Option markets anticipate volatility of the underlying product between now and when the options expire. If there is segment of time between now and when the options expire that traders expect the market to be slow, they will lower bids accordingly. This has the effect of lowering statistical volatility readings without lowering the perception of *real* volatility going forward.
Obviously options do not always estimate future stock volatility correctly. In fact they never get it exactly right, it’s an estimate. Surprises happen. But all things being equal, we are not going to be volatile over the next couple weeks. If you see a low VIX, you can call it complacency, or you can say that it’s simply a realistic anticipation of non-activity in a traditionally slow stretch. I am going with the later.
And I am using VIX for simplicity sake, but it’s for every option.
The point is that IF volatility looks low and you are inclined to call that complacency, and then are inclined to use that perception of complacency as a sign to get bearish, be very careful.
Yes, it’s noteworthy that in this time of Fannie and Freddie meltage, there’s no evidence of Fear. But by the same token we have 10 slow calendar days in front of us, so it’s perfectly rational to lower bids ahead of that.
Again, at this particular juncture in time, the VIX futures and options provide a better volatility gauge than the *cash* VIX. And they have barely budged, as the market expects 22+ volatility in September. The fact that there is a premium in the futures is expected, in fact, barring an actual uptick in fear, it happens every time. As I noted last week about the VIX Sep futures, "These are trading markets, and as such will price in the holiday. Right now
Courtesy of Allan – recommending long positions in a couple solar stocks, Canadian Solar Inc., CSIQ, and Trina Solar Ltd., TSL.
A friend of mine [David Gordon] emailed me this weekend and suggested that I take a step back from my charts, remove my trend lines and allow my intuitive powers out, in an attempt to see the charts as what they are, not what I am interpreting them to be. So for much of Sunday I have been occupied with looking at charts without any preconceived bias. The result: The solars look great.
Above is a CSIQ-Daily of price only, you decide.
Below the weekly, does this help?
Finally, let’s throw my trend lines back on:
Next, a simple line chart of another Solar, TSL, with only Triangle signals:
And once again, with my trend lines:
Solars are great trading stocks, they seem to cycle very nicely and provide excellent Intermediate percentage returns. For example, either of these two Solars could return 50% on a modest move back to the top of their respective channels.
I still don’t know if this sector belongs in the Energy complex, the Technology complex, or are their own complex. Doesn’t matter. My trend lines merely represent what my eyes are seeing, without the trend lines. Both these stocks look to be oversold and beginning a rally to overbought…….and that is the Trade.
Is Obama the liberal’s liberal or something else? In How Obama Reconciles Dueling Views on Economy, the New York Times attempts to portray Obama as some sort of quasi free-market half-conservative "Chicago School" pragmatist in favor of more regulation, handouts, and redistribution of wealth schemes. Is that possible? Let’s take a look.
The United States remains a fabulously prosperous country, relative to almost any other country, at any point in history. Yet Americans seem to realize that something has gone wrong. In recent polls, about 80 percent of respondents say the economy is in bad shape, and almost 70 percent say it’s going to get worse. Together, these answers make for the most downbeat assessment since at least the early 1980s, and underscore that the next president will be inheriting a set of domestic problems as serious as any the country has faced in a long time. John McCain’s economic vision, as he has laid it out during the campaign, amounts to a slightly altered version of Republican orthodoxy, with tax cuts at the core. Obama, on the other hand, has more-detailed proposals but a less obvious ideology.
Well before this point on the presidential calendar, it’s usually clear where a candidate fits within the political spectrum of his party. With Obama, there is vast disagreement about just how liberal he is, especially on the economy. My favorite example came in mid-June, shortly after Obama named Jason Furman, a protégé of Robert Rubin, the centrist former Treasury secretary, as his lead economic adviser. Labor leaders recoiled, and John Sweeney, the head of the A.F.L.-C.I.O., worried aloud about “corporate influence on the Democratic Party.” Then, the following week, Kimberley Strassel, a member of The Wall Street Journal editorial board, wrote a column titled, “
Farewell, New Democrats,” concluding that Obama’s economic policies amounted to the end of Clintonian centrism and a reversion to old liberal ways.
Some of the confusion stems from Obama’s own strategy of presenting himself as a postpartisan figure. A few weeks ago, I joined him on a flight from Orlando to Chicago and began our conversation by asking about his economic approach. He started to answer, but then interrupted himself. “My core economic
Fascinating topic: pharmaceutical companies, financial interests, and politics. Might also be interesting to those of us with daughters, who may be thinking about whether to get them vaccinated for HPV. Courtesy of Deborah at Wall Street Weather.
“Merck lobbied every opinion leader, women’s group, medical society, politicians, and went directly to the people – it created a sense of panic that says you have to have this vaccine now.” - Dr. Diane Harper, professor of medicine at Dartmouth Medical School and a principal investigator on the clinical trial of Gardasil, to The New York Times.
An editorial accompanying a study published online yesterday by The NewEngland Journal of Medicine(“Human Papillomavirus Vaccination – Reasons for Caution”) by Charlotte J. Haug, M.D., Ph.D, questioned the “lack of sufficient evidence of an effective vaccine against cervical cancer.” An article on the marketing of Merck’s (MRK) Gardasil vaccine in The NewYork Times describes how the company managed to get “an obscure killer confined mostly to poor nations to the West’s disease of the moment.” Merck is forecasting sales could top $2 billion this year.
According to the government’s Centers For Disease Control and Prevention (CDC) website, “11,892 women in the U.S. were told that they had cervical cancer in 2004, and 3,850 women died from the disease. It is estimated that more than $2 billion is spent on the treatment of cervical cancer per year in the U.S.” Scrolling further down the CDC’s web page shows statistical trends that “suggest that cervical cancer incidence and mortality continue to decrease significantly overall." These statistics are from 2004 – two years before the FDA approved Merck’s Gardasil vaccine.
Cervical cancer is caused by the human papillomavirus (HPV) virus. As Merck’s Gardasil Patient Information sheet states: “There are more than 100 HPV types; Gardasil helps protect against 4 types (6, 11, 16, and 18). These 4 types have been selected for Gardasil because they cause approximately 70% of cervical cancers and 90% of genital warts.”
Most of the population has contracted the HPV virus but their immune system has been able to combat it on its
Monday was manic as usual, with very nice pre-market gains quickly turning sour. We fell from 11,665 on Monday morning all the way back to 11,300 on Wednesday and finished the week at 11,628 – not exactly inspiring overall but we held our Aug 4th lows, which were better than our July 28th lows, which were better than our July 15th lows so it’s kind of like progress only without the higher highs that indicate a proper recovery. So it looks as though we may still be consolidating, and that means perhaps another trip to 11,800 and the next time back down we’ll be hoping to hold 11,450 as a firm bottom to call it progress.
It’s all going to depend on the first two days of this week, if we can race up to 11,800, we have a good chance of breaking up, if we can’t get there until Wednesday, we can expect it to be "hump day" and back down we go. From a data perspective we have July Existing Home Sales, probably not exciting, on Monday, followed by Consumer Confidence, July New Home Sales (blah) and the FOMC minutes on Tuesday. Nothing there that sounds like we’ll be making new highs is there?
Our best chance for a big rally is Wednesday’s GDP, which may be even higher than the 2.7% projected (thanks to the stimulus checks). It’s very, very, very hard to sell a recession story when the economy is growing at 3%. If we can couple a better than 2.8% GDP with less than 400,000 jobless claims on Thursday morning AND we’re holding 11,800 from Tuesday THEN we may get back over 12,000, that’s the best-case scenario for the week.
We get earnings from TMA on Monday evening and Tuesday we see AEO, BIG, CHS, SFD, TUES, BGP and JCG, which will give us a good look at consumer spending patterns. Wednesday it’s…
Analyst Richard Bove has stated Lehman CEO Richard Fuld has "lost control of the game." That is something I completely agree with as it should be obvious to all. Bove went on to say "If he doesn’t do something this weekend, as of next week, the game is on." That makes absolutely no sense. Nor does Bove’s price target of $20 per share.
Yes, Lehman has been shopping around for buyers, but buyers have been balking. I talked about Lehman talks collapsing and how poorly Lehman’s preferreds trade in
The same way sovereign funds balked over Lehman Brothers CEO Dick Fuld’s terms to sell them a chunk of the firm, some private equity firms are balking over Fuld’s terms to sell them a part of Lehman’s investment management business, which includes the firm’s crown jewel, the Neuberger & Berman asset management unit, sources have told CNBC.
As first reported by CNBC, Fuld, Lehman’s long-time chief executive, is looking to sell a 70 percent stake in the investment management division and have an option to buy it back at a later date. As a carrot to the potential buyer is a warrant to purchase a 20 percent stake in Lehman that could be cashed in when the credit crisis abates and the firm’s stock price recovers.
But potential buyers—which include nearly every major private equity firm—are starting to balk at Lehman’s initial offer, according to Wall Street executives familiar with the matter.
Their problem is the price. Lehman is pricing the investment management division at around $10 billion, meaning a 70 percent stake would cost $7 billion. But the real cost will be much more than that, because asset management firms are only worth something if employees remain with them following such a
"Recall that dollar volume flow (aka money flow) represents the dollars flowing into or out of a particular stock or market. We look at each transaction in each stock and multiply the transacted price times the volume of that transaction. If the transaction occurred on an uptick, we add it to a cumulative total; if the transaction occurred on a downtick, we subtract it from the cumulative total. That cumulative total at the end of the day is the money that has been flowing into (if the sum is positive) or out of (if the sum is negative) the stock…."
Excerpt: "A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China’s central bank.
“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.”
Freddie and Fannie shares touched 20-year lows yesterday on speculation that a government bailout will leave the stocks worthless. Treasury Secretary Henry Paulson won approval from the U.S. Congress last month to pump unlimited amounts of capital into the companies in an emergency.
China’s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong. The Chinese government probably holds the bulk of that amount, according to McCormack.
Industrial & Commercial Bank of China yesterday reported a $2.7 billion holding. Bank of China Ltd. may have $20 billion, according to CLSA Ltd., the Hong Kong-based investment banking arm of France’s Credit Agricole SA. CLSA puts the exposure of the six biggest Chinese banks at $30 billion.. .."
Excerpts: "Midwest Bank Holdings Inc. Chief Investment Officer Don Wiest is wagering U.S. Treasury Secretary Henry Paulson will rescue him from a failing $67 million stake in Fannie Mae and Freddie Mac.
Melrose Park, Illinois-based Midwest and banks from Philadelphia-based Sovereign Bancorp to Frontier Financial Corp. in Everett, Washington, own preferred shares in the beleaguered mortgage-finance companies that have lost more than half their $35 billion value since June 30. Concern that Paulson may step in with a rescue plan that would wipe them out along with common stock investors has sent the securities tumbling.
Cassandra on Peak Credit and our economic future. She worries, "some will think that these ruminations border on the insane" but I don’t think so, all appears perfectly sane to me. Courtesy of Cassandra does Tokyo.
Does Peak Credit inevitably follow piqued credit? Well if you’re my age, and you thought so and positioned accordingly, you’d have been bankrupted a very long time ago – possibly as early as the late 1980s. And if you were a glutton for punishment, you’d have been toasted again in 1994, another time in 1998, yet again in 2002, and rubbing one’s nose in it, perhaps every year after that until midsummer two-thousand-and-seven. Dog days indeed for those bearish on the ability of the financial system to manufacture, distribute, and service debt, whether in real or nominal terms, or in relation to any measure of the economy or change in the growth thereof.
Yet as pessimistic on its sustainability (and wrong!!) as one would have been in the past, one should now be as optimistic one’s assessment that this is The Big One, that we’ve smacked head-first into the boundary of the maximum amount of debt that can be assumed by households, corporates and governments in our economy and be reasonably sustained with the fruits of our labour, and investment. Actually, I would posit that we long-ago pierced any reasonably sustainable threshold, and only through sheer inertia and the fortuitiousness of pulling of rabbits-out-of-hats have we lasted this long. But it is the anchoring of popular belief in faith and absent solvency from days long passed combined with the extrapolation a series of non-extrapolatable macro income streams which could cause any sensible human being believe or have believed that the boundary lay somewhere in front of us and not far behind us.
Culpability is not singular. Stern-Stewart, investor short-termism and systemic mono-focus, along with greedy managers replete with agent/principal dilemmas must assume blame on the corporate side. Selfish American Voters repeatedly demanding representatives requite incongruous financial goals with cynically lame and unsustainable fiscal policies, along with a near complete detachment from reality in regards to present consumptive desires in relation to both incomes and longer-term savings requirements are just as at fault as the monetary wrecktitude resulting from an
Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun
The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.
Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes&rdqu...
Following a a planned demonstration over how police handled the arrest of Freddie Gray, a 25-year-old Baltimore man who suffered a spinal injury at some point after he was detained by police on April 12 and died a week later; hundreds of protesters confronted lines of police. Objects were thrown, stores pillaged, and at least five police cars have been damaged. The Mayor of Baltimore has asked fans to remain inside the ballpark "due to ongoing public safety concerns." Ferguson 2.0?
Question: Do price waves answer the Continuation or Reversal question?More from RTT TvAnswer: Yes when you understand Wyckoff logic, more so if you understand Richard Wyckoff law off 'Effort vs Results' and how it supports the Richard Wyckoff law of 'Supply and Demand'.AMZN price chart with waves colored (the daily price waves are the same formula as PnF wave/bar calculation below, allows sync of price action).
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Auto PnF chart from our Swing Pop out charts.
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King Dollar has been on a role since last summer, up over 20% in less than a year. When looking back on the US$, the rally has been rare and nearly historic. Majority of the rally took place inside the steep rising channel above. Over the past month the US$ might have put in a double top. Over the past few days, the US$ has slipped a little below rising support at red arrow above.
Here's an interesting argument by Felix Salmon, although I think he is taking two correct observations and mistakenly attributing a cause-and-effect relationship to them: Bitcoin is going nowhere because women are not involved.
More likely, in my opinion, women are not involved in bitcoin because bitcoin is going nowhere (and they know it). Or maybe, simply, bitcoin is going nowhere and women are not involved.
Nathaniel Popper’s new book, Digital Gold, is as close as you can get to being the definitive account of the history of Bitcoin. As its subtitle proclaims, the book tells the story of the “misfits” (the first generation of hacker-l...
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As we get into the heart of earnings season and anticipate the GDP report for Q1, the investor spotlight has been taken off the Federal Reserve and timing of its first interest rate hike, at least temporarily. Even though Q1 economic growth will undoubtedly look weak, the future remains bright for the U.S economy – even though many multinationals will struggle with top-line growth due to the strong dollar – and any near-term selloff resulting from weak economic or earnings news should be bought yet again in expectation of better results for the balance of the year. High sector correlations remain a concern, reflectin...
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
In my last post (Part 1 of this article), I looked at alternative ETFs that could be used as hedges against the corrections that we have seen during that long 2 year bull run. Looking at the results, it seems that for short (less than a month) corrections, a VIX ETF like VXX could actually be a viable candidate to hedge or speculate on the way down. Another alternative ETF was TMF, a long Treasuries ETF which banks on the fact that when markets go down, money tends to pack into treasuries viewed as safe instruments. In some cases, TMF even outperformed the usual hedging instruments like leveraged ETFs. There could of course be other factors at play since some of 2014 corrections were related to geopolitical events which are certain...
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PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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