by Chart School - March 17th, 2010 4:53 pm
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The SP is trying to break out of the trend and hold it’s gains. I would not get in front of this, unless you wish to guarantee an opportunity for an additional short squeeze. Remember, the wiseguys can peek into your collective hand at will, and read your strategy within milliseconds of your executing it. That is why playing short term trends is becoming increasingly difficult for the individual speculator.
It is useful to watch the Nasdaq 100 at key support and resistance levels, as well as the broader indices. The SP futures are generally the ‘push’ where the flash and sizzle of bull markets occur of late. Buying the futures drags much of the market behind it. But this can only last for so long unless additional ‘real’ buying steps in.
Formidable retracement. Now the rally must show its mettle and either confirm an economic recovery or the start of a new bubble led by financial assets, or not.
Little pricing in of fear, but the markets remain thin and a bit uneasy.
The Dollar is hanging on to support.
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by ilene - March 11th, 2010 1:59 pm
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Courtesy of Gus Lubin at Clusterstock/Business Insider
QB Partners fits the description of hedge funds that Rick Bookstaber accused of pumping the gold bubble and — even worse — of fueling the bubble with publicity.
The New York fund leapt to the defense of gold by sending an email to Business Insider with a message for Bookstaber.
Attached was the point-by-point rebuttal they gave to Nouriel Roubini in December when he had the nerve to diss gold.
See Also:
Rick Bookstaber: Hedge Funds Are Pumping The Gold Bubble And Luring Investors Off A Cliff
See also this chart (below) via Jesse’s Americain Cafe, and the comment by bidwhacker at Clusterstock
The economic cycle is definitely not the right framework for determining when to be in gold. Gold bull and bear markets can extend across economic upturns and downturns.
Absent an "economic meltdown" as you call it, the best tool for determining when the gold price will advance (at least since Nixon broke the last vestiges of the gold standard) is real interest rates:
Gold bull markets happen in an environment of negative real interest rates…This is the closest thing to an one-variable indicator for the gold market. But as you point out, it only good over longer periods of time and not a perfect correlation. The way I like to look at it is, when you have negative real interest rates, the odds are strongly with you that gold prices will go up.
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by ilene - March 9th, 2010 4:13 pm
Courtesy of Gus Lubin at Clusterstock/Business Insider
The SEC’s Rick Bookstaber can hardly watch as sheep-like investors chase the gold bubble straight off a cliff.
Although his employer doesn’t give market advice, the SEC’s senior policy adviser shows his personal frustration in a post on Roubini Global Economics. First, he drops this great line about how people don’t even pretend that gold isn’t a bubble:
Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest.
Second, Bookstaber thinks hedge funds managers like John Paulson have a pump and dump scheme on gold.
RGE:
Given that “hedge fund” and “highly secretive” are usually said in the same breath, don’t you get suspicious when so many of the top managers are so vocally out there about their gold investments? And when their positions are structured in a way that make them open to view? Paulson and Soros have huge positions in gold ETFs. We know that, because if you buy ETFs, they show up in your 13-F filing. Granted, with an equity investment you can’t help putting that information out into the market, but with an asset there are plenty of ways to take the position without signaling it.
That they are taking a highly visible route to their positions suggests the game that is being played is one of leading the herd. The 13-F reports positions with a big lag, so no one will notice if they quietly slip out the side door while the party is still hopping. And how about when the view is backed up by none other than Goldman Sachs? Will they let everyone know when they think it has gone too far before they get out. Or before they go short? Maybe they already have.
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by ilene - March 1st, 2010 10:13 pm
Karl argues that the "animal idiocy" we’ve seen over the last year is proof that we’ve learned absolutely nothing. Hard to take the other side of that one. - Ilene
Courtesy of Karl Denninger at The Market Ticker
Yes, I said CRASH, and I meant it.
Why?
SINGAPORE/CAIRO, March 1 (Reuters) - Copper is likely to
climb when trading starts on Monday, lifted by uncertainty over
supply after the world’s top copper producer Chile was pounded
by a massive earthquake, analysts said over the weekend.
The front-month contract opened up more than 8%.
This, despite the fact that the earthquake was hundreds of miles away from the mines in Chile and there was zero damage to them. Some were offline for a few hours due to power failures, but none suffered any physical or structural damage, nor did their export points and the transportation network between the two.
So why did price spike more than 8% even though all this was known by the market before it re-opened for trading?
No part of the markets are trading on fundamental values, nor on forward business expectations. They are instead trading as "hot money" repositories where speculators rotate in and out of various instruments literally on a minute-by-minute basis.
This is how crashes happen.
When there is no fundamental value underlying a market there is no floor on price. Price then becomes one thing and one thing only - the number at which you can find another sucker to take your position from you.
This is how tulip bulbs went nuts in Holland, it is how houses went nuts in California in 2005, it is how tech stocks went nuts in 1999 and it is how oil went nuts in 2008.
But now literally everything has gone this way.
Take European national debt. We now know that Italy, for example, was cooking their books as early as 1995. This means that bond buyers overpaid for their bonds and took less coupon than they should have. This should have resulted in an immediate destruction in the value of those bonds when discovered, but it did not.
Why?
Because there was still a bigger fool.
Tech stocks were the same thing in 1999. These "companies" claimed the global GDP some 100 times over between the IPO-issuers in 1998 and 1999. This, of course, is impossible. Yet people kept buying even though mathematically 99% of them had to lose all their money. Ultimately, they did exactly that.
Oil went to $150 in 2008 even though demand was cratering. It…
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by ilene - January 20th, 2010 12:33 pm
Courtesy of Joe Weisenthal at Clusterstock
It’s not just perma-skeptics like Jim Chanos warning about a massive real estate bubble in China.
The latest is Fred Hu, the Goldman Sachs Inc. Chinese Chairman
ChinaPost reports (via Alphaville) that Hu told a conference in Taipei that Singapore, Hong Kong, and Mainland China all need to be on the lookout.
Bear in mind this isn’t just talk from the bank. Earlier this month it emerged that Goldman has been dumping real estate holdings in Shanghai.
See Also:
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by ilene - January 13th, 2010 12:46 pm
Courtesy of Vince Veneziani and Joe Weisenthal at The Business Insider/Clusterstock
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The whole world felt the reverberations of China imposing leverage limits on its banks. Regulators there are clearly freaked out by the heat of its economy.
Meanwhile, Jim Chanos and Thomas Friedman are going back and forth about whether China is a bubble, and whether there’s money to be made shorting it.
So we thought we’d adjudicate the question.
Our answer is yes, China’s real estate is the most obvious bubble ever. More obvious than the Dubai bubble in fact.
(naked capitalism, 2/18/10)
(Investment U, 3/3/10)
(Dividend Growth Investor, 3/10/10)
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by ilene - December 18th, 2009 1:53 pm
By Gus Lubin at The Business Insider
When he coined the term Chimerica in 2006, Niall Ferguson was refering to a mutually beneficial relationship: cheap money from China and wild spending from America.
But recently he has called for the end of Chimerica — seeing as America’s economy sucks and China looks a lot like bubble.
Published this week, his latest paper shows how insane fiscal policy in China created the monster.
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by ilene - December 11th, 2009 1:11 pm
Courtesy of Michael Panzner at Financial Armageddon
OK, let’s go through this one more time. Despite what we keep hearing from the politicians and moneymen, things are not getting better. Yes, we have seen the economic equivalent of a dead cat bounce — how could we not, given the trillions that have been thrown at the system — but it is simply not sustainable.
The reality is that we’ve just careened through decades of overborrowing and malinvestment, which created an array of dangerous imbalances and undermined our nation’s economic foundations. Now that the party is over, the wreckage is going to weigh on our prospects for years, if not decades.
Unfortunately, those who live in a bubble (i.e., Washington) or who’ve come to depend on them (e.g., Wall Street) have not seen through the fog of funny money policymaking. But as Bloomberg reports in "Americans Grow More Pessimistic on Economy, Nation’s Direction," the average Joe (and Jane) seem to have their eyes wide open when it comes to today’s depressing reality.
[Click on table to enlarge]
Americans have grown gloomier about both the economy and the nation’s direction over the past three months even as the U.S. shows signs of moving from recession to recovery.
Almost half the people now feel less financially secure than when President Barack Obama took office in January, a Bloomberg National Poll shows.
Those concerns have put consumers in a miserly mood as they head to the mall for holiday shopping, with half the country planning to spend less on gifts than last year and few buyers willing to run up credit-card debt for Christmas.
“The recession may be over, but the administration seems to be losing the battle when it comes to winning the hearts and minds of Americans,” says Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “This is important because the spending of consumers is the main factor that will turn the economic recovery into a self- sustaining one.”
Obama yesterday addressed anxiety over the economy with a speech proposing new spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient.
Unemployment in November stood at 10 percent, a drop from 10.2 percent in October yet still the second month in a row the figure stood in double digits.
No. 1 Concern
The economy is the country’s top concern, with…
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by ilene - November 16th, 2009 4:57 pm
Courtesy of Karl Denninger at The Market Ticker
Here’s Bernanke’s speech and what he said:
We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability.
That’s a new one. You are attentive to it eh?
Well then about this, Sir Jackass?
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An EXACT correlation as soon as Bernanke’s words were released - synchronized EXACTLY as to time. Dollar spiked, the S&P 500 dropped.
The Fed has the lever to force this carry trade out of the system before it grows large enough to destroy our economy and productivity. They need only raise rates - not a lot - just enough to make our markets unattractive. 2% should do it nicely.
Who can argue that 2% isn’t "very accommodative" in terms of rates?
Bernanke claims:
My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely.
He’s lying. If he truly believed this The Fed Funds rate would not be at zero - but it is.
Bernanke "outs" himself by saying:
The demand for credit also has fallen significantly: For example, households are spending less than they did last year on big-ticket durable goods typically purchased with credit, and businesses are reducing investment outlays and thus have less need to borrow. Because of weakened balance sheets, fewer potential borrowers are creditworthy, even if they are willing to take on more debt.
Here’s the most-recent Z1 credit graph:
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Note that The Fed’s "base money" is at present about $1.8 trillion, which is $1 trillion larger than the "normal" $800 billion.
But credit outstanding is some $53 trillion dollars.
Clearly, without credit expansion it is not possible for economic growth to occur. But credit expansion requires economic activity that in turn allows the coupon payments - interest and principal - to be made.
Where is the evidence that this is, at present, possible?
It’s absent because it hasn’t happened, and that’s a major problem. By refusing to allow the market to take care of the imprudent, forcing the default of bad loans and thus clearing them from both the lender and borrower’s balance sheets, we have impaired any ability to return to economic growth, as the…
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by ilene - November 13th, 2009 8:38 pm
Courtesy of Charles Hugh Smith, Of Two Minds
The global central banks have flooded the world economy with hot money for years. Why has this created massive asset bubbles rather than inflation?
In the 1970s, expanding credit triggered a decade-long bout of high inflation as cheap money chased scarce goods. Why hasn’t the massive expansion of credit/hot money of the past decade caused inflation? Short answer: overcapacity.
Let’s look at a few charts to recall the enormity of the current credit bubble: the trillions of dollars of credit created, the trillions borrowed in mortgages and other credit to chase asset prices upward, the trillions created as assets like housing rose in bubblicious euphoria, and the trillions extracted from those skyrocketing assets:
Despite the trillions being created, borrowed and pumped into the economy, inflation remained benign:
With all that money flowing around, jobs were relatively plentiful, setting a floor under consumption and consumer credit:
Even as all this money chased goods, services and assets, interest rates fell, earning savers less and less return:
Meanwhile, the capacity to make stuff like steel exploded: 
So here’s the dynamic which enabled low interest rates and low inflation even as credit exploded and bubbles rose in one asset class after another.
1. Massive expansion of credit was paralleled by a massive expansion of industrial capacity in China and indeed the entire world.
2. This expansion of capacity was matched by an expansion of supply in commodities. As the industrialization of China (one of the so-called BRIC nations–China, Russia, India and Brazil) and other developing nations drove demand for commodities, the incentives to exploit new sources drove up supply of almost everything: oil, iron ore, coffee, etc.
3. While prices have fluctuated in an upward bias, at no time did the cost of commodities rise to levels which threatened global growth except for the oil spike in 2008. Adjusted for inflation, oil is well within historical boundaries even at $80/barrel.
4. To feed the giant credit-dependent machine they’d fostered, central banks kept lowering interest rates and increasing liquidity/money supply. This drove the returns on savings and bonds down to absurdly low levels, forcing money managers to chase riskier assets to make a decent return on investments.
5. This need to earn higher returns drove vast floods of money into assets, inflating one bubble after another.
6. Though consumption also skyrocketed, the vast expansion of industrial capacity and commodity supplies actually outpaced rising consumption, keeping supply and demand…
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March 20th, 2010 1:08 am
John's thoughts on the relentless trend higher in stocks, with the languishing VIX.
The Boredom Before the Storm (Time to Buy Volatility)Courtesy of John Rubino at Dollar Collapse
As eventful as the past few months have been (what with Greece, California, Illinois, Iran, the Lehman Brothers revelations, U.S./China trade friction, and record deficits just about everywhere), you’d think the financial markets would be agitated, to put it mildly. Instead, just about everything is range-bound, and the things that aren’t, like U.S. stocks, are trending slowly, reassuringly, higher. This has taken the VIX, the main measure of fear (i.e. volatility) in the options market down to levels last seen before the ...
March 20th, 2010 5:48 am
Courtesy of Chopshop
In succinct synopsis of what lays just over the horizon ~ "the cycle of economic implosion" ~ for the ill-conceived amalgam known *today* as the European Union, phinance's phavorite political prisoner, Martin Armstrong, cautions that:
- "the EU is in dire position", on the precipice of shattering into default and civil unrest;
- the sovereign debt crisis materializing across Europe will soon reach US shores;
- the CFTC will curtail currency speculation by slashing leverage from 100:1 to 10:1, which "can cause a liquidity crisis that backfires, magnifying everything."
Since "debts will never be paid and interest expenditures are the greatest transfer of wealth ...
March 19th, 2010 12:05 pm
Quad Witching Expiration and a Pullback from the Long Term TrendCourtesy of JESSE'S CAFÉ AMÉRICAIN
The front month on the SP futures has now switched from March to June as a part of the Quad Witching Expiration. (Technically it switched last week, but for charting purposes I made the switch last night.) The June Futures have essentially the same formations as did March, it's just that the earlier months have few trades to mark them. This is the first serious test for US equities since mid-February, as it has been on a spectacular rally streak, no doubt fueled by excess liquidity applied to a selling exhaustion in the funds. Curiously not among corporate...
more from Chart SchoolMarch 19th, 2010 9:29am
Well now we're officially cashed out!
As I always do before options expiration I reviewed our Buy List, which, this quarter, is a list of 37 stocks we've been playing since late December and, sadly, after reviewing 37 of our favorite investments very carefully this week - I could only conclude that cashing them out was the only decision I could be comfortable with this week. Of 66 trades we had on our 37 stocks, 64 are winners with an average return since 2/8 of 28% - since most of the trades were designed to make 40% for the year - it just seems silly not to take the money and run now, on March 19th.
You are not supposed to have 64 out of 66 winners in 6 weeks, you are not supposed to make 3/4 of what you anticipate for the year in 6 weeks - that is NOT how the markets are supposed to work! When the ma...
March 19th, 2010 11:05 am
Identifying the Fundamentals
Stocks move under the influence various factors that we can use to identify stocks that are likely to move 3-5% in a single day. Even t...
March 19th, 2010 4:41 pm
Today’s tickers: BBY, DNDN, GLD, BAC, AET, BA & NBR
BBY - Best Buy Co., Inc. – Shares of the world’s largest electronics retailer rallied 2% to $41.25 during the trading session after receiving an upgrade to ‘buy’ from ‘neutral’ at Goldman Sachs Group where analysts increased BBY’s target share price to $47.00 from $44.00. Options traders employed a few different bullish tactics to position for continued upward movement in the price of the underlying stock through expiration in April. Plain-vanilla call buyers targeted the April $44 strike to purchase 5,100 calls for an average premium of $0.55 apiece. These investors stand ready to accrue profits if Best Buy’s share price increases 8% from the current value to exceed the effective breakeven point on the calls at $44.55 by expirati...
more from Andrew
March 15th, 2010 6:49 pm
By Ilene
Let's take a look at Insider Buying and Selling over the last week or so. These are screen shots from Finviz - the significant buys against a green background first and significant sells against the pink background second. All the buys fit into my screen shot but the sells did not. Click here to see all the sells.
Note that the largest buy in the group, for KITD was at a price of 9.73 (KITD is currently at 11.54). The buy was part of an Equity Offering rather than an open market purchase. Tuzman Kaleil Isaza's (KITD's Chairman and Chief Exec. Officer) history of buys is http://www.insidercow.com/ more from Insider
March 15th, 2010 8:55 am
This post is for live trades and daily comments.
To learn more about the swing trading portfolio (strategy, membership etc.), please click here
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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