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.
The only preview you need of today's first FOMC statement for 2015, one which has already cornered Yellen as any additional USD strength from here on out will certainly be economy and S&P500 negative, and who as Deutsche summarizes is damned if she does, and damned if she doesn't, and that as Jim Reid politely puts it, "something will have to give at some point."
From DB's Jim Reid:
One wonders how careful the Fed will be in 2015. We may get some early clues today after the conclusion of the first FOMC meeting of the year. This meeting isn’t going to see the release of the Fed’s Summary of Economic Projections, nor a press conference but nevert...
Please consider Greeks Rebuff EU Call for More Russia Sanctions. A spokesman for the ruling coalition of Alexis Tsipras, prime minister, said Greece had not approved a statement from EU heads of government that asked their foreign ministers to review further sanctions in response to the latest flare-up of violence in eastern Ukraine, blamed by the US and most European nations on Russian-backed separatists.
The Greek statement raised questions over whether the new government, led by the radical leftist Syriza party, would s...
Please review a collection of WWW browsing results.Date Found: Tuesday, 13 January 2015, 01:43:37 PM
Click for popup. Clear your browser cache if image is not showing. Comment: Ouch! See the last point of demand between $60 and $70 In Dec at resistance, now strong selling, Large pattern forecast sees a price under $40
Date Found: Tuesday, 13 January 2015, 06:54:16 PM
Click for popup. Clear your browser cache if image is not showing. Comment: Coffe ETF bounces off support, minor spring, if get some strength to $40, a trade may be on!
Date Found: Friday, 16 January 2015, 02:28:29 AM
Click for popup. Clear your browser cache if image is not showing. ...
While other commodity prices have further softened recently, Gold rallied – rising from December low of $1,174/oz. to touch $1,300/oz. Joel Crane, an analyst at Morgan Stanley, expressed pessimism that...
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Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...
An interview with John Ehlers of Stock Spotter and Mesa Software
Ilene: John, in our last discussion about trading systems in general and yours in particular (Can trading be reduced to cycles, stresses and vibrations?) you mentioned Monte Carlo simulations and their use in measuring performance. Can you explain more about how you measure the performance of a trading system?
John: Let's start with comparing trading with gambling. The two have several things in common. In both ...
So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.
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...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
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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