Posts Tagged ‘bonds’

Will We Hold It Wednesday – 1,333 or Bust (as usual)

Here we go again!  

We blew right though our expected bullish levels of Dow 12,500, S&P 1,317, Nasdaq 2,775 and Russell 825 but failed to make 8,300 on the NYSE so, as usual, our biggest and most difficult to manipulate index is holding us back – flashing a warning sign while the other indices scream for us to "party on."  Fortunately, as I mentioned in yesterday’s morning post, we had already gone aggressively bullish with the SPY Aug $128/131 bull call spread at $1.83, selling the Sept $120 puts for $1.57 and that net .26 spread is already net $1.86 – up 615% since I posted the trade idea at 12:53 in Monday’s Member Chat.  

It’s good to have a few aggressive trades like this to take advantage of market bounces.  Before that we had taken the SSO Aug $51/53 bull call spread at $1.05, selling the Sept $44 puts for $1.07 for a net .02 credit at 10:46 in Member Chat (the SPY play was for late-comers who missed out on SSO).  The Aug $51/53 spread finished the day yesterday at  $1.35 but the real win comes from the short $44 puts, which fell to .70 so the .02 net credit is now a .65 net credit for .67 total profit, up 3,350% in less than 48 hours.  See, options are fun!  

The only other trade ideas from Monday were a long-term bullish play on RIMM (selling 2013 $22.50 puts for $4.20) a long futures play on the Russell Futures (/TF) off the 810 line (now 835) and I reiterated our bearish spread on CMG as I felt they would disappoint on earnings (they did).  Yesterday we picked up a long-term longs on GLW, RYAAY and WFR, half covered our FAS longs (iffy so far), took a poke at shorting the DIA that worked for a quick 10%, shorted oil with a DUG spread (futures too scary) and picked up another short spread on CMG – selling 3 Aug $330 calls for $16 ($4,800) against 2 long Dec $360 calls at $18 ($3,600) for a net $1,200 credit – those should be nice winners this morning!  

In the afternoon we flipped more bearish and picked up 10 SPY weekly $133 puts at $1.15 ($1,150 of our virtual dollars) for our $25,000 Virtual Portfolio and those are probably going to hurt this morning as the Dollar
continue reading


Tags: , , , , , , , , , , , , , , , , , , ,




ETF News Update:Korea, Ireland, and Quiet on The Western Front (SPY, DIA, UUP, TLT)

Courtesy of John Nyaradi

Sabres were rattling on the Korean Penninsula today while Europe’s troubles percolated on the back burner and U.S. markets meandered in lighter than average pre-Christmas volume.

South Korea conducted its drills in spite of dire North Korean warnings but the ripples of the conflict spread across the region as the Shanghai Composite (SSEC) dropped -1.4%, bringing its decline from early November perilously close to the -10% marker for an official “correction.”

On the other side of the world, Europe continued struggling with its debt problems as Moody’s downgraded Anglo Irish Bank to junk status and Portugal and Greece continue attracting the negative attention of the ratings agencies.  In France, the cost of insuring debt rose to record highs while the Euro declined over concerns of the ongoing banking stress in the Union.

At home, all was quiet on the Western Front as the dollar (UUP) gained, the long bond(TLT)  declined and the Dow (DIA) slipped into the red while the S&P 500 (SPY) remaisn near two year highs.

On the technical side of market analysis, we remain in a sideways consolidation, unable to break higher while finding solid support just below current levels.  Momentum continues to wane and the action in China could have bearish implications as the Shanghai Composite is being seen by more and more analysts as a leading indicator as that country’s global economic clout continues to grow.

At Wall Street Sector Selector, we remain in the “Yellow Flag” mode, expecting choppy to lower prices ahead.

Disclosure: Wall Street Sector Selector trades a wide variety of widely traded exchange traded funds and positions can change at any time.

Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector


Tags: , , , , , , , , ,




The Shocking Selloff In Muni Bonds That Has Investors Running Scared.

Courtesy of Gregory White at The Business Insider

Today saw a massive selloff in the broader bond market, but the muni bond situation may be the most alarming.

The threat of the end of the Build America Bond program looms large, and it is scaring investors into selling out of the muni market.

It could be the next black swan looming, ready to cause an even larger problem for states already overburdened with debt.

Just check out the down move in the Muni bond ETF today. It may be off its lows of the day, but it still doesn’t look good.

chart of the day, mub, dec 2010

Originally published at The Business Insider, CHART OF THE DAY: The Shocking Selloff In Muni Bonds That Has Investors Running Scared.

 


Tags: , , , ,




2&3, 3&4 or 4&5? That is the Question.

Courtesy of Bruce Krasting

Published at Zero Hedge

I think this day chart of the 30 year says it all. After the very stinky NFP numbers the bond made a predictable jump higher. But it wasn’t long after that the air started leaking out and the bond closed on the lows.

Why the stinky price action when we get a big miss on NFP number? QE and the talk of stimulus done it. The numbers were so bad that by 9:30 talking heads and pundits concluded that the tax cuts were coming and we might just get a break on Social Security payroll deductions any day. Forget about restraining QE-2; the talk went straight into high gear with the only question; “How big might QE-3 be?”

So with that gibberish in mind bonds headed to the crapper while gold set new highs. The confirm that QE is now driving bonds lower came late in the day when there was a convenient leak of a Sunday TV appearance by Ben B. The only quote leaked was: “We might do more”. Stocks liked that talk and ended up; while the bonds ratcheted down another notch.

I am pleased that the market has made the connection that more QE and more stimulus is bad for bonds. The market is the only discipline left that may slow the insanity creeping over D.C. When market forces turn on the “New Monetarism” and shut the door on the insanity, the policies will change. Until they get hit hard over the head the Fed will continue to print. We are getting closer by the day. Consider this graph of the long bond since QE-2 was announced:

Long rates have backed up by 40 bp in just the past month. The exact opposite reaction that ‘the Bernank’ wants. How deflationary is this increase in interest rates? Mildly so. My guess is that the impact of rising rates exactly offsets the stimulative benefit of keeping short rates at historic lows. Yes, more debt is financed short term than long, but a back up in mortgage rates and the increase in long term fixed rate capital for municipalities and corporations will offset any benefits from ZIRP.

On the question(s): “Will interest rates fall from the current levels of ~3% for ten-year


continue reading


Tags: , , , , , , , , , , , , , ,




Sovereign liquidity – Mike Whitney’s morning thoughts

Mike wrote to me this morning,

"Whoa! Have you seen this article?  Sovereign liquidity, what lies beneath

"Am I misreading this or has Trichet pulled out the bazooka? My question: High ranking US officials from the Treasury flew to Spain yesterday. Do you or Phil think the Fed is on a euro bond spending spree to prevent a crash (because the Germans won’t support EU--QE?)  Never a dull moment,  Mike" 

Excerpt: 

Here’s a perfect end to a week in which the ECB has apparently bashed peripheral bond markets into submission. Apparently.

Watch those bid-offer spreads.

We couldn’t quite believe this chart of the bid-offer spread on ten-year Spanish government bonds, made by Divyang Shah of IFR Markets, when we saw it. But it checks out, and is worrying (click to enlarge):

(Still not at the May 2010/Greek crisis nadir… yet.)

Source: Sovereign liquidity, what lies beneath, by Joseph Cotterill

http://ftalphaville.ft.com/blog/2010/12/03/426946/sovereign-liquidity-what-lies-beneath/


Tags: , , , ,




“Sell the News” Bearish Flattening of Yield Curve Continues; Reflections on “Relative Value”

Continuing on the theme of stock market prices vs. real fundamental value, Mish writes: "This is what happens when investors chase "relative value" instead of asking if there is any real value at all…[This] applies to those chasing the stock market at these lofty levels on the basis ‘stocks are cheap relative to treasuries’ or some other nonsensical reason to justify valuations." – Ilene 

Courtesy of Mish

Curve Watchers Anonymous notes a continuing bearish flattening of the yield curve as shown in the following chart.

click on chart for sharper image

A bearish flattening occurs when the curve tightens with yields generally rising. Conversely, a bullish flattening occurs when the curve tightens with yields generally falling.

Since early November, 5-year treasury yields have risen about 60 basis point, 10-year yields about 45 basis points, and 30-year treasury yields have risen perhaps 5 basis points.

Once again we can see the results in today’s action with thanks to Bloomberg.

Buy the Rumor Sell the News

Note the continued unwind of the "sure-thing" treasury bet, with the Fed concentrating its purchases in the 3-to-7-year range hoping to drive down rates, and everyone front-running the trade. That trade is now unwinding.

Clearly this reaction is not what Bernanke wanted at all.

Reflections on "Relative Value"

Check out that .81 yield on 3-year treasuries. On October 18, investors scarfed up $750 million of 3-year Walmart Bonds yielding .75% for the stupid reason they yielded more than treasuries. Now treasuries are yielding more.

This is what happens when investors chase "relative value" instead of asking if there is any real value at all.

The same idea applies to those chasing the stock market at these lofty levels on the basis "stocks are cheap relative to treasuries" or some other nonsensical reason to justify valuations.

There is no value, only unwarranted bullishness.

Mike "Mish" Shedlock

Originally published at Mish’s Global Economic Trend Analysis, "Sell the News" Bearish Flattening of Yield Curve Continues; Reflections on "Relative Value".


Tags: , , , , , , , , , ,




DEEP THOUGHTS FROM DAVID ROSENBERG

Courtesy of The Pragmatic Capitalist 

Via WealthTrack:

“On this week’s Consuelo Mack WealthTrack, a Financial Thought Leader who called the credit and housing bubbles way ahead of the pack. Gluskin Sheff’s prescient Chief Economist, David Rosenberg shares his economic and market outlook, plus advice on how to invest in it.” 


Tags: , , , , , , , ,




Bear Flattener in Treasuries Continues; Mortgage Rates Climb

Bear Flattener in Treasuries Continues; Mortgage Rates Climb

Courtesy of Mish 

Curve Watchers Anonymous has a quick update on US Treasuries.

click on chart for sharper image

The yield curve is flattening, in a bearish way. A Bull flattener would be when yields are dropping across the board with yields on the long end dropping more than the short end.

In this case, 5-year and 10-year yields are up about 45-50 basis points from the low just after QE II started, while yields on 30-year treasuries are up only about 30 basis point.

Daily Snapshot

You can see this easily in a daily snapshot from Bloomberg.

click on chart for sharper image

As I have pointed out before, this action is not at all usual. It is an artifact of everyone front-running the Fed’s announcement of Quantitative Easing purchases, then selling the news.

Yields are higher across the board than in August when the Fed first hinted at another round of QE.

Mortgage Rates Climb

Curve Watchers Anonymous also points out that mortgage rates are on the rise

Mortgage rates are a quarter point higher than a month ago and back to where they were three months ago, even as housing slips further into the gutter. Please see Bernanke Claims QE II will Create 700,000 to 1 Million Jobs; Where? Mexico, Peru, China for more on mortgage applications and mortgage rates.

Mike "Mish" Shedlock


Tags: , , , , ,




Where the Risk Premium Thinking Leads You

Where the Risk Premium Thinking Leads You

Courtesy of Eric Falkenstein of FALKENBLOG

As they say, somethings are so silly on the highly educated can believe them. John Campbell, an archetype of conventional financial academic thinking, has an interesting yet absurd piece on why the low yields of US treasuries makes sense. He starts off with the standard view, that yields of government bonds are due to three things

  • expected real interest rates
  • expected inflation
  • risk premium

As current interest rates are around 2.5%, and current inflation expectations are around 3%, even with a slight convexity adjustment there’s a negative real expected return here. To guys like Campbell, that means, bonds are some kind of insurance, because the only reason investors would accept this is if they pay off in a very bad state of nature, just as you pay for car insurance. Specifically, everyone is supposedly afraid of a recession that would also bring with it deflation. 

While the CAPM betas of bonds have historically been positive, they have been negative lately. If you believed in the CAPM, that would mean the expected negative return makes sense, it is a negative ‘risk premium’. Of course, the positive beta previously did not explain why bonds cratered from 1960 to 1980, and the CAPM does not work at all within equities, the arena it was designed for. It also does not work in corporate bonds, REITs, options, etc. But looked at in isolation it is a plausible explanation, and hope springs eternal.

I think a better explanation of the current interest rates is that the Federal Reserve has been buying hundreds of billions of dollars in US Treasuries. Considering, they have an infinite supply of capital to do this (they create the money when they write the check), the market is not going to offset this via expectations of future inflation. So, the expectations are there, but US Treasuries are a rigged market, with one huge buyer debasing the world’s most powerful currency because it’s in the standard Keynesian manual for how to treat excess unemployment when inflation is currently low. Once the evidence of this short-sighted policy becomes clear, the inflation toothpaste will be out of the tube, and on to the next bubble-crash. 

That is, the expected return on bonds is negative, because bonds are in a Fed-supported bubble. Just look at gold to see what an


continue reading


Tags: , , , , , , , , , ,




Currency Wars: Debase, Default, Deny!

Currency Wars: Debase, Default, Deny! 

Hiker pausing at fork in path

Courtesy of Gordon T Long of Tipping Points

In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.

By lowering interest rates and effectively guaranteeing a weak dollar through undisciplined fiscal policy, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention. 

It’s called debase, default and deny.

Though prior to the 2008 financial crisis our largest banks had become casino like speculators with public money lacking in fiduciary responsibility, our elected officials bailed them out. Our leadership placed America and the world unknowingly (knowingly?) on a preordained destructive path because it was politically expedient and the easiest way out of a difficult predicament. By kicking the can down the road our political leadership, like the banks, avoided their fiduciary responsibility. Similar to a parent wanting to be liked and a friend to their children they avoided the difficult discipline that is required at certain critical moments in life. The discipline to make America swallow a needed pill. The discipline to ask Americans to accept a period of intense adjustment. A period that by now would be starting to show signs of success versus the abyss we now find ourselves staring into.  A future that is now significantly worse and with potentially fatal pain still to come.

Unemployed Americans, the casualties of the financial crisis wrought by the banks, witness the same banks declaring record earnings while these banks refuse to lend. When the banks once more are caught with their fingers in the cookie jar with falsified robo-signing mortgage title fraud, they again look for the compliant parent to look the other way. Meanwhile the US debt levels and spending associated with protecting these failed…
continue reading


Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,




 
 
 

Zero Hedge

No, Robots Cannot Replace Us

Courtesy of ZeroHedge. View original post here.

Authored by Per Bylund via The Mises Institute,

Automation seems to be a never-ending source of fear-mongering. Judging from the commentary, robots will “replace us” and cause large-scale unemployment. With the entry of artificial intelligence (AI), and robots that make robots, the value of human beings as productive forces in the economy is simply zero. People then become value-less consumers, only “mouths to feed” while production is carried out by machines.

...



more from Tyler

Phil's Favorites

Breakout

 

Breakout

Courtesy of 

There’s a new kid on the block. Innovator’s IBD® Breakout Opportunities ETF, ticker BOUT.

The goal of this fund is to identify stocks before they break out. Basically, they’re delivering on a style of technical analysis via machine, which I find intriguing.

When I was trading stocks, I would often buy on the breakout and then sell on the retest. Over and over I would let my emotions get the best of me. Needless to say, it was not a profitable strategy.

Theoretically, an algorithm will eliminate some of these biases that all traders have to overcome. Below is ...



more from Ilene

Kimble Charting Solutions

Connect Series Webinar September 2018

Courtesy of Chris Kimble.

We cover dominating patterns in major global Indices, sectors, commodities and the metals markets.  We produce chart pattern analysis and empower people to improve entry and exit points.

To become a member of Kimble Charting Solutions, click here.

...

more from Kimble C.S.

ValueWalk

Global Return August 2018 Commentary: Thinking Differently

By Jacob Wolinsky. Originally published at ValueWalk.

Global Return Asset Management commentary for the month ended August 31, 2018; discussing Yahoo’s business model.

Dear Friends,

For the month of August, we generated a net return of 2.09%.1 We ended the month with 18% of assets in cash and had a net market exposure of 29%.

Q2 hedge fund letters, conference, scoops etc

Below is a new section we’re calling...

Think Differently

The purpose of this section is to...



more from ValueWalk

Insider Scoop

Discovery Communications' 20% Gain Difficult To Justify, Pivotal Says In Downgrade

Courtesy of Benzinga.

Related DISCA Benzinga's Top Upgrades, Downgrades For September 18, 2018 A Peek Into The Markets: US Stock Futur...

http://www.insidercow.com/ more from Insider

Members' Corner

Nike, Colin Kaepernick and the pitfalls of 'woke' corporate branding

 

Adding this article to Members Corner, in case anyone wants to share their opinions on Nike and Kaep, or on divisiveness in general. Also see the article I mentioned in the comments section, "A Warning From Europe: The Worst Is Yet to Come" and What’s behind the current wave of ‘corporate activism’? ~ Ilene

Nike, Colin Kaepernick and the pitfalls of 'woke' corporate branding

Courtesy of Simon Chadwick, University of Salford...



more from Our Members

Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

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

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



more from Biotech

Chart School

Gold stocks, Elliot Wave and Volume

Courtesy of Read the Ticker.

Whom ever paints the chart with Elliot wave always has to try and sideline their bias. Elliot wave can work when it applied correctly and the chart is friendly to receive its application.

More from RTT Tv





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








Fundamentals are important, and so is market timing, here at readtheticker.com we believe a combination of ...

more from Chart School

Digital Currencies

A history of Bitcoin - told through the five different groups who bought it

 

A history of Bitcoin – told through the five different groups who bought it

GeniusKp/Shutterstock.com

Courtesy of Dave Elder-Vass, Loughborough University

The recent fluctuations in Bitcoin’s value are just the latest in a series of spectacular peaks and troughs since it was created in 2009. (Though its price has been falling recently, it remains five times higher than last April, before the l...



more from Bitcoin

Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



more from M.T.M.

OpTrader

Swing trading portfolio - week of September 11th, 2017

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 ...



more from OpTrader

Promotions

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

...

more from Promotions

All About Trends

Mid-Day Update

Reminder: Harlan 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...

more from David





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 >>


As Seen On:




About Ilene:

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.

Market Shadows >>