Dastro may have a good call yesterday. If we continue to see this chop throughout this Wednes day, we may be starting a bottoming process.
A bottoming process makes sense from a look at volumes. Comparing with the Bear-Sterns fall of 2008, the volumes were higher the last few days, so this market correction means to me a number of funds are lowering their positions at the current pricepoints and sitting on the sideline again. We saw the market capitulate, then back to low volumes again. Comnpletely different pattern from 2008.
The question is, why did this happen now? Is this a result of the foresight of institution managers, as it seems we are still in recession and they’re expecting a weakening of earnings? Or is it the result of HFT vigilantes causing enough movement on the market for some of the boys to get margin calls?
Although not being an insider with insider information I have a guess. I think the trigger was the reduction of the US GDP, which, coupled with the political situation, triggered of the lowering of the rating of the Treasuries by S&P. I think that caused the selling of equities by institutions holding T’s for reserves. The logic for that is you need more reserves, you can’t buy China treasuries, nobody except the ECB wants European T’s, so people are still moving to US T’s as the safest bet. And dollars. So selling Equities gives you dollars, and maybe you buy T’’s. And, as we know, US T’s have the highest reserve factor, next to the dollar (We did see some buying of the dollar the last few days, as well as T’s)
Thus entereth the HFT’s which can smell weakness or strength, and start their fishing, this time finding and reinforcing a weakening trend. Then it’s logical that we would see margin calls for heavily leveraged funds, which could explain yesterday's volumes.
What does the near-term future hold? I think it’s back to the usual low-volume, and I think we’ll see some more leverage bringing in money to the market, albeit slowly. There’s not real good reason to move forcefully into an investment position right now. So a trickle up makes sense to me.
We saw a double-top of the VXX at 36. The VXX at 36 might be a good place to start a small short. We could see that drop 10 points quite quickly.
But I think we'll go through this with time and price. Dastro's timeframe of a rally mid-month makes sense to me.
I've started to go long again, looking for those W formations and getting started.
Thanks Rock.
ReplyDeleteEye opening article- JP Morgan runs 26 states food stamp programs... a real growth industry!
http://dailybail.com/home/jp-morgans-food-stamp-monopoly-the-more-americans-that-fall.html
mike
Good Dylan Ratigan rant. Starts at about 3 minutes in.
ReplyDeletehttp://www.businessinsider.com/dylan-ratigan-rant-2011-8
Bloomberg said the last hour was all electronic trading and mostly short-covering. Had I had this information yesterday, I would have been out again last night rather than holding on to a few longs. Oh well.
ReplyDeleteI wonder where you get that information in a more timely manner......
French banks are falling apart.
ReplyDeleteItalian market tanking, off 1.5%, lowest level since 2009.
@Rock:
ReplyDeleteRE your 9:56
Did you mean "yesterday's last hour"?
Yes. Yes, that's what I meant.
@Rock, your 9:56. I think when you see the SPY go up $7.50 and Apple go up $18 in the last hour and a half of trading, you should assume it's the machines and short covering. The moves were too huge for any other explanation.
ReplyDelete@Greg
ReplyDeleteThanks. Added to my notes.
@ICan
ReplyDeleteSU is way oversold. I've kept just a tiny amount to trck its performance. All my oil herds, oih, oix.x, uso dig, xop, are all lower than -7% underperforming the S&P.
I think it's not time for oils yet.
However, it may be time for TIF. Ralph Lauren reported increasing and higher than expected earnings. TIF is off big. I'm starting a long position in TIF.
@Thor:
ReplyDeleteOuch indeed.
Considering earnings, we are currently at March 2009 lows.
I commented the other day that I didn't expect to see a 666, but it's interesting the market has (temporarily) stopped going down at almost the same P/E point as March 2009.
I forget who it was, maybe Mannwich, who commented when we hit the 666 point that maybe that was where the market was supposed to be priced, and everything above that was inflated. Looking back, I think that was a sage comment.
As we all know, earnings are up because expenses have been cut. Most of the fat's gone. Now, I think the stocks we will see rising will have higher than 10.5 PE forward looking outlooks.
I'd be interested to see P/E charts. All my charting softwares will chart Price, volume, and oscillators. None bring in frice/fundamentals choices.
It's too bad the earnings reports can be full of fraud.
2012 Spending Binge Watch: 10-Year Real Treasury Rate at Zero
ReplyDeleteRock - agree!
ReplyDeleteEmmie - I wonder if 0 percent interest is going to be enough this time around. . . . Hasn't helped Japan all that much has it?
Groupon Alters Accounting, Reports Loss
ReplyDeleteJust like old times...
France’s AAA Credit Affirmed by S&P, Moody’s
ReplyDeleteSocGen Denies Rumors About Credit as Shares Tumble
It really is 2008 again, isn't it?
@emmanuel117:
ReplyDeleteBloomberg said france is likely to have a downgrade on Monday from S&P. I believe they're guessing, but they had a Talking Head on who said that the ECB must remain consistent in their message to lower any effect.
I don't know the regulation requirements on reserves in the EC. But according to Bloomie, at the bond auction the bids from indirect bidders was up, and they said that indirect bidders was typically European banks.
That may be why European banks are taking the pipe.
BONY Mellon to lay off 3% of their workforce.
ReplyDeleteThey take our money then they lay off our people. Warms the cockles of your heart, doesn't it?
http://uk.reuters.com/article/2011/08/10/bnymellon-jobs-idUKN1E7790L020110810?feedType=RSS
(Mannwich isn't here so we need some stand-in support)
Nice selloff this afternoon. my end-of-day VXX hasn't turned me green today because I stayed long last night, but it certainly has helped.
ReplyDeleteVXX is almost 35. It reached 36. Might be time to start a short to hold for awhile.
-50. Wasn't expecting that this soon.
ReplyDeleteTLT reminds everyone who's the boss.
ReplyDeleteSo does this mean tomorrow we rebound?
ReplyDeleteMutt
Crisis of confidence.
ReplyDeleteOr market makers want QE3.
@Rock,
Thanks for the post and your thoughts. Keeping an eye on SU.
ICan
CANDO and TRP green.
ReplyDeleteICan
Been in meetings all morning. one word: OUCH
ReplyDeleteThor - OUCH, Exactly.
ReplyDeleteIt seems you would have just as good a chance of predicting the market direction, by flipping a coin.
This is crazy stuff.
Mutt
@Mutt:
ReplyDeletePimco's CEO doesn't believe the selling's done. He's looking at a 2-tailed coin.
I believe we'll see this daily chop around 1120 until Dastro's rally starts. I let TDAmeritrade draw the regression on the 60 minute chart. If that regression starts on July 25th, it looks like we will leave the downchannel around Aug 16th.
If we start the downchannel on July 22nd when the stochastics started noticing a downward trend, and we continue chopping around 1120, we'll exit the downchannel around Aug 18th.
So will see whether Pimco or TradersAnonymouse is correct. I feel comfortable that I have Dastro on my side.
Of course, that is my opinion, and I lose my opinion when the market opens. Until I see evidence of a trend, I won't use my money to call a bottom, and will continue to be out every night.
Oops, I meant ananymouse Traders....
ReplyDeletesorry sorry sorry sorry sorry......
Futures way up. Gotta love these snap back rallies.
ReplyDeleteI wonder if anyone other than machiens are trading this market.
@Thor;
ReplyDeleteMachines and me. I'm riding very short term trends because there's no M's or W's to trade and add. But I shouldn't complain, because last week was a banner week, and I don't want that to happen to all of us again.
Rock - You must have nerves of steel, or very tight stops :-)
ReplyDeleteI got 3 m's on the VXX with the right side lower. On the 3 minute chart. It may be that we see a pullback in the VXX today.
ReplyDeleteAgain, that would be a short term trade. My opinion, now lost, was that at 36 it might be a good place to start a short, so once again, I'm early. But opinion is gone while we trace through those M's on a nice, controlled lower and lower. My stops are at the top of the previous left-upper-point of the M.
One other stock that's on my radar is VMW again. It made a lot of money for my kids, and I'm looking at that one to re-enter in one of my investment accounts.
This comment has been removed by the author.
ReplyDeleteI meant to say XOM has hit the circuitbreakers. It's really odd a stock that big would see a swing that size.
ReplyDeleteI'd love to see the order placement for tha. It looks like the volume is low, and that to cover that volume, only 184K, the machines had to godown to 68.92. That means nobody wants to sell XOM right now, and they moved their stops low.
Maybe SU is the place to be, now, ICan.
Swiss Franc Falls as SNB Sees Possible Euro Peg
ReplyDeleteIs this even possible, given the size of the eurozone's currency flows? And do they really want to peg at the current price?
Emmie - The blind leading the blind. . . .
ReplyDelete@Emmanuel117:
ReplyDeleteI heard a Bloomberg vignette on this. It may be that the Eurozone wants to give the semblance of stability. They don't want S&P downgrades of France and Italy to move the combined strength of the Eurozone.
Whether it's possible or not, I think it is, because it simply means that the value of the Euro will on foreign exchanges, track the Franc.
However, a McDonalds burger price may change inside Eruope. If the real value falls, companies that sell products will simply adjust their prices, and negotiate longer-term contracts with a money-value sharing clause. We used to do that all the time. It protects both companies from wild money-value swings.
Europe Considers Ban on Short-Selling
ReplyDeleteThis sounds familiar...
+50?
ReplyDeleteLooking for a selloff the last hour.
ReplyDeleteIf you're interested in shorting, here are a few recommendations:
sfy cpx c beav mco adtn crzo glng netl cavm panl.
Probably not cavm or panl, their strength is too high right now. But maybe the others.
SPX 50% retracement: 1237.56
ReplyDeleteFuts 50% retracement: 1225.25
Guess I should have dumped some TLT at 108ish? Sigh. Was out having fun this morning golfing and my wife's cousin's wedding tomorrow. Someone's gotta do it, but it kills me to be away right now at such a momentous time.
ReplyDeleteToo much price movement to be healthy.
ReplyDeleteHello all. Rally on then?
ReplyDeletere rumors about France losing its AAA rating: this scenario is the one I've been fearing for some time now (not only because it's my country).
This article by Charlie Parker sums it up well (if a little bit exagerated, maybe):http://citywire.co.uk/wealth-manager/charlie-parker-the-euro-is-likely-to-fall-if-france-loses-aaa-rating/a515180
"Without its AAA-rating those nations able to act as a AAA backer for the fund are effectively reduced to Germany plus some minnows like Luxembourg."
Basically, if my place loses the AAA, the new fund for "stability" will be short on funding. I'm not even eager to see how the market would react to such an annoucement..
ReplyDeletere Emmy:Too much price movement to be healthy..
ReplyDeleteI for one am struggling with updating the analysis on the few stocks I follow. So many levels have been broken, with no pattern in sight yet.
@emmy: Ya think? This is ridiculous. Definitely no way to gain confidence of the Sheeple in the markets.
ReplyDeleteManny & Emmie, I was thinking the same thing. Too reminiscent of 2008 for my tastes.
ReplyDeleteWolfStreet - I hear you on not being able to find a pattern to get in on.
ReplyDeleteI figured things would be unsettled this week and probably well into next, but all the stocks I have been watching have no pattern that I feel comfortable with.
However the only constant that seems to be showing is - If the market is up in the morning, buy and sell at the close.
If the market opens down, short and sell at the close.
But I do not have the guts for that.
Mutt
Emmie - looks like they banned short selling in Europe after all. What do they know that we don't (already) know?
ReplyDeleteTraders want to hold long over the weekend? Friday's close red?
ReplyDeleteICan
Ican - definitely.
ReplyDeleteAnother way to beat inflation(without tight monetary policy) in EMs - let currency appreciate.
ReplyDeleteCNY!
China letting the Yuan rise! How far?
ICan
@ICan:
ReplyDeleteRight on!
futures down 12 on the S&P and 99 on the Dow.
ReplyDeleteThe selloff may have started early?
ReplyDeleteWe are right now at the crossover point of the downchannel on the 60 minute chart. The slope of the rise hs reached 0, after about a 45 degree up. The stochastics have hit and crossed the 80% (I use 10,4,3 right now because the volatility is so high)and the %K and %D have crossed.
ReplyDeleteWhat does that mean? I dunno.
One guess is that we'll see a selloff to around 104o, maybe ending around the 17th, That's the pure technical outlook from fitting inside the downchannel.
One guess is that we'll see a selloff to around 2380, the kinda-sorta low point of the downchannel. One could see volume-based support there.
One guess is that we'll rest here for a few 60 minute segments, then drip higher.
My guess is the third--I think after a rest, we'll drip higher. Why? When we see a few segments (maybe a couple of days) of horizontal price, we will see the funds start to buy, because they don't want to miss the next great rally if they sat out the one from March, 2008. Also I think the P/E of many stocks is good. also I think foreigners will think it's a good time to use dollars to buy the market so their stash of dollars has to go somewhere, and TLT may not be the best place for safety or return.
The SEC will investigate the possibility of insider trading on the US debt downgrade.
ReplyDeleteThe volume increase in the market before the downgrade was announced was noticable. I think we commented on that, somewhere.
It'll be interesting to see the results of this one. But I think without a whistleblower and pre-authorized wiretaps, there will be no roof.
http://www.bizjournals.com/albany/morning_call/2011/08/sec-to-investigate-sps-debt-downgrade.html
Make that "proof" not "roof".
ReplyDeleteNew keyboard.
@rock's 10:49
ReplyDeleteMake 2380 to 1120.
Damn keyboard.
Yea right Rock blame it on the keyboard - Next thing we know you will be blaming things on the damn dog :)
ReplyDeleteMangy Mutt
A little bit of a selloff here.
ReplyDeleteEmmanuel117 - Do you think people are selling off so as not to hold over the weekend and we will get a continued sell off into the close or do you think this is just natural trading?
ReplyDeleteThe market has seemed pretty quite today, but the market news has been kind of dreary.
Mutt
@Mutt
ReplyDeleteNatural trading. On the other hand, TLT has been up all day.
Reading this, I wonder if the negative wealth effect kicks in through the September economic data.
ReplyDelete@emmanuel117:
ReplyDeleteinteresting article. However, I never knew consumer sentiment determined or indicated a recession. I always thought that recession was a result of [gdp growth - inflation], unemployment, capacity utilization, household income, and business profits. On the other hand, consumer confidence is a product of MSM publications, government press releases, and other education factors. The wealth effect can be managed, and you could be made to think you're better off than you really are, significantly increasing your confidence. Like was done when you thought your house was worth 800K, but is really only worth 200K.
If we focus on the US only, we all know that the USGvt can adjust whether or not we're in a recession by adjusting the inflation numbers, GDP numbers, and unemployment numbers wherever they want.
However, they can't do that with corporate profits. When I read income statements from international companies, their US revenues (therefore US profits) are lower YOY.
They can't fudge the household income and unemployment numbers (which right now are government lies). Based on foodstamp utilization, I put a previous post on household income and how many more now fall below the level allowing food stamp program participation. I put together a post on the fallacy of the government's unemployment number (based on foodstamps again),
From those numbers and the recently adjusted GDP growth numbers, we never left recession.
It's obvious that the USGvt Plunger Team isn't managing numbers correctly, and is not managing the MSM headlines correctly, because that's what will put a slope on the consumer sentiment graph. Effective management of those data will set whether or not we're in recession (I mean not really, but what would be published at the NY Fed and Chicago Fed websites). Obama's team isn't as good as Bush's team was.
Problems in Washington are also compounding the lack of consumer confidence. Obama certainly didn't manage that well. But tha's just emotion, not recession.
The numbers (honest ones) show we are still in and have never left recession.
The answer to getting out of recession is to put better management in place, so our consumer confidence rises and we start spending again. So revenue statements show YOY growth from the US segment. So more employed people are required to make the widgits that we're spending money to buy.
The whole thing is based on consumer confidence, and the current administration has demonstrated the inability to constructively direct that in the positive direction.
And that is what's shown in the graphs of the article. See when Obama took office? See the average rise of consumer confidence?
Almost 0. That defines Obama's presidency so far. Almost 0.
@Emmanuel117:
ReplyDeleteAbout September numbers: regardless of consumer confidence, Sally will have to have her "Fast Fashion" and Johnny will have to have his Jocks Gear to go back to school. The ANF's, Gaps, etc will profit, and the Targets and Wallmarts will suffer. And again, for the holidays, the upscale names will profit. Same as last year.
I think people will want the wealth effect shown through their children, and will adjust spending habits accordingly.
And of course, TIF is a buying opportunity now for sure. And AAPL.
My useless son announced that he's going back to school for another useless degree and wants me to buy him an iPad. I couldn't stop laughing for 5 minutes. (he's the one with the Ferrari in the container somewhere over the Pacific right now).
I don't mean degrees are useless. But degrees that aren't used most certainly fall in that category.
I forgot to say that if my son were in middle school or high school or college, I'd have to buy him an iPood. Ipad. Whatever. So look for AAPL to get bigger in Sept. as well.
ReplyDeleteRock - Are you saying my house is NOT worth 800K huh, who woulda thunk it.
ReplyDeleteWell you can have it for cool 500k
Your 4:33 and 4:45 make great sense.
I have been watching TIF and have put some concideration into buying some, it would be kind of funny to make money off a store that I would never be allowed into.
Mutt
Rock - yes, I think middle school kids these days would require an iPad. Or a smart phone at the very least. If only for the map function so they can find their way home if they're ever lost.
ReplyDelete@Thor
ReplyDeleteTruer words were never spoken. Or written.
http://fivethirtyeight.blogs.nytimes.com/2011/08/12/g-o-p-house-majority-at-risk/#more-14713
ReplyDeleteVoila! :-)
Great article on the State of the US Markets.
ReplyDeletehttp://www.economist.com/node/21525935
Hit me baby one more time
Markets will take any help they can get
ADDICTS always crave one more hit. With markets slumping over the past two weeks investors hoped that the Federal Reserve would unveil a third round of “quantitative easing” (QE), the creation of money to bolster asset prices, on August 9th. The second round, announced in August last year, had triggered an equity rally in late 2010.
Addicts indeed. Junkies is more like it. Sociopath Junkies would be ideal :-)
And the money quote
ReplyDeleteSuch rates chime with the “ice age” thesis of Albert Edwards, a Société Générale strategist who has long predicted a Japanese-style crunch for the developed world. “Unsustainable private-sector debt mountains were transferred to the public sector in 2008 to prevent the adjustment to the Depression-era reality that the debt unwind would undoubtedly have brought about,” Mr Edwards wrote in his latest research note. “Yet, those debts are as unsustainable in the hands of the public sector as they were in the private.” Mr Edwards expects ten-year Treasury-bond yields to fall to 1.5% (they are currently 2.1%) before the “ice age” is over.
Nice Roubini interview in WSJ- Marx was right, capitalism will destroy itself.
ReplyDeletehttp://online.wsj.com/video/roubini-warns-of-global-recession-risk/C036B113-6D5F-4524-A5AF-DF2F3E2F8735.html
mike
Google to Acquire Motorola Mobility for $12.5 Billion
ReplyDeletePatent stocking.
Swiss Government, SNB in ‘Intense’ Talks, SonntagsZeitung Says
ReplyDeleteWow, they might actually do it.
Emmie - will be interesting to see if Google can turn Motorola around. They have no experience as a manufacturer.
ReplyDelete@Thor:
ReplyDeleteI don't think Google wants anything from Motorola except the patent package. Even if Motorola came up with a line of Androids, they are so far behind the curve, it would take an APPL miracle to revive them.
rock's container has arrived. Of course, I was expecting the usual Customs delay, but for some reason, Customs waived all inspections. Even the Ferrari made it with absolutely no impound, no fee, no tax, no smog inspection requirement, no crash-test report.
I wonder how that happened......
so tomorrow,I won't be here with you for TurnAround Tuesday.
Looking at the chart, we've clearly broken out of the downtrend established since July 25. If the pundits are right, we should see at least one retracement maybe back to 1100.
But my opinion is that the market, after maybe one turn-around tuesday head fake, will continue upward. Really fast.
I could be my thoughts about a Greek default should be applied to this, that the Braxton Hick will carry us back to 1340 and beyond.
So what is this, are the same people getting back in, or is this a different dcrowd? I'd love to be on the NASDAQ feed to see which trading houses are moving the market.
In the meantine, when I'm not unloading the container, I'll lose my opinion and play the tape. Looks like enetgy stocks are making great moves.
today, I had a very very very good day. I hope y'all did as well.
I may be late with my post. There's quite a lot of work unpacking. If iss OK with you, I'd like to steal Thorsday. That would give Dastro a couple of days, me a couple of days and you could do the weekend thread thing which seems to work quite well.
Damn keyboard.
ReplyDelete