Thursday, November 25, 2010

Thanksgivings Reflections and Observations

Hedge Fund Turkeys Stuffed with Search Warrants

Thanksgiving weekend started off with a Bang — and a bust — for the hedge funds, about a day after rumors began circulating that a major insider trading investigation was going to blow wide open.

Talk about a case of the Mondays. Reuters reports: “At about 10 a.m., FBI agents, including one in a sweatshirt, entered Diamondback offices and shouted into the trading room. They ordered about 60 employees to halt work immediately and herded them into a conference room for about one hour, according to one employee at the firm.”

This is all part of an ongoing investigation, and no one has admitted any wrongdoing, as expected.

But other reliable sources reports that Diamondback’s returns at times have been prenaturally and questionable too good — almost three times better than its peers’ returns.

Diamondback gained a whopping 73 percent from mid-2005 through July this year, compared with 22 percent for funds with a similar trading approach, as tracked by Chicago-based Hedge Fund Research Inc. The fund beat so-called multistrategy funds in 2006, 2007 and 2008, when it skirted losses from the credit crisis. It has lagged behind the strategy average since then.

What else is new . Risk Seeking greediness cheeting continues in Wall St.The US general public knows this is going on and will go on as long as there is greed in Wall St. This is one of the main reasons for retail investors not participating in the markets. It will continue to be a traders market only so take your money averyday and run. Buy and Hold does not work and the rich greedy cheeters manipulating the Equity Markets will continue.

  Have a safe and funfilled Thanksgiving holiday

Turkey Weekend- Wed Nov24 - Durable Goods Day - Review

Thursday Nov25 Update :

Long from 1188.25 . First Target reached at 1200.25 for  + 12pts Profits
second target never reached its destination. Out Flat at 1195.25 for another
Total GAIN : + 19 PTS Profits. Not bad for a Holiday Trade.
Targets emailed to subscribers upon request. Some of them did not trade during the Holiday

Big Picture Analysis:  The bears’ window of opportunity was shrinking today, as seasonality favored the bulls again this Wed afternoon, and especially so on Friday. 

Despite the barrage of negative headlines, last week’s lows in the ES held, and traders have bid up equity futures on a favorable Jobless Claims report this morning (despite a below consensus Durable Goods report).  That report was ignored due to the GDP revisions, as expected.

A close above 1188.00 today allows continuation that builds momentum into next week.  A close below 1177.25  would have left the window open for the bears.  With international headlines in the forefront, it’s also important to recall last year’s Dubai 30 point shakeout.  Only a close below 1157.00 would have casted serious doubt about the bulls regaining the upper hand. Bulls won this one again.

New Swing Position Initiated Intraday:  Long 1188.25

Trade SETUP :
TTT Buy Day
RSI ( 2 ) Buy Day # 3 at the Close, but intraday Long Entry
with much better fill and less risk. 80% positive and proven expectancy
of trade success. See previous posted trades.
VIX Count : Friday  Nov 13 , Number 13 Down ( bullish )
Equities reaction to Dollar Index

Other Clues as delivered by email to Subscribers. Thank you for
your comments.

Sunday, November 21, 2010

Options Exp. Friday Nov 19-Price Action Review

Yesterday,Thursday -the ES pushed above 1194 resistance on the Phili Fed report that surprised to the upside, but the market could not quite crack the 1200 level, including overnight. The move down shortly after Bernanke’s QE2 support speech at 5:15 am this morning was on news that China raised its bank reserve ratio.

The timing suggests it intends to counteract QE2 contagion with such offsetting sterilization efforts. It will be important to monitor its effect on risk markets going forward. On the Ireland front, no major developments overnight. The 1202 remains critical resistance for the Bears to defend, and they have seasonality on their side for a few more days.There is a Low Volume Gap from from 1187.50 to 1182 that will probably be filled before this market heads north to new highs. It may go lower than 1181 but it will find a lot of buyers waiting between 1180 and  1176.25.

It was a day of consolidation both overnight and during the RTH. A day where the 1201 Res area was not tested although the sup at 1193 was erased. This is somewhat bearish, therefore will  monitor 1201 as the Bulls should take that out early next week ( probably during Sunday Globex Session) if they are for real. Otherwise looking for a test of 1192.50 again and then a test of 1188 and 1182. If 1201 is penetrated the next one is 1206.

The typical pattern on options expiration day, is for a down move in the first hour with some continued weakness into the early afternoon, followed by a rally in the final hour. This does not happen every single opex day, but it’s important to take note of strong tendencies.There is another more reliable tendency for a down day after Options Exp. sometimes withing two days.

Thursday, November 18, 2010

Swing Trade from last Thursday-Final Update

Long Swing Position in the E-Mini S&P500 Futures contract , ESZ10 - December:

Final Target 1199 Peak reached ( that's me in the summit, arms extented, ready to jump ) LOL

Profits for the final target :
 + 127.25Pts or $ 6,362.50 per futures contract.
Thank you for the subscribers emails received, hope you are enjoying the profits well.
Those followers and non-subscribers , you are missing a lot.

Wednesday, November 17, 2010

Long Swing Position Update

Thursday Nov 18 Update:
Globex Pre-Open,
Third Target Reached at 1191.50
for a GAIN of  + 120 Pts

Wed Nov 17 after the close ( Globex ) Update:

Long Swing Position Second Target Hit ,
Gain :  + 114.50 Pts or $ 5,725 per futures contract
Breakout from today's NR7 and Inside Day
Today was a TTT Buy Day

Recap : Long ESZ10 at 1071.50 ( Institutional Number and Key Level )
Trade Setup : Tuesday Nov 16 RSI ( 2 ) Reading of  2
As explained on this Blog, this setup had more than 80% expectancy of success.

Concern over Communist Chinese inflation and interest rates has been roiling the commodity markets. Communist China imposed price controls on some commodities and there is talk that they will raise rates on Friday.  Europe continues to wrestle with some recalcitrant partners about the Irish situation. Talks are beginning in Dublin involving the EU and IMF; there is also talk that the UK may get involved.  CPI was soft and smells of deflation.  The core CPI rose at an annualized 0.6% rate.  Housing starts were also weak; multi family construction has collapsed in the past months.  The weekly crude inventory report was out at 9:30 AM CT. 

Yesterday, the bears made their presence known and have likely regained control for at least a week.  From a seasonality standpoint, we look to the November seasonality map from MarketSci, which suggests bears have the advantage until Monday.  We would also add there is bearish seasonality from the 2/5/7s Treasury auctions through 1:00 pm on Wednesday. 

Note, however, the strong bullish seasonality for the days just before and after US Thanksgiving, which could allow for a strong push Wednesday afternoon and Friday when most traders are absent (also recall last year’s Dubai debt shakeout).  Trading during options expiration weeks, such as the current week, typically favor mean reversion as opposed to trending (though, the exceptions tend to be extreme).

Accordingly, we will be on alert for a potential reversal rally today or tomorrow, with the maximum upside target of 1194 (around the 20 day MA and a 50% retracement).  Bulls need to reclaim 1194.50 to have a shot at new highs.  The markets are at an important juncture with respect to long term implications, and I see three potential scenarios unfolding: Available to Subscribers Only.

Tuesday-Nov-16 :Highest Volume Bearish Wide Range Day

Another High Volume Wide Range Down Day.
The Communist Chinese keep driving this Market down and the USA keeps kissing their asses while they play games with their currency manipulation.

The bulls missed their opportunity yesterday to take equities higher, and it looks like the bears took control overnight on more rumors of Communist Chinese monetary tightening and sovereign debt problems in Ireland.

These stories are nothing new, but it's important to take note when traders change their reaction to events, as is happening now. My long term bullish bias has not changed, but short term I am playing the swings and potentially intermediate term, to be determined by today's price action. Only a close over 1191.00 would change this and suggest the bulls regained short term control.

Monday, November 15, 2010

Swing Position Reached its Target before the Market collapsed

Another great trade executed and exited on time

Recap : Long @ 1092 Friday , Jan 12

Final Exit Target : 1202.50
Total points GAIN : 
110.50 Pts or $ 5,525.00 USD

Looks like 1202 Key Level did NOT Hold and the Wide Range/ Higer Volume  Theory worked as expected.

  The drop from 1224.75 will end soon. I am expecting a final swing low in the 1170-75 range

Once this low is in place a move to 1250 should start. The March 2008 low was 1253 and it occurred on the Bear Stearns failure. This combination marks that level as strong resistance above the market.

Last Friday traders wondered what happened to the Fed’s first attempt at hyper-rigging the stock market via QE2. Shockingly, despite the Fed’s massive cash infusion to the banksters, the market fell. Was this a situation where the market rallied before the actual act of outright monetization then fell when it began: buy the rumor, sell the fact?

That could very well be a portion of the reason why the market fell Friday; however, another reason is surely the increased bond spreads of indebted European nations. Next up in the EU to implode: Ireland.

Shares in Ireland's banks hit record lows and national borrowing costs reached new euro-era highs Monday as the government presented its latest plans for financial survival to the European Union's economic commissioner, who has the power to order changes.

The interest rates charged on the treasuries of Ireland, as well as fellow indebted euro-zone members Portugal and Spain, have been rising ever since German Chancellor Angela Merkel last month said she expected any future EU bailouts to come with new rules requiring bondholders to absorb some losses.

But Ireland is experiencing by far the greatest skepticism from would-be lenders, who look with horror at Ireland's projected deficit of 32 percent of GDP, a modern European record.

Bank of Ireland and Allied Irish have received billions in state aid to cover their dud loans to bankrupt construction tycoons, while Irish Life & Permanent has received no bailout help but is most exposed to Ireland's depressed market for residential property.

Traders said a widely read article in the Irish Times by University College Dublin economics Professor Morgan Kelly - known in Ireland as "Dr. Doom" because of his accurate forecasts of the death of the Celtic Tiger economy - added to the gloom.

Kelly forecast that state support for banks would cost taxpayers an extra euro30 billion beyond the euro45 billion to euro50 billion declared last month by Lenihan. He accused the government of maintaining "a dreary and mendacious charade" on the true scale of property-based losses in the pipeline.

Kelly called the current deficit-fighting push "an exercise in futility" and rated Ireland's financial fate alongside that of the Titanic. He said there was no point trying to cut billions from the budget "when the iceberg of bank losses is going to sink us anyway."

"We are no longer a sovereign nation in any meaningful sense of that term. From here on, for better or worse, we can only rely on the kindness of strangers," Kelly concluded.

As the traditional owners of Irish treasuries - chiefly banks in Britain, Germany, the United States and France - seek to dump them because of their falling value and increased perceived risk, new sellers can be attracted only by offering higher yields.

Traders say the main buyer of Irish bonds in recent weeks has been the European Central Bank.

I highlighted the portion of the article where Angela Merkel says bondholders should absorb “some” of the losses. Oh, how very nice of her! So the taxpayer in Ireland who does not deserve to get screwed, will get screwed, but to a lesser extent. Again, how very nice of her.

Who are the bondholders? They are the very people who created the mess: fraudulent banksters. And they should eat the ENTIRE loss.

A Few Trade Setups using this as Confirmation

This can be used as a reference Map but does NOT replace actual price action only as a confirmation of were the market might be heading next.

Notice how the price action today reacted to the Line In the Sand.

Saturday, November 13, 2010

A Perspective on Wide Range Days

Swing Trade Update - Monday Nov 15 ( my birth date )
Long from 1092 initiated on Friday Nov 12
Current price : 1201.50
Open Profits : + 109.50 Pts

RSI ( 2 ) Reading :  7
Prices above the 200 MA ( RSI Requirement )
Long Term Bullish Trend Line tested
Other Clues as emailed to Subscribers and qualified Followers.

James need your opinion on the last twenty posts. Thanks. Hope your doing great in Singapore.

Looks like the Range Theory goes out the window.The Market likes to prove that we are wrong sometimes, LOL

Swing position is doing great. RSI ( 2 ) Setup worked as a champ !. Current profits are now
 + 113.75 Pts.

The simple definition of a "distribution day" is a down day on higher volume than the previous day. Many investors pay attention to these days because when a number of them occur over a short period of time, it flashes a potential warning sign of a near-term top in the market.

To expand on that subject the distribution day must meet additional parameters:

1. It must be the Widest Range Day of the last 5 days
2. It must close near the Low of the Day
3. There must be an increase in Volume compared to the previous day.

Looking at the last four months, there was only three days that meet the criteria and they were all followed by lower prices.Therefore it is reasonable to assume that Friday sesssion will be followed by lower prices and will be a great opportunity to go Long.Must likely it will occur during the Sunday Globex session.

Friday Nov-12-Wide Range Bearish Day-Review

The simple definition of a "distribution day" is a down day on higher volume than the previous day. Some investors pay attention to these days because when a number of them occur over a short period of time, it flashes a potential warning sign of a near-term top in the market.
The Volume on the ES was 55% less than the previous Inside Day and is the highest volume of the last TEN Days. To keep it in proper good logical perspective, it is 16% more than Tue Nov 09  an Outside Bearish Day and 15% more than Wed Nov 03 FED Day, a very bullish Day.
Will do more research on that subject.

Friday, November 12, 2010

Swing Trade from last Friday-Update

Final target reached and filled during Globex overnight Session. The G20 was the Clue and the Catalyst for a reaction of the S&P500

Recap : SHORT from 1222.50 and 1224.50 initiated on Friday Nov 05.
Final target filled at 1193.25 ( 1193- S 2 ) for a total of + 31.25 pts. ES LIVE TRADE HOME RUN !

Premarket movers

Renewed fears out of China that Beijing could be closing in on further interest-rate hikes were pressuring U.S. stock futures.
Global markets

Stocks in Shanghai plunged 5.2%, leading a regional selloff, as investors in China rushed to lock in profits ahead of potential monetary-tightening measures from the government. The reaction reverberated in Europe, with markets in the region moving lower.

For those that have been following this Blog. There is a low risk buying opportunity today in the 1092 to 1093 zone. This is a multi year back tested RSI ( 2 ) winning trade with more than 80% expectancy of success. 1093 is Floor S2 and 1091.50 is the Key Institutional Level. The Confluence with the Daily 20 EMA at  1191.50 makes it an ideal Long Entry with the Daily Trend.

New Swing Position Today Friday Nov 12
Long ESZ10 - E-Mini S&P 500 @ 1192 ( Avg Price ) on Multiple Contracts

As the BULLSHIT G20 Meeting gets underway and the President of the great USA is
defending the Fed's actions in the G20 meeting, while the Fed makes allies with the millionares Republican congressmen behind his back and they become more powerfull enemies of the great President.

Thursday, November 11, 2010

Veterans Day Review

Today's Volume in the E-Mini ES was 28% less than yesterday.
At this time in the Globex Session price action is testing the Prev Low as the Dollar Index is breaking out above Previous High. SHORT Swing position is working as planned.

Yesterday's Overview:

It was a day of reversals. The market started weak, but gained considerable ground which allowed it to close green. However, after the bell, Cisco came out with a poor earnings report which fell well short of Wall Street's projected sales and profit targets, taking Cisco stock some 12% lower in after-hours trading (and pressuring futures readings as well). Acting as a technology sector bellwether, this poor report by the sixth-largest US technology company (by its market value) weighed on the market today.
Adding to yesterday's positive mood were some encouraging economic data releases. Initial jobless claims for the week ending November 6 were down 24,000 week-over-week, coming in at a total of 435,000 new claims (consensus estimate: 450,000 initial claims). A downward push was also seen for continuing claims: these came in at 4.30 million (prior reading: 4.39 million continuing claims).

September's US trade deficit totaled $44 billion (consensus estimate: a $44.8 billion deficit; August's reading: $46.5 billion). October's Treasury budget showed a deficit of $140.4 billion (consensus estimate; a deficit of $140 billion).

Markets were looking ahead to the G20 meeting on today and Friday to be held in South Korea. The announcement of the US Federal Reserve's second quantitative easing program has resulted in significant international criticism from China, Germany, as well as other countries. As discussed some of the fears yesterday. One major concern is the foreign exchange market, with countries fearing the US is deliberately attempting to push the US dollar lower to aid the export sector. It is anticipated that QE2 will be a major, contentious topic of discussion at the upcoming meeting.

Tuesday, November 9, 2010

Swing Trade from last Friday-Update

Short from 1222.50 Friday Nov 05 and from 1224.50 today.Now in profits : + 16.5 Pts and + 18.5 Pts.
Targets as specified and according to price action.

Wed, Nov 10 Update :
So far, the scenario laid out in my Blog Post from Sunday  is playing out pretty well
First target reached at 1202 for + 22.50Pts of Real Live Trade Profits ALL ENTRIES AND EXITS POSTED LIVE ON THE STOCKTWITS FEED

Trade Setup Today :

 Intraday 5min Bearish Engulfing Pin Bar at Key Resistance Level on Lower Volume
 US Dollar breakout above Prev High and UPCross of Prev Close at 11:10am est
 Breakdown below Key Institutional Level : 1218.50  on the Third Hour ( as submitted to Investor Group )
  Weak Internals : Financials and the Four Horseman
  MACD Bearish Divergence
  RSI ( 2 ) Reading : 100- Two Consec. Days
  Key Reversal Dates Window
  TTT -Sell Short Day : worked like a champ !
Today : Bearish Outside Day and Closed below Friday's Low as expected in Trade Plan
Will Update on this Post. Stay Tune.

Sunday, November 7, 2010

NFPayrolls Report Day -Friday Nov-05- Setups Review

The warm days of scuba diving in the tropical seas are over. Is time to head for the Snow Mountains for some skiing.

The broad market consolidated its strong gains after yesterday’s ( Thursday ) moon shot. A last minute buying spree ( Short Covering Squezze ) just lifted the Dow, which had traded much of the day in the red, to a sixth consecutive gain. The Nasdaq 100 slipped slightly. Meanwhile, the S&P 500 outperformed, gaining nearly 0.4% on a second consecutive day with relatively heavy volume (of 4.68 billion shares). The S&P 500 has now closed above its April 2010 peak; it is the last of the major indexes to do so. The volume on the E-Mini S&P was 8% less than the previous day.

Initial further upside could be limited and give way to a consolidation / modest retracement over the short-term. Broad Markets were mixed to risk adverse during the overnight session.

Similar to yesterday’s market action, today’s trading produced another surplus of proprietary bearish signature clues.  I think this could further limit upside potential in the market over the short term. I see more of a flattening out of the current rally and think that there would be only limited further upside, followed soon by a modest pullback.

Many of the US indexes struggled today, with the exception of the S&P 500. Once again, this lack of progress was attributed to the US dollar which was up today, adding 0.9%. The dollar gained on the news that the US non-farm payrolls report for October brought some unexpected strength. Nonfarm payrolls were up by 151,000 while 159,000 private payrolls were added last month (consensus estimates: an increase of 60,000 in each category). However, the unemployment rate remained at 9.6% and the labor market participation rate continued to dwindle (as more and more job seekers give up the search for employment).

The financial sector clearly outperformed today, up 2.1%. Bank stocks did well amid speculation that some of the funds from the Fed’s quantitative easing exercise could soon enable banks to raise their dividends and repurchase shares.

Among other economic data releases, September pending home sales were off 1.8% on a month-over-month comparison (consensus estimate: an increase of 2.5%). September consumer credit came in with a gain of $2.1 billion in September (consensus estimate: a decline in credit of $3.3).

The Fed’s move to a second round of quantitative easing may have boosted the market over the past two days, but it also has its critics, notably on the international stage with policy makers in emerging markets sharply criticizing the move as it could spark a wave of protectionisms and currency tensions. Germany’s Chancellor Angela Merkel has also voiced concerns. Finally, some market commentators point out that if there were a sudden resurgence in economic growth, the Fed’s QE2 program would likely become unnecessary. Good economic news would thus contribute to a potential sell-down in US equities, as the market might fear a withdrawal of stimulus money. The fact that today’s relatively positive jobs numbers did not lead to a greater market rally may be a signal of this issue, one commentator suggested.

Sunday, Globex Session UPDate :
As submitted to Investor Group:
SHORT Swing position from Friday at 1222.50 now in profit + 5.25 pts
Expecting a breakdown of Prev Low
Trade Setup :
60min - MACD Bearish Divergence
RSI ( 2 ) Reading : 100 two cons. days
VIX Count
Other clues as submitted

Saturday, November 6, 2010

The Higher it goes the stronger it will FALL

The Illusion of Wealth Continues in America

For all of those who denied the existence of a Plunge Protection Team (PPT) creating the Illusion of Wealth in WALL ST.

 It's here. It's real. And it's happening today!

Yes sir, who needs the so-called smoke-filled back rooms of PPT deals when you have the Federal Reserve Board? Who needs to continue the so-called myth of the PPT when the past TWO Chairmen of the Fed openly admit that they are rigging the so-called "free markets" of equities, bonds, and commodities.

Wikipedia says of the PPT..."Plunge Protection Team" was originally the headline for an article in The Washington Post on February 23, 1997, and has since become a colloquial term used by some mainstream publications to refer to the Working Group. Initially, the term was used to express the opinion that the Working Group was being used to prop up the markets during downturns.

Of course, all "right thinking" Americans thought that the very idea of a PPT rigging the market was flat-out unamerican and would therefore never...ever..happen. Ever! Yeah, right!

Let's cut the bullshit shall we? The Fed is rigging the market today, BIG TIME !; there is no doubt about it. There is no need for a PPT run by a president's council when the bankster's mega-banker...the Federal the real version of the PPT. They surely call it another name, but who cares; let's just call it Quantitative Easing for now.

The prior Chairman, The Greenspan-Put, confirmed in late July on Meet the Press what everyone knows: namely that the primary goal of the Fed is to encourage higher stock prices: "If the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here."

Riiiight... ! the Fed is agnostic on whether the market is affected by its measures...riiiight !. Is that still true even when the CHAIRMAN says that the best thing it can do is stimulate the economy via the STOCK MARKET?

But it doesn't end there. Helicopter-Benron-Backstop Bernanke agrees with The Greenspan-Put: the only thing that matters are the equity markets. These Monetary Duo do not give a damn about your inflation, your deflation, your unemployment ( same as Wall St. ); they only care whether the banksters are happy or not.

That statement above by EZ-Al was made three months ago; however, about three days ago the new Chairman (Bernanke) said - "And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

The Fed’s move to a second round of quantitative easing may have boosted the market over the past two days, but it also has its critics, notably on the international stage with policy makers in emerging markets sharply criticizing the move as it could spark a wave of protectionisms and currency tensions. Germany’s Chancellor Angela Merkel has also voiced concerns.

Therefore, Logic and Common Sense ( Let's cut the BULLSHIT ) :

* The stock market is not rising because of good fundamentals. THE STOCK MARKET IS RISING BECAUSE OF THE FOMC.

* The commodity markets are not exploding because of a sudden increase in demand by itself. THE COMMODITY MARKETS ARE RISING ACROSS THE GLOBE THANKS TO THE FOMC.

* The US dollar is not collapsing by itself. THE US CURRENCY IS COLLAPSING BECAUSE OF THE FOMC.

* Gold and Silver are not skyrocketing for no reason. GOLD & SILVER ARE RISING BECAUSE OF THE OUTRIGHT MANIPULATION BY THE FOMC.

* The ENTIRE GLOBE is engaged in active currency debasement for one reason only: THE UNITED STATES FEDERAL RESERVE BANK

Please read :

It is stunning that so many people (at all levels) in this country believe that high consumption levels are paramount to a sustainable economy. The problem with this system is that even now when we are in a weak economy, which was essentially caused by our over-consumption of foreign goods and a lack of domestic investment (ie savings, production, etc.), so many are advocating policies that would only revert the country back to the old system.

Without production and investment an economy will be unable to sustain itself. In the United States, consumption accounts for 70 percent of GDP. Of this 70 percent, over half is spent on services. The U.S. spends 22 percent of consumption on real estate (a dead market) and health care (a high-cost market with low direct economic benefit). Approximately Two thirds of federal expenditures (8 percent of GDP) is spent on the defense budget; total government expenditures make up 20 percent of GDP, with state and local governments spending 12 percent. Bringing up the rear at 16 percent of GDP is private savings and investment. Just to get the ball rolling, let’s throw in the U.S. trade deficit, which reached $816 billion in 2008 (it decreased in 2009 because of the global recession) and is on pace to hit similar levels in 2010.

These numbers paint a bleak picture. As members in a service-based economy the majority of Americans are unable to produce real wealth. American jobs essentially consist of selling and transitioning the sale of foreign goods. The same companies that pay our wages are generating the profits from our consumption. Generally, this is a perfectly acceptable system and exactly the kind of system that sparked such huge growth in America’s golden era. However, the companies paying our wages now are for the most part foreign-owned or internationally financed. Essentially, what Americans are doing is passing around money that is financed and controlled by foreigners, and then using that money to buy more foreign goods. What little wealth that is created from a service economy is sent right back into the hands of foreigners.

Thursday, November 4, 2010

Day Before the N.F. Payrolls Report - Review

After an initial dip on the FOMC announcement yesterday, ES futures closed higher and, overnight, rallied through strong resistance and the Key Institutional Level, thus invalidating the Reversal Date. 
The markets responded to the Fed’s more than tripling of Treasury purchases, which will now funnel about $25 billion per week through the primary dealers and into the markets (after having been levered) beginning late next week, and continuing at least through June 2011.  This is enough to be inflationary throughout the economy and, while we were on alert for a sell-the-news reaction over the last week, it clearly did not materialize. 

Not surprisingly, the US Dollar is down, and Treasury futures were up, though 30 Year T-Bonds are noticeably lagging.  This is purely because of the preference of Fed purchases, which will concentrate in the 2-10 year tenors.  Inflation concerns will keep the 30 year yields (and mortgage rates) relatively higher, and will eventually impact the 10 Year similarly.  While 10 Year T-Notes should rally initially, a dip in the yield (inverse to price) below 2.0% (and corresponding overshoot of the December 2008 lows) would be a long term short signal in the futures. 

Going forward, the most serious impediment to the risk markets will be regarding the currency in which they are denominated.  For instance, US equities will sell off when other central banks announce programs to counter US Dollar debasement, or if the Fed starts attempting to sterilize its purchases.  There will be some violent shakeouts, but until this happens, we will be in a buy the dips environment.  Enjoy the ride while it lasts. The Claims Report was ignored as expected, thus giving more clear evidence that Wall Street never cares about the poor unemployed in Main Street.

Wednesday, November 3, 2010

FED Day Review

Thursday-Nov-04 UPDate
Last night the Asian markets gave the Fed’s QE2 plan a vote of confidence as stocks rallied and the Dollar slumped to new lows. In Europe, October Services PMI came in a bit better than expected. This added to the pressure on the USD, which in turn is adding to the tailwinds for equities and commodity prices. Round two of QE is bigger than traders were looking for. This should prove to be bullish for commodity prices. It may NOT help economic growth and it raises the odds of inflation down the road and less margins for domestic sales, which are in weak already, except for the Rich, they don't feel anything. This morning US weekly jobless claims were higher than expected, but within the recent range. Tomorrow morning we get the October employment situation report. Traders are raising the bar to estimate a rise of 60K in payrolls after a drop of 95K in September, this will give them an excuse to Sell after all this Election BULLSHIT . Next week has the quarterly refunding auctions and Veteran’s day ( poor people , they won't have a job waiting for them, thanks to the fuckups Republicans ) on Thursday.

Dec. S&P: 1208.00 is the 2010 high basis ESZ; that’s the pivot point for this morning. It looks like tomorrow will have the Sell Short day signal.
Yesterday's election results mean that they won't be getting much help from fiscal policy

The Fed will add another $600 billion to its $1.7 trillion in direct purchases so far this recovery cycle, a little more than expected yet not enough to fire up much enthusiasm. The new purchases will extend through the second quarter next year and if the jobs market doesn't pick up by then, QE3 can be expected given the Fed's promise to monitor progress and adjust the program as needed. The underlying question is whether lower rates will significantly stimulate borrowing and investment. It will probably not because of the weak Real Estate Market will continue and the odvious lack of Fiscal Stimulus that will occur after this elections.

The Dow rose 0.2 percent to 11,215 in mild reaction to the results while the dollar index fell 0.3 percent to 77.07.

Fed purchases will be centered in the middle of the yield curve, not the longer end as many had expected making for slightly lower rates on the short to middle part of the curve and a 12 basis point jump in the 30-year yield to 4.05 percent. Oil rose $1 to $85 while gold slipped slightly to just under $1,350.

Tuesday, November 2, 2010

Election Night Trade Target Reached

Long from 1182.25 - 9:31 PM Sunday Oct 31st . Final Target reached at 1196.25. If you were paying attention to Twitter , your profits: +14 pts

Let's ALL Toast to the great comeback of the BUSH years all over AGAIN, Hurraaay ! More Tax Cuts for the Rich stockholders and their Corporations so that they can continue to export US jobs overseas. Same old bullshit.What is good for WALL Street does not have to be for the Unemployed. Very smart America !

Today's Election Day rally was catalyzed primarily by US dollar weakness, market observers suggest. The greenback relinquished 0.7% today in face of a strengthening euro which gained ground following strong eurozone manufacturing data. Giving further impetus for equity market traders to take their cues from US dollar swings was the fact that there were no US economic data releases scheduled for today.

Apart from bringing clarity in regards to the election results, tomorrow will also bring a very crucial Fed meeting which is widely thought to result in further quantitative easing, as discussed here several times over the past few weeks. At this point, the market has likely priced in that QE2 will happen; the discussion are to what extent the market has already priced in a given size / scope of QE2, a minimum of $500 billion according to some economists. The market may further have priced in that Democrats will lose the House; in fact, prediction service Intrade suggests a 95% probability of this occurring. While some observers suggest a political change in Washington will bring fundamental improvements ( very doubfull due to the bad performance of the last Republican Congress ), others suggest the anticipatory rally seen since early September is / was nothing more than a liquidity event manipulated and generated by the Fed for the benefit of the Banksters.

Today's anemic overall volume output reflected uncertainty. Less than a billion shares were traded on the NYSE today. It is apparent that many traders / investors would like to see the outcome of both the elections and the Fed meeting before placing bets. Looking a little further ahead, on Friday, the US government is scheduled to release its monthly jobs report data ( not really important to Wall Street ), another crucial piece of the evolving economic puzzle.