Posts Tagged ‘short squeezes’

Short Sales: The Real Issue

Karl Denninger presents a compelling argument that market makers should not be exempt from rules preventing short-selling shares that cannot be borrowed (naked short selling). Because the quantity of a given stock in "float" is fixed, traders and market makers should not be allowed to create unreal and illogical bets on stocks that result in perversion of market dynamics and wild price swings. That’s my summary, Karl explains in detail. – Ilene

Short Sales: The Real Issue 

Stack of red gambling chips over two numbers on roulette table

Courtesy of Karl Denninger at The Market Ticker

Matt Taibbi once again writes in Rolling Stone, this time on naked short sales, and while he gets a good part of the issue right, he (and many others who have opined on this situation over the years) miss the forest for the trees.

Matt writes:

But the most damning thing the attack on Bear had in common with these earlier manipulations was the employment of a type of counterfeiting scheme called naked short-selling. From the moment the confidential meeting at the Fed ended on March 11th, Bear became the target of this ostensibly illegal practice — and the companies widely rumored to be behind the assault were in that room. Given that the SEC has failed to identify who was behind the raid, Wall Street insiders were left with nothing to trade but gossip. According to the former head of Bear’s mortgage business, Tom Marano, the rumors within Bear itself that week centered around Citadel and Goldman (GS). Both firms were later subpoenaed by the SEC as part of its investigation into market manipulation — and the CEOs of both Bear and Lehman were so suspicious that they reportedly contacted Blankfein to ask whether his firm was involved in the scam. (A Goldman spokesman denied any wrongdoing, telling reporters it was "rigorous about conducting business as usual.")

Matt gets so close, but fails in the closing.

See, there are two area of naked shorting that nobody wants to really deal with, yet both have to be if we are ever to make a difference. Let’s deal with them in turn.

The first, the writing of "naked" swaps, is one that I’ve written about before. The essence of a "credit default swap" is a contract whereby the buyer of protection insures…
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Recent Failed Sell Signals and Short Squeezes in the SPY

Recent Failed Sell Signals and Short Squeezes in the SPY

Courtesy of Corey at Afraid to Trade

I wanted to give an updated look at the recent post entitled “If History Repeats, Will it Mean New High for S&P 500?“  As we see today, the answer is overwhelmingly “yes” as I suspected would be the case when I wrote that post on October 6th.

Let’s take an updated look now that ‘history has indeed repeated’ and also step inside the three most recent “short squeezes” on the SPY and S&P 500.

Starting with an updated look at the SPY Daily chart:

SPY Chart

In the prior post, I mentioned that the pattern looked eerily similar to the prior “surprise” rallies that were fueled in part by short-covering (buying pressure to exit positions with losses).  The yellow highlighted regions reflect the “short squeeze” while the red regions represent valid and classic short-sale signals (be they from momentum or volume divergences, and/or breaking beneath the 20 day EMA).

These ‘failed sell signals’ started with the July ‘breaking’ of the widely publicized Head and Shoulders pattern which led to a massive short-squeeze (so many people were 100% convinced the market was going to break to new lows from this pattern).

From there, buyers have invalidated (or busted/broken) three additional short-sell (swing trade) signals, resulting in snap rallies to break to new 2009 highs each time.

Let’s step inside the highlighted zones above and see them on a plain 60min chart:

(Click for Full-Size Image)

Not only were there valid divergences, but there were large downside (morning) gaps and strong selling days that preceded the reversals to the upside, which tells us that shorts were entering positions, and as the market -for whatever reason – began to reverse, an “avalanche” occurred as prices rose, which triggered out stop-losses and drew in fresh buyers.

Notice the swift upside gaps and strong up bars in each of the highlighted regions, especially the current region which began on October 5th.

What is the implication?

As I mentioned in the previous post, odds strongly favored a retest or breaking of the 2009 high which occurred today (a re-test).  Should price continue to nudge slightly higher beyond $108.03 in the SPY and 1,081 in the S&P 500, then we will see more short-sellers be stopped out which will create further upside ‘bursts.’

This is…
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SP Futures Hourly Chart at 2:30 EDT

SP Futures Hourly Chart at 2:30 EDT

Jesse's Cafe AmericainCourtesy of Jesse’s Café Américain

Some short term indicators are flashing that we are nearing at least a short term top. There is also indication of distribution of stock here by insiders to the public, which is also an indication of a possible top. This judgement is based on many charts and indicators not shown here.

Having said that, our discipline will not prompt us to do any seriously non-hedged shorting until the ‘trendline’ Key Pivot is violated at least on a daily close, and then confirmed by a move lower.

The market is rising on thin volumes, and unless the sellers come back in, it can continue to drift higher on program trading and short squeezes.

We are within two weeks of a potential ‘crash window’ where a final top will be made, and a selloff with a significant leg lower will be seen into the end of year. The window is a bit wide for now, a six week period starting around August 17th. We will hope to tighten that up by the end of July.

This is only a probability, not a hard forecast. But it has us edgy to be on the long side, even in precious metals miners, without hedging a general market decline. The Cashflow in the market is looking a bit stretched. We may have to wait until later in earnings season for this to shake out.

In sum, the markets seem ‘precarious’ and unstable to us, but not enough to jump in front of the market to the bear side yet. 

As an aside, we are seeing quite an increase in ‘screwy fills’ on the bid ask level II where fills on the retail side seem to be made ‘out of bounds’ of the usual bid/ask action.

We do not use market orders normally and would not suggest them here for those that do. The market makers are shaving fills and front running perhaps although that is harder to spot except on the thinly traded stocks where other issues may come into play.

But we are seeing far too many fills BELOW our limit bids on some stocks to believe this market is functioning normally.

[Click on chart to enlarge]


 


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Digital Currencies

How the US Government Could Effectively Use Crypto

The US government could start, or officially endorse an existing crytpo coin. What they would do is build a fee into the software protocol that went to a single address that they control. This is effectively a tax. The fee could be a transaction fee, a percentage of the next block award, or a combination of both. How this works is every single transaction that occurs everywhere wihtin the system, the fee scalped goes directly to this single address that is owned by the IRS, in this case, the "New-IRS." Forget postcards. We're down to a single dude in one office chair in front of one computer. Imagine that being the IRS, because that's where this is going. The consequences of this mechanism are dramatic. First off the IRS is now one guy. Granted, this guy controls the private key for the most valuable thing in the world. This key would be the single most important key right up there with the nuclear launch code, but the system would most definitely still work. More strikingly, the US...

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Phil's Favorites

New Animal Spirits: What it takes to be wealthy

 

New Animal Spirits: What it takes to be wealthy

Courtesy of 

Michael and Ben’s new episode of Animal Spirits is out today, and it’s awesome as usual. If this isn’t part of your weekly routine yet, I don’t even know what to tell you at this point. No one is covering more interesting topics and blowing up like this podcast is.

This week’s topics:

  • Are Jack Bogle and Vanguard actually underrated?
  • Why closet indexing will never die.
  • Why money is flowing out of growth funds even though they’ve outperformed. ...


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Zero Hedge

Trump No Longer Allowed To Block Twitter Users, Judge Rules

Courtesy of Zero Hedge

President Trump's e-haters just won a major skirmish in the battle against his tough-talking tweets.

Federal district court Judge Naomi Reice Buchwald, a Bill Clinton appointee, ruled on Wednesday that Trump is no longer allowed to block people from viewing his Twitter feed.

As we reported in July 2017, a free-speech group sued President Donald Trump for blocking Twitter users from his @realDonaldTrump account, arguing the practice violates the First Amendment of the U.S. Constitution.

The lawsuit alleged that because ...



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Insider Scoop

Benzinga's Daily Biotech Pulse: Insmed Presents Data, Pfenex Pulls Back On Offering, Oncolytics Listing

Courtesy of Benzinga.

Related IBB Benzinga's Daily Biotech Pulse: Melinta, Ardelyx Pull Back On Offerings, Insys Awaits FDA Verdict ...

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Chart School

Wide Market Cycle Review

Courtesy of Read the Ticker.

Lets review some big market cycles, to see where cycle pressure is building or peaking.

Cycles are like long term trend lines and are great for the long term view, of course price action leads (Wyckoff Logic) before cycles.

Lets go ...

US 10 yr: Trending higher to 4% ... Ouch. Inflation moving from Wall Street to Main Street.

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The EURO looks to bottom (USD topping).

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SSEC looks forward to another pump up to save the SP...

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Biotech

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

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

 

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

Courtesy of John Bergeron, McGill University

In 2013, Kyoto University’s Shinya Yamanaka was awarded one of the first Breakthrough Prizes in Life Sciences for his discovery of “induced” stem cells that enabled researchers to convert adult cells back into stem cells.

The Breakthrough Prize is not to be sneezed at. Founded in 2013, the prize “honours transformative advances toward understanding living systems and extending human life.” It’s also the most financially attractive aw...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



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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 ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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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...

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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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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.

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