How 'bout that stock market?
- Thread starter Ski_Banker
- Start date
...good reading from a buddy that sent this to me...
</H2><!-- Begin .post -->Friday Financial Roof Fire
Jobs jobs and more jobs!
Well, not quite...
The blowups in Hedgistan are now a daily event. Here's the latest; a lockup but not an explosion yet....
"Union Investment Asset Mangement has temporarily closed its ABS-Invest fund for institutional investors and halted redemptions, said spokesman Markus Temme."Is that good?
Nonfarm payrolls up 92,000 in July, unemployment basically flat at 4.6%, earnings up 0.3%.
As ADP predicted, this number is WAY LIGHT. Construction and manufacturing both down (duh). The futures did not like it a bit, collapsing by nearly half a percent instantly, but then recovered some. The dollar shit the bed .vs. the Yen immediately as well; that's potentially more important and its not the piece that people are watching.
Oh, Countrywide? The Option MMs listed five dollar options today on them. FIVEs! Including for the front month - August - which expire in two weeks! If you want to play on a raw bankruptcy in the next two weeks on them, now you can.
Amazing.
And the credit markets? They're thinking that might be a good bet! Credit spreads went apeshit the last two days on Countrywide's debt, widening by nearly 100 basis points today alone! That, by the way, is a roughly thirty percent increase in one day. Does someone smell something rotten seeping out from under the door?
Nor is it just them. Look at IndyMac Bank and WaMu for more examples.
Essentially the story today is "if you write mortgages, you're getting roached." To that I say - its about damn time. These "exotic" products have gotten way, way too common the last few years and it is my sincere hope that when the risks are exposed those who wrote 'em are forced to eat them.
Last night in response to IndyMac posting a letter on their web page basically bleating for a government bailout I penned a letter to Chris Dodd (Chairman of the Banking Committee) asking that he do exactly nothing. Click the link to read it, then reword as you deem appropriate and, if you are of like mind, fax him something similar. The markets must be allowed to punish those who have inappropriately taken risk!
ISM Non-manufacturing fell to 55.8, much worse than the expected 59. More evidence that we're headed for a recession as the economy cools!
The equity markets are finally waking up to the truth about "Subprime" (that is, its not about subprime at all; its about the real estate bubble created by our former Fed Chairman), and its not liking it a BIT. In the days and weeks to come I predict we'll be talking about this:
Of course you won't hear that from our mainstream media idiots - at least not for a while. But someone will eventually write a book or three about this, and who's really responsible for the nuclear blast and knock-on effects that are certain to roil our financial markets - and the economy - in the coming months.
You have to love the talking heads today - they're all over CNBS talking about how "electronic trading makes it all so volatile and makes it easy to explode." Yeah, right. What makes for blasts in the financial markets is raw, intentional mispriced risk - in short when GREED - or "animal spirits" if you wish - overrides good common sense.
Does electronic trading make it easier to "pile in"? Sure. But electronic trading actually reduces the risk of market dislocations - there is nothing worse than a market in which you cannot sell at any price because the volume overwhelms the system. THAT is the kind of thing that REALLY begets trouble, and electronic trading reduces that risk.
The credit squeeze is getting worse and the street is starting to wake up. Try this:
"But the fallout could get worse. Some experts say the debt crunch could squeeze underperforming companies that have, until now, been able to finance their way out of trouble - and trigger a wave of corporate bankruptcies.Naw, you think? I do.
"There have been a lot of operational problems and other problems within some companies that have been masked by liquidity in the marketplace and the ability to refinance their debt," said Jeff Marwil, a partner in Winston and Strawn's restructuring and insolvency practice in Chicago."
But boy are the talking heads trying to dismiss it. All of it. Anyone remember how CNBS for months talked about the "LBO PUT" under the equity market? Well guess what - its forking GONE now guys! Now add to this the risk of some REAL bankruptcies (not to mention that they seem to actually be happening!)
So how come with that "PUT" gone you think its unreasonable that some of that price appreciation comes back off? And let's be straight here - the market has essentially a 30% premium in it - even now with the "correction" - from that PUT!
Decelerating earnings growth, a slowing consumer, the housing market is bad and going to get a lot worse and people are bitching about a 5% correction being "overdone"? YOU ARE NUTS CNBS! My minimum downside target on this market is 20% and a 30% retracement from the 2003 lows is more likely! IF those levels don't hold - and they may not - then we are gunning for those '03 numbers!
Bear Stearns tried to soothe the markets about their exposure (and the financials in general) and instead threw gasoline, propane, butane and diesel fuel on a roaring fire - and I think they also parked a truckload full of ANFO next to the blaze. There's a good chance they have lit the fuse with that call - we shall see, but the market didn't like it a bit up front and it turned what was a fairly quiet day into a total rout going into the close.
Heh Bear Stearns (and the Credit Markets) - DAMN IT, YOUR ROOF IS ON FIRE!
How many times do I need to tell you before you figure it out!
Cramer went nuts today on the air! You have to see this link....
http://www.cnbc.com/id/15840232?video=452808336
Amazing stuff. I swear the guy's going to blow an aneurysm right on National TV!
As for what the mortgage market is going to look like for the next few years, well, its basically what it looks like now:
"Some nontraditional mortgage loans have vanished from lenders' menus, while others have gotten more expensive during an eventful week for those in the mortgage industry.And it won't. Agency paper will remain available, if you have 20% down, a 36% back end ratio (DTI) and want a conventional mortgage (no more than 400kish.) If you need a Jumbo, it'll be a point higher (as it was in the 80s and early 90s.)
But a looming credit crunch for riskier mortgage debt has not yet spilled over to traditional, creditworthy borrowers, who can still obtain conventional financing at market rates, mortgage lenders say."
If you want to get cute with an interest-only loan, option-arm or other means of committing financial suicide via lender extortion so that Wall Street can pay out a few billion in bonuses and mortgage house CEOs can cash half a billion in options over 2 years, sorry, that window has been closed.
THAT IS A WINDOW THAT SHOULD HAVE NEVER BEEN OPENED, AND THE PEOPLE WHO DID OPEN IT SHOULD BE IN FEDERAL PRISON FOR THEFT BY CONVERSION FROM THE AMERICAN PUBLIC, NOT WHINING TO UNCLE BEN AND DEMANDING FED RATE CUTS (which wouldn't help anyway!)
EAT THIS mortgage company CEOs and Wall Street spinmeisters - The INVESTOR, including foreign governments like CHINA, Pension funds, Endowments and others have woken up to the FACT that your claimed "AAA" paper IS NOT AND NEVER WAS. They have WOKEN UP by being exposed to BILLIONS (that's with a capital "B") in REAL losses and they're NOT going to get assraped a second time by you guys. THE GAME IS OVER and Cramer ought to tell his "buddies" to take a walk off the parapet on one of the nice 40 floor building roofs on Wall Street when they call him next time!
Ok, technicals, and I'm sure you want to see 'em. Here's the charts and the reality:
Ouch. But it gets much, much worse. Here are the transports:
Now this sucks. Severely. For Dow theorists, this is "game over." You've got a violation of support confirmed by the Transports. For The Bulls, this is serious, it is severe, and it is undeniable.
Now here's the SPX:
There ain't a thing to like here. Next stop is the February lows. All the "normal" Fib retracements and support levels have been broken with conviction. No ifs, ands, buts or maybes. Now the February lows loom below us, and if they don't hold...... well..... here's what we're facing:
Ok, here's the deal guys. Assuming the decline does not stop right here, the next place we target is the February lows.
That is an extremely serious support level because it is suspiciously near the long-term trendline!
If that level violates CONVINCINGLY then WE ARE NO LONGER IN A LONG-TERM BULL MARKET!
We then have a number of support levels below, including a strong support level around 1165, which is 50% retracement plus a late 05 support, and 1072 plus 958 below that, but we are also eyeing 768! Aieeeee!
Now we got one more critical support matter to attend to. The Nasdaq Composite violated second-level support today on a closing basis (a new signal not seen before) BUT BUT BUT - and this is important - the NDX (Nasdaq 100 and QQQQs) DID NOT. It DID, however, break the short-term support from earlier this week. 1900 is the critical level to watch there, with 1880ish below that.
So this is what we got, as I see it here:
In short this sort of action illustrates why last weekend I said that there was much risk here for both Bulls and Bears, and that it is nearly impossible to know what the right "count" or right "level" is to pull the trigger on shorts or longs. This is a market where defined-risk plays are the safest but they're getting expensive - the options MM guys are wising up FAST to what may be on deck, as was seen in the lenders this week. Expect this to spread to index options FAST if a plunge starts to develop.
- There are people calling for a "corrective rally" in the indices to retrace part of the first move downward, followed by a roller-coaster plunge. Many have said they expected this to be a common "wave" sort of retracement. Today's price action shows why expecting a 50% or 61.8% retracement on a "Elliott Wave" basis can rape you raw - if you traded for a long retracement the other day you got murdered this afternoon. NEWS OVERRIDES TECHNICALS! In fact we did get a fib retracement, but it was the 23.6% level early in the week - a level which is rarely seen.
- The risk is quite high that we are setting up for a huge plunge Monday. At this point this is not a matter of Elliott Waves; it is a matter of news flow, the credit markets and especially what happens to the Yen Sunday night in the FX market when it re-opens. If the Yen goes under 118 into the 117s (or worse, below 117!) the risk goes up precipitously of forced-unwinding of Carry Trades. THAT IS THE FUEL FOR A CRASH MONEY MORNING. WATCH THE FX AND CREDIT MARKETS, AND BLOOMBERG BOTH SUNDAY NIGHT AND THE EARLY MONDAY FOR HINTS!
- An alternative scenario and one you must guard against if you are short anywhere in this market - that is a SURPRISE Bernanke Fed RATE CUT. I rate the odds of this extremely low but you cannot ever turn your back on risk in the market guys! As such if you don't have protective stops over all your shorts in the market, go out there RIGHT NOW and put them on. IF - and I say IF - because I think there is less than a one percent chance this happens - Bernanke was to cut rates Monday (or Tuesday) we would get a violent whipsaw and I cannot predict which way it would go. Odds are it would fuel a market collapse as it would all but be an admission of a recession but there is the possibility that the market could shoot up 500 points in minutes. You simply must protect against being caught offsides!
As I see it here attempting to play for a bounce going into the close today was a bad bet. But - if we open up Monday and regain the 200 on the SPX and Transports, you must consider stepping aside until this pattern resolves.
However, odds now favor the scenario of the corrective rally being far weaker than anyone (including me!) had looked for last weekend, and for it being over as of today.
This means that we are now at serious risk of a major plunge Monday or Tuesday, and if we don't get it Monday then all eyes will be on The Fed.
If you think the risk was high last Friday, its off the charts now.
Good luck and have a great weekend!
Haha good read and good tips, this is why I left the mortgage company I worked for. I saw the way business was being run, I saw the greed in the eyes of the owner. Boob job for his wife written as a business expense, wife collecting a paycheck for "consulting work" (AKA shopping). All the lies about we need to tighten our belts yet the executive staff's pay was never touched or reduced. No wonder the company eventually went poof, its because money was still flowing out the window. But once again, unless the government actually steps in to go after these guys, nothing is going to happen. Many people laid off, economy going in the tank, company owner sitting nicely in a multi million dollar home (one of many homes). Sound fair?? Didn't think so. Such is the state of Corporate America. Dare I bring up the former CEO of Home Depot who made hundreds of millions while the company stock value went down? As far as I am concerned Executives need to be held responsible for the company performance, PERIOD. No parachutes, no excuses, if you cant get the job done, you get nothing because you have failed.
Ski_Banker
Suspended
I wouldn't do that Steve, unless for a very short term trade. Some Wall St banks just started announcing layoffs last week.
It is short term. IMO the only long term one should habe is a fund:wink: I am looking for 60-65. Sub prime is less than 5% of LEH I think when the dust settles LEH will be ok. I owe it to LEH for all the $ they made me on SIRI back in the day when they diluted SIRI and sent it sub $1.
As long as you keep it short term!
I think the calm before the storm is coming to an end...
The big money on wall street has been quietly heading for the exits over the past month. The dumb money has been duped into thinking they're buying a bargain.
1. Fed won't do a damn thing. Take a look back at the depression in '28... the fed actually tightened credit and raised rates going into the depression. Keep in mind the fed is more a private bank than anything here... You won't hear that on CNBC, but do a little digging on the institution. If its not good for their bottom line, they won't do it.
2. Dow will be at/around 10k by the end of December. This isn't doomsday irationalism, but rather a prudent, rational, and logical look at the big picture. This storm has been brewing for years now, prepare for it. This isn't a pullback, its not a correction, and its certainly not a dip. Welcome the bear market; its been awhile, but its back and about to prove it with fury. I think we'll see at least a 1000 points off the Dow by the end of September.
Disclaimer... I'm nothing but a futures daytrader, i'm not a financial analyst or anything of the sort. That being said, do you actually think your financial analyst (aka salesperson) would ever tell you its a good time to get out of the market?
If you want out (and I would STRONGLY advise that) do it yesterday! The slew of econ reports due out this week are going to start rocking the boat, and when the FOMC meets in a week and keeps rates the same its gonna be the catalyst in the powder keg.
Cheers, and good luck in the coming weeks. I think we're all gonna need it!
I think the calm before the storm is coming to an end...
The big money on wall street has been quietly heading for the exits over the past month. The dumb money has been duped into thinking they're buying a bargain.
1. Fed won't do a damn thing. Take a look back at the depression in '28... the fed actually tightened credit and raised rates going into the depression. Keep in mind the fed is more a private bank than anything here... You won't hear that on CNBC, but do a little digging on the institution. If its not good for their bottom line, they won't do it.
2. Dow will be at/around 10k by the end of December. This isn't doomsday irationalism, but rather a prudent, rational, and logical look at the big picture. This storm has been brewing for years now, prepare for it. This isn't a pullback, its not a correction, and its certainly not a dip. Welcome the bear market; its been awhile, but its back and about to prove it with fury. I think we'll see at least a 1000 points off the Dow by the end of September.
Disclaimer... I'm nothing but a futures daytrader, i'm not a financial analyst or anything of the sort. That being said, do you actually think your financial analyst (aka salesperson) would ever tell you its a good time to get out of the market?
If you want out (and I would STRONGLY advise that) do it yesterday! The slew of econ reports due out this week are going to start rocking the boat, and when the FOMC meets in a week and keeps rates the same its gonna be the catalyst in the powder keg.
Cheers, and good luck in the coming weeks. I think we're all gonna need it!
Wow that was depressing. BYW you said
A good salesperson should be putting you in postion no matter what way the market goes. It's never about getting out of the market it's about which way to trade it.
Very good point Steve! The sad realization is that far too often that isn't the case. Take a look at the past two week of this market bounce. Fundamentally what is happening is that institutional money is bailing ship, but they need the retail investors to step in and buy their positions, so they are artificially inflating the market by propping it up allowing the smart money to cycle out and be replaced with small investors in their positions.
This largely being fueled by all of the financial advisor's saying "buy buy buy!" to everyone. Take this article for example: http://www.marketwatch.com/news/sto...x?guid={228B4FA6-B3D1-450F-8404-86832B31BE34}
Stuff like that just boils my blood. How people can claim to be a financial advisor and provide information to clients like that in the current market is downright criminal in my humble opinion.
Anyway, thanks for the intelligent discussion. Hopefully we can all learn something here.
Cheers!
This largely being fueled by all of the financial advisor's saying "buy buy buy!" to everyone. Take this article for example: http://www.marketwatch.com/news/sto...x?guid={228B4FA6-B3D1-450F-8404-86832B31BE34}
Stuff like that just boils my blood. How people can claim to be a financial advisor and provide information to clients like that in the current market is downright criminal in my humble opinion.
Anyway, thanks for the intelligent discussion. Hopefully we can all learn something here.
Cheers!
Very good point Steve! The sad realization is that far too often that isn't the case. Take a look at the past two week of this market bounce. Fundamentally what is happening is that institutional money is bailing ship, but they need the retail investors to step in and buy their positions, so they are artificially inflating the market by propping it up allowing the smart money to cycle out and be replaced with small investors in their positions.
This largely being fueled by all of the financial advisor's saying "buy buy buy!" to everyone. Take this article for example: http://www.marketwatch.com/news/sto...x?guid={228B4FA6-B3D1-450F-8404-86832B31BE34}
Stuff like that just boils my blood. How people can claim to be a financial advisor and provide information to clients like that in the current market is downright criminal in my humble opinion.
Anyway, thanks for the intelligent discussion. Hopefully we can all learn something here.
Cheers!
So are you short right now and if so are you using puts? Are you long with options for downside protection? Are you just out altogether?
Do you think institutional money is playing the downside yet? I can't imagine smart money not being in play on the housing stocks downturn. smart money would have been there 6 months ago in LEAPS.
Look at the activity on the 2010 20's http://finance.yahoo.com/q/op?s=TOL&m=2010-01 on both sides. All the builders charts look the same.
My long-term investments are in a full cash position and have been since the end of July.
I'm unwilling at this point to hold any positions overnight because quite frankly things are way too volatile right now. Take option expiry this month. The Fed came in and did its little smoke-and-mirrors- dance with their discount rate on Option X Friday. Put/Call fluctuation's had to have been upwards of 500% percent that day. And frankly, thousands of options traders lost all of their money and more that Friday. So right now, all I do is my intra-day trades with the S&P 500.
Institutional money playing the downside? You bet! That is one of the great things about being a daytrader. You really get a feeling for the eb and flow of the market and more importantly the institutional buy/sell programs that are blatantly shoved into the charts once or twice a day. For the past 6 months there was a constant bid under the market, everything got bought, and the norm was buy programs all the time (short little 2-5 minute upbursts of 3-8 points).
In the past month there has been a violent shift leaning towards sell programs. The invincible bid is no longer under the market and when programs fire off it is almost always to the downside. So yea, I KNOW institutions are playing the downside. Its so blatant its hard to miss!
As far as TOL goes... their chart is aggressively bearish. If there is activity on both sides it is simply the educated clashing against the "its down a lot so its a really great bargain" investors.
Cheers!
I'm unwilling at this point to hold any positions overnight because quite frankly things are way too volatile right now. Take option expiry this month. The Fed came in and did its little smoke-and-mirrors- dance with their discount rate on Option X Friday. Put/Call fluctuation's had to have been upwards of 500% percent that day. And frankly, thousands of options traders lost all of their money and more that Friday. So right now, all I do is my intra-day trades with the S&P 500.
Institutional money playing the downside? You bet! That is one of the great things about being a daytrader. You really get a feeling for the eb and flow of the market and more importantly the institutional buy/sell programs that are blatantly shoved into the charts once or twice a day. For the past 6 months there was a constant bid under the market, everything got bought, and the norm was buy programs all the time (short little 2-5 minute upbursts of 3-8 points).
In the past month there has been a violent shift leaning towards sell programs. The invincible bid is no longer under the market and when programs fire off it is almost always to the downside. So yea, I KNOW institutions are playing the downside. Its so blatant its hard to miss!
As far as TOL goes... their chart is aggressively bearish. If there is activity on both sides it is simply the educated clashing against the "its down a lot so its a really great bargain" investors.
Cheers!
I am seeing this too. Gaps in charts so big you could drive a truck through them.
Always seems to trigger on the downside too. Are you watching anything in particular?
Well if its true that all gaps fill sooner or later, i'd say it doesn't look good! 
I'm not watching anything in particular. If I was looking to buy it would only be fundamentally sound companies. Quality names you couldn't imagine not being around twenty years from now. Also, look into getting into industries that share an inverse relationship with market downturns. If there is going to be growth in private companies, lean on the energy sector!
But all of this is subject to what unfolds this month. Plainly put, its a bad time to initiate positions in most everything (outside maybe an inverse etf, etc). I've found when you see something like this start to play out the sidelines aren't a bad place to be. You may not be in the game, but theres Gatorade and you won't have to be carried off the field by emt's!
I'm not watching anything in particular. If I was looking to buy it would only be fundamentally sound companies. Quality names you couldn't imagine not being around twenty years from now. Also, look into getting into industries that share an inverse relationship with market downturns. If there is going to be growth in private companies, lean on the energy sector!
But all of this is subject to what unfolds this month. Plainly put, its a bad time to initiate positions in most everything (outside maybe an inverse etf, etc). I've found when you see something like this start to play out the sidelines aren't a bad place to be. You may not be in the game, but theres Gatorade and you won't have to be carried off the field by emt's!
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I am not buying all this doom and gloom.
Anyone with their head in the game knew the housing market
would correct / tank. I was shocked it ran as long as it did.
(Hello, 7-10 year cycle)
Also who didn't see the "credit/debt bubble" building over the past
several years? No mystery there...........
I am just going to ride it out. The pattern of selling in May-July
and buying back in Sep-Oct went out the window back in 2000.
Prior to that though, it was easy money.
Just my 2............
Anyone with their head in the game knew the housing market
would correct / tank. I was shocked it ran as long as it did.
(Hello, 7-10 year cycle)
Also who didn't see the "credit/debt bubble" building over the past
several years? No mystery there...........
I am just going to ride it out. The pattern of selling in May-July
and buying back in Sep-Oct went out the window back in 2000.
Prior to that though, it was easy money.
Just my 2............
- Joined
- 1 September 2001
- Messages
- 4,123
Good point. I would think the major players have taken into account the interest rates rising MONTHS ago. I would think the market has already responded to it???
I know nothing about investing though, so someone correct me.
I read that a few days ago, and if I remember right, the market has to drop A LOT for them to make money. Hurricanes aren't enough. It would have to be a crash or a terrorist strike.
That said, I think I read the same thing happened right before 9/11???
I stick to the forex, 5min charts. Did all the other shit for 7 years now and love the forex, lots of action 50k in a few hours win / lose lol I do hate the damn hours EST 7:00am and 2:30 am are the money times. Trade the trend, 3 EMA's 1 MA when the 50 SMA gets 20% or grater slope trade inside the other 2 ma's. Works great keeps you outa the slop
I do hate the damn hours EST 7:00am and 2:30 am are the money times. Trade the trend, 3 EMA's 1 MA when the 50 SMA gets 20% or grater slope trade inside the other 2 ma's. Works great keeps you outa the slop I stick to the forex, 5min charts. Did all the other shit for 7 years now and love the forex, lots of action 50k in a few hours win / lose lol
I slept in, got up and traded 'cable' today for the first time... I was bored, and I "had the day off" but with the markets closed I wanted to occupy myself. Defiantly a different beast from the ES i'm used too... very whipsaw-ish action!
Got favorite pairs?
These were my plays, actually went 4/4 today which I was surprised by. Had to be quick to take pips... wasn't really used to that, but fairly predictable action I suppose. Were you in anywhere in here? I think i ended up +28 pips... is that good? I'm oblivious to the standards forex traders associate with good and bad. The whole pip spread commission thing takes a bit of getting used to.
Cheers!
I slept in, got up and traded 'cable' today for the first time... I was bored, and I "had the day off" but with the markets closed I wanted to occupy myself. Defiantly a different beast from the ES i'm used too... very whipsaw-ish action!
Got favorite pairs?
These were my plays, actually went 4/4 today which I was surprised by. Had to be quick to take pips... wasn't really used to that, but fairly predictable action I suppose. Were you in anywhere in here? I think i ended up +28 pips... is that good? I'm oblivious to the standards forex traders associate with good and bad. The whole pip spread commission thing takes a bit of getting used to.
Cheers!
I like the EUR and JPN the best, JPN can have 100 point bars but it's a good time. Also the spread thing sucks try trading 100 contracts lol I dont even think about the 3-5% I give up per trade. I also shoot for about 300 points a month and my risk is 6-8 points on the eur target is 15-20ish, jpn is about 12-15 points target is 30ish. It's good but I play the pullbacks in the trend. Most days go 100 points one way and get in the trade once it pulls back between the 10 and 21 EMA on the 5min and the slope of the 50MA is 20% or greater. Simple system that works.
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