s financial entities.

The you know what hit the fan today for those that understand. October 4th 2010, the essence of securitized debt on mortgages died!

That alone gives you gold at $1650.

"

http://jsmineset.com/

Doesnt really make a difference. The judge doesnt set the market price. neither does lady liberty.

The crooks run the joint.

"As my good friend and longtime gold bull John Roque, of WJB Capital, likes to say, all the price of gold tells you is what paper money isn't worth. At what price per troy ounce will that cease to be true? ....

Louise Yamada, the eminent technical analyst who for many years worked at the various firms that have coalesced into Citigroup and now presides over LY Advisors, last week remarked in a client note that gold—based on its current trajectory—most likely wouldn't represent a true bubble unless and until it gets to $5,200 an ounce (from its $1,317.80 December-contract close on Friday) within a couple of years.

So, does gold seem a bit uncomfortably popular here, a kind of heads-I-win, tails-you-lose instrument? Sure.

......There is too much of a discount being placed on gold reserves in the ground based on the valuations of gold-mining stocks, for this trend to fall apart with any drama anytime soon."

very well put, I thought ...

Hi Analyst65 - This news is bogus. Mortgages are well secured at inception - its the chain of title brought to you by the banks acting at the insistence of the lax politicians that is in question now. The current servicer has the implied authority to act on behalf of the sliced & diced mortgage as farmed out by Fannie et.al., but don't wait for the current crop of crooks to formalize the obvious as this type of tripe news is good for the masses in these troubled times. Happy Trading

from mr. flecks...http://www.zerohedge.com/article/report-front-lines-gold-bubble

Apparently banks cannot distinguish which banks own the title to the foreclosed home. multiple banks own the same home. And title co's are starting to refuse to insure the transaction.

Homes in foreclosure are in limbo. Vacated previous owners are now suing banks. 90 day foreclosure moratorium is being discussed. squatters are who have yet to be vacated might have bought even more time to live rent free.

All the above is A) threatening to melt down housing as more than 65% are all foreclosure sales and B) puts into more question what these CDOs are worth on the balance sheets of banks.

Welcome to the jungle
We got fun 'n' games
We got everything you want
Honey we know the names
We are the people that can find
Whatever you may need
If you got the money honey
We got your disease

Bill,
A question for you regarding strength of the US dollar. With the abundance of natural gas able to be produced in the US, I'm thinking the price of nat gas will have to offer support to the dollar at some point. Are you seeing any correlation or have you heard any talk of this? I don't think nat gas will do well in the US due to the "remember the hindenburg" lesson, but developing nations could use nat gas and US turn into the largest exporter. Would also help to keep price of oil down. I've never seen the affect of currency strength when a country finds large amounts of natural resources and was hoping you could give some insight.

No rush to reply. Hope you're enjoying your time off.

... to Asia

http://bit.ly/b7Vqcz

S&P +1.50 / +0.13%
Level 1,136.30
Fair Value 1,132.54
Difference 3.76
Nasdaq +3.75 / +0.19%
Level 1,980.75
Fair Value 1,973.02
Difference 7.73
Dow +2.00 / +0.02%
Level 10,709.00
S&P|Nasdaq|Dow

surprise surprise the RBA puts rates on hold. I guess the Ozzies pay more attention to economic data then most - and not Washington's bs data. So the hot ticket commodity exporter is taking a wait and see approach. That should have hot money hesitating - whether it creates a retracement or a full on selling spree will be the thing to watch.

http://caracommunity.com/content/trading-desk-blog...

I'll be watching to see if EWA suffers with a currency pullback like Bill suggested of EWZ.

I noted some little nuggets of info sourced by Evans-Pritchard, with a wait and see message attached:

http://blogs.telegraph.co.uk/finance/ambroseevans-...

Looks like authorities from much of the world is now taking a wait and see approach. Well, except the Fed, they just wanna print...

Gold & silver broke to new highs (1329, 22.25) in afternoon asian trading. PM is in a serious buy-the-dips mode at the moment - the price chart shows a linear move up, with only momentary and shallow pullbacks to allow new riders to board the train.

Got gold?

This Mauldin letter is a must read. It pertains to a new EU ruling affecting insurance companies called "Solvency II".

It means they may have to buy up a lot of bonds to offset future liabilities:

"Solvency II will govern capital adequacy standards in the European insurance and life insurance industry. It represents a complete overhaul of the existing rules (Solvency I), which date back to the 1970s. One of the pillars of the new directive is the introduction of a risk-based approach to reserving.

Going forward, European insurers will have to be able to pass a 1-in-200 years’ event stress test, which has been designed to give the industry enough cushion to withstand even the most severe of bear markets without being forced to sell out in the darkest hour. Risky asset classes such as equities, commodities and other alternative investments will be assigned much higher reserve requirements than less risky asset classes such as bonds."

http://www.investorsinsight.com/blogs/john_mauldin...

Various entities around Europe (definition of an insurance company differs amongst EU states) are desperately trying to remain outside of this new ruling. However, if Brussels drags more of these industries under its new regulatory umbrella, watch out.

NEW YORK (CNNMoney.com) -- The Bank of Japan lowered its key interest rate Tuesday to virtually 0%, citing concerns about the pace of the economic recovery.
While the reduction was slight -- the rate was cut to a range between 0% and 0.1% -- the Bank of Japan said it was necessary to launch a "comprehensive monetary easing policy," due to the slowdown in the pace of Japan's recovery. Previously the rate had been set at 0.1%.
As part of its efforts to boost the economy, the central bank also said it would purchase $60 billion (¥5 trillion) of government bonds and other assets.
Shares in Japan rallied on the news, with the benchmark Nikkei index closing up nearly 1.5%.
In its policy statement, the Bank of Japan cited concerns about heightened uncertainty in the United States and the appreciation of its currency -- the yen, whose strength has hurt exports recently. Last month, the Japanese government said it would intervene in the currency market, buying up dollars to try and rein in the yen's record run.
"Although Japan's economy still shows signs of a moderate recovery, the pace of recovery is slowing down partly due to the slowdown in overseas economies and the effects of the yen's appreciation on business sentiment," the Bank of Japan's statement said.
The central bank, which has struggled to fight deflation, pledged to maintain its virtually 0% interest rate policy until "price stability is in sight."
With there being little room to lower rates further, the central bank identified additional steps it would take to shore up its economy.

Good morning.

POMO Injection Scheduled For Today - Outright Treasury Coupon Purchase

10:00 - ISM Services

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AAPL - Apple initiated with a Buy at Jefferies. Target $365

MSFT - Microsoft downgraded to Neutral from Buy at Janney Montgomery citing the company's inability to leverage its desktop franchise into mobile. The firm has a $28 price target for shares.

ORCL - Oracle initiated with a Buy at Canaccord. Canaccord expects the upgrade cycle to boost organic growth and views valuation as reasonable. Target $32

RIMM - Research in Motion initiated with a Hold at Jefferies. Target $55

WAG - Walgreen upgraded to Buy from Hold at Jefferies. Target $45

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Mining Stocks Update:

GRS - Gammon Gold upgraded to Neutral from Underperform at Credit Suisse.