Just one week ago the World was coming to and end and now everyone has their rally caps back on. Investors really are sheep – except I think sheep have better memories… We're still right on plan of dropping 10% and then bouncing 4% (strong bounces) by Wednesday (today) that was initiated on October 6th by our friends at the Fed (see yesterday's post for the summary). For those of you keeping score, our strong bounce predictions for today were:
Dow 16,466(weak) and 16,632 (strong).
S&P 1,878 (weak) and 1,903 (strong).
Nasdaq 4,280 (weak) and 4,360 (strong).
NYSE 10,360 (weak) and 10,540 (strong).
Russell 1,104 (weak) and 1,128 (strong).
The Dow is just 17 points away from our goal and we'll just need the NYSE and the Russell to confirm their bounce lines and THEN we can get bullish again. Meanwhile, we actually got a bit more bearish in our Short-Term Portfolio (also in yesterday's post) as our Long-Term Portfolio popped right back to up 18.1% for the year so we wanted to lock those gains in with the STP, which finished the day up 81.8%, down from 92% in the morning as the markets rocketed.
If the rally is real, the Dow should have no problem at all popping our 16,632 line – after all, it jumped 234 points yesterday but stopped dead right at our strong bounce line. The…
The NYSE’s most recent disclosure of margin debt indicates a surge in trading in margin accounts, where total debt shot up to $231 billion as of December, up $58 billion from February or 30%, and also an increase of 4.5% from November. This is an indication that "animal spirits" have surged by about the same amount as the broader market since the market lows: in other words, speculation is now rampant, and, to make things even better, is very much on margin, or leveraged. And we all know what happens when levered speculative bets turn out not quite as expected. For those who may be confused, Dow Jones provides a useful primer of how a margin call feedback loop tend to make things ugly, fast.
A potential pitfall for those trading "on margin" is a sharp decline in stock prices, which can expose investors to margin calls, requiring them to post additional collateral lest their brokers sell their securities to cover the debt. A wave of margin calls can worsen selling pressure on stocks and was seen as partly to blame for the market’s woes in the fall and winter of 2008-09…
But why worry – just like in 2006, every sellside (and in many cases, buyside) model now crashes if you plug in negative growth. At that point, coupled with a blue screen of death, the best outcome is to just reboot the computer and head to the nearest pub for a beer or seventeen. In the meantime, all problems will just resolve themselves on their own: especially if you have $100 trillion in discount window borrowings collateralized with recently defaulted securities from AIG’s worthless portfolio. Oh, sorry, the Fed said ML III is worth at least part. So yes, all is good – Go back to drinking.
Following China's official PMI print at a 3-year low, Caixin's PMI collapsed to 47.3 - the lowest sinec March 2009. Despite another CNY150bn liquidity injection (but the biggest strengthening of Yuan since Nov 2014 and a financial conditions tightening in FX trading), China, US, and Japanese stocks are plunging... SHCOMP -4%, Dow -280, NKY -340
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We live in a highly correlated world when it comes to stock market trends!
Last week as the Dow was falling 1,000 points a week ago today, the Power of the Pattern reflected that many of the key markets around the world were hitting 4-year rising channel support at the same time.
The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...
With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.
Stock market sell off surprises some while others were prepared and are hedged prospering
Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
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...
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 firstname.lastname@example.org 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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