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Posts Tagged ‘excess liquidity’

Rosenberg’s Explanation For Recent Market Surge: Liquidity Pump & Short Covering

Rosenberg’s Explanation For Recent Market Surge: Liquidity Pump And Short Covering

Courtesy of Tyler Durden at Zero Hedge 

It seems everyone is perplexed by the most recent irrational bout of July market action. Like clockwork, once July rolls in, the market surges, no questions asked. This year, the ramp is particularly blatant because as the attached chart demonstrates, bonds, which are a far more credible barometer of market (in)sanity, indicate the S&P is rich by at about 50 points. As this spread will most certainly converge eventually as we discussed previously, a short stock, short bond position would generate some much needed P&L in this world of deranged fractal algorithms. As to what may have caused the most recent bout of irrational exuberance, David Rosenberg has the most logical, and generic solution: excess liquidity and a short covering spree, and "nothing fundamental here."

From Breakfast with Dave

WHAT’S DRIVING THE MARKET?

We’ve been asked repeatedly how the stock market has managed to bounce off the nearby lows with such veracity. Especially with the ongoing weakness we have seen in the incoming U.S. economic data due to the fact that the retail investor still refuses to participate and is solely focused on income-generating strategies. The answer is that the market may have been on the receiving end of another few jolts of liquidity. M2 money supply has expanded $38.5 million in the past two weeks and the M1 money multiple has risen from 0.839 to 0.862.

When we go to the weekly data from the Fed, we see that “trading assets” on commercial bank balance sheets expanded to $325 billion in the past two weeks from $297 billion. And, when we go to the Commitment of Traders report, we see that there has been a big swing in the net speculation position on the S&P 500 “E-minis” on the Mercantile Exchange (futures and options) to a net long position of 28,172 contracts from 15,155 net shorts just two weeks ago. That’s a big part of the bounce-back — prop traders and short-coverings. Nothing fundamental here, as far as we can see.

JUST CALL IT A WHOLE LOT OF VOLATILITY

  • Last week’s 5.4% increase was the best performance since mid-July 2009 (week of July 17th). But yet, prior to last week, the S&P 500 saw the largest decline (-5% during the week of July 2nd) in eight


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The credibility of farmers, priests and prostitutes – and bankers?

First, welcome to Michael Pettis.  Michael is a professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.  He is also Senior Associate at the Carnegie Endowment for International Peace.  Second, this is an excellent article that provides insight into the thoughts of the Chinese people. – Ilene

The credibility of farmers, priests and prostitutes – and bankers?

chinese prostitute - credibility highCourtesy of Michael Pettis at China Financial Markets

Three weeks ago China Daily published a pretty funny article about a recent survey on credibility that had taken place in China. According to the article,

At a time when shamelessness is pervasive, we are often at loss as to who can be trusted. The five most trustworthy groups, according to a survey by the Research Center of the Xiaokang Magazine, are farmers, religious workers, sex workers, soldiers and students.

A list like this is at the same time surprising and embarrassing. The sex business is illegal and thus underground in this country. The sex workers’ unexpected prominence on this list of honor, based on an online poll of more than 3,000 people, is indeed unusual.

It took the pollsters aback that people like scientists and teachers were ranked way below, and government functionaries, too, scored hardly better.  Yet given the constant feed of scandals involving the country’s elite, this is not bad at all. At least they have not slid into the least credible category, which consists of real estate developers, secretaries, agents, entertainers and directors.

I am not sure what secretaries have done to get themselves such poor rankings (could they mean party secretaries?), and I am not sure what kind of directors they mean (movie directors? managing directors?) but not everyone found this survey funny.  Last week a columnist in the People’s Daily had this to say about the same survey:

In recent years, China has already paid a high price for the prevailing credibility crisis. The annual losses caused by bad debts have reportedly amounted to about 180 billion yuan, and the direct economic losses induced by contract fraud each year is also up to 5.5 billion yuan. Besides, shoddy and fake products contribute to another great loss involving at least 200 billion yuan. Generally, credibility crisis would cost China as much as 600 billion…
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Zero Hedge

Obama Administration Bullies Allies Over Iran Nuke Deal Dissent

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

President Obama is "blowing up our alliances to secure a deal that paves Iran’s way to a bomb," according to European sources close to the negotiations, and as Washington Free Beacon reports, efforts by the Obama administration to stem criticism of its diplomacy with Iran have included threats to nations involved in the talks, including U.S. allies. France has borne the brunt of Obama's wrath as one source in Europe close to the ongoing diplomacy said the US has begun to adopt a “harsh” sta...



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Phil's Favorites

In the News, 3-27-15

From Bloomberg 

Economy in U.S. Grew 2.2% in Fourth Quarter on Consumer Spending — The U.S. economy expanded at 2.2 percent annualized pace in the fourth quarter, led by the biggest gain in consumer spending in eight years.

A Physicist Is Building a Time Machine to Reconnect With His Dead Father  — The hour is late.

His scientific papers were published years ago, filled with equations wrought by the energies of a younger man. But at 69, theoretical physicist Ron Mallett still goes to work every day to build a time machine based on his most elegant construct...

[Photo:&nbs...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Insider Scoop

Raymond James Downgrades Power Integrations To Market Perform

Courtesy of Benzinga.

Related POWI Benzinga's Top Downgrades Benzinga's Volume Movers

Analysts at Raymond James downgraded Power Integrations Inc. (NASDAQ: POWI) from Outperform to Market Perform and removed the price target of $57.00.

Power Integrations shares have dropped 18.42% over the past 52 weeks, while the S&P 500 index has surged 10.69% in the same period.

Power Integrations' shares fell 1.51% to $51.65 in pre-market trading.

Latest Ratings for POWI DateFirmActionFrom...

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Chart School

Q4 GDP Third Estimate Remains Unchanged at 2.2%

Courtesy of Doug Short.

The Third Estimate for Q4 GDP, to one decimal, came in at 2.2 percent, unchanged from the Second Estimate. Today's number was a minor disappointment for most economic forecasts, which were looking for a somewhat higher Third Estimate. For example, both Investing.com and Briefing.com had forecast of 2.4 percent.

Here is an excerpt from the Bureau of Economic Analysis news release:

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quart...

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Promotions

Watch Phil on Money Talk on BNN Now!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show last night. As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. (And get this, Obama - the President - is following Phil on Twitter.) ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here. Part 2 is here. Part 3 is here.   ...

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Sabrient

Sector Detector: Bulls retake the wheel, with a little help from their friends at the Fed

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Scott Martindale at Sabrient Systems

Well, it didn’t take long for the bulls to jump on their buying opportunity, with a little help from the bulls’ friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing clichés continue to work -- “Don’t fight the Fed,” and “The trend is your friend.”

In this weekly update, I give my view of the cur...



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OpTrader

Swing trading portfolio - week of March, 23rd, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Digital Currencies

Bitcoin vs. Uber: Bitcoin Lovers Respond to Mish

Courtesy of Mish.

I recently commented that it would not surprise me if bitcoin plunged to $1.00. That was not a prediction, it was a comment.

Still, I still feel a collapse in bitcoin is likely.

For discussion, please see Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?

In response, reader Creighton writes ...

Hello Mish

While I'm not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.

While it's likely that the US government watching Bitco...



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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Option Review

Cypress Semi Draws Bullish Option Plays

Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...



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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

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...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Help One Of Our Own PSW Members

"Hello PSW Members –

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 jennifersurovy@yahoo.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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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