I’m not bothering to do any analysis today because who knows what kind of market we will have tomorrow. Will the inverse ETF’s even be trading? How will put options behave if market makers can’t hedge their risk by shorting? Etcetera.
I am happy to report that I was all-in and leveraged short before the Crash of ’08, and I got out at an ideal time: Tuesday morning’s gap down. I had excellent profits, and got out before they changed the rules. Now let’s see if my profits evaporate out of the computers of the financial system.
Nice going Washington! Nice going New York! You crashed the whole thing!
Well, it could be worse. You could wake up with 10 Russian warships on your doorstep just like the Israelis.
I have noticed a lot talking heads in the media, including President Bush and Steve Leisman, using the phrases “free world” and “free capitalist world” recently. Have the geniuses in Washington who just wrecked our economy begun a subliminal program to brainwash us for a coming war with Russia?
Starting wars is a traditional method for the USA to end economic recessions and depressions after all.
I must say that this enthusiasm to fight nuclear-armed countries like Pakistan and Russia is a bit alarming.
So, lets hope that our fearless leaders have sated their appetites for destruction by destroying the economy.
Do you think Dick Fuld is deriving sick pleasure from taking the whole system down with him? There were actually fools in Korea who wanted to buy his sinking ship!
hmm russians all around the world, russian market opens soon or alreayd opened. I wonder how this latest reaction will be.
I don’t know how long market shorting has been around, but I surely wouldn’t be tinkering with something that has been working for years or decades. Results may be unpredictable.
“If it ain’t broke, don’t fix it”.
Reading up on candlesticks today apparently the Japanese invented them for rice trading in the 1700s and we know the Dutch were trading futures and going short in the 1600s. But somewhere else it turns out Sumerian merchants were using bills of exchange, letters of credit and speculation ~2500 b.c. This too will pass. If we can’t trade tomorrow (& unfortunately I didn’t get out…glad somebody was more disciplined) Jesse Eisenger has a very good dissection of AIG and how it’s not the shorts on Portfolio, I’d point you again to http://epicureandealmaker.blogspot.com/ for his K-T boundary post and then point out that none of this is law as yet; nor even regulation. And Barney Frank was sure reaming Ben a new one for saving AIG and so forth. Talk about no clue about the exposure….if the world was rocked by LEH’s CDS’s can you imagine if AIG went down ?
Shorts put a bid under the market if anything — they want to cover
Guys,
these new announcements and changes to the market are scary. It is no longer a free market we have. This is a highly manipulated and artificially propped up market that we are heading to. A fake rally that in the end that will suck in all of the remaining wealth in the US and destroy it.
This is truly the end of free markets, the end of the economy that we know it. The trust in the US just went out the window.
George,
Yes, reaching into a complex system and plucking out one of its components is guaranteed to cause unpredictable behavior. Try it with your computer and see what happens! Trading strategies that worked before may no longer work now, which is why I have just been a spectator since Tuesday morning.
Matt
To add fuel to the fire of what we could be trading on Jeff Gundlach had this to say, “In the deteriorating climate he sees unfolding, Gundlach said, the Standard & Poor’s 500 Index could fall another 30%, giant Citigroup could become an “AIG-sized debacle,” Morgan Stanley would merge with a banking company, Wachovia won’t be able to stand alone, default rates on even prime mortgages could soar, and European banks’ woes are just beginning. ”
http://tinyurl.com/4f9yvl
Our assessments exactly ? He predicts an 800 SPX. Ah joy !
Dblwyo,
those predictions and article were printed on Thursday @ 4pm when we still had a free market. That isn’t the case anymore
So yes.. we will have a meltdown like none we’ve seen ever before, but not before everyone is sucked into the biggest bear market rally that the world has ever seen.
BTW.. futures are up an insane amount so it has already begun.
So would put options no longer be around too? Or have they not thought that far ahead yet…
We saw what happened when they cracked down on naked short sellers (and because it was so ham handed, it made it hard to legitimately short). This is very bullish. I think it’s idiotic and will come back to bite us in ways we can’t imagine, but for now, very bullish.
The U.S. would be stupid to ban short selling. Money would flow to other markets where this is still possible. All major European markets except stupid Brits. I reiterate my point of view. Short selling is positive because it stabilizes markets. Most shorties will become buyers at some point in time. Naked short selling is outragous fraud and should indeed be banned.
For now let’s welcome the bollocks rally and hope we can short it in the next few weeks.
PS – I’m fairly certain short selling was around before 1929 in the United States, as the uptick rule was enacted as a result of the crash.
Well guys I’m gonna try and get some sleep…see you in 10 min after I dry my eyes.
I’m losing less than feared in Europe. Not selling my short ETF’s. Good luck folks, futures just hit 1,240.
I went long SPY yesterday and probably will sell on the opening gap this morning.
Recent developments are extremely bullish for gold longer-term, and the correction in that market this morning is a gift.
BTW banning short selling means no more short squeezes.
This will cost the bulls dearly once the current rally runs its course.
Russia all around the world.
North Korea preparing to restart nuclear facility.
US Bans short selling.
BYE BYE WORLD
you were right Paul I the college kid will be skrewed!
Crimson, yes we will have to change our position on gold soon. Difficult to know when all these actions becomes inflationary.
as soon as all sellers get squeezed we will see the greatest depression coming. TAKE THAT BUSH.
*short sellers
i want to get this manufactured
http://www.capitalstool.com/forums/uploads/post-1339-1195706992.jpg
oh guys i will stop spamming and head to class but this is classic.
Christopher Cox said in a statement. “The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets.”
I can’t wait to get SKF at $75 or lower and ride to $200 after short selling ban is lifted.
matt -
do you have any idea on how the short selling bn will affect the ultrashorts operations?
the bank is on short selling bank, so skf is affected, but what about srs and twm?
@K: You will have the opportunity maybe already today. SKF is at $101 in premarket. While I’m writing this, the futures are going into kill-all-bears mode. I think I will go 100% into cash today if the market hyperventilates and buy back cheaper next week when the bulls are more sober again.
dressguard I agree. I will try trading on tuesday if I see reality set in.
hi all. Can someone elaborate for me about the short selling rules changes ? When do they take effect ? What happens with existing short positions and inverse ETF’s ? What about other countries ? Could shorts migrate to other exchanges ? And there are put options, in the money put options that are an alternative…
I checked 321gold.com, gold looked to be down a bit…I thought it would be up large…
Methinks Matt has it bang on to sit this out a tad and see what unfolds.
I’m just keeping my BCE shares, crossing fingers and toes the takeover goes through…
thanks to all for your insight, contributions and hard work here.
Here is the list of stocks banned from shorting:
http://www.sec.gov/rules/other/2008/34-58592.pdf
Matt – actually when we step back from this a bit you’ve implied an important, perhaps critical, rule. When things are running to well too long and you don’t know why step off the train. Alternatively when things are going to well and you don’t know why get off. In some ways even more important than the “mkts irrationality > my liquidity” rule.
May not have put it well but it struck me as important. Personally if I’d gotten out on We after a great two week run and not gotten greedy for one more little taste…well..
Which also suggests that this too shall pass. Don’t know when or how this misplaced euphoria wears off – might be next week or next month but it will and hopefully we’ll go back to a rational market where our models are based on reality rather than quicksand.
Matt-
I have to take the short opportunity I have to
“THANK YOU” for being so nice to my daughter.
I appreciate it.
My Aussie friends want to know why we Yanks
have not fired everyone in our govt. yet, and
they think the U.S. is now more communist
than China.
Larry-
I must know. Are you an Ayn Rand fan yet???
Also if you want to know where the world is
headed watch the movie “Rollerball” once
a year
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed below. The rates are effective at the close of business on Thursday, September 18th, 2008.
MARGIN RATE FOR GOLD FUTURES (GC), COMEX miNY GOLD (QO) AND COMEX ASIAN GOLD CONTRACTS (QS)
COMEX Division Margins on Gold Futures Contracts
Member: Clearing and Non-Clearing (Hedge Margin): New: $ 5,500 Old: $ 3,750
Non-Member Customer (Speculative Margin): New: $ 7,425 Old: $ 5,063
BTW.. here is another great Christopher Cox quote:
“The Commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets,”
looks like they used the most extreme weapon to manipulate the market higher IMO..
In a market like this, would you guys think that money flows into equities/financials especially and thus money flows out of commodities / gold / oil even faster? This causes big issues for the already crashing commodity market doesn’t it? Would like your thoughts on this.
Brian,
can you elaborate your last most. I don’t really know how to translate that.
Thanks!
towelie,
Puts are still allowed,
Paul K,
Short and ultra-shprt etfs have various methods of functioning. Some are simll indexes and the creators pay on them based on a fornula (they usually have a ultra-long partner to balnce out the losses). Other work by buying puts and derivatives. These should still function, technically speaking.
I had some more comments on this yesterday evening, but try this analogy: if you drive a car off a cliff, the brakes will still slow down the wheels, technically speaking.
I’m glad the short selling is limited to specific financials. It expires Oct 3.
Several stock pick sites have closed out all positions until things calm down.
Charlie, I’m in your camp re: free markets. This could create a hyper-inflated stock price to companies not deserving. We won’t be able to tell the “wheat from the chaff”.
Amazing times. This must be similar to how folks felt during the ’29 crash – major uncertainty.
Charlie, it’s an announcement from the exchange that margin requirements for gold have increased.
CNBC joke: “FED fixes Tom Brady’s knee so he can play today.”
They got the analogy wrong:
“FED fixes Super Bowl, so Patriots can win without Tom Brady.”
I was just thinking – Black Monday vs. White Friday.
SteveK,
Thanks for posting the list.
Matt
MEB,
Glad that you could pop in. As I recall, the Aussies have a bit of real estate problem themselves.
Matt
Fed buying Fannie and Freddie debt. (Source: Marketwatch)
That should help my Freddie shares I got at .35 cents. Hey, you never know.
Man, you guys got me reading the news. I even watched CNBC last night to catch the outcome of the Paulson/Bernake & party heads’ meeting.
The fed will also buy commercial paper.
http://tinyurl.com/compaper
Pretty heavy underwater now. Fun times.
Short sellers are blamed in every bear market, including the secular bears in 1930s-40s, 1970s-80s, and in Japan (blamed on foreign speculators), and one restriction or another is invariably tried. (Jesse Livermore was one of the most famous short sellers in US history.)
But stock prices fall in secular bear markets because of overvaluation, falling earnings, investments going bad, revelations of fraud, debt-deflationary crises, demographics, liquidity preference, and so on, NOT SHORT SELLERS.
Also, the largest rallies occur in bear markets, followed by sharp reversals and subsequent stair-step declines to lower lows.
I speculated a few days ago that officials might shut down the market in the worst of the carnage; well, they have effective shut down short selling by implication, thus eliminating a critical factor in price discovery for equities and corporate bonds.
But such a desperate move, short of completely halting of trading, suggests to me that officials have become truly desperate and will resort to extreme measures ahead, including overt purchases of equities, futures, corporate bonds, etc. In effect, officials would be conceding that the system is irretrievably broken.
Thus, one must conclude that we are at or near the end of the capitalist system as we know it; although this process has been underway for 70+ years.
The most amoral, rapacious rentier-financier parasites who have succeeded in bringing the system to its knees are squealing the loudest for a corporate-statist bailout. Schumpeter was right.
What we are seeing is the culmination of Mussolini’s (and Hitler’s by extension) vision of fascism: the merging of the state and the largest corporations into an all-powerful, one-party, imperial corporate-state.
Like it or not, gentlemen, we’re all fascists now. Empires always cost too much and result in bankruptcy, decline, and collapse.
Nonetheless, SPX 1250s-60s would be the 38% retracement within the 3 wave, which would then be followed by another crash to the 900s by mid-Nov. Call be just too bearish, but I still hold out that this is the more likely outcome, frantic bailouts by the rentier parasites or not.
ICE up $27 and I’m not in – bummer.
I’ve almost doubled my $ in FRE though.
Well there may be more to this than met the eye at first, speaking of wild theories that may have some substance.
Terror Attack on US Financials? Details of SEC Short Ban
http://bigpicture.typepad.com/comments/2008/09/terror-attack-o.html
And there are great ironies, painful as they are for us, in that the SEC’s reduction on capital limits requirements for the BD’s led to their implosions:
Ex-SEC Official Blames Agency for Blow-Up of Broker-Dealers The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.
http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/
Read it and weep. Who’s got their tinfoil hats handy.
Matt-
You’re right. But the Aussies do not have
two crime famlies running their country
like we do.
Rich-
You hit the nail on the head.
Rich,
It has been a privilege to read your thoughts as well as everyone else here. I have made pretty good money this year, but with a heavy heart, as I watch the destruction of this country’s values and morals. My only hope is that my children will find a way to cope with what promises to be an epic and historic hangover. Good Luck everyone!
John
Fading the gap is alive and well this morning. Now, if my data feeds would just cooperate.
I have no idea what my account is worth. The option spreads are rediculous, and the stock prices are so volatile.
Rich,
Great stuff.
I can’t believe how CNBC is gushing over all of this market manipulation. I guess for them it is all about saving GE’s stock and hanging onto their own jobs. I should tape the entire day on CNBC today and play it back at the end of the year when our econ system has officially been flushed down the toilet.
td waterhouse showing skf halted
Erin: “Is today’s trade fairly hugely distorted?”
‘Ya think?
TDAmeritrade shows SKF at $91, -20%
Forced logout from Ameritrade and Scottrade site giving me run time errors. Nice.
cramer is babbling about buying the bad collateral at $0.30 on the dollar. Is he really so stupid that he doesn’t realize that much of this is worth a lot less AND a lot more! This is why the markets were frozen!
NO KNOWS WHT THIS STUFF IS WORTH!!!
Guys, what if we still end this week down…
Geeze, BBT gapping all over the place.
Stockcharts data is screwy or else it’s on my end. Nope, my other charts are messed up too. Must be bad data from exchange.
Be careful.
Brian,
Actually , I show SKF frozen as well, but still getting quotes.
I’ve got a question: why didn’t they just open the market AFTER paulson spoke.
Appears that the datafeed system is at time overwhelmed. Sporatic updates.
My SKF hasn’t updated on any charts since the gap down on the opening on any of my charts and scottrade. I wonder if it is frozen? Last was 93.00.
Brian:
Your comments re the PM market VERY interesting. Apparently, not only is the government moving against short-sellers, could they be in collusion with the COMEX to suppress the PM’s? Mighty interesting!
Rich-
“Rollerball” is your movie.
SKF is indeed frozen. Maybe it’s illegal now to trade heart attacks with a ticker symbol.
Having trouble with TradeKing. I’m not looking to trade anyway, but it is very disconcerting. The musical chairs game is losing a few seats. What would a full scale panic look like?
The Washington communists stopped the party. PARTY POOPER!!!
I think trading on SKF has been suspended. That just ain’t right! I’m not in it, but I want to get in. Do they think a stock can’t be sold?
UYG the non-inverse wasn’t frozen. This is a loss of freedom.
Bumbsteads.
Woody Allen once mused that his grandfather kept his money under the mattress because he never trusted the financial system during the Great Depression. Unfortunately, the government ordered all mattresses confiscated and he became a pauper overnight!
I wanted to go in SKF but can’t. Am I supposed to bid for C and MS now? The Washington communists are really stupid. As I said several times, shorting is ok, but not naked shorting. Now they spoiled the whole game because a few weren’t behaving well. It’s like in kindergarden.
SKF has a bid of .01 on Interactive Brokers!
I want in on skf or anything that is today down for that matter. you just know things that gap up go down in a few days. many badd stocks do that. this is pump and dump scheme being done on large scale.
sad but the little guys will still get burnt.
SKF is flying actually: $97 !!! Not bad!!! Hank, could you please shut your trap so we can go on real business? LOL
TD Ameritrade just crashed. Can’t log on, can’t use Command Center, too bad.
always happens to the little guys
I’m adding to my WaMu position here, below 3.50
When F&F were bailed out we had a one day rally. When AIG was bailed out we didn’t have a rally at all. Now all the crooks on WallSt are bailed out we have an overnight rally. On Monday the bully party might be completely over again.
Note that exchange authorities tightened margins on comodity longs this summer because they wanted those prices to drop.
Now they crack down on stock shorts in attempt to inflate global equites.
What is this but not so thinly disguised PRICE CONTROLS.
that’s it here I go guys. bout to loan a laptop and get in before the weekend bailout
The Fidelity web site also went down this morning.
Fortunately I was able to dump my SPY at 127 just before they went down.
If you bought MS at the open you lost 20%!!!
Paint me silly but my VIX readings indicate that the move to final capitulation is just starting.
Anybody here? I think everybody went to the beach. Ok, I turn off the lights. Good night!
Faded the open with OCT 127 SPY puts. had a lot of problems with brokers and their sites.
SDS and QID have made excellent counter moves up today per the 15 minute stochastic and MACD. Sold half on 1 minute MACD x-over. Other half following 5 minute MACD which is weakening.
call me nuts but DUG looks great buy right now lol unless they will freeze shorting the oil companies too. hmpfff
SPX 1182, 1197, and 1182 are Fibo support now from 1133 to 1260 print so far.
SPX 1239-42 remains bear market weekly-close resistance, so a close below this zone is more likely than not today.
SPX 1258-63 is the 28 and 50 DEMA, which tend to be strong resistance in a bear market.
I’ve heard today that at least one broker is limiting or prohibiting margin trading long or short, which might imply that they are having trouble with cash management via their own accounts or counterparties’ accounts. Beware.
Dguard – my free Stockcharts is updating SKF but my Yahoo intraday stopped at 9:30. Not sure what’s going on. Heart attacks and adrenaline aside the Q’s and S’ look like they’re functioning. Given what we thought might happen that’s not bad. Wonder what it’s like in the back room. Whether these things work or not depends on how they’re put together vis a’ vis the SEC ruling. Thoughts ?
The uptick rule would be more symbolic than anything else. An uptick is easy to create: Someone would just have to put a market buy on 1 share than a market sell on 1,000,001 shares. Big deal.
Zen,
I saw that, too. Dropped at the open, then kept rising. Still above 30.
I noticed the other day that there was a large volume of XLF Oct 24 calls being purchased. This was like 2 – 3 days ago. Now we know why. This game is rigged and the government is helping the fat cats. I officially hate the current administration for the damages they are causing.
We may not get the crash now, but I am debating about moving out of the country soon. I’ve tossed it around lightly in my head, but there are some big cycles out there running that indicate a major calamity in about 4 – 5 years. Australia anyone? Canada is too cold.
Rich – what were those limits again 1182, 1197 AND 1182 again ?
George – thanks. That 36pd MA thingee is a great tell. How’ you at poker ?
K,
If tax-payers get screwed, they’ll get screwed twice: the more debt the US takes on, the bigger the chances for inflation. The US governent isn’t exactly overflowing with surpluses. Inflation will drive commodities up, including oil.
Market topped this AM watch action into the close
Any selling now without shorts buying back creates a vapor!
Very dangerous
Actually, not as volatile as I expected so far this morning. The 1 minute bars on ICE are specks of dust. Traders got their $28 and taking the rest of the day off.
Fortunes have been made in this market the past few weeks. If it reverses today, that wokld be incredible. With such a daily gap on SDS and the MACD hasn’t moved up, that’s what I would look for.
SDS or QID anyone? i found out i have one more day trade left hehe
It looks like SKF was halted after 4 minutes of trading. It seems to have opened at $89 and moved up to $93 before being shut down. Some systems probably show a bid of $0.01 for stocks that are halted. If you wanted to play, maybe puts on UYG would work.
I’m not surprised that a lot of brokers are having trouble given the surge in volume.
I meant daily gap on SSO with the MACD not moving up.
Sorry
jayj, sounds good to me
Rich:
“SPX 1258-63 is the 28 and 50 DEMA, which tend to be strong resistance in a bear market. ”
I have never heard of this, but thank you for sharing. Where did you pick this up?
123.31 is R1 in terms of floor pivots today on SPY. I don’t know what that will mean on quad witching but if that breaks the 5 MA is 120.48 and the pivot is 118.55.
Just something to keep in mind.
MATT………….thanks again…..i bought ddm at 55.10 wednesday……YESTERDAY when it dropped to 52 i felt like i was going to PUKE….i thought of you AND WHAT YOU SAID ABOUT EMOTIONS and doubled my position…..i sold all at open today….THANKS MATT !!!!!!!!!
Bush: “The federal governement should interfere in the marketplace, only when necessary.”
I believe he meant to say “intervene.” Quite a Freudian slip.
SDS at 67.50 waiting to be filled. holding over the weekend also maybe. let’s see
well it got queued for over 15 mins on scottrade so the heck with it i guess i won’t be holding anything over the weekend
Spy volume on the opening gap was horrible relative to the move.