Archive for March, 2009

Intermediate-term Consequences Of A 30′s-Like Market

Rob Hanna describes the 1930s-like trading environment he’s expecting for the next few years. – Ilene

Intermediate-term Consequences Of A 30′s-Like Market

Courtesy of Rob Hanna at Quantifiable Edges

I don’t normally reprint large sections of the Subscriber Letter on the blog but I’ve received several inquiries about the longer-term and I figured, “What the heck.” Below is from this week’s intermediate-term outlook:

The question that I keep hearing over and over is “Is this rally for real?” What needs to be considered when formulating an answer is what constitutes a “real” bull move. It is my contention that the current environment most resembles that of the 30’s from a trading standpoint. Certainly the kind of damage that has been done to the market has not occurred since at least that time period. Additionally, volatility levels reached during the course of this bear have reached levels not seen since at least the 30’s in some cases.

I’m of the belief that the market is likely to trade in a very wide range over the next few years. It is unlikely to begin a new secular bull market during this time. Rather I believe we are likely to see both bull and bear runs occur. Some of these, such as the October and November rallies, may be too quick for most traders to capture significant portions of. Others may last several months before reversing course in a convincing manner. Below I’ve again pulled up some charts from the 30’s. In this case I’ve overlayed the zig-zag indicator in light blue.

What the zig-zag does is identify all moves of at least 15% either up or down from close to close. You’ll notice there were a substantial number of these moves during that time:

Late 1929 – late 1934. (created with Tradestation, click on charts for larger image)

Lots of sharp sizable moves can be seen during the period. The 1932 low seen here is "the" low.  

Next is late ’34 to late ’40 (created with Tradestation):

Several bull and bear markets could also be identified here.
The next great bull move, though didn’t take place until 1942 as can be seen below:

So is it for real? Well, I’m not at all convinced that we’re looking at a

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Derivatives: the Heart of Financial Darkness

At the heart of our dark, collapsed economy, is the derivative monster.  Jesse’s Café Américain has displayed its vital statistics with very colorful charts. 

Derivatives: the Heart of Financial Darkness

Courtesy of Jesse’s Café Américain

The heart of our financial crisis is reckless speculation with "too big to fail" funds by a relatively small group of US based money center banks.

There is sufficient circumstantial evidence from their concerted lobbying efforts to undo and resist regulation to show planning and forethought in what is an almost amazingly straightforward case of fiduciary and financial fraud. Many a blind eye was turned to the decline of the nation as it occurred, as the media and politicians and financial regulators were caught up in a seductive web of corruption.

The perpetrators are still in place, relatively unrestrained, and certainly not facing anything that might be called ‘justice.’

Before there is any recovery, the banks must be once again restrained and balance restored to the economy and the financial system. The efforts of the Obama Administration are hopelessly ineffective, conflicted, and supportive of continuing losses.

The Prime Suspects [click on chart for sharper image]

The Killing Field

The Wagers on Failure

The Wages of Speculation


THE WEEK THAT WAS: 3/23-27/2009

Market Update, courtesy of Robin Hood Trader 

THE WEEK THAT WAS: 3/23-27/2009

We didn’t get the bounce off of lower levels before going up; we just continued to push higher this past week. The following are comments from last weeks’ blog published on 3/21/2009.
Comments from last week on the DOW: “Look for a retest and a bounce to retest resistance at 7449-7551. If the index breaks through that area, the next stop is 7800.”   
So what happened?  We ended the week on the DOW at 7776!
Comments from last week on the SPX. “Look for a successful retest of 741 and a bounce higher to re-challenge the resistance at 804”. I also indicated in my chart analysis on the SPX from last week that there was resistance was at 819.
How did the week really play out?  The SPX ended the week at 816!
The week began with a massive move up in the markets. The DOW closed up 497 points. Treasury Secretary Tim Geithner went from goat to hero as he announced details regarding the Public-Private investment program designed to remove up to $1 trillion in toxic assets from the balance sheets of banks. Existing Home Sales surprised by rising 5.1% in February.
Tuesday experienced profit taking as one would expect after the large move on Monday. Geithner and Bernanke testified on The Hill with AIG taking most of the heat on the bonus mess. The DOW closed down 116 points.
Wednesday, Durable Goods Orders surprised on the upside rising 3.4% in February and New Home Sales increased 4.7% in February to spark a move higher. The DOW finished the day 90 points to the good.
The market received mixed news on Thursday as  4thquarter GDP was revised to a more favorable number. However, the jobless claims made record highs. Earnings came in strong for some retail stocks and the Treasury auction on 7 year notes went well as the DOW sorted through all of this and decided to trade up 175 points.
The week ended with the DOW retracing 148 points on declining Consumer Spending and Income Reports as several companies announced job cuts.

Week over week, the DOW gained 498, the SPX was up 48 and the COMPQ was better by 88.

Come join us at marketamer and learn how to consistently pull money from the markets.



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Dave’s Daily


Dave Fry at ETF Digest, March 31, 2009


Sometimes it’s just too obvious so let’s just let the image tell today’s quarter and month-end story.

I’m not real sure we can make too much of this type of activity until we get past Friday’s employment data since today’s action may just be bogus frankly.

Volume was again below average while breadth was quite positive.

March wraps-up with some green as cynically one might believe some tape painting was present. But it is what it is.

I don’t have much to add today since I’m pretty focused on the rest of the week’s news and actions. Remember, we have much to come this week with earnings, more economic data and the all important employment report.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, XLF, XLI, XLY, GLD, DGP, DBP, DBB, DBC, USL, EFA, EEM, EWY, EIS and FXI.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.


Another record decline for home prices

Tim Iacono reports on record annual declines in home prices. 

Another record decline for home prices

Courtesy of Tim Iacono at The Mess That Greenspan Made

The January report(.pdf) for the S&P Case-Shiller Home Price Indices shows both the 10-city and 20-city index once again making new record annual declines of 19.4 percent and 19.0 percent, respectively. Price indices for all 20 cities are shown below.

The top to bottom position on the right (corresponding to the order of the legend in the upper left to aid in viewing the data) saw a few changes last month, both Phoenix and Minneapolis moving down a notch or two.

As shown below, Phoenix maintained its leadership role in year-over-year price declines with an astonishing 35 percent plunge. Las Vegas and San Francisco are not far behind with declines of more than 30 percent as indicated in red and Miami may be ready to join that select group.

Minneapolis joined the ranks of 20+ percent annual decliners, moving from -18.4 percent to -20.4 percent in January. That group now numbers six as indicated in blue.

IMAGEWhat the heck is going on in Minneapolis with those back-to-back five percent month-to-month declines? That’s the sort of thing you see in Phoenix and Las Vegas, but Minneapolis?

David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, noted:

Home prices, which peaked in mid-2006, continued their decline in 2009. There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSA’s falling more than 20% in the last year.

Indeed, the two composites are very close to that rate and have been reporting consecutive annual record declines since October 2007. The monthly data follows a similar trend, with the 10-City and 20-City Composite showing thirty consecutive months of negative returns.

You’d think that at least the pace of the price declines would slow, but it’s not.


John Mellencamp- "Little Pink Houses"


Yoo Hoo! Yes, Mr. Cop – Over THERE! (AIG)

Karl Denninger reports on the AIG "Patient Zero" Cassano’s reckless activities and wonders who else is involved.

Yoo Hoo! Yes, Mr. Cop – Over THERE! (AIG)

Courtesy of Karl Denninger at The Market Ticker

Hmmm….. this is interesting….[The Executive Who Brought Down AIG, ABC News]

"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples’ hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he’s wrought on America."

Oh, I see.  There’s that nasty "F" word, and this one you can say on TV!

But let’s not be misdirected by bonus payments and "special legislation" eh?  After all, anyone who believes this guy acted alone must be smoking something….

After the huge losses became known, Cassano was fired from AIG in early 2008, but he still received a salary of $1 million a month until Congress intervened. AIG has received about a $180 billion in bailout funds so far.

Ah.  Let me see if I can grok this.  Here’s a guy who allegedly "hid" huge losses, was fired for it, but got a $1 million a month "salary" after being "fired", and he acted alone?  That’s why they paid him $1 million a month after firing him?

You expect The American People to believe that?

It gets better:

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

Yes, and again, there was nobody else within the firm that saw something like "Lichtenstein Subsidiary Profit, $10 billion" in the internal accounting of the company and thought that was funny? 

Anyone remember the infamous "barge transactions" from the era of ENRON?

Of course AIG’s CEO

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T. Row Price Calls Trading Heavily

Today’s tickers: TROW, BDK, EWZ, AMZN, PLD, MON, POT, XLF & WFC

TROW T. Rowe Price Group, Inc. – Shares of the financial services company have risen by 6% to $29.01 amid broad market gains for financials. TROW appeared on our ‘hot by options volume’ market scanner after one investor sold 16,300 calls at the July 35 strike price for a premium of 1.90. This trade was enacted for one of two plausible reasons. It could be pure naked selling in which case the investor takes in the 1.90 premium afforded by today’s 6% increase in the underlying share price. The trader is then left short 16,300 calls which he would need to buy back at some point in the future before expiration. Another explanation could be that this trade is a covered call. If this is the case, the investor purchased shares of the underlying stock and sold the calls to create an exit strategy. If shares were to rise through $35.00 by expiration this investor would enjoy the 1.90 in premium plus an additional 20% gain on shares of the underlying.

BDK The Black & Decker Corporation – Shares of the global manufacturer and marketer of power tools and home improvement goods have increased by more than 5% to $32.20. Shares are gaining amid improvements in other durable goods companies today as well as on the coattails of news regarding BDK’s increasingly large debt offering. The company has upped the size of the offering to $350 million from the previously announced $250 million, according to one news source. Option traders responded by picking up calls in the April and May contracts. At the April 35 strike price some 5,400 calls were scooped up for an average premium of 70 cents. Reflecting even more optimism, investors looked to the May 40 strike where over 2,100 calls were bought for an average of 66 cents apiece. Investors seem to be looking for BDK to put the $350 million in borrowed funds to good use in the hopes that such action will spur shares to continue to move higher.

EWZ iShares MSCI Brazil Index Fund – The Brazil ETF has added more than 2% to its share price today and currently stands at $38.12. A butterfly spread established in the near-term April contract caught our attention. The investor constructed the butterfly by purchasing the wings and selling the body. At…
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So much for the Social Security surplus

Tim Iacono writes on the vanishing Social Security surplus; now you see it, soon you won’t. – Ilene

So much for the Social Security surplus

Courtesy of Tim Iacono at The Mess That Greenspan Made

Among the plethora of new ills plaguing the U.S. economy as it goes stumbling toward its uncertain future is a problem that, until very recently (meaning two days ago), was believed to be one reserved for the latter half of the next decade – the dwindling social security surplus.

Recall that, for decades, incoming payroll taxes have gone directly to government expenditures while IOUs piled up in a filing cabinet somewhere, famously visited by former President George Bush in early 2005 after an election win compelled him to boldly go into his second term as a reformer before he began quacking like a duck.

The initiative to reform the nation’s second largest entitlement program and undo the marvelous mid-1980s accounting change that would make the U.S. budget deficit look deceptively small for decades was a resounding failure and the quacking started long before most had ever dreamed.

In retrospect, if the nation couldn’t forge some sort of fundamental reform to its entitlement programs back in early 2005, when household wealth had soared to once unimaginable levels just before the housing bubble met its pin, is there any realistic possibility that substantive reforms will ever come voluntarily?

In any event, word now comes from the CBO (Congressional Budget Office) that yet another fallout of the recent economic tailspin is that payroll taxes have fallen off a cliff along with home values and stock prices leading to the real possibility that the Social Security surplus will turn into a deficit much sooner than originally thought, all but vanishing next year according to the most recent calculations.

Last year, the CBO figured the surplus would be $80 billion this year and next, rising from those levels before falling to zero in about ten years. The most recent projections are for a slim $16 billion surplus this year and just $3 billion next year but, given the rosy predictions that usually come out of Washington, a deficit is certainly within the realm of possibilities.


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The Politics of Banking and the Banking of Politics

Here’s a cool graphic representation of the incestuous relationship of the financial sector (and companies in other sectors) with the government. – Ilene

The Politics of Banking and the Banking of Politics

Courtesy of John Carney at ClusterStock
Click on the chart for the big picture.

It’s well known that at least a piece of the TARP gets funnelled right back into Washington DC when banks donate to politicians. So which lawmakers are connected to which bailed out institutions. The center for Computational Legal studies has created a stunning visualization tracking TARP recipients’ political contributions to the members of the 110th Congress.

It’s visually arresting and a very cool way to see all the interconnections. David Zaring at the Conglomerate points out that banks are pretty equal opportunity donors to politics, giving to both parties at pretty similar levels. Some banks, however, are slightly more red than blue and some more blue than red.

Here’s a partial list

  • Republican leaning banks: JPMorganChase, Citigroup, Morgan Stanley, BofA, Merrill Lynch.
  • Democrat leaning banks: Goldman Sachs.

That probably won’t come as a shock to most people. But what might is the fact that the Democrat leaning banks, boosted by Goldman’s hefty campaign contributions, give more than the Republican leaning banks.

As the image we’ve excerpted from the chart suggests,  the center of a lot of things are the biggest TARP recipients and Senator Chris Dodd.

AIG Was Responsible For The Banks’ Jan. & Feb. Profitability

As an introduction, Phil’s words:  "Zero Hedge claims to have "inside information" from a trader who claims essentially that the "good earnings" claimed by C, BAC et al that led to the rally of March 10th were nothing more than a gift from the Treasury, funneled through AIG in the form of ridiculously profitable counter-party trades that made Billions for the banks which AIG turned around and wrote off as their stupefying losses.  If true, it’s a hell of a scandal…"

Exclusive: AIG Was Responsible For The Banks’ January & February Profitability

Courtesy of Tyler Durden at Zero Hedge 

Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.

I present the insider perspective of trader Lou (who wishes to remain anonymous) in its entirety:

"AIG-FP accumulated thousands of trades over the years, all essentially consisted of selling default protection. This was done via a number of structures with really only one criteria – rated at least AA- (if it fit these criteria all OK – as far as I could tell credit assessment was completely outsourced to the rating agencies).

Main products they took on were always levered credit risk, credit-linked notes (collateral and CDS both had to be at least AA-, no joint probability stuff) and AAA or super senior portfolio swaps. Portfolio swaps were either corporate synthetic CDO or asset backed, effectively sub-prime wraps (as per news stories regarding GS and DB).

Credit linked notes are done through single-name CDS desks and a cash desk (for the note collateral) and the portfolio swaps are done through the correlation desk. These trades were done [in] almost every jurisdiction – wherever AIG had an office they had IB salespeople covering them.

Correlation desks just back their risk out via the single names desks – the correlation desk manages the delta/gamma according to their correlation model. So correlation desks carry model risk but very little market risk.

I was mostly involved in the corporate synthetic CDO side.

During Jan/Feb AIG would call up and just ask

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Zero Hedge

Why Is Maduro Still Pushing The Petro?

Courtesy of ZeroHedge View original post here.

Authored by William Luther via The American Institute for Economic Research,

In a recent Wall Street Journal article, Mary Anastasia O’Grady writes that Venezuela’s “National Superintendency for the Defense of Socio-Economic Rights is reportedly pressuring stores to accept the government’s new digital fiat currency, the petro.” The Venezuelan government claims its digital...

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The Technical Traders

Is The Technology Sector Setting Up For A Crash? Part IV

Courtesy of Technical Traders

As we continue to get more and more information related to the Coronavirus spreading across Asia and Europe, the one thing we really must consider is the longer-term possibility that major global economies may contract in some manner as the Chinese economy is currently doing.  The news suggests over 700+ million people in China are quarantined.  This is a staggering number of people – nearly double the total population of the entire United States.

If the numbers presented by the Chinese are accurate, the Coronavirus has a very high infection rate, yet a moderately small mortality rate (2~3%).  Still, if this virus continues to spread throughout the world and infects m...

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Phil's Favorites

Why Trump's post-impeachment actions are about vengeance, not retribution


Why Trump's post-impeachment actions are about vengeance, not retribution

President Trump fired Army Lt. Col. Alexander Vindman for testifying in his impeachment trial. AP Photo/Susan Walsh, File

Courtesy of Austin Sarat, Amherst College

Since the end of his Senate impeachment trial, President Donald Trump has carried out a concerted campaign against ...

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Biotech & Health

Deep learning AI discovers surprising new antibiotics


Deep learning AI discovers surprising new antibiotics

A colored electron microscope image of MRSA. NIH - NIAID/flickr, CC BY

Courtesy of Sriram Chandrasekaran, University of Michigan

Imagine you’re a fossil hunter. You spend months in the heat of Arizona digging up bones only to find that what you’ve uncovered is from a previously discovered dinosaur.

That’s how the search for antibiotics has panned out recently. The relatively few antibiotic hunters out there ...

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Kimble Charting Solutions

King Dollar Going To Lose Strength Here? Gold & Silver Hope So!!!

Courtesy of Chris Kimble

Is King$ and the Euro facing important breakout/breakdown tests at the same time? It looks like it in this chart!

The US$ trend remains up, as it has created a series of higher lows since the start of 2018. The opposite can be said for the Euro, as it has created a series of lower highs since early 2018.

The US$ is currently testing the top of its 18-month rising channel, as the Euro is testing the bottom of its falling channel.

What King$ and...

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Insider Scoop

The Daily Biotech Pulse: Heron Pain Drug Review Extended, Disappointment For Teva In Tourette Syndrome Study

Courtesy of Benzinga

Here's a roundup of top developments in the biotech space over the last 24 hours.

Scaling The Peaks

(Biotech Stocks Hitting 52-week highs on Feb. 19)

  • Adverum Biotechnologies Inc (NASDAQ: ADVM)
  • Akebia Therapeutics Inc (NASDAQ: AKBA)
  • Ana... more from Insider

Digital Currencies

Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year


Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year

‘We have you surrounded!’ Wit Olszewski

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

When bitcoin was trading at the dizzying heights of almost US$2...

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What US companies are saying about coronavirus impact

By Aman Jain. Originally published at ValueWalk.

With the coronavirus outbreak coinciding with the U.S. earnings seasons, it is only normal to expect companies to talk about this deadly virus in their earnings conference calls. In fact, many major U.S. companies not only talked about coronavirus, but also warned about its potential impact on their financial numbers.

Q4 2019 hedge fund letters, conferences and more

Coronavirus impact: many US companies unclear

According to ...

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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.

Date Found: Tuesday, 01 October 2019, 02:18:22 AM

Click for popup. Clear your browser cache if image is not showing.

Comment: Wall of worry, or cliff of despair!

Date Found: Tuesday, 01 October 2019, 06:54:30 AM

Click for popup. Clear your browser cache if image is not showing.

Comment: Interesting.. Hitler good for the German DAX when he was winning! They believed .. until th...

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Members' Corner

How to Stop Bill Barr


How to Stop Bill Barr

We must remove this cancer on our democracy.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia


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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires


Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:


The ‘experts’ I hear from keep saying that once 300B more in reserves have ...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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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...

Learn more About Phil >>

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.