Posts Tagged ‘perfect storm’

Did a Big Bet Help Trigger ‘Black Swan’ Stock Swoon?

I wouldn’t call this a "black swan" event any more than Jon Stewart would call it a "perfect storm." Felix Salmon - it’s a silly theory – Nassim Taleb Didn’t Cause the Crash makes a better argument below. – Ilene  

Did a Big Bet Help Trigger ‘Black Swan’ Stock Swoon?

Red Bull Air Race Perth - Training Day

By SCOTT PATTERSON And TOM LAURICELLAWSJ

Shortly after 2:15 p.m. Eastern time on Thursday, hedge fund Universa Investments LP placed a big bet in the Chicago options trading pits that stocks would continue their sharp declines.

On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.

The trade by Universa, a hedge fund advised by Nassim Taleb, author of "Black Swan: The Impact of the Highly Improbable," led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.

Then, as the market fell, those declines are likely to have forced even more "hedging" sales, creating a tsunami of pressure that spread to nearly all parts of the market.

The tidal wave of selling fed into a market already on edge about the economy in Europe. As the selling spread, a blast of orders appears to have jarred the flow of data going into brokerage firms, such as Barclays Capital, according to people familiar with the matter…

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Nassim Taleb Didn’t Cause the Crash

By Felix Salmon

Of all the silly theories about the cause of Thursday’s stock-market plunge, I’m not entirely sure why the WSJ has decided to give particular credence to the idea that it can all be traced back to a single $7.5 million trade for 50,000 options contracts. Lots of options trades of that size take place every day, and just because this one happened just before the market fell doesn’t mean it was the cause of the crash.

It’s becoming increasingly clear that the crash was fundamentally the fault of weak market structures, especially in the smaller electronic exchanges. It wasn’t a fat finger, it wasn’t cyberterrorism, it wasn’t the sale of 16 billion


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Jon Stewart on the Flash Crash

Jon Stewart on the Flash Crash

Courtesy of Josh M. Brown, The Reformed Broker 

The market plunged because of a "Perfect Storm"…one that happens about every two weeks.

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
A Nightmare on Wall Street
www.thedailyshow.com
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Fed Watch: The Debate Continues

Fed Watch: The Debate Continues

Courtesy of Mark Thoma, referencing Tim Duy’s Fed Watch at Economist’s View

the debate continuesTim Duy looks at the shape of things to come:

The debate over the shape of the  recovery continues unabated.  Equities, at least this week, are voting in favor of the V-shaped recovery, with the Dow pushing past the 9,000 mark for the first time since January.  Never one to accept good news at face value, Nouriel Roubini predictably took the opposite position:

A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”

 

Roubini, chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business, predicted that the global economy will begin recovering near the end of 2009. The U.S. economy is likely to grow about 1 percent in the next two years, less than the 3 percent “trend,” he said.

 

Roubini based his short-term outlook on the worsening condition of the U.S. housing and labor markets, which he called “inextricably linked.” He said a “weak” job market will contribute to another 13 percent to 18 percent drop in house prices, bringing total declines nationally to as much as 45 percent from their peak.

I would add to Roubini’s pessimism that  bond market investors as of yet do not share the optimism of their brethren in the equity side of the industry.  The run up in yields that brought a 4-handle to the 10 year Treasury appears to have been stopped dead in its tracks, and that maturity has pulled back to the mid threes.  If the run-up in yields foreshadowed a burst of optimism in equities, the pull back would suggest that this rally has nearly run its


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Zero Hedge

US & China Stocks Are Plunging After PMI Hits 6.5-Year Low, PBOC Strengthens Yuan Most Since Nov 2014

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

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

Carnage!

China -4%

...



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Phil's Favorites

Getting Started - The Hardest Part of Investing

 

Getting Started – The Hardest Part of Investing

Courtesy of The Banker

“Let’s start at the very beginning, a very good place to start,” sings my children’s favorite nanny-from-the-movies, Maria.

School started for my girls this week, so I’m in the mood for new beginnings. New school uniforms, freshly sharpened #2 pencils, and lined notebooks still unblemished with unicorn stickers.

Besides inheritance (obviously the very b...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Summer's Over Get Smart on Cash Flow and Become a Very Serious Investor (Bloomberg)

In 1863, the Dowlais Iron Company had recovered from a business slump, but had no cash to invest for a new blast furnace, despite having mad...



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Chart School

Modest Losses

Courtesy of Declan.

Bears took it upon themselves to press their advantage into the close of business. Selling volume was light and lacked the conviction that had accompanied the rout of the previous week.

The S&P is caught in a no-mans land, with a retest of 1,867 likely needed at some stage to rebuild confidence on bulls.


The Nasdaq has so far honored resistance at 4,825. Little else to say other than that.


The Nasdaq 100 did likewise, but hasn't...

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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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OpTrader

Swing trading portfolio - week of August 31st, 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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Kimble Charting Solutions

Forget the S&P 500, keep your eyes on this leader!

Courtesy of Chris Kimble.

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.

I shared on 8/26, that the “Global bull market was still intact!” ( See Post Here)  

Did many of you tell your friend...



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Insider Scoop

Lowered Miner Estimates Lead To Southern Copper Downgrade

Courtesy of Benzinga.

Related SCCO How To Play Copper Long Term Amid A Low Prices Environment HSBC Initiates Southern Copper At Buy
  • Southern Copper Corp (NYSE: SCCO) shares are down 8 percent in the last three months, even after picking up momentum last week and rising 6 percent.
  • JP Morgan’s Rodolfo Angele downgraded the rating on the company from Overweight to Neutral, while reducing the price targ...


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Sabrient

Sector Detector: Finally, market capitulation gives bulls a real test of conviction, plus perhaps a buying opportunity

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

Courtesy of Sabrient Systems and Gradient Analytics

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 ...



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ValueWalk

Some Hedge Funds "Hedged" During Stock Market Sell Off, Others Not As Risk Focused

By Mark Melin. Originally published at ValueWalk.

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

While so...



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Digital Currencies

Bitcoin Battered After "Governance Coup"

Courtesy of ZeroHedge. View original post here.

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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Pharmboy

Baxter's Spinoff

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

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).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

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. 

Since...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

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...

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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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