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Saturday, September 24, 2022

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Just Another Manic Monday – $1.25Tn ESM Edition

Another week, another $1.25Tn.

That's the way the Global Markets function these days as RUMOR has it that Germany will now bow to International pressure and allow the "permanent" ESM Fund to be" temporarily" doubled from to $1.25Tn extending the due to expire EFSF and combining with the existing ESM.  That then, in theory, will prompt the IMF to put in $1Tn of their own (40% US money!) as Christine Lagarde has said she would not advocate increasing IMF resources to help reinforce the euro zone firewall unless EU countries act convincingly first.

This "great" news sent to the Euro and the Pound up half a point this morning and turned the EU markets from down 0.5% to up 0.5% as Europe, once again, is "fixed."  It also "fixed" oil prices, which were in danger of slipping back below $106 this morning but now back at $107 and that's still not enough because the S&P says if Russia can't get oil up to $120 a barrel, there is no way they can balance their budget this year and each $20 below that mark will cost Russia a notch of credit ratings.

On the other hand, according to the IEA's Chief Economist, if Russia gets their $120 oil – it's the rest of the World that will plunge into a Global recession.  The IEA estimates that the EU will spend a record $502Bn this year on net imports of oil, up from $472Bn in 2011.  That represents 2.8 per cent of the bloc’s gross domestic product, whereas between 2000 and 2010 it was spending on average 1.7 per cent of GDP on oil imports.  The US will spend $426Bn on imports (2.7%), Japan $198Bn (3.6%) and China $251Bn (4.1%) while India is spending 5.9% of their GDP just on imported oil.  The IEA notes that every recession in industrialized nations since WWII have been preceded by spiking oil prices.  

That has not stopped Bernanke, this morning, from giving a speech where he once again hints at additional Fed easing and that has rammed our futures up (8:30) to the day's highs but pretty much exactly where I predicted they would be when I set shorting targets in this morning's Member Chat at 7:10, when I said

Dollar rallied back to 80 and now is back to 79.67.  The rally didn't drop the indexes but the drop back from 80 to here shot us up like a rocket in the past 90 mins.  There's stimulus news from Europe but it's the same thing repackaged again – I can't see this move up lasting if that's all they have.  S&P (/ES) 1,400 makes a good shorting line as does Dow (/YM) 13,100, Nas (/NQ) 2,750 and RUT (/TF) 835 BUT– above those lines – we're going to have to be bullish.  

Bernanke's "conclusion" in his speech has this rally fuel to help goose the markets into the end of the first Quarter on Friday: "Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies. I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well."  As Paul Simon says:

He’s a one trick pony
One trick is all that horse can do
He does one trick only
It’s the principal source of his revenue
 
He’s a one trick pony
He either fails or he succeeds
He gives his testimony
Then he relaxes in the weeds
He’s got one trick to last a lifetime 
But that’s all a pony needs     

Or, as 1020 pointed out in Member Chat this morning, Ben's "Gotta have more cowbell!"  Bernanke's comments did the trick and the Dollar plunged back to 79.25 for the first time since early March, when the Dow first rocketed to 13,250.  So we have cheap Dollars boosting US Industrial Exporters and cheap Yen boosting Japanese Industrial Exporters and that means we're all counting on the EU to buy all our stuff – what can possibly go wrong with this plan?

Actually, my bearish theory is the Dollar will hold 79.25 and bounce back as the unfolding crises in Spain, Italy and Portugal make it seem like $1.25Tn is going to be a drop in the European bucket and Chinese news continues to disappoint as well and THAT'S why we're bearish on my target lines!

Still, we have to expect $1.25Tn from the EU and another $1Tn from the IMF and another $1Tn from the Fed (all rumors, of course) to give us a nice run-up into Friday's end of quarter window dressing.  After that – who cares – it's 4 days from now and you know investors don't look that far into the future…  

Pundit scoresSpeaking of people who can't see the future, CXO Advisory's "Guru Grades Page" tracked the accuracy of many famous stock analysts and scored them based on the accuracy of their predictions and, not surprisingly, they are not, on the whole, any more accurate than flipping a coin.  As I commented to Members on the subject:  

Gurus – About what you'd expect, no better than just guessing.  This is why the only sure bet in the markets is to BE THE HOUSE – Sell premium to suckers who think they are going to be smarter than the markets.  These guys are the best of the best and only 4 are better than 50% (and not much better).  Some, like Abby Cohen are so bad they make great contrary indicators and she's the SENIOR US INVESTMENT STRATEGIST AT GOLDMAN SACHS!!!  It's a total joke folks – the only danger is if you take these people seriously…

There's a reason our mission statement at Philstockworld.com is "High Finance for Real People – Fun and Profits" – if you don't learn to have fun with the markets, they can be endlessly frustrating and you certainly don't have to take the markets seriously to make a profit – no more so than you do a roulette wheel or the roll of dice on a craps table – there are no "secrets" other than the one that our friends Steve Wynn and Shelly Adelson know all too well:  

BE THE HOUSE!  

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exec
Aside from what Phil said is we are having problems breaking out of the 82.27 line there is resistance at 840 and support at 815 today and where is the middle? Above or below from here. Next line is somewhere in the 870-880 area, below 896 is a short.

exec 84.27!

exec
Dam me that 840 screwed me up 84.40 84.15 84.70-.80 and 83.96! Sorry!

VXX at the LOD… under $16 now. 

Cable/Phil – why are cable co's like CMCSA and TWC doing so well?

NOK/Vibrating tattoos
 
That could be the Apple pips squeaking killer app that changes everything. I can just imagine where some women will be placing their tattoos, though delicacy prevents me from elaborating. Anyway, it will give a new meaning to the phrases: Call me later and Busy signal. And the TV commercials will be great. Forget Windows 8, this is it.
When the world seems to shine like you've had too
much wine,
That's a – more.
Bells will ring ting-a-ling-a-ling, ting-a-ling-a-ling
 
[as sung by Francis Albert Sinatra]

SGEN – Buying June 20/25 BCS….$1.35.  Selling May $20 Ps.

UNC lost so my brackets are screwed… I guess I'll just have to say GO ARNA!!!!!!!!!!!

Blizzard conditions in the Tetons again! 66 degrees yesterday.

AMZN – don't really see resistance till 208 and then 220.  What do the chartists see on this board?  Any feedback is appreciated. 
Pharmboy – you had an amazing play on this.  Does it keep continuing up from here?

lolo – no idea, I was just watching the tape and liked the risk reward since I have a small account. 

jmm1951
Vibrate tone choices available:Coming soon
Vibrate me to the moon. Sinatra
Can't get no satisfaction. Rolling Stones
Satisfaction. Hot Rocks
Great Balls of Fire. Jerry Lee Lewis
Whole Lot of Shakin. Elvis
Dream Lover. Glenn Shorrock
Vibrate. Rufus Wainright
Eight Miles High/. Byrds
Tattoo Song. Jordan Sparks

LNKD:  (Surely one of our fundamentalist favorites)  Last week, I pointed out that it had a beautiful C&H with confirmed BO.  Measured move about 130.  Moving slowly but nicely today.  

ripcar – how about:

Shake Me/Cinderella

Thunder Island/Jay Ferguson

Bang Go the Bells/Tesla

lflan/PCLN – what's your play?

ZLCS just came back into 1.04…..FYI.

Phil,
 
It's evident you love the movie "Ariplane", did you know it was a direct parody of  a movie from 1957 called "Zero Hour"?  I watched it and it's funny just seeing where all the lines came from.

Only 78mm shares on the Dow…you would think the strongest day this year would have more volume.

Reducing AAPL positions by 1/2

RIGL….buying stock.

AMZN / Lolo – Indeed, some "dead air" between 200 and 210. 208 is a 50% line, but not a strong one. Here is the volume by price chart:

FU PCLN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 AAPL    And here's what I've done.     I've closed all positions then reopened 20   April 575/625 bull call spreads.  Prices later stj……..

lolo      short 625 May puts PCLN.   (STO)    

PCLN – you sold puts??  You think this thing is gonna keep going up?

vxx down nearly 10%

EOD in the middle. As jabobeast would say, "FU Market!"

PCLN/Phil
 
Just took the earnings estimates from analysts.

Well if "they" really are manipulating this market… "they" are bad-asses!  I was all over buying at the bottom, and did very well… but I don't like buying high and it has really cost me.  I'm super impressed, and I don't see them giving up these gains.  Not for a while anyway.  

Zero Hour/Phil
 
No, it's from that movie and it's exactly Airplane only serious.  They have all the same lines like "He's very sick, we have to get him to a hospital", Stewardess "What is it?"  in Airplane he tells the joke, here the Doctor says I can't go into it now.  Even has the lines like "I chose the wrong week to give up coffee".  You have to see it, it's hilarious.  They even slap the hysterical passenger and then the doctor says that's enough and he starts shaking her.

so Phil,  I think you're "right"… but I think I'm gunna throw my hat over into Goldman's ring… 

AAPL portfolio:   stjeanluc…….here are today's numbers…….Bought to Close  50 April 600 calls for 20.50.   Sold to Close 30  April 575 calls for 37.00    then  Sold to Open  20   April 625 calls for 9.77.      Trade logic:   Portfolio up about 10% for the day, so following my rule to reduce position size.     Repositioning for higher yield for $ invested, but less overall invested.     I expect AAPL to be under accumulation this week as hedgies and others 'dress up' their portfolios, and I expect AAPL to be above 625 at April expiration.   And lolo, the PCLN play doesn't imply that it will keep going up, but rather that it will be above 625 by May expiration.   

PHIL
TZA / Merkel / Dollar/ commodity price of bunny fur
 
AFTER HOURS POST
PART SERIOUS-PART JOKING
 
So lemme' see if I got this right……..I've been studying everything I can learn about the Russell for the last Two and a Half Years. Same with TNA/TZA. Have read every single thing I can find to read about them. Learned all about their strengths and advantages, AND their weaknesses and dangers.  I ACTUALLY HAVE read the Prospectus'es (Prospecti?), word for word, cover to cover.  I studied the financial strength of Direxion. I studied the daily volume, and I knew that 25M shares a day and spreads of a penny would make for a stable product.  I've done maybe 40 trades,  about 70% profitable, 10% breakeven, and 20% loosers.  I've spent, conservatively……say 400 hours or more learning just about those two symbols. And I'm nowhere near JRW.
 
I've developed my own "system", based mostly on very elemenatary TA and the charts. I would call myself a "chartist" more than anything else. I make trade decisions based almost exclusively on my own prop Mov Avg lines and Envelopes. That decision is 80% "mechanical". The other 20% is "gut", combined with the news environment and the general market position and trend. That "system" took about a YEAR to develop. I'm still trying to "fine tune" it with Standard Deviations of the ATR. I see possible room for very granular "tuning" there.
 
I am completely 100% self taught. Never had a day of training in this (apart from reading on the web and reading MANY books about Trading, Investing, etc.
 
I print charts out on paper, several charts per day (often, but not every day). When I do, I annotate them literally by hand, with a ruller and different color ink pens.  When I have a position on, I look at it every single day. I calculate the percentage of ATR, percentage above or below my Entry, etc.  When I annotate a chart, I draw maybe 8 separate lines on one page, and do maybe 4 or 5 math calculations, just for that chart.
___
 
So NOW, I have to start reading the news about what Angela Merkel says? AND I have to start looking at what the international Central Banks are doing in terms of "stimulating" their economies, with dumping money into them?
 
AND, to be most effective, I have to start reading about, learning about, and get fluent with Dollar Forex?
 
Hell, the only thing you left out was Oil, and the market for used video games.
 
Even before starting the "job" I've been working on for almost a month, I was ALREADY spending maybe 2 to 4 hours a day (most days) cruising the web looking at interesting things, both Market news AND General news. One of the benefits of reading your articles the last two years has been that I have started to "think" about the Macro, not just U.S., but International as well, and taking THAT GENERAL news into account about whether I buy one standard lot of TZA or TNA (as I've said, they are the only things I trade).
 
PLEASE tell me that to continue sucessfully trade TNA-TZA into the future I don't REALLY need to learn about what the Euro CB's are doing, what Angela Merkel says from day to day (it seems to vary by the week), and how the Dollar is varying (against what, by the way?  the Euro?)
Say it ain't so Joe, Say it ain't so…………….   (:

scottmi / VXX / Phil
AFTER HOURS POST
 
Dude, if you get that totally figured out, you're probably going to go into the Trader's Hall of Fame. Voodoo Squared, from what I've been seeing here on the subject.  Or "The Random Walk" raised to the N'th power.
 
I made ONE trade with VXX, and lost a LOT of money, largely becuase there  WAS VERY LITTLE CORRELATION between the actual Vix and the VXX Product.
 
As I posted maybe a  couple weeks ago or so, (before being sent temporarily to the "Time OUT" Chair), I found that when the Vix went down, the VXX went WAY down. When the Vix went up, the VXX went up a little, but not NEARLY  in the ratio you would think it would, and not nearly in the ration than when it went down. I called it "heads you win, tails I loose".
 
I suggest  very, very carefully reading everything that has been posted here over the last week or so, and then go to other outside sources to get more observations about the Product. You could also search SA on the topic, there is probably a lot there.
 
I have not read all the Vix/VXX stuff here the last week, so Phil may or may not have already commented on it, or explained it.
 
BUT the most important thing I learned from him about VXX, after my big loss (like more than a year ago, I think), he explained in detail that it is NOT an Index Tracking Instrument the way TZA + TNA + IWM are. He talked about it as being "paramutual betting", which I don't really understand. (I've never made a "horse" bet or been to a "track").
If I understood ANY of what he explained to me, it sounded like the VXX is almost like Futures, where you are betting against the cumulative expectations or opinions of gazillions of other traders. Don't rely on that comment, I'm not positive if it's right.
So if he hasn't already written a Tutorial in the last few weeks explaining Vix/VXX bizarro-ness, in detail, it would probably be a good subject for one of his detailed "explanatory" articles.
 
I know this………I'll never touch VXX again, or any other instrument that allegedly mirrors the Vix.
 
Best Wishes

rustle123
CMG / restaurants / "trendiness"
 
Just a quick point. Sure you already know this.  Not sure how much you follow the "restaurants" sector, but I've always thought of the group as pretty scary, in terms of long term investing.
You and I are in roughly the same age group.   In my adult lifetime, having lived my entire life here in and around Minneapolis, I could come up with AT LEAST a dozen "chains" of restaurants that started out of nowhere, went through rapid, then ridiculous, growth. This could take 2 or 3 or 4 years. Many of them were "trendy" or "the fad of the time".  Kind of the way I look at Yoga centers right now. I'd bet an arm there are going to be a lot less Yoga centers ten years from now then there are now. I just think that is a "fad", and that it has peaked, or will soon.
But I can think of all these fairly large rest's that were once VERY popular, then they weren't, then people got totally bored and tired with them, business volume fell off, and eventually they closed.
 
Do you remember the "Rainforest Cafe"?   Or Sbarro?  Perkins went bankrupt a few months ago (maybe thats mostly a MN chain, not sure).  What was that "Boston Home Cooked Food" chain that went bankrupt back around 10 years ago or so?  (I forget the exact name at the moment).
 
Phil has referred to CMG as "a place that sells $15 burrito's".  How long can that really last?
 
stock=$57 to $424 in 3 years?
 
I don't know anythings about how to study "fundamentals", but I would bet that CMG see's $250 before it see's $650.
 
my 2 pence

Newbie – I believe you may be right about the yoga centers disappearing in 10 years as I read something about 75% of Americans being obese by 2020. 

Phil, 
I have a tza april 17/18 BCS for .45.  What is the best course of action for this.
Thanks

Damn… I want to be a bull, but the stock market is correlated to this economy, isn't it?
 I better stop reading.  
 
Maybe I'll watch FOX NEWS.

Speaking of correlation:  http://view.ed4.net/v/LVA6WW/QN70ET/8ZB56HZ/F46QW/  — Not that this is likely to surprise anyone on PSW.  From FT:
 
Excerpt: "
 

The Commodity market's algorithmic challenge

By Javier Blas, Commodities Editor

The growing trend of increased correlation between the price of oil and commodities markets and other assets class, including currencies, equities and bonds, is well documented. 

But now two economists have found evidence of a rise in cases of heightened correlation over very brief periods – even as short as one second – pointing to the increased impact of algorithmic trading strategies on commodities.

David Bicchetti and Nicolas Maystre, at the United Nations Conference on Trade and Development (Unctad), say they have found “striking” correlations between commodities such as oil, corn, soyabeans and the US equity market over very short periods, including 5-minute, 10-second, and 1-second frequencies.

“This is consistent with the idea that recent financial innovations on commodity futures exchanges, in particular the high-frequency trading activities and algorithm strategies have an impact on these correlations,” they said.

The paper by Mr Bicchetti and Mr Maystre – ‘The synchronised and long-lasting structural change on commodity markets: evidence from high frequency data’ – provides evidence of a marked change in the presence of HFT in commodities.

“Before 2008, high-frequency co-movements between commodity and equity markets did not usually differ from zero over a long lasting period at such high frequencies,” they said. But “in the course of 2008, these correlations departed from zero and became strongly positive after the collapse of Lehman Brothers.”

“We believe a conjunction of factors made that change possible. First, financial technical innovation spurred HFT through the gradual introduction of full electronic trading on exchange platforms since 2005. Second, investors moved away from passive strategies and opted for active ones,” the authors said.

The role of HFT in commodities is controversial, with some market participants criticising them for distorting prices. Last year, the chairman of the World Sugar Committee, the industry body that represents the big traders, said in a letter to the ICE Futures US exchange, that high frequency traders “only serve to enrich themselves at the expense of the traditional market users”.

Sean Diffley, chairman of the WSC and a hedge fund manager, wrote: “It would appear that the computer-based traders are parasitic, contributing little.”

Does anyone know what the ISEE number is? 
 
Of possible significance is the extreme that the ISEE numbers posted today. The Equities ISEE number was an all-time high 410 at today's close. The last time this number was over 300 (302) was April 6th, 2011. The SPX began a multi-day pullback the following session. When the equities ISEE number has closed above 300 it has often marked a significant market top within a period of just a few days. Of course, the liquidity here and the expectation for QE3 could well make this time different.

Are there any bears left?  You got to admire the degree of bulls in such a nothing economy.  

peedlew99ISEE Index

Looking out five years, I would like to make a longer-term investment in The Vanguard Select Global Growth Sniffer Equity Fund, since it seems that real GDP growth is going to be a scarce global commodity going forward.  Unfortunately, it doesn't exist, so I am trying to synthesize it.  If anyone has any fund suggestions along these lines, what I have in mind is select Central & South American companies, Canada, and a few SE Asian prospects, primarily Indonesia, Thailand, Burma and Malaysia.

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