So I'd simply like to leave this message of peace and goodwill (and say "thanks" to you all who come every day).
Happy Easter! & Chag Pesach Kasher veSameach!
Morning Audibles 4.2.10 - Enjoy the Holiday Weekend!
To all the "peeps" who share this blog everyday, I'll be out and around all weekend enjoying some nice sun, and attending some gatherings.
So I'd simply like to leave this message of peace and goodwill (and say "thanks" to you all who come every day).
Happy Easter! & Chag Pesach Kasher veSameach!
CV
So I'd simply like to leave this message of peace and goodwill (and say "thanks" to you all who come every day).
Happy Easter! & Chag Pesach Kasher veSameach!
Morning Audibles 4.1.10 - April Fools Day
"A FOOL and his money are soon parted" (Thomas Tusser - English Farmer/Writer, 1524-1580, who also said "Sweet April Showers do spring May flowers")...
Speaking of Fools (and April), here's how Wall St. works to make the logic of Tusser come true.
It starts with these two guys (shown here paying a visit to their sock puppet sugar daddy rich uncle). They then proceed to play version of 3 card monte [probably with tarot cards]. They bid up equity prices day in and day out, exchanging them between themselves. So as to not look so obvious doing it, they focus on "single digit midgets" (like C, AIG, FNM, FRE), or shares that are hanging around somebody's REPO shelf.
On the first 2-3 days of each month then, a big transfer occurs.
These MoMo's (money managers), appear to the masses to be hard working types, pouring over charts & analysis all month & interested in nothing more that YOU being able to retire in semi-luxury in that retirement McGolf community.
Of course it was YOUR money that the MoMo's used for that transaction (the money YOU NEVER saw because it was whisked out of your paycheck, and into your 401k account for the Momo to distribute while he fancied himself being THIS GUY).
Now OTOH, if you're a "trader" of this phenomenon, it's probably just best to wait until all these transactions have taken place, and if you're a market BEAR, that opportunity won't likely come until next Tuesday or so.
Any questions? You could perhaps refer them to Tusser, who also said, "Methesulah lived to be 969 years old. You boys & girls will see more in the next 50 years than Methesulah saw in his whole lifetime"... And Tusser said THAT in the 1500's...
On the first 2-3 days of each month then, a big transfer occurs.
I always wanted to have this guy in my foursome...
Of course it was YOUR money that the MoMo's used for that transaction (the money YOU NEVER saw because it was whisked out of your paycheck, and into your 401k account for the Momo to distribute while he fancied himself being THIS GUY).
Instead, THIS GUY, just made "A million dollars"
Any questions? You could perhaps refer them to Tusser, who also said, "Methesulah lived to be 969 years old. You boys & girls will see more in the next 50 years than Methesulah saw in his whole lifetime"... And Tusser said THAT in the 1500's...
Morning Audibles 3.31.10 - Last Day of MBS Purchases by Fed
If anybody really thinks this is the end of the line, they probably need their head examined. But it's nice to observe occasions with a little cake and a few party favors.
After all, tomorrow is April Fools Day, and therefore we have more important things on hand to celebrate in this country.
I could probably be really funny here and conjecture about all the things that might happen as MBS purchases by the FED fade under the carpet into the past, but I'd rather take a more normal approach, and treat it for what it is... Here, I'll give you the Easter Bunny version (so as to be seasonal).
Let's review what the Fed buying MBS did in the first place.
- Helped bolster fraudulent balance sheets for the next wave of liquidations.
- Given banks time to raise capital & loan loss reserves ahead of that.
- Given a feeling of 'safety' (with implicit guarantees)
- Allow for a period of "risk on" trades to occur (more on that later)*
- Create a hypothetical conduit for "risk on" trades to unwind to a desired direction (don't laugh or spit out your coffee when I say that, while I doubt that was "in the plan" - I don't think the FED is that smart), It may end up as a bonus feature.
Still, while it is now easy to understand what this form of QE accomplished in hindsight, it is difficult to understand what the withdraw of such will produce.
Remember, this move has been 'telegraphed' for a long time. Amen Ra (on this blog, and many other blogs, for that matter, have even taken to doing "countdowns" as the final day approached. To offer a comparison, remember back in February (on the Thursday before OPEX - after the close of the markets) when the FED did a surprise hike on the "discount rate"? Remember the market reaction? A quick "whoosh" in AH trading, but by the next morning, algos & HFT were treating it as nothing ever happened. Now, remember, the "raising of the discount rate" was another move that was widely telegraphed (yet nobody was sure when it was coming). This policy shift (with regards to MBS), has been known about for quite some time.
So I'm going to hazard a guess that BASICALLY NOTHING HAPPENS. Or, if it does (and on what day it occurs), will likely be attributable to the mysterious way in which the markets move in aggregate.
Bottom line? This is "priced in" (and has been for quite some time).
Now we can get in to OTHER hypothesis. Being "priced in" could actually mean that a "RISK OFF*" trend needs to ensue (as hinted about above). It's a matter of 'timing'. The official end of these purchases by the Fed comes at the end of the first quarter. So it could be, in hindsight, that the apparent strength in equities over the past 6-8 weeks (especially PD bank stocks), has been typical "window dressing" in anticipation of the final event. I mean, even if you own a "clunker" car, you're probably going to slop it up with a little "Armor-All" if someone is going to take a look at it. Right?
So I'd nominate the same hypothesis as we've been doing for the past few weeks as the possible outcome.
- Equities are probably a little overbought 'technically' here, it's probably time for a little correction
- The dollar seems to be readying for its final medium term rally of strength
- The Treasury needs yields to flatten (appropriate time for some RISK ON trades)
These are "highly probable" occurrences, but, as always, the TIMING can't be predicted. The exact duration & steepness of the move (how far - how fast) is tough to determine as well. So if you're looking at in terms of equity index levels, what does it mean? 1150? 1120? 1000? Do we push minimally higher first?
My best guess is that if we push higher now (say, within the next 3 trading days), it will only be 'marginally' higher (I've set 1183 as a bogey in that case). One thing that this Fed & this Administration have successfully accomplished thus far is to EXTEND & PRETEND. Someday we'll probably crash. But the easiest way to "get by" in the meantime is to AVOID going totally vertical.
ANOTHER date coming up on the calendar is April 14th (the anniversary of the sinking of the Titanic). I suppose we need to get about "re-arranging some deck chairs" in order to pay proper tribute.
I could probably be really funny here and conjecture about all the things that might happen as MBS purchases by the FED fade under the carpet into the past, but I'd rather take a more normal approach, and treat it for what it is... Here, I'll give you the Easter Bunny version (so as to be seasonal).
- Helped bolster fraudulent balance sheets for the next wave of liquidations.
- Given banks time to raise capital & loan loss reserves ahead of that.
- Given a feeling of 'safety' (with implicit guarantees)
- Allow for a period of "risk on" trades to occur (more on that later)*
- Create a hypothetical conduit for "risk on" trades to unwind to a desired direction (don't laugh or spit out your coffee when I say that, while I doubt that was "in the plan" - I don't think the FED is that smart), It may end up as a bonus feature.
Still, while it is now easy to understand what this form of QE accomplished in hindsight, it is difficult to understand what the withdraw of such will produce.
Remember, this move has been 'telegraphed' for a long time. Amen Ra (on this blog, and many other blogs, for that matter, have even taken to doing "countdowns" as the final day approached. To offer a comparison, remember back in February (on the Thursday before OPEX - after the close of the markets) when the FED did a surprise hike on the "discount rate"? Remember the market reaction? A quick "whoosh" in AH trading, but by the next morning, algos & HFT were treating it as nothing ever happened. Now, remember, the "raising of the discount rate" was another move that was widely telegraphed (yet nobody was sure when it was coming). This policy shift (with regards to MBS), has been known about for quite some time.
So I'm going to hazard a guess that BASICALLY NOTHING HAPPENS. Or, if it does (and on what day it occurs), will likely be attributable to the mysterious way in which the markets move in aggregate.
Bottom line? This is "priced in" (and has been for quite some time).
Now we can get in to OTHER hypothesis. Being "priced in" could actually mean that a "RISK OFF*" trend needs to ensue (as hinted about above). It's a matter of 'timing'. The official end of these purchases by the Fed comes at the end of the first quarter. So it could be, in hindsight, that the apparent strength in equities over the past 6-8 weeks (especially PD bank stocks), has been typical "window dressing" in anticipation of the final event. I mean, even if you own a "clunker" car, you're probably going to slop it up with a little "Armor-All" if someone is going to take a look at it. Right?
So I'd nominate the same hypothesis as we've been doing for the past few weeks as the possible outcome.
- Equities are probably a little overbought 'technically' here, it's probably time for a little correction
- The dollar seems to be readying for its final medium term rally of strength
- The Treasury needs yields to flatten (appropriate time for some RISK ON trades)
These are "highly probable" occurrences, but, as always, the TIMING can't be predicted. The exact duration & steepness of the move (how far - how fast) is tough to determine as well. So if you're looking at in terms of equity index levels, what does it mean? 1150? 1120? 1000? Do we push minimally higher first?
My best guess is that if we push higher now (say, within the next 3 trading days), it will only be 'marginally' higher (I've set 1183 as a bogey in that case). One thing that this Fed & this Administration have successfully accomplished thus far is to EXTEND & PRETEND. Someday we'll probably crash. But the easiest way to "get by" in the meantime is to AVOID going totally vertical.
ANOTHER date coming up on the calendar is April 14th (the anniversary of the sinking of the Titanic). I suppose we need to get about "re-arranging some deck chairs" in order to pay proper tribute.
So RELAX, and enjoy the cruise in one of these babies!
AmenRa's Daily Candle Wrap
SPXDoji day. Boring. Midpoint stayed above 10 SMA. Held fibo ext 85.4%. No daily 3LB changes. Only 1 more day of QE!!!
DXYBullish short day. Tested Gann 2x1 level and passed. Uptrend is back (Go Bucky!). No daily 3LB changes.
VIXBearish short day. Tested the fibo ext 50% and failed. Did not hold the 21 SMA. Midpoint still above 10 SMA (barely). No daily 3LB changes.
GOLDBearish short day. Confirmed doji to the downside. Back below the 89, 55, 21 and 10 SMA's. No daily 3LB changes.
EURUSDBearish short day. Midpoint is still below the 10 SMA. Next fibo level of 1.2935 is back in sight. No daily 3LB changes.
BACBearish long day. Three previous days all show heavy selling pressure. Couldn't hold the fibo ext 85.4%. No daily 3LB changes.
Morning Audibles 3.30.10 - P2, The Run of Forrest Gump
On just about every financial blog I read, the constant topic seems to be, "How long will this bull run continue, seemingly unabated"? I've been known to ponder the same question from time to time. My ponderer is sore. So instead of trying to figure it out on charts or anything (which enough, ahem, "experts", have done already). I thought I'd illustrate what seems to be the path we're following in a metaphorical sense (both in terms of possible duration, and underlying motive for doing so).
Everyone remembers Forrest Gump running across America. Most famously, he ran across America back to back several times over a span of three years to get over the heartbreak of Jenny's leaving him.
Everyone remembers Forrest Gump running across America. Most famously, he ran across America back to back several times over a span of three years to get over the heartbreak of Jenny's leaving him.
AmenRa's Daily Candle Wrap
SPXBullish short day. Boring. Midpoint stayed above 10 SMA. Back above fibo ext 85.4%. No daily 3LB changes. Only 2 more days of QE!!!
DXYBearish spinning top day. Gann 2x1 level failed. Uptrend is back (so far so good). No daily 3LB changes.
VIXBearish short day. Tested the 50% fibo ext and failed. Did not hold the 21 SMA. Midpoint still above 10 SMA. No daily 3LB changes.
GOLDDoji day. Still below the 89 and 21 SMA's. Held the 144 SMA. Daily 3LB reversal up with reversal now 1088.80.
EURUSDBullish short day. Midpoint is still below the 10 SMA. Next fibo level of 1.2935 is coming soon. No daily 3LB changes. Head fake?
10YR BONDBearish harami day. Closed above weekly 3LB reversal price of 38.62. The last three days form a short term wedge. No daily 3LB changes.
Morning Audibles 3.29.10 - It's Spring, But Keep the Earmuffs Handy
This past weekend I did hardly anything market or blog related. I stayed almost completely away from economic and financial news and instead worked around the yard most of the weekend getting areas cleaned out and ready for spring planting.
Naturally, come late Sunday, early Monday, I have to post a thread for this blog so I did a quick perusal of some of the usual haunts (Bloomberg, ZH, etc.) to see if there were any 'headline' happenings that might affect the markets this week. Before I get into that, I should start with a summary of the ideas I had in my head after the close of Friday. Sort of a "what worries me, what doesn't worry me" checklist. I'll list some of those here.
WHAT DOESN'T WORRY ME
- I believe that fundamentally equities are in bubble territory and will eventually correct.
- I apply that logic to both short and long term (medium term I'm still debating). To quantify that, perhaps a 5-10% correction in the short term, and eventually possibly a 50% correction (or more) longer term
- I'm not overly concerned with my own economic status, however, I'd prefer not to lose money trying to 'short' equities while the markets ar behaving irrational.
WHAT DOES WORRY ME
- Markets have shown that they can stay irrational for a long time.
- I'm worried that now that we seem to be in the latter phases of "bubble mentality", that NEWS FLOW tends to be the "justification of choice" to keep a bid under the market. Emotionally, it's very difficult to hold a position against that.
- I'm worried that, going into this week, the DIAL of that news flow is going to be turned to HIGH VOLUME.
If that's the case, and you're a bear, it might be best to put the ear muffs on for awhile.
Here are some examples of how the MSM and stock touters are going to operate this week.
1. End of quarter - NEED to "window dress" (we still have 3 more days to endure).
2. Proximity of S&P index to 1,200. (It's sure to get there, right?).
3. Manic Mondays - Market always "melts-up" on Mondays, right. Futures are already green.
4. Friday's jobs report will show employment gains (census jobs - but who cares about details)?
5. Earnings season coming
6. Economic Confidence numbers in Europe improving
7. Greece bailed out.
8. Dollar strong (now WAIT, this 'should' be a negative right? This week they'll spin it POSITIVE and say that since Treasuries are weak, and with a falling Euro, the only asset class to buy will be US equities - YOU WATCH).
9. Then, you get stuff like this that I read over at ZH
Naturally, come late Sunday, early Monday, I have to post a thread for this blog so I did a quick perusal of some of the usual haunts (Bloomberg, ZH, etc.) to see if there were any 'headline' happenings that might affect the markets this week. Before I get into that, I should start with a summary of the ideas I had in my head after the close of Friday. Sort of a "what worries me, what doesn't worry me" checklist. I'll list some of those here.
WHAT DOESN'T WORRY ME
- I believe that fundamentally equities are in bubble territory and will eventually correct.
- I apply that logic to both short and long term (medium term I'm still debating). To quantify that, perhaps a 5-10% correction in the short term, and eventually possibly a 50% correction (or more) longer term
- I'm not overly concerned with my own economic status, however, I'd prefer not to lose money trying to 'short' equities while the markets ar behaving irrational.
WHAT DOES WORRY ME
- Markets have shown that they can stay irrational for a long time.
- I'm worried that now that we seem to be in the latter phases of "bubble mentality", that NEWS FLOW tends to be the "justification of choice" to keep a bid under the market. Emotionally, it's very difficult to hold a position against that.
- I'm worried that, going into this week, the DIAL of that news flow is going to be turned to HIGH VOLUME.
If that's the case, and you're a bear, it might be best to put the ear muffs on for awhile.
Here are some examples of how the MSM and stock touters are going to operate this week.
1. End of quarter - NEED to "window dress" (we still have 3 more days to endure).
2. Proximity of S&P index to 1,200. (It's sure to get there, right?).
3. Manic Mondays - Market always "melts-up" on Mondays, right. Futures are already green.
4. Friday's jobs report will show employment gains (census jobs - but who cares about details)?
5. Earnings season coming
6. Economic Confidence numbers in Europe improving
7. Greece bailed out.
8. Dollar strong (now WAIT, this 'should' be a negative right? This week they'll spin it POSITIVE and say that since Treasuries are weak, and with a falling Euro, the only asset class to buy will be US equities - YOU WATCH).
9. Then, you get stuff like this that I read over at ZH
I can tell you THAT was met with much "consternation". The article seemed to give the impression that a "melt up" was imminent. Frankly, I don't think it implies anything in particular (comparing to the similar two spikes to now and last March when the markets started on this P2 run). I'll give you some reasons:
- Both came at the end of March. Japans fiscal year end. This may have had more to do with carry trade unwinding and squaring than anything else. Same with last year. This happens EVERY March.
- Look at the EOQ months on the chart. All EOQ months show spikes (rebalancing). For that matter, the smaller spike that preceded January '10 was followed by a 'correction in equities' (and in fact, the trough afterwards was perhaps just an insurance policy to get through the quarter).
- The large cover SPY positions may have even been the Fed, who was instructed to keep a put under the market until the HC bill was passed. In fact, last week there were several attempts to take the market down, which all failed.
The bottom line is, if you have EARMUFFS on, you don't have to really see anything sinister in the markets. I could be wrong here, but that's my position.
Two things I think we do have to watch very closely are long bond prices, and the EUR/USD. Last week, Goldman did a 180. (Going from a BUY recommendation on the Eur with a STOP LOSS at 1.34, to a SELL rating on it with a STOP at 1.35). This morning, 1.35 is likely to be tested. It would be AMAZING to see GS get stopped out TWICE on a public call they made within a few days time.
If Goldman IS on the right side of the Euro trade, then it would seem to me that ANY news article you read about the situation in Europe having been mitigated, is a load of crap.
As for bond prices, I mentioned last week that the last time the 10y note put a 4 handle on (last June), led to a 9% correction in equities. Don't forget that CHICAGO OWNS NEW YORK. Whatever Bernanke does, he cannot let the long bond market get away. Recently, it's been getting tougher and tougher for the Treasury to roll over short term debt. With this Administration and Congress showing no indication that they can say "no" to any spending opportunity, the cost of funding these measures at higher yields up the curve is simply not feasible.
It would be a lot more feasible to tank equities at this point than to let the long bond slip away.
But these last two ideas aren't things that are understood in CRAMERICA. Cramericans will be fed a steady diet of sugar coated news. For the rest, this is your likely posture for the week ahead.
Disclosure/Warning
