Posts Tagged ‘stress tests’

Monday Market Measurement – Just Right?

Welcome to dead center! 

We are finally back to the middle of our predicted trading range.  It's the range that our 5% rule predicted since October of 2008 so we're hardly going to be shocked to be here now.  Usually we are shocked when we're NOT in our range.  I detailed the movement this weekend in our 5% Rule Update, so I won't get into it all here but let's just focus on our short-term chart and embrace the uncertainty as we move back to the middle of our range at 1,100

I say it all the time and I'll say it again:  I'm not bullish or bearish – I'm rangeish.  That means I get more bullish at 5% under our line and I get more bearish at 5% over our line and I get extremely bullish or bearish as we get into that 10% zone because – if the market fundamentals don't change – then my midpoint doesn't change and the opportunity is to play us to return to "reality" at S&P 1,100 (Dow 10,200). 

Just look at those nifty little resistance points we have to watch now – the 200 dma is at 1113 and the 50 dma is at 1,084 and we just ran up from 1,030 (we ignore spikes) past the 5% rule at 1,081, which just so happens to be pretty much the 50 dma so that will be our key test for the week as our bottom to top run from 1,101 to 1,102 is close enough to 10% to merit a 2% (20% of the run) pullback back to, WHOOPS!, 1,080.  So 1,080, 1,080 and 1,080 is our line in the sand for the week.  If the rally is real, the number will hold and, if it doesn't hold (especially with all the earnings and economic data we have coming in) then we have to look at the drop from 1,220 to 1,020 (200 points) and consider the move back to 1,120 nothing more than a strong, 50% bounce back to our mid-range. 

We are past the EU Stress tests but JPM says 54 banks should have failed for the following reasons:

  • Lack of rigour in macroeconomic stresses, leading to low virtual portfolio loss rates
  • Sovereign haircuts were applied only to trading


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More Stress Test Shenanigans

More Stress Test Shenanigans

Magician performing trick on stage

Courtesy of Washington’s Blog

AFP reports:

The Federal Reserve will expand its so-called stress tests of the banking system to ensure they have enough capital during difficult periods, Fed chairman Ben Bernanke said Friday.

Bernanke highlighted the positive impact of stress tests conducted earlier this year on major banks, a move aimed at ensuring their financial health and building confidence.

"Building on the success of this initiative, we will conduct more frequent, broader, and more comprehensive horizontal examinations, evaluating both the overall risk profiles of institutions as well as specific risks and risk-management issues," Bernanke told a conference organized by the Boston Federal Reserve.

The highly publicized stress tests conducted earlier this year focused on 19 major banks, and indicated 10 needed additional capital.

Bernanke said the Fed would step up efforts to review bank capital requirements to avoid a recurrence of the credit crisis that has spread around the world.

"Additional steps are necessary to ensure that all banking organizations hold adequate capital," he said.

He noted that the Financial Stability Board — a global watchdog made up of senior representatives of national financial authorities — had called for "significantly stronger capital standards," and that the Group of 20 "has committed to develop rules to improve both the quantity and quality of bank capital."

"The Federal Reserve supports these initiatives. The structure of capital requirements should also be reviewed," Bernanke said.

Should we be reassured by the new round of stress tests?

Well, let’s take a look:

  • Time Magazine called the previous stress tests a "confidence game" and Geithner a "con man" for running them deceptively
  • Paul Krugman called the stress tests a mere "self-esteem class" for banks that no bank would be allowed to fail
  • Nouriel Roubini said the stress tests "fail the basic criterion of a reality check"
  • William K. Black called them "a complete sham"
  • FDIC head Sheila Bair didn’t believe they were credible
  • The stress tests were a P.R. stunt devised by the banks themselves
  • The government has more or less admitted that the stress tests were meaningless (see this and this)

In addition, AFP quotes Bernanke as saying:

"For example, to reduce the tendency of current capital requirements to


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Hey, Look, The Stress Tests Really Weren’t Stressful Enough

Hey, Look, The Stress Tests Really Weren’t Stressful Enough

Courtesy of Henry Blodget at ClusterStock

Calculated Risk illustrates what we already knew: the bank stress tests weren’t nearly stressful enough.

The chart below looks at unemployment by quarter.  The green bars are the "base case" in the stress tests (the most likely scenario, in the government’s opinion).  The blue bars are the "adverse case" scenario--unlikely but possible.  And the red bars are what’s actually happening (Q2 is a forecast).

The larger story here, unfortunately, is that the Obama administration continues to blow its credibility on the economy.  By being too optimistic from the get-go, the administration is opening the door for critics and opponents who are already arguing that the Obama plan has failed.

Calculated Risk has a bigger version of the chart and more thoughts here >

 


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Phil's Favorites

A 2019 Earnings Recession?

 

A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...



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Zero Hedge

How Will The Pound React To Tuesday's Brexit Deal Vote? FX Traders Weigh In

Courtesy of ZeroHedge. View original post here.

Months of extreme volatility have taken their toll on the pound, with traders declaring the G10 currency "untradeable" during the worst of the withdrawal-deal related chaos last year, as daily swings of multiple percentage points became increasingly common, prompting some traders to muse once again about how the pound - one of the world's most liquid, heavily traded currencies, was behaving more like the Turkish lira than a designated global reserve currency (as its membership in the IMF's SDR basket would suggest). 

Now, after months o...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

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Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...



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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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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

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...

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