Market Resiliency
By Barry Ritholtz - July 6th, 2009, 5:00PM
US Futures looked like hell this morning, after Global markets got slapped around last night.
And yet the indices scratched out some gains. Even the Nasdaq — the only market in the US up for the year — cut its early losses in half.
Trading volume was on the light side, so go easy reading too much into it.
Regardless, the market has been resilient in the face of bad data, with everyone and their brother expecting a major pullback. Lots of institutions remain under-invested.
I wonder just how washed out sellers became in the March lows . . .
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Chart via WSJ
July 6th, 2009 at 5:16 pm
So who is pushing things higher? Is some one(or group) goosing the market?
July 6th, 2009 at 5:29 pm
Looks like the same old PPT to me. Been goin’ on for months.
July 6th, 2009 at 5:35 pm
here’s a headline from Yahoo Tech Ticker that fits in nicely with the topic-
“Bad Timing: ‘Dumb’ Money Chasing Gains in Riskier Assets — Again”
or- how about this headline-
“US STOCKS SNAPSHOT-Dow turns positive on bargain hunting”
don’t let the P/E’s bother you
July 6th, 2009 at 6:06 pm
Don’t bet major institutions are under invested………that’s old school!
July 6th, 2009 at 6:07 pm
Thing is, when you go from S&P 1550 to 666, you’re gonna get a bounce, matter of fact a big bounce…
Interestingly, on March 23, 2009, S&P closed at 823. That means of the total gain since the low 898-666, = 232, 157 points of that gain were in the first 10 trading days, and the past ~70 trading days we are up 75 points on the S&P…That is fascinating to me…
In other words we had a super dynamic bounce and we’ve been more or less consolidating ever since…
The key feature of this equity market right now is the fact that we are in range b/w 880 and 950…
We keep holding… The move should be substantial either way and can be played with the least risk after price breaks out either up or down out of the range and then confirms…
Playing this in the 880-950 range or on a breakout w/o confirmation is likely to lead to losses b/c this is the kind of market that is frought with false breakouts and seems determined to part people from their money…
Just read Mandelbrot and Hudson, (Mis)behavior of Markets, suggest people do the same…
Also, am about 2/3 through Bailout Nation, really like the layout and the content is downright Ritholtzian…
BR – all bailouts occur after we go off gold standard….
July 6th, 2009 at 6:50 pm
The intermediate trend is still decidedly up, and sentiment is only mildly bearish if that. Those who are betting on the next big sell off might be disappointed.
July 6th, 2009 at 6:55 pm
Whitney now bullish on banks
http://www.forbes.com/2009/07/06/mortgage-modifications-whitney-markets-economy-banking-housing.html?partner=yahootix
July 6th, 2009 at 7:01 pm
Just read Mandelbrot and Hudson, (Mis)behavior of Markets, suggest people do the same…
You’re onto something there. Nassim Taleb’s summary of it: “The deepest and most realistic finance book ever published.”
FWIW, I humbly agree.
July 6th, 2009 at 7:30 pm
P.S. As to market directions, I’m also in agreement with other commentors here that the foundational issue here is “are we in a deflationary cycle or an inflationary one?”
John Mauldin’s latest (today’s) “Out of the Box” comments come from Niels Jensen, of Absolute Return Partners, in London. He, too, sees this issue as “Make Sure You Get This One Right” — in fact, that’s the title of the article.
Brief excerpt: “The point I really want to make is that the inflation v. deflation story is the single biggest investment story right now and being on the right side of that trade will effectively secure your investment returns for years to come.”
With plenty of humility, I agree with this as well. Suggest reading the full article via Mauldin’s free service in order to derive its full benefit, but I will say that if you are an inflationist you will not take courage from its observations/arguments.
July 6th, 2009 at 7:45 pm
Those who read Zero Hedge know the reason.
July 6th, 2009 at 8:16 pm
Interesting, I wonder what we will be saying on July 6th 2010…I’m with Tom K, I wouldn’t put to much on the next “big” sell off..
July 6th, 2009 at 8:34 pm
Come on Barry…
A 2nd GRADER could figure out the technicals of this market…
1. The trendline from the Oct ‘07 highs intercepting the 5/19/08 high (the week that BHO won the North Carolina primary and the country said “oh fuck”, we’re gonna get Obama, not Hilary), would give you TECHNICAL room to call the market up to 1182 TOMORROW if it wanted to…
2. Then, on the other side, you have FUNDAMENTALS not bearing out much more than 33x earnings using the last 3 quarters as a basis…(by my standard 14x calculations, that takes you to 462 on the S&P)…900 exists ONLY because 21.5x hoped for “operating earnings” is not undue by Mega Lotto standards…
3. So the market is willing put a $42 handle on earnings based on HOPE for a recovery, the THOUGHT that operating earnings are going to be better due to inventory re-stocking, payroll cuts, and HOPE that someone, somewhere is going to find a mall that’s not boarded up on their GPS navigation system)…
4. They were able to play the game (#3 above) during the whole 2nd quarter due to the GS put under the market (b4 they paid back the TARP)…All hopes about to be dashed soon with a RUSH TO GOVVIES…
5. But now EARNINGS start to come out…After Alcoa, the banks will report first. Since it is no longer necessary for them to report anything REAL, I’m sure they’ll troll out the ‘better than expected” jargon one more time for fun…
6. The rest is just speculation, but from a TECHNICAL standpoint, the S&P hit 956 then pulled back to 889…It then did a PERFECT .618 retrace back to 931 and promptly SOLD OFF like a furniture store on a month end sale…
7. Now you have everybody’s favorite term TRADING RANGE…So you have room up to about 912, and room down to 880…AND…you have about 2 weeks for that game to play itself out before the latest wedge collapses…
I’m taking the UNDER…
But I bought crude today…Looky at me!…I expect a crude a smidge lower tomorrow, but then a bounce for just a couple of days…Gimme 8% on that trade and I’m OUTTA THERE as well…
High for the year has been put in (956)…
Next stop lower? 572-576 range…
Then we can dick around with the 1050 – 575 “trading range” for 2010 while they debate “Stimulus Package 2″ and get their asses re-elected come middies…
July 6th, 2009 at 8:49 pm
It didn’t look so resilient last Friday.
Although the intraday chart seems to indicate otherwise, I think the “resiliency” today was largely due to the ISM non-mfg number.
The market is “resilient” (i.e., directionless) because the recent economic news has been mixed following those earlier “green shoots”.
I think it will be a double-dip like ‘80 / ‘81-’82 followed by a zombie economy for several years.
July 6th, 2009 at 8:53 pm
Friday should be Thursday above.
July 6th, 2009 at 9:10 pm
…BTW
So if one happens to be a FIRST GRADER (instead of a 2ND GRADER), I’ll dumb this down 4u…
1182 + 462 =1,644/2 = 822
That would represent the technical midpoint of the TECHNICAL EXUBERANCE vs. the FUNDAMENTAL REALITY (although I’m sure Steve Barry could lower that barrier slightly – and rightfully so)…
…and remember, that is a DECLINING SLOPE (so unless someone actually SELLS something in this economy in the next 6 months, and the other factors remain constant, we’re looking at a midrange of 767 by January 1st, 2010)…Do your own math…
I’ve said it before (about 20 times already)…that we’re done BUYING DIPS…We’ve moved onto SELLING RIPS…
I’ve used 826 as my Q3 midway point…Above that is a sell (but wait for the 910 test first – should come b4 opex week), below that is a potential buy (but even at that point, why not just wait for 750…after all, 750-825 would be a 10% move…hardly worth the effort otherwise)…
I’m happy to hang in TLT for the rest of the year (with casual ’shorts’ on SPY puts)…Curious, because my largest NET WORTH position is in gold – although it is NEVER something I trade because I own the bullion…
I’m just WEIRD…I know…
July 6th, 2009 at 9:12 pm
Hmm…
My “part 2″ of the (8:34) post keeps getting eaten…
Maybe it’s too close to someone’s book…
July 6th, 2009 at 9:13 pm
KJ Foehr- Agree. It looked pretty scary last Friday with decent volume. It was a nice little bounce off the lows, but volume was low on the day.
Also, agree with BR here that it “seems” like a lot of people are expecting a pullback. I wonder if that’s just folks doing some pre-rationalization, preparing for the inevitable situation when their longs starts losing money. Markets rarely do what everyone expects. Based on the conversations I had this weekend, NOBODY I talked to thought we would revisit the lows again “cuz the recession would be over this year.” I would suggest that a move to the lows would be as surprising an outcome as setting new new highs from here, perhaps more so.
July 6th, 2009 at 9:14 pm
Just thought I would pass along some news of green shoots today. (You’re welcome, F411.)
My employer told me today that FedEx shipments are up; not much, but up. And a producer of white dye is also reporting that their sales are up slightly. I suggested that this just might be summertime activity and might not be lasting (but, I’m keeping an open mind).
July 6th, 2009 at 9:15 pm
@Andy T
Glad to see you back AT…
I welcome a completely objective viewpoint to my LUNATIC rantings…
July 6th, 2009 at 9:17 pm
Also, would say that if you thought “futures looked like hell” this morning, then perhaps we’re forgetting what really hellish futures can look like….it was only down 11 pts and was essentially matching the 6/23 lows….”‘Twas merely a scratch…”
July 6th, 2009 at 9:19 pm
@Okie Lawyer
That’s the FED-EX shipments of the “white out” that they’re sending out companies to try and make $1,750.00 payroll checks into $750 payroll checks…
…it might WORK!
July 6th, 2009 at 9:23 pm
@Andy T
I’m CERTAIN you’re the most serious one I know in the known universe on this subject on this one…
But if you please, go back to this post I made earlier…
http://www.ritholtz.com/blog/2009/07/deeply-oversold-bounce-not-green-shoots/#comment-190215
Whadda think about those long term “gap avoidances” (as I’d term them)?…
July 6th, 2009 at 9:41 pm
cvienne: because of the way my charting program computes the daily open on the SP500, I really don’t get many gaps on my chart. Looking at the Nasdaq chart, I can some of the gaps you cited that get created day to day. I’ll be honest, I don’t really see too many gaps that haven’t been “filled” within a few days. The only gap I can see of a significant nature is the one created between 10/3-6/2008.
I would also add….I used to be very concerned with overnight gaps, especially in energy/grain markets. However, with the explosion of CME Globex volumes we now have a very robust 24 hour market, and decent volumes get traded there just before and after the official stock market closes. So, often the gaps you see might actually be getting closed in the futures markets.
Put another way…there are gaps, and THEN THERE ARE GAPS. Small little gaps don’t bother me too much…I know they’ll get filled within a few days….It’s the bigger gaps caused by “break away” moves higher or lower that give me greater concerns, in general.
Hope that helps….Andy.
July 6th, 2009 at 9:43 pm
Barry,you’re sure playing coy and cryptic with you market posts lately. What are you trying to glean from this audience? Come on, come clean with us!
July 6th, 2009 at 9:54 pm
The pattern of down to flat most of the day with a spike up on heavy volume in the last 15 – 30 min has been going on for some time now.
With programmed trading around 50% of volume most days it could be pretty ugly when those black boxes all decide simultaneously to sell at 3:45 instead of buy.
Wouldn’t want to be standing in the way of that train.
July 6th, 2009 at 10:02 pm
@Andy T
…Fair enough
Actually I probably misused the term GAPS…They really weren’t really gaps at all (more like unfettered buying and selling)…
I’d still term them as GAPS under those auspices though…and I personally don’t think they’ve been “filled in” with any effort…
That’s why I THINK we’re kinda stuck there until OPEX expiry (July)…depending on the “aggressivity” of moves in the interim…
A simple effort to paint some lines in the 885 – 910 area for two weeks…get PUTS a little cheaper, followed by a GAP down hard come end of July/early August…
So I’m actually long crude here (as of today’s close)…My ‘hedge’ is to go long FXP, (and I’m thinking of jumping on the SRS just because I like to self flagellate on occasion)…
I’d be in to looking at August S&P puts (so long as 910 is reached on 7/17 instead of BEFORE)…If we jerk around 900 until OPEX (& therefore the VIX stays pinned under 30), I’m looking to go long VIX (for a ‘double) for a Red October maturity…
But…I still have an S&P 826 on the table for July opex…If I can see 910 within the week I’ll buy a lottery ticket on that…
July 6th, 2009 at 10:12 pm
Very few people can comprehend the massive debt hole we are in and how bad this will be. Therefore the best contrarian bet of all-time is to bet against the markets. Sentiment surveys such as II Bulls, market put/calls and nasdaq 100 Bulls are not showing people expecting a pullback…in fact they are all near 5 year highs for bullishness. The whole move up since March has been on light volume.
July 6th, 2009 at 10:21 pm
@SB
That’s the FUNDAMENTAL SIDE of the picture I was trying to paint in the following post…
http://www.ritholtz.com/blog/2009/07/market-resiliency/comment-page-1/#comment-190429
In fact, I quoted YOU Steve Barry, in the 8:34 post that I made (which was mysteriously eaten despite several re-trys)…
…and all of this is ASSUMING that 33x earnings with a 14x multiple =462 is valid…
I probably figure that nobody on God’s green earth is willing to accept that reality…Therefore, my 576 call is purely technical…
So someday, everybody on TBP can ask me how I came up with the 572 – 576 number (after the fact)…I’ll be happy to share that number with you all…Meanwhile, I’ll only tease you with hints…
CV
July 6th, 2009 at 10:56 pm
@BR
Per the chart BR…(I’ll say this because I seem to be the only one contributing here on a Monday evening after a holiday weekend – I assume I’m the only one not spending my lavish paycheck on a night out at Franklins favorite restaurant)…
It would appear that the QID would be the bid…(Although it doesn’t interest me personally)…
I mean REALLY, think of all those “operating cost” savings that all the NASDAQ listed companies could realize by taking the NFP number to the 10.3 “stress test” level this fall…
…or does Brian Westbury still think that the notion of “shifting to technology upgrades” on the part of business at large (at the expense of reducing payroll) will be the KEY to sending our economy into a new stratosphere?
I can’t remember…my brain must be sunburned…
July 6th, 2009 at 11:23 pm
@SB–”Very few people can comprehend the massive debt hole we are in and how bad this will be. Therefore the best contrarian bet of all-time is to bet against the markets.”
Yep!! I’ve bet on the “debt hole” and against the herd. Loved that comment by Biden that they “mis-read” the economy regarding the stimulus they prepared but apparently were “still” right in getting it passed. How is that possible??
July 6th, 2009 at 11:52 pm
I have also been on the “there is too much debt” train from the beginning as well. Although it might be because of my time as a bankruptcy attorney. I still think there is too much debt (even with the massive reported increase in the savings rate).
Long term, there will need to be a correction in the disparity of wealth held by working folks and those that own the companies that employ them. (Currently, the Pareto distribution of wealth in the U.S. is the top 20% own 86-87% of all assets — which I think is unsustainable.) Earnings by wage earners will need to reflect an ability to pay off the debts they have incurred (or write-off’s of the same debts, or a combination of both).
Health care costs (still the #1 cause of bankruptcy and still getting worse) must be contained. And the only way to contain those costs will be to create a single risk-pool with a single primary payment mechanism (i.e. single payer, single risk-pool). I find it curious that the benefits of “economies of scale” should only benefit private industry and the owners of capital and not common people.
July 6th, 2009 at 11:59 pm
@OkieLawyer
“the only way to contain those costs will be to create a single risk-pool with a single primary payment mechanism (i.e. single payer, single risk-pool). I find it curious that the benefits of “economies of scale” should only benefit private industry and the owners of capital and not common people.”
I agree with that…
Therefore, what we need to achieve is to establish a way or mechanism whereby “common people” get themselves organized on the scale of PI & the owners of capital…
Tough job, but if there’s a WILL there may be a WAY…
July 7th, 2009 at 12:04 am
@Pat G (11:23)
What made me laugh was how the headline ran on Bloomberg…
It read…
“Biden says Obama misread the economy” (or something of that nature – I’m sure I’m paraphrasing that because I read it casually over the holiday weekend)…
In any case, it made me laugh…All I could think of at the time was BHO on Air Force One heading to Russia reading that line and saying “SHUT T.F. UP JOE, ur KILLING ME”…lol
July 7th, 2009 at 12:14 am
Holy Hell people!!!!
There’s no need to be mystified by anything in this market, and no one, repeat no one should be trading US stocks without a dollar index chart right in front of your face. The futures were ugly because the dollar was strong pre-market (80.89 @ 8:30). That hissing sound you heard all day wasn’t market resiliency, it was your currency losing air (80.36 @ 4:00 close).
Look:
http://www.quote.com/us/stocks/chart.action?s=DX+A0&chartUi.period=V&chartUi.bardensity=MEDIUM&chartUi.overlay=spy&chartUi.bartype=CANDLE&chartUi.size=620×300&chartUi.minutes=5
This happens pretty much every single day. You know what you can’t have though? A Strong, or even stable currency and an up market. So, if you want to see your money devalued half a percent every day, then we can have a resilient market….Weimar style!
The question you should be asking yourself is: How long will China let us get away with this? Who wants Sovereign debt paying 0.5 % for one year from a country that’s let it’s currency slip more than 10% in four months?
July 7th, 2009 at 12:17 am
@ cvienne
Yeah, I bet BO had a few choice words for Biden re; his comment. He has a tendancy of shooting himself and therefore; BO in the foot with his mouth. Still, how could their analysis be wrong yet their solution still be right? lol
July 7th, 2009 at 12:31 am
@mark: Ouch! Never thought of it quite that way.
Actually makes sense. Foreigners are buying stocks with devalued dollars. IS that it?
Sounds like the equivalent of the market going down 10%.
July 7th, 2009 at 12:34 am
Nothing like seeing what’s in store for the following day:
http://www.quote.com/us/futures/chart.action?s=ES+U9&chartUi.period=V&chartUi.bardensity=LOW&chartUi.bartype=CANDLE&chartUi.size=650×450&chartUi.minutes=5
I shake my head in disbelief watching the overnight pumping action.
July 7th, 2009 at 12:45 am
@mark mchugh
Careful there Marky Mark…
I’m sure MOST (including myself) on this site believe in the eventual dollar demise, the next 4-6 months might be a different story…
When the “recovery” story starts getting pushed from 2H09 to “whenever 2010 depending on QE packages”, the the dollar might look much better (for awhile)…
My prediction?…a weak OPEN by the dollar tomorrow (followed by a rally)…Andy T would describe that as a WAVE 3…(or, you may even see by the end of the week that it could be part of a larger WAVE 1)…and I’m sure lefty would be much much happy about that…
July 7th, 2009 at 12:46 am
One man’s resiliency is another man’s government manipulation. Denniger made an excellent point that the US attorney admitted in federal court that the GS prop trading desk has been manipulating the market.
July 7th, 2009 at 12:55 am
@Cursive
I think KD made an EXCELLENT rebuttal on that this afternoon…
Sure…GS…probably has its kung fu grip on the BALLS of many these days…But it still hasn’t effected the ‘tradeability’ of these markets IMO…(and from the Denninger report, it’s a non-starter because THAT doesn’t dissolve visability)
So…to survive…just think like Bill Murray put it in Caddyshack…
“I gotta think like an animal…”
July 7th, 2009 at 12:58 am
alfred,
I’m not sure who or why, but what I can prove beyond any doubt is that the dollar and stocks are inextricably linked in such a way that if you work the numbers right, we’ve essentially been on a treadmill for over two years.
At the risk of angering Barry, I’m posting a gratuitous link to some preliminary work I did a while back:
http://acrossthestreetnet.wordpress.com/2009/05/03/its-the-currency-stupid/
Since then, I’ve been trying to tighten up the math to a point that would be useful. I’m very close to putting that together. But ranting is much more fun than making spreadsheets….
July 7th, 2009 at 1:03 am
cvienne,
I read you enough to know that we see the world the same (although I’m a wave agnostic).
The “Holy Hell” was an expression of disbelief that we got more than 30 comments without anyone mentioning the dollar.
July 7th, 2009 at 1:14 am
@mark
Re: alfred e post “Actually makes sense. Foreigners are buying stocks with devalued dollars. IS that it?
Sounds like the equivalent of the market going down 10%.”
—
Mark – I’d LOVE to back you on this…
Disclosure: My BIGGEST net worth position (aside from real estate that I own 100% outright), is gold…
Not stocks, not ETF’s…Instead, GOLD BULLION…I started buying it in 2004 (and have stashed it around the globe)…
I agree with you also that the dollar will collapse eventually…But like that guy in GLADIATOR said “but not YET…not YET”…
I see ONE LAST move into the dollar as the indices do a redux of 2008…They’ll but govvies (and hold onto them until January 2010 when Larry Summers becomes the new Fed chairman)…Then – you can SHORT the US DOLLAR AT WILL…
Let’s put it this way…when the S&P hits 574, I’ll be looking to ADD to my gold bullion holdings…(and maybe some other equity CRAP to buy for a trade)…
I mean…look at it another way (for the “short term”)…look at the yen vs. dollar (or euro) this morning b4 the open…That tells me that the CARRY TRADE is getting repaid for the March-July equity slobfest…Now the SAFE bet for the remainder of ‘09 is going to be USD/GOVVIES…
Let Joe Retail and the desperate hedgies slug it out with commodities & equities for the rest of ‘09…
July 7th, 2009 at 1:15 am
@Mark: fascinating stuff – your charts.
Hmmm, let me think. Could certain big traders be playing the dollar against the market. Pumping both ends against the middle? SLP?
There does seem to be a very nice correlation that seems to be tightening up.
July 7th, 2009 at 1:33 am
Right on cvienne, and thanks alfred,
I look at the world as one giant crooked casino anymore, and I am totally uncomfortable entering crowded trades (because that’s the time to rig the game). I literally get frightened when people on TV agree with me.
I also love gold, but sometimes I wonder if it will ever be monetized in any meaningful way again. I mean, couldn’t central banks settle with weapons-grade plutonium if they wanted? So I’ve got some of that, too. JUST KIDDING – DON’T SEND THE NSA!
July 7th, 2009 at 1:42 am
Cvienne and alfred,
I replied, but it looks like it got eaten.
What’s the world coming to when you can’t make a little radioactive isotope joke? Well, maybe it was for the best.
I gotta sleep, goodnight all.
July 7th, 2009 at 2:01 am
“Resiliency”
Such a cute name for fraud.
July 7th, 2009 at 8:17 am
mark mchugh:
Interesting thesis on the dollar/stock correlation. I think that’s the surface sign of some deeper things. Recommend checking out the video of Hugh Hendry. Link posted last week where he talks about the value of the yuan and chinese speculators affecting the markets. It made some sense also.
July 7th, 2009 at 10:51 am
Anybody tape watching this AM?
Is this a little bear trap brewing on the SPX? Or a just an old fashioned retest of yesterdays lows?
The shakeout yesterday didnt seem to catch many shorts flatfooted, but gave the bulls a little relief spike on covering. Probably not the juice bulls were looking for.
Today feels weird, wouldve expected more of a bounce in commodities and equities… dollar’s pretty flat, gold pretty flat… calm before a storm? Or just more consolidating going on.
Havent had time to check AT’s analysis yet this AM, but plan on doing so in a min.
July 7th, 2009 at 11:12 am
@I-man
I expected to see a little morning weakness on crude, but then a move up…
The up move hasn’t come yet (but I still think it will either at some point today, or maybe even tomorrow)…
In any case, this suggests to me that TECHNICALS are firmly in control…What seems to be happening is that on technical LOWS there is little spark or follow-through…On technical HIGHS there are swifter moves…
It tells me the next big break in the market will be down (but I still think we clown around between 883 and 910 until after opex week)…JMO
July 7th, 2009 at 11:13 am
@I-man
Speaking of technicals, I picked up a little FXP at the close yesterday (and it’s up over 4% today)…I will most likely be adding on dips on that one FWIW
July 7th, 2009 at 11:16 am
I like FXP here… DUG too… DGP too possibly… but I’m just already loaded up on SDS, QID, SRS, and FAZ.
So many trades, so little capital.
July 7th, 2009 at 11:34 am
@I-man
FWIW…Here’s how I see it playing out (once this 883-910 wedge plays itself out)…
- crude is the lowest right now (so may bounce a little higher – taking the S&P up to the 910), but then I’d be short that (long DUG & SDS)
- I think that emerging & Frontier markets have the most to fall (so I like FXP)
- I think NASDAQ has to revert to a mean a little as well, but I’m worried that it may hang on for a little before getting dragged down…I think that $$ that gets pulled out of commodities & emerging markets will first find a home in tech, before chasing govvies…(so QID isn’t my initial favorite play)
- I’m not sure at all about the banks, or what they’ll do
- SRS ought to go up, but that has been such a frustrating trade (behaving better lately)
- Put options on the SPY have been doing very nice trading in and out of
July 7th, 2009 at 11:59 am
Those SPY puts sure have become more expensive.
I think upside on SPX has got to be capped around the 915-910 range also, works pretty nicely when you look at a 20 period MA… has it pinned nicely.
Agree on the EEM taking a big hit if a global correction gets underway… I like that FXP, and EEV could be a nice one also, just havent done much homework there.
July 7th, 2009 at 12:07 pm
@I-Man
I was all over FXP yesterday at the close…It was doing the most obvious headfake that you could imagine…
A FIBO retrace from 14.47 back to 11.45 was putting you at 12.39…
It looked like it had taken out that to the downside so probably scared a bunch of people away…My clue was that it spent 4 days UNDER that number then gapped up hard last Thursday…
When it came back down to RETEST 12.39, I saw the line from 20 days ago that would draw support at 12.20 (so I jumped on that)…
I think this does AT LEAST a double between now and RED OCTOBER…I’m going to add to it all the way from here on out…
July 7th, 2009 at 12:12 pm
@I-man
A way to counter the SPY puts getting more expensive is to just buy the VIX…
So when the S&P clowns around for 2 weeks and frustrates the time decay for those holding puts, the VIX gets cheaper as well…
I can’t see the VIX getting much lower than 27 before the next move down in the S&P…& I see the potential for a 60 handle on the VIX come fall…
July 7th, 2009 at 12:23 pm
@I-Man
That 12:00 MACD cross might be where crude gets its feet back…I wouldn’t be surprised to see some sideways action here for the rest of the day, then a GAP UP tomorrow into that empty zone from 7/2…
Also…that 6/22 print looks like the left shoulder of a reverse H&S going forward…
July 7th, 2009 at 12:27 pm
@I-Man
The bid on that 36 strike on July USO calls is .35 cents
July 7th, 2009 at 12:30 pm
The MACD crosses have been pretty money on those 60min charts… I need to get a stockcharts subscription pronto… gotta have those.
July 7th, 2009 at 12:31 pm
@I-Man
Actually – maybe one last tiny move down today…$33.60 or so on USO…Price that BID on the July 36 strike at 30 cents & I might jump in…
July 7th, 2009 at 12:35 pm
Re: playing bounces in crude
I’m taking a breather on countertrend moves for awhile… even for day and swing trades. I got caught hard last September, and almost got burned again trying to fade this rally back in late May… luckily my deadline was 950 on SPX…
So needless to say I am a bit gunshy on the countertrend plays right now, so I am sitting everything out but my position trades. If these work out, I’ll use my additional margin to open some energy or EM shorts, ie: DUG and FXP or EEV.
I am sticking with my core shorts as position trades from here on out. 930 is my new deadline. No more piecemeal in and outs for me. I’m going Steve Barry for awhile and ignoring the noise. Big moves only.
July 7th, 2009 at 12:36 pm
Wheres Manny?!
The IYR is falling out of bed again…
July 7th, 2009 at 12:38 pm
@I-Man
I hear ya…
If you’re looking to sleep well (but also maybe hit a 10 bagger), do a Hugh Hendry…
Go long delta and buy the Jan 2010 TLT 105 calls…Today they’re a little pricey, but if you can get them under a buck you might end up with a 10-14 smacker…
July 7th, 2009 at 12:39 pm
Oh I love that trade CV, but Mrs I-Man has banned me from options…
Its kind of a long story.
July 7th, 2009 at 12:41 pm
Well… here we are…
Is it clavadista time or bouncey time?
July 7th, 2009 at 12:41 pm
Sounds like a wise and beautiful woman…
July 7th, 2009 at 12:42 pm
The BID/ASK spread just widened on the USO calls to 30-40…Feels like “bouncey”
July 7th, 2009 at 12:44 pm
I wouldnt be the least bit surprised at a shakeout/Bear trap scenario here to take out yesterdays lows…
July 7th, 2009 at 12:44 pm
I’m still waiting to see $33.60 though (actually – $33.623)
July 7th, 2009 at 12:47 pm
The market (crude in particular), just seems TOO MUCH IN A RUSH to get down to support with only 8 days left before opex Friday…
It want’s to bracket that spread ASAP…So it’s telling me BOUNCE…
July 7th, 2009 at 1:09 pm
I hear ya… but think about that for a minute… too much of a rush…
Did you happen to check out Joe Saluzzi’s interview on bloom and his white paper on “Toxic Equity Trading Order Flow”?
If he is correct, and I know you are familiar with the amount of Program Trading volume on the NYSE, then its quite possible that there is a serious volume and liquidity illusion going on right now with many of the ETF’s I trade (the most active ones) and the overall SPX… that liquidity “trap door” is a serious thing that many are unaware of. The landscape has changed alot in the last 12 months…
There could be a serious liquidity land mine out there that we’re just kind tip toe’ing around at the moment.
Just speculation, but I think there is some big shit about to go down along this storyline. Not saying I have all my facts straight, cuz I dont… but between Saluzzi, Kid Dynamite, and 0-Hedge… I think they are all onto something. Just dont know the extent of it yet.
July 7th, 2009 at 1:17 pm
@I-Man
All I know is that I hear the rumors just like you do…
That’s kind of why I like the TLT thing the best of all (for what it represents)…
&SPY related action…
The rest of the ETF’s are minimal plays…
Remember ben22 himself was alluding to the ETF’s (and his companies position on them)?
July 7th, 2009 at 1:23 pm
Nah I didnt catch that… I only trade ETFs these days so I’m definitely interested. What did he say?
July 7th, 2009 at 1:30 pm
He was saying something about that his company was not allowing any of them to trade any double short ETF’s (I think),
…and that they couldn’t ADVISE any of their clients to trade them at all…They could only take action if the specific request came from the clients, and even then only a select number they were able to trade…
My story probably isn’t totally straight, but the point is, I wonder how many firms have the same policy, and if so, perhaps there IS SOMETHING to the liquidity aspect & the program trading giving illusory signals…
July 7th, 2009 at 1:36 pm
Well I know thats true for my firm as well… they just put out some new reg’s on the ultrashorts. Cant trade them.
I suppose if it were an unsolic order we might be able to, but even then I think they have a new disclosure thing they make peeps sign, which pretty much tries to talk them out of it.
July 7th, 2009 at 1:39 pm
So all that SRS, SDS, QID stuff is your own personal account I guess…
July 7th, 2009 at 1:45 pm
Totally… I dont have clients… just a support role. Just an order taking schlep who doesnt know anything about the capital markets… but I’m good at faxing shit and staying organized.
and I’d prefer to keep it that way… until I can do my own thing anyway.
July 7th, 2009 at 1:46 pm
Oh yeah… I dont trade either. Never have.
July 7th, 2009 at 1:47 pm
RE: ETFs
I’m wondering if the restrictions imposed on ETFs is to keep clients away from them so as not to compete with funds w/ high MERs????
BTW, any takes on today’s action? S&P retested yesterday’s low and held with a quick reversal in the last 5 mins or so. USO also bouncing up off the lows…I would have anticipated we open up this morning after yesterdays close but the media is reporting with a negative bias and very little news flow. I don’t know what to make of this…
July 7th, 2009 at 2:07 pm
@CC
It’s kind of just meandering around isn’t it?
Right now, the best thesis I can hold onto is the following…
1. I think the selloff at 931 (from the retrace back to 956) was HUGE…It means that bulls have to put up or shut up…The onus is on the bulls to call this market up…There will be more door slamming from here on out…
2. Technically we’re probabaly looking at a range between 880 – 910 (but I even see the possibility of going down and doing a little look at 877 to scare everyone (and then a quick snap back to see who’s sleeping)…It might even happen late today…
3. You have OPEX in 8 days…So if this range of 880-910 can be set early, it sets up for a little reversal…Oil may lead a portion of that charge back…
4. I see 910 being put in on or around July 21st…After then, the selloff will start to get ugly…we might be looking at 826 within a couple of days thereafter…
July 7th, 2009 at 3:05 pm
“if this range of 880-910 can be set early, it sets up for a little reversal…Oil may lead a portion of that charge back.”
I am on board with that – and also agree with Mark McHugh regarding the $ and trading – it’s ALL ONE TRADE. Have been picking at some energy stocks, may do more later.
July 7th, 2009 at 7:00 pm
Thanks for the support, it means a lot Lefty!