Friday’s Trading
KaboomCo
Bill Gross was criticizing a lot of people yesterday, but maybe he needs to look in the mirror because now we know why he is so adamant that the government bail out Fannie and Freddia. From a Bloomberg story:
“About 61 percent of Gross’s holdings were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae, according to data on Pimco’s Web site.”
If Gross is so smart, why is he begging for the US taxpayers to bail him out? If I had any money in Pimco, it would be bailing the hell out.
We’re into the third year of the mortgage crisis, and this guy still owns hundreds of billions of mortgage-backed securities??? Pimco sponsors CNBC, and the Pimco guys are treated like gods there, but if these guys aren’t morons, who is?
Pimco? How about KaboomCo?
If we taxpayers bail out Gross, there should at least be some sort of hazing involved.
Shortly after I wrote the above, the Wall Street Journal reported that Pimco’s CEO had resigned:
“Bill Thompson, 63, a 15-year Pimco veteran, will retire from his co-CEO post at the end of this year. He says one reason is because he wanted to leave at the top.”
“At the top” indeed! Talk about a Freudian slip!
Doug “Kaboom” Kass
At 7:57am Thursday morning, Doug “Kaboom” Kass called the bottom in this bear market:
“This is what market bottoms look like.”
Then the Dow plunged 345 points.
Make sure to take a look at Danny’s study of “all sectors red” days like we had yesterday.
Watch the comments section for updates throughout the day.
September 5th, 2008 at 12:01 am
http://stockcharts.com/h-sc/ui?s=SPX&p=W&yr=3&mn=0&dy=0&id=p55572292115
http://stockcharts.com/def/servlet/SC.pnf?c=SPX,P&listNum=
http://stockcharts.com/h-sc/ui?s=CPC&p=D&yr=0&mn=6&dy=0&id=p94253726891
http://stockcharts.com/h-sc/ui?s=CPCE&p=D&yr=0&mn=6&dy=0&id=p94253726891
http://stockcharts.com/h-sc/ui?s=CPCI&p=D&yr=0&mn=6&dy=0&id=p94253726891
The emerging EW structure implies a cyclical wave 3 of a C has begun via the weekly SPX chart from the ~50% retracement at SPX 1313; a bounce from the low to upper 1100s is likely before a low in the 900s in 9-10 weeks (Nov.).
A seasonal low and rally to the next low would be typical, followed by a plunge in late summer to fall ‘09 or early ‘10 to the ‘02-’03 lows.
C waves in a bear market are breathtaking and highly destructive; however, short-covering rallies are equally stunning in their tendency to take back bears’ gains, as shorts are the only ones with money/gains buying under the market in such episodes.
Moreover, volatility rises in a bear market, and even more so in a secular bear market, thus the VIX should make new highs for the cycle, i.e., above 44-45, in the next 2-12 to 18 months.
Don’t try to be a hero shorting from here; wait for a bounce from below SPX 1200 to scale in shorts to cover below 1000 this fall (around the “selection”).
The global economy is tipping into, or already has entered, a recession; the point of recognition has arrived or will very shortly.
We face the worst debt- and asset-deflationary global financial crisis since the 1930s and 1890s; prepare yourself and your loved ones accordingly.
Good luck.
September 5th, 2008 at 1:13 am
Question is, are we going to get a strong bounce tomorrow, or will it be the day after? We’re clearly headed lower, but not so fast. I may cover at tomorrow’s close if we don’t bounce (end-of-day trading only).
September 5th, 2008 at 1:22 am
Haha, nice piece.
Asia down almost 3%.
Financials in Japan down 6%. Carry trade is unwinding according to Reuters. That is not good news for stocks or assets.
RBS analyst in Japan: ‘This is not a flight to safety. It’s a flight.’
Maybe Dept of Labor will save the weekend?
September 5th, 2008 at 4:50 am
New ugly day in Europe. Real panic might kick in today unless jobs numbers……..
September 5th, 2008 at 6:11 am
Another hedge fund looking suspect ???? (FT.com Fri 5th Sept)
———————————————————————————
Atticus denies liquidation rumors
Speculation sweeping the market that large hedge fund Atticus Capital is liquidating its positions and closing down is not accurate, according to executives of the firm, reports the WSJ. Tim Barakett, founder of Atticus, which has about $14bn under management, denied the rumours and said: “In fact we have a large net cash position and are looking for opportunities to invest capital”. One reason stocks tumbled Thursday was selling by hedge funds trying to get out of positions they fear fellow hedge funds, such as Atticus, will sell if they are under pressure to close shop or trim losses. Some are trying to make money shorting stocks held by struggling hedge funds, traders say. Some stocks that Atticus has held in recent months were clobbered Thursday, including Burlington Northern Santa Fe Corp, Union Pacific and MasterCard.
September 5th, 2008 at 7:53 am
Yerk,
Thanks for your response. A base long-term position and a smaller short-term trading position seems like a good strategy.
Generally I tend to do better on my long-term positions compared to my short-term (few days) trades. I think it is actually the thought process, for me, is different. I tend to be more thorough on the long term positions (and patient) and a bit more gung-ho on the other. All a question of discipline and patience (many is the time that I wish I had waited rather than rushed in!!).
September 5th, 2008 at 7:56 am
IMHO, Gross made his bets based on the fact that the worst possible scenario would be a bailout by the Fed and/or treasury. Probably had a pact with Hank and Ben. Don’t forget Greenspan works for Pimco. I hope he had a hand in all of this.
Now Gross appears to be hung out to dry. He is acting like a spoiled kid cuz he is losing. This guy is the definition of economic socialism.
September 5th, 2008 at 8:03 am
“Sept. 5 (Bloomberg) — Dell Inc. is seeking to sell all of its manufacturing plants worldwide” — wow!
September 5th, 2008 at 8:39 am
unemployment 6.1 how do like that Crash?
September 5th, 2008 at 8:41 am
That unemployment number didn’t look too good. Unemployment now @ 6.1% courtesy of Marketwatch.
September 5th, 2008 at 8:43 am
Q,s premarket are down .53 44.07 the July low 44.23
September 5th, 2008 at 8:48 am
This action is very similar to June 6th after the first jobs-bomb. So maybe the action in the second week of June is a good model to use now: rally attempts on declining volume can be ignored and/or shorted until we get the big high-volume capitulation plunge. After that, we could expect the next bear-market rally perhaps six weeks from now.
September 5th, 2008 at 8:49 am
Anyone have a real-time quote on the market? I have this from CNN
S&P 500 -15.20 1221.40 9/5 8:32am
NASDAQ -22.50 1753.25 9/5 8:31am
Dow Jones -112.00 11088.00 9/5 8:32am
Looking to be another ugly day out there. Hang Seng below 20,000 for the first time in a year. Global recession is here boys.
September 5th, 2008 at 8:51 am
Pooch,
I show a real time quote of 43.17 on the bid and 43.18 on the ask for the Q’s.
Where are you getting your quote from?
September 5th, 2008 at 8:52 am
Charlie, SDS indicated at 71.39 / 71.4; QID 48.08 / 48.10 (but they have been higher!)
September 5th, 2008 at 8:54 am
Ameritrade they were down there
September 5th, 2008 at 8:55 am
The futures plunged to 1220 after the jobs news and are now making a rather blatant bear-flag pattern.
September 5th, 2008 at 8:59 am
In the pre-market, tech is leading the way down so far, followed closely by Jim Cramer’s “early cycle” plays: retail, homebuilders, and financials. Health care (XLV) is the only green sector.
September 5th, 2008 at 9:10 am
Marty Chenard at StockTiming is turning short this morning. He likes the QQQQ and IWM best for shorts. His site is the first thing that I read each morning. He doesn’t like to anticipate bear legs, but will jump on as soon as he sees a conclusive crack in the market.
September 5th, 2008 at 9:13 am
Oh Pooch, I like it. Just think, we aren’t anywhere CLOSE to a bottom in job loss. Then in 2009 and 2010 we will see the Birth/Death model making job loss look WORSE. I wonder what the Birth/Death added for August?
What will be the catalyst for future job growth? Haven’t received an answer on that question for over a year.
All that said, I expect a big bounce at some point today. If we get it I’m going for some PUTs, probably QQQQ and SPY.
September 5th, 2008 at 9:16 am
Good Morning Pooch,
I left Ameritrade last August when their system went down on a similar volatile early morning. I’m with TradeKing now and I couldn’t be happier.
September 5th, 2008 at 9:16 am
Well thanks to job losses at 6.1% applw should be down for me. and skf should skyrocket.
k from mobile over and out hehe
September 5th, 2008 at 9:28 am
jcmri,not to impressed with them but can’t switch accounts now
September 5th, 2008 at 9:28 am
Crash,futures came way off there lows so after the 1st hour we could rally
September 5th, 2008 at 9:33 am
Pooch,
IMO, it will be sooner, which would be good. Then a slow steady drop later.
September 5th, 2008 at 9:36 am
Nokia tumbling.
September 5th, 2008 at 10:08 am
If your considering a bounce, take alook at the IWM, ETF for the RUT. It has held up the best.
The 50MA is at $70.94. I might take a quick trade there with a tight stop
if the market shows any divergence at that moment.
September 5th, 2008 at 10:11 am
Also, keep an eye on the vol on the SPY. Yesterday it tok til about 12:20 to get to 100M shares. Today, last check we are already at 66M shares at 10:10
September 5th, 2008 at 10:15 am
no bounce ?
September 5th, 2008 at 10:15 am
If no bounce that would be a nasty sign for the bulls heading into the weekend. You could see some nasty, panic action early next week.
September 5th, 2008 at 10:17 am
Dollar getting strong again, oil dropping. This is fun.
September 5th, 2008 at 10:33 am
SPY has some support at $122.50, which was the cliff that it dove off of the morning of July 15th. If that doesn’t hold, then SPY should proceed directly to test the July low at $120.
September 5th, 2008 at 10:38 am
While the selling pressure peaked yesterday afternoon and continued declining this morning, the TRIN has turned back up over the last 30 minutes and the TRINQ has flattened out. Not bullish.
The Q’s have fallen below their July 15th intra-day low of $43.30, and that is now resistance.
September 5th, 2008 at 11:00 am
So much for the RUT.
The SPX in July initially stopped it’s descent at 1,214.75 +- after an intraday drop to 1200. So, I am looking at 1,214.7 as my next target for a possible bounce.
September 5th, 2008 at 11:12 am
After posting an Institutional Warning yesterday, an Institutional Index down move took the Institutional “core holdings” down to its 60 minute, two month support level.
This has a good probability of giving us an up bounce at the open today, but a high risk of failing and moving back down to test this support. If this Institutional Index breaks through the bottom support and closes below it today, then Monday could be a real nasty day.
One more note: Our ordering system went down last night and we are now trying to fix it. Any new orders or renewals will NOT be able to go through until we fix it today. If you need personal assistance while we are fixing this problem, please call Cindy at 828-296-1200 as she can manually enter subscription requests.
Please click this link for today’s update and chart(s):
http://www.stocktiming.com/Friday-DailyMarketUpdate.htm
(If you are having trouble with the link, copy and paste it in your browser.)
Regards,
September 5th, 2008 at 11:15 am
That was from Marty Chenard
September 5th, 2008 at 11:15 am
Lots of lov from SKF, SDS and BBT (early this AM, $1.00 move in 35 minutes).
Counter-trend in the making.
September 5th, 2008 at 11:19 am
Should be a (?) after counter-trend in the making. Not yet though.
September 5th, 2008 at 11:23 am
George,
are you still holding your SKF from yesterday?
September 5th, 2008 at 11:26 am
Charlie;
Yes, the “core” position. But swinging it also.
September 5th, 2008 at 11:28 am
Could this be the bounce?maybe i can jinx it
September 5th, 2008 at 11:36 am
XLF is still tough as nails.
XLE is the big stinker.
September 5th, 2008 at 11:46 am
Charlie;
Here’s a neat little scalp trade setup. This works for the 1 minute well but I haven’t tried it for the 5 and 15 time frames.
Set the screen up with a MA of 3, 9, 36. Have a stochastic.
On the 1 minute (long trades) when the candle crosses the 9 MA and the 5 candle crosses the 3 MA, and, preferably the stochastic has bottomed at or near the 20, although you don’t have to wait on that, that’s an entry.
If price moves above the 36 MA, hang with the trade until the MACD trendlines cross. If it doesn’t, get out when the stochastic kisses.
I believe this is my own ditty; I don’t remember reading about it anywhere.
I use it every day just about. I just used it on SSO.
I hope I described this correctly. Again, it’s using two time frames for confirmation.
September 5th, 2008 at 11:48 am
Of course, you can continue in the trade by observing the higher time frame MACD, MA’s, whatever you choose.
September 5th, 2008 at 11:49 am
Here it is - can the main averages go positive?
September 5th, 2008 at 11:50 am
Yeah.. I know what you mean about XLF. Seems to be very strong.
September 5th, 2008 at 11:50 am
I’m using the 5 minute to track the SSO trade because the 1 minute crossed the 36 MA which means that time frame is trending up with confirmation of the 5 minute.
September 5th, 2008 at 11:50 am
over the weekend?
September 5th, 2008 at 11:51 am
Now the 5 minute will approach the 36 MA as resistance. If stochastic turns over, I’m out.
September 5th, 2008 at 11:51 am
Thanks for the tip Geoge. Going to try it soon
September 5th, 2008 at 11:55 am
When and IF price CLEARS (i.e., opens and closes with an up candle) the 5 minute 36 MA, I will shift to the 15 minute to continue watching the trade.
If not, I will let stochastic turn down to 80 or MACD histogram go negative ON THAT TIME FRAME.
September 5th, 2008 at 11:58 am
It cleared but that bar has not finished closing on my screen. Still on the 5 minute.
September 5th, 2008 at 12:03 pm
5 minute MACD still strong. I’m being distracted from stuff here.
I’ll keep following as long as possible.
September 5th, 2008 at 12:05 pm
Stochastic is turning over will get out if it hits 80.
September 5th, 2008 at 12:06 pm
15 minute stochastic and MACD is positive. Doesn’t mean it will hold, but if it does, has a way to go to get to the 36 MA for resistance.
September 5th, 2008 at 12:08 pm
My stochastic hit 80. I’m out.
September 5th, 2008 at 12:08 pm
George,
Thanks for sharing your trading style. Can you tell me what Time Periods you are using for you MACD and Stoch? Mine are (8,17,9) for MACD and (10,10) for Stoch and I don’t change them when viewing different time periods.
Thanks
September 5th, 2008 at 12:08 pm
Nice scalp. I made .90 cents on that one.
September 5th, 2008 at 12:10 pm
Nice trading George and thanks for the commentary through it!!
September 5th, 2008 at 12:10 pm
Dink;
Those are fine. I’m using stock charts and askresearch charts and the settings affect them differently even though I use the same settings on both.
Just get used to them and ensure stochastic settings follow price.
I’ve noticed no difference in the MA’s among various charting programs.
September 5th, 2008 at 12:12 pm
Now, as an aggressive trade, I would have stuck with the 15 minute until it took me out.
A lot of that depends upon where I get in.
But, it’s better to get the .90 cents than to have it turn against me - after all, I am bucking the trend here.
September 5th, 2008 at 12:13 pm
When I buck the trend, I know the moves are not going to be big. They will almost always be short.
September 5th, 2008 at 12:16 pm
bye bye bounce
September 5th, 2008 at 12:22 pm
Another way I do aggressive trades is to follow the 5 minute MACD once I’m in and let it take me out. BUT, that’s based upon the number of time frames that are cycling at the same time. The more, the better/bigger the move…like yesterday with SKF. You could see it coming.
Now, the 1 minute on the SSO is cycling. I will wait for it to set up again. Since the 5 minute MACD is still going up - with the 15 and now the 30 minute showing some life, I could make another scalp if it lets me.
Every timeframe above the 1 minute are TRENDING down because they are beneath the 36 MA. If the 1 minute holds, it could change that.
If not, SDS here we come. Which I should be in right now - lol.
September 5th, 2008 at 12:23 pm
Mish’s monthly take on the unemp number is 2nd to none:
http://globaleconomicanalysis.blogspot.com/
September 5th, 2008 at 12:25 pm
Just teasing about being in SDS. There’s no setup yet.
September 5th, 2008 at 12:25 pm
Anybody know how/why the 10 Year Yield jumped from 3.57 to 3.64 in minutes?
http://finance.yahoo.com/echarts?s=%5ETNX#chart1:symbol=^tnx;range=1d;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
September 5th, 2008 at 12:32 pm
The aggressive trade would have been the better choice.
Stochastic on 3 time frames were positive. That’s all it takes sometimes.
This is what I meant about re-entering the trade on the one minute when the stochastic turned back up.
I didn’t do that, but I am in BBT. which is defying gravity right now.
September 5th, 2008 at 12:35 pm
XLF up 1% now. that is quite strong.
September 5th, 2008 at 12:48 pm
Hmm, the SSO time frames stochastic are all going positive but not all have cleared their trendlines.
Need to watch that.
September 5th, 2008 at 12:57 pm
SPX 1,234 was the last low we broke through, which is todays current high. I am in a SDS position just below that level with a stop at 1,235.
September 5th, 2008 at 12:59 pm
eli;
What number does that equate to on SDS?
September 5th, 2008 at 1:04 pm
I’m waiting on the SDS and SKF trends to resume too.
Looks like SDS is filling its intraday gap.
September 5th, 2008 at 1:06 pm
XLB, XLE, are those the targets? Barring a Fed rate cut, I think XLF will possibly hold its range. That sucker is a tank right now. You couldn’t break it if it were made of glass and you had a sledgehammer.
September 5th, 2008 at 1:06 pm
I see very little positive with SDS right now.
September 5th, 2008 at 1:08 pm
this is a big rebound for XLF.
September 5th, 2008 at 1:09 pm
I bet the SDS 15 minute is going down to the 36 MA to test.
September 5th, 2008 at 1:22 pm
Charlie;
Had we taken the more aggressive side, following the successive time frame MACDs, we’d have the 15 minute up against the 36 MA right now deciding where it wants to go.
One clue for us is that the 30 minute stochastic is up and cleared its trendline but that time frame is not trending upward yet.
So, again, the scalp would be to use the 15 minute stochastic. Or aggressive would be to use the 30 minute MACD to get out if it turns over.
September 5th, 2008 at 1:23 pm
George
Sorry for the delay, it passed it up (or down) at .29
September 5th, 2008 at 1:24 pm
eli;
No problem. Thanks.
September 5th, 2008 at 1:26 pm
During June I made a lot of money beating up on XLF - it was the weakest sector, so that’s where the easy money was. During this bear leg, that doesn’t look like it will be the case. Rather, the Q’s look to be the ideal whipping boy over the next few weeks. Any other ideas on weak sectors going forward?
September 5th, 2008 at 1:28 pm
matt,do think we get much of a bounce on the Q’s
September 5th, 2008 at 1:35 pm
Wow, can you believe this market?
I’m selling my BBT. Look at the 15 minute chart - looks like a vapor trail of the space shuttle.
September 5th, 2008 at 1:38 pm
SDS hit that 36 MA and got a bounce up.
September 5th, 2008 at 1:41 pm
Great call on SDS George!
September 5th, 2008 at 1:43 pm
Now it has to hold.
September 5th, 2008 at 1:48 pm
Ok Q’s are probably best bet going into earnings in mid-late Oct and pre- announcements late Sept…… so my take , will adhere to the short side on this next rally that WILL happen soon, tech too washed out now and Lowry’s 90% down day yesterday plus heavy selling this AM is setting it up, if not today then Mon/Tues.
September 5th, 2008 at 1:54 pm
Matt,
I agree with your call on the Q’s being a mess. But I think it is a matter of days before the next shoe drops on financials. Gross spooked it yesterday. At any point it can be bad earnings, writeoffs, etc. Lehman speaks next week.
September 5th, 2008 at 2:02 pm
XLF on Gross comments yesterday should have imploded they didn’t in fact up today….. think we have a couple of weeks of XLF upside sloppy but up …… then swoosh!
BTW Gross if Fre and FNM head south in a big way Treasury ain’t going to Goldman or Blackrock for help and solutions, they will go to him afterall he can manage those portfolios with one sheet of paper and an HP 42c ……. he is by far the smartest and most realistic person in the bond biz bar none!
September 5th, 2008 at 2:03 pm
I’d hope to get another hunk of SKF into the close. I looks to be setting up.
September 5th, 2008 at 2:07 pm
Folks, on the next leg up, take a longer term view. We’re going down.
September 5th, 2008 at 2:13 pm
SSO still showing some life.
September 5th, 2008 at 2:22 pm
Any thoughts on the current move?
September 5th, 2008 at 2:27 pm
I was looking at the Trin. Currently @ 0.73 per stockcharts.. Is that correct?
Anyone can provide a view?
http://stockcharts.com/h-sc/ui?s=TRIN&p=D&b=5&g=0&id=p19732310555
September 5th, 2008 at 2:30 pm
SSO looks strong. Its 60 minute cleared the 9 MA and has 4 white candles. But the MACD has not gone positive, so tentative move until then.
Perfect opportunity to swing the 1 - 5 minute when the higher time frames are up like that. Until the last one, of course, that will fail if the trend reverses.
September 5th, 2008 at 2:30 pm
Charlie,
Yes, the TRIN and TRINQ are in buying territory, so the bias is to the upside for the moment.
Matt
September 5th, 2008 at 2:32 pm
I think the XLF has been acting strong simply because the stocks have been so beaten down. XLF may simply go sideways for a year.
September 5th, 2008 at 2:33 pm
A year?
September 5th, 2008 at 2:33 pm
This is a great opportunity to play both sides of the market with scalps.
Very low risk.
September 5th, 2008 at 2:45 pm
Matt,
do you think that financials are done going down hence your comment? I know they have been damaged badly, but they still seem overpriced at the moment.
September 5th, 2008 at 2:49 pm
Man, I missed that ICE move today! Up over 5 bucks.
September 5th, 2008 at 2:49 pm
Art Casin looking for a big down day monday then rally Tuesday.Kramer just said selling is all done for now,take your pick!!
September 5th, 2008 at 2:56 pm
Next move up to resistance for SSO is the 30 minute time frame. Around $58.00. That is if it continues, of course.
September 5th, 2008 at 2:58 pm
I said resistance, I meant 36 MA. I don’t think that is resistance, just a reference point.
September 5th, 2008 at 3:01 pm
its 2:00 lets see this baby bounce
September 5th, 2008 at 3:03 pm
180 point bounce isn’t enough?
September 5th, 2008 at 3:08 pm
This may end up being an up day in a down market. The SPX daily candle didn’t move the stochastic or MACD up today.
Also, I like trading banks, but will most likely back off after today unless I see something really nice happening. It will have to be a great setup to jump in.
Calm before the storm and all that. Although I don’t like to think with any bias. I’ve out-smarted myself too many times in the past. Solid analysis=okay.
September 5th, 2008 at 3:16 pm
just seeing multiple stoch crosses on multiple timeframes for SKF.
September 5th, 2008 at 3:17 pm
potential crosses at least until all the candles close.
September 5th, 2008 at 3:20 pm
Charlie;
Yep. All they need to do is begin clearing those 9 MAs and we’ll have something.
September 5th, 2008 at 3:24 pm
Thanks for the “heads up” Charlie. Let’s see where it takes us.
September 5th, 2008 at 3:29 pm
I think the markets may do a little bull flag to resistance to work off their oversold nature. SPY 125.3 anyone?
September 5th, 2008 at 3:33 pm
Hopefully that happens George
September 5th, 2008 at 3:34 pm
Or maybe not even a flag. May this bear flag is the trip up.
Or maybe everything just goes straight to hell LOL. Tricky here.
September 5th, 2008 at 3:35 pm
I do think the VIX needs to pull back to about 22ish, however, to move up solidly. Yesterday was the biggest VIX move strength-wise that I know of in this whole bear cycle (at least according to my measurements).
September 5th, 2008 at 3:35 pm
During yesterday’s carnage, the XLF didn’t even get near the lower end of its trading range. The Q’s on the other hand, knifed right through a huge support area. All I’m saying is that it is easier to short things that are weak. The XLF has been relatively strong. Why fight that when there are easier targets? When a lion is surrounded by humans, it always tries to escape by lunging at the weakest looking hunter.
September 5th, 2008 at 3:41 pm
Matt you are on the money. I think the trade is long XLF on a bounce and short SPY, QQQQ, XLE, and XLB at resistance.
That’s just my opinion, but even if the fundamentals don’t show anything - at least not yet - the charts sure do.
September 5th, 2008 at 3:42 pm
The short-term model that I use (STEM.MR) shows that SPY and QQQQ are now well off of their oversold conditions. They are about halfway up to overbought country, so there could indeed be more upside. However, the odds are no longer stacked in favor of long-side trades as they were this morning.
September 5th, 2008 at 3:43 pm
What is STEM.MR?
September 5th, 2008 at 3:44 pm
Matt, the next wave down will be led by those who have benefitted recently from the fast money fleeing commodities. Techs, retail and why not healthcare?
Finance will not stay flat because all shoes that drop will cost some banks money. The are not going to meet revenue expectations. And they are under severe stress - RBS just called for Barcleys to raise something like 10bln pounds. Oh, they all have to refinance. Which got way more expensive.
They might not lead the market down but they are not in a position right now to beat expectations. Look at what happened to Commerzbank who just bought Dresdner. Unfortunately they will rely heavily on external financing. Dropped 15% in three days, broke all support lines - so much for creating the second national banking champion in Germany…
September 5th, 2008 at 3:45 pm
George,
Thanks for your comments today. I’m still studying your method and starting to get the hand of it. How do you choose which stocks to play each morning? Do you look at list of high-percentage movers? High-volume?
Matt
September 5th, 2008 at 3:47 pm
Zen,
STEM.MR is one of the models that you get when you subscribe to:
http://www.sentimentrader.com
It’s a very good model.
Matt
September 5th, 2008 at 3:49 pm
Matt, short termish you’re right. But things will change again
September 5th, 2008 at 3:51 pm
Charlie;
That move on the 1 minute (crossing the 9 MA) right at 3:00 est. That was the entry point.
However, seeing that happen after the fact, that would have been the time to look at the other timeframes too see if they meet the requirements WITH the 1 minute holding up.
It would have been a buy at the 3:00 time frame - all the conditions were met, but would have exited about 3:15.
Important to get in at the 1 minute bottom stochastic.
George
September 5th, 2008 at 3:51 pm
Yerk,
OK, so we agree that tech may lead the next wave down?
Matt
September 5th, 2008 at 3:53 pm
XLF is up over 3% .. that is pretty crazy. I can see what you mean Matt when you say that there is strength in financials.
September 5th, 2008 at 3:53 pm
yep (isn’t that the current wave
September 5th, 2008 at 3:54 pm
Q’s are bringing up the rear today. And I don’t like the TRINQ pattern; it looks like the big dogs are selling into this snap-back rally.
September 5th, 2008 at 3:55 pm
Matt I hate to bug you on your blog, but are the other tools at sentimenttrader good? I think Tim Ord mentioned it in a book of his I read recently.
September 5th, 2008 at 3:55 pm
Thanks for the link Matt, and once again, excellent commentary by everyone here.
I am intrigued by techs being the new whipping boy, I am going to do more work on that.
September 5th, 2008 at 3:57 pm
Nobody else is a believer in shorting XLB and XLE maybe? Maybe they are too dependent on the dollar?
September 5th, 2008 at 3:58 pm
I’m still up in my core SKF. That downage was offset by my BBT trades, at least most of it.
September 5th, 2008 at 4:00 pm
Hey Charlie;
I’d be in better shape if I would have followed my method in SSO. That’s okay though. Still a profitable day.
September 5th, 2008 at 4:04 pm
Hey George,
I presume you’re hung onto your SKF core? That was pretty rough.. a $10 + move from the highs to the lows of the day.
September 5th, 2008 at 4:04 pm
Zen,
Yes, SentimenTrader has an incredible amount of excellent statistical data in addition to its models. It’s only $25 a month or so. The guy who runs it, Jason Goepfert, called the bottom in July, and just recently called the top at 1300.
Matt
September 5th, 2008 at 4:13 pm
Charlie;
Yes. Still have the core. I’m not worried though, because I play counter-trends plus the inverse. It all balances out and in fact, comes out better that way.
Like, yesterday, I played SKF to the upside and made as much as it was down today. So right now, I have a free trade so to speak.
Simple mind, simple methods. HEHE
September 5th, 2008 at 4:40 pm
George,
did you just notice a huge dip in SKF right now in afterhours? Seems like Gov is providing a backstop to FRE/FNM?
more rumors and LEH bailouts..
September 5th, 2008 at 4:49 pm
Charlie,
That dip in SKF doesn’t have much volume associated. Monday might be very interesting.
September 5th, 2008 at 5:11 pm
I didn’t see that dip in SKF. One thing I don’t worry about is after-hours trading or pre-market. Affects the opening often but may not carry through the day.
IMHO, the lower SKF goes, the better. That goes for any stock or index. Those create the best opportunities.
I used to get “stuck” in a stock (no money management). I would play the counters to where I got even or better. I like doing that although it is dangerous at times. That won’t work for a stock that is doomed. I haven’t gotten into those yet. That’s why I’m mainly in ETFs now except for a couple of favorites like BBT, ICE, NCC (not now though), and a few others that move well.
Often, I just keep SSO and SSD on my screen and play them while keeping an eye out on one of my favorites. You can make a good living trading those two.
September 5th, 2008 at 5:14 pm
Matt,
We may have got the Exhaustive Gap-Down today with a midday reversal on the Q & indices. Near term could be ready for a retracement rally. What’s your thought?
September 5th, 2008 at 5:17 pm
Didn’t the Q’s crap at the close?
September 5th, 2008 at 5:27 pm
i sold my smidge of SKF early today…seeing it down now and even more in after hours…wondering if I should autopilot buy it back cheaper on Monday than where i sold…
Matt, are you holding any SKF or related shorts/puts on the financials ?
September 5th, 2008 at 5:35 pm
well, not just SKF up in after hrs but the q’s as well:
POWERSHARES QQQ TR 1(NasdaqGM: QQQQ)
After Hours: 43.93 0.48 (1.10%)5:19PM ET
September 5th, 2008 at 5:36 pm
The close may be the selling before weekend as trdrs have been spooked by the drop this week and wouldn’t want to hold. How Mon opens will determine if we had the exhaustive gap today. Maybe Matt can tell us the reversal today was convincing by looking at other stats.
September 5th, 2008 at 6:21 pm
FANNY & FREDDY getting hammered AH Fanny down 20% how will the stong sector bode for Monday?
September 5th, 2008 at 6:32 pm
There is WSJ story about solution to FNM and FRE coming out soon - maybe this explains part of the action…
http://online.wsj.com/article/SB122064650145404781.html?mod=hpp_us_whats_news
September 5th, 2008 at 7:13 pm
And here comes the other hint at why to buy banks now:
“Companies in the S&P 500 are forecast to report profits in the fourth quarter that are 42 percent higher than a year ago, the biggest increase ever. Financial company earnings are projected to rise more almost five-fold, while income at mining and chemical companies may increase 35 percent.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apcAFrA5Cg.A
Have a great weekend
September 5th, 2008 at 7:21 pm
And who ya gonna believe:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6BxAKLBZvII&refer=home
“The best already may be over for the U.S. stock market this year.
The Standard & Poor’s 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world’s 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent. ”
Bloomberg vs Bloomberg ?
September 5th, 2008 at 7:54 pm
So SKF up BIG TIME monday if these 2 fail?
HMM opinions guys
September 5th, 2008 at 7:58 pm
Fannie and Freddie are down because traders think their common stock might get wiped out in a deal. The XLF is up because traders think the deal will remove a potential catastrophe. Of course, Barron’s had a similar article a couple weeks ago. The WSJ article had only two details: there was a meeting, and Freddie changed some corporate bylaws. Maybe the meeting was just a response to Bill Gross’s criticism; to make it look like Paulson and Bernanke were doing something. The deal may get dragged out until after the election. After all, a gazillion dollar bailout of rich bond holders and sovereign wealth funds would provide the Democrats with a lot of political ammo.
September 5th, 2008 at 8:00 pm
Kevin,
I will probably be posting something on this morning’s action over the weekend.
Matt
September 5th, 2008 at 8:05 pm
after,
I was questioning the wisdom of shorting the financials earlier today, so as you can imagine, I am not short them now.
I went short in the S&P futures today, and bought some QQQQ puts. I will add to those positions into any rally early next week, unless there is explosive volume.
Matt
September 5th, 2008 at 8:08 pm
Yerk,
The fool analysts just haven’t revised down their 4Q estimates yet. They will capitulate soon enough.
Matt
September 5th, 2008 at 8:13 pm
I wonder if “It’s the economy stupid” (James Carville) is applicable now. That is to say, the current administration is pressured to make it look good before the election.
They better hurry - not much time left.
September 5th, 2008 at 10:27 pm
well 11th bank failed. WOOOT
http://bloomberg.com/apps/news?pid=20601087&sid=adweqGJO2lNc&refer=home
Silver State, with $2 billion in assets and $1.7 billion in deposits
September 5th, 2008 at 10:58 pm
K,
Yep, regardless of what happens with Fannie and Freddie, the credit contraction will roll on. The business cycle can not be materially altered. It will contract until it is done contracting, and the end is not yet in sight.
Matt
September 5th, 2008 at 11:05 pm
Here is an interesting fact from the Bloomberg article:
“Mudd and Syron must approve of any government intervention under the law, unless the FHFA declares that either firm has insufficient capital. The FHFA was scheduled to release its own assessment of the companies’ capital levels as early as this week as part of a quarterly appraisal of their finances.”
Politically, it is not possible for the CEO’s to remain on the job with their huge salaries. The taxpayers will not tolerate that, so they have to go. However, Paulson and Bernanke cannot make them go unless they can prove the “capital levels” case. And that does not appear to be a done deal.
Over the weekend, Paulson and Bernanke will probably be trying to convince Mudd and Syron to abdicate. And since Mudd showed up at the meeting on Friday with his attorney, it doesn’t look like he will be going quietly. So, maybe there will be no deals, or just one with Freddie while Mudd holds out.
September 5th, 2008 at 11:06 pm
Fannie and Freddie Gov’t taking over this weekend….details to come stay tuned
September 5th, 2008 at 11:18 pm
and yahoo has it on front page
http://biz.yahoo.com/ap/080905/mortgage_giants_crisis.html
AWESOME LOL
September 5th, 2008 at 11:32 pm
Jim Cramer was saying today that the hedge funds normally finish their selling to meet redemptions by the fifth business day of the month, and thus, the selling is now complete.
Cramer is simply in denial. The wave of selling that he says has just ended did not occur in a vacuum. Any hedge fund with large tech holdings just took a huge markdown even if they are not getting any redemptions. Once their investors see the results, the next wave of redemptions will begin.
I have no doubt that there are plenty of big funds salivating over a Fan-Fred rally so that they can sell into it and liquidate at optimal prices.
Money in hedge funds is not insured by the FDIC, right? Investors in hedge funds know that if they are not the first out the door, they may never get out.
Cramer also trumpeted how strong the market was because it didn’t crash today after the jobs report. But of course, it crashed yesterday in anticipation as it often does.
The jobs report carries a lot of weight. It is not forgotten the next day like other reports. It is the number-one indicator on the economy for most traders.
The big money wants OUT of this market, and unless there is a massive surge in volume on any Fan-Fred rally next week, it will be a dead-cat bounce.
September 5th, 2008 at 11:57 pm
I have a feeling that the FDIC would be shutting down more banks if they had the manpower. One per week is probably all they can manage right now, though they are expanding their offices, training up new “seizers”, and bringing some old ones out of mothballs. Maybe they will be able to do two per week soon…
September 6th, 2008 at 12:34 am
Matt why would you expect a FRE-FAN rally,there is a lot speculation that the common shareholder gets 0
September 6th, 2008 at 10:00 am
I meant a general stock-market rally based on a Fan-Fred deal. FNM and FRE may go to zero, but the rest of the market would rally. That’s what happened after hours on Friday.
September 6th, 2008 at 10:32 am
The New York Times reported:
“Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing…”
The common shares are not important, but if the preferred go to zero and stop paying dividends, that would be a disaster for a lot of banks. Many banks own huge mounds of the preferred and depend upon the dividend for a large chunk of their income. The shrapnel from this deal could be quite deadly.
The Washington Post reported that the preferred would be protected, so it looks like most of these stories are just speculation.
September 6th, 2008 at 10:58 am
Matt,
with regard to the question which sector will suffer most in the future. Here’s a comparison of the gains of several etfs since the market bottom in Sept. 2002 (or Jan 03 if they bottomed later). Energy and emerging markets are on top, technology third.
low 09/02 today increase
xle 21,36 68,42 320%
eem 11,57 36,96 319% (series starts 04/03)
qqqq 20,35 43,45 214%
xlb 17,55 37,22 212%
iwm 34,65 71,64 207%
xlu 17,46 35,39 203%
xlk 11,9 21,52 181%
xli 19 33,76 178%
xlp 18,51 28,32 153% (low in 01/03)
SPY 81,79 124,42 152%
rth 65,72 96,85 147% (low in 01/03)
iyr 44,69 63,46 142% (series starts 09/03)
smh 18,71 26,5 142%
xlv 22,67 31,85 140% (low in 07/02)
xly 21,65 30,28 140% (low in 01/03)
hgx 100 129,01 129% was below 02 low… (low 1/03)
rkh 92,02 107,73 117% was below 02 low…
xlf 19,31 21,74 113% was below 02 low…
Interestingly xlf and rkh as well as hgx have bounced a bit after dropping to / below 02. If the market assumes that 02 is a likely target area for this bear, one could ask why the 02 lows should be the right valuation level for xlf and hgx given that their current situation and outlook are much worse than in 2002. Looks like a moving target to me - and will the others drag with them as well.
And the complexities of turning around a financial system are far more significant than deflating a bubble in internet stocks. It will be interesting to see what kind of reimbursement the banks will get for their shares as they will have to immediately amortize their holdings. JPM led the way, but they forgot to write down the second 50% lost. From the top of my head interest payment on some bonds is linked to shares paying dividend so there are issues as well.
September 6th, 2008 at 11:12 am
FRE & FNM—there is no way the Gov’t will even haircut the PRF’D , can’t banks use that as good capital….. Gov’t will put in some type of Super PRF’D that will actually strengthen the banks PRF’D …the dividends may have to accrue on the PRF’D until the Gov’t is made whole or re-capped out of their stake but the old PRF’D will be live.
September 6th, 2008 at 12:53 pm
The board of directors is elected by the common shareholders and I don’t see them riding their stake down to zero whilst protecting the preferred stock… Issuance of a new class of stocks is to be decided upon by the board and not the government… I’m only sure that some legal action will ensue (and the market will go up)
September 6th, 2008 at 1:33 pm
Yes a BOD is elected by the common, yet the BOD has a fiduciary responsibilty to protect ALL holders up and down the capital structure This is done in the best interests of the Company. In the end the BOD is there to make sure the Company an as entity survives and flourish.
The Gov’t will go the BOD with a proposal for a capital infusion….the BOD can say no and go find a better deal—doubtful —or they can accept the deal in the best interests of all stakeholders and the Company and if the equity get wiped out, equity will sue and 10 yrs later may or may not recover something.
BTW if you subtract the “soft” assets off the balance the negative equity is insurmountable…..nuff said lets watch the action on Monday AM
September 6th, 2008 at 1:42 pm
Yerk,
Thanks for the list of ETF’s. That’s a good approach to discovering where the sharpest corrections may come. The XLU for example has a large, and blatant, head-and-shoulders pattern on its weekly chart, and it looks like it decisively broke the neckline last week. It was the worst sector on Friday. In my trading program, I have added a screen named “targets” with the sectors that top your list.
Yes, the banks and homebuilders are a mess compared to 2002. I just think that hyper-focusing on them may cause me to miss better opportunities.
Matt
September 6th, 2008 at 2:41 pm
I suppose the market could bounce.2 ago weeks FRE & FAN said no intervention would be needed,now 2 weeks later the government has to jump in to bail them out at the expense of the taxpayers and common shareholders?? So the financials should go up??? Does this not show the desperation of the situation?? Buy Lehman stock so the government can bail them out to,oh but your shares are going to 0,what am I missing here?
September 6th, 2008 at 2:45 pm
The New York Times said most or all of both the common and preferred shares would be worth little or nothing.”
http://www.bloomberg.com/apps/news?pid=2...
What did Paulson say? If congress approves the 800 billion dollars it will instill investor confidence and it is highly unlikely that the money would be needed.
Liar or idiot?
The Treasury doesn’t get the $800 Billion until 1 October so why is Paulson moving on the 2 GSE’s now?
Could it be because the mortgage situtation is much worse than the numbers indicate? Is it possible that Paulson and company know that the 2 GSE’s will be swamped in the next few weeks? There has to be some dire reason for moving so early.
Hold on to your seats ladies. The devil is in the details and my guess is when the details are released it will be the equivalent of a financial atomic bomb.
September 6th, 2008 at 3:00 pm
“Fannie and Freddie need to sell billions of dollars of bonds each month to pay off maturing debt. As of mid-August the companies had $223 billion of debt to refinance by the end of the quarter.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeBCZUDSozyM&refer=home
So they had to move now…
September 6th, 2008 at 3:04 pm
They are making noise now because the market crashed on Thursday, and Bill Gross blamed it on Paulson. Even if they can’t get a deal done on the weekend, they will continue yapping about it to try and talk the market up. So far, the yapping has worked in Friday’s after-market trading, but if there is no deal this weekend…
September 6th, 2008 at 3:14 pm
Yerk,
Last I heard, Fan-Fred’s recent bond auctions didn’t go too badly. I believe that they had to pay higher-than-usual rates on the last one, but it wasn’t too alarming.
But if Bill Gross is going to lead a buyer’s strike, then perhaps the next auction would be a disaster.
This thing is like a shark that has to keep on swimming. How in the hell will they ever figure out a way to keep feeding this monster? How does the dollar survive a massive bailout? Even if Bill Gross will buy the new paper, will his investors keep their money in his agency funds?
Matt