I got a few charts i’ll try putting up by tomorrow where i compare the indu and the trin and i came to a conclusion that soon we might see another decline to maybe the 10,800′s and then start the bullish run later next year but i’m talking long term so don;t mind me.

there are a lot of conflicting theories out there right now. Some people believe that the S&P just made a “kiss of death” on the 61.8 retracement from the recent lows, some people think that today’s action was very bullish into the close by reclaiming the recent trading channel as well as the 1263 mark on the S&P.

I would like to get your thoughts. Are you bullish short-term and bearish longer term?

Any insight on what Institutions were doing today?

I don’t think that an exhaustion gap should be confirmed. If the selling were “exhausted”, why did it continue today? The Q’s spent 4 hours below Friday’s opening gap-down price. So, I would say that it was a gap, but not an exhaustion gap.

However, I will say that since the Q’s are so dramatically beaten down here, they should be able to mount a counter-trend move soon.

Matt

“From what I can see so far, it looks like both senior and subordinated CDS will have 100% recovery (this is pretty unusual), so basically all the contracts will just get torn up for “no cost”.

I see “no cost” because what ends up happening is that if you’ve traded CDS in these names profitably, you’ll actually be losing money, and vice versa if you were showing down on your CDS trades on Friday you’re in for a windfall gain. This is because your profit in CDS is the Present Value (PV) of the future cashflows, but when a CDS triggers, the premiums stop getting paid so that PV you’d assumed is actually zero.

If thats not clear, here’s a little example:

I buy FRE sub CDS, 5y, at 50bps in $100mm, a while back. Nice trade, since it then widens to 250bps, where I sell it in $100mm. What’s my profit? Well, its 200bps a year for the next 5 years, discounted at the risky rate. 200bps = 2%, and lets say 5 years worth of that is worth 8% (not 10%, as we’re discounting those future cashflows).

SO…my P+L is showing up 8% of $100mm = $8mm. Great, nice trade. EXCEPT…along comes todays event, CDS triggers, but bonds are all above par. So the PAR – RECOVERY payout (ie. getting paid 100 in exchange for “defaulted” bonds) is zero, BUT all the CDS contracts stop paying the premiums.

So now I have received no payments, but my CDS trade where I was paying 50bps has gone away, AND the CDS trade where I was receiving 250bps has also gone away, so now my P+L is zero. Unfortunately, I’d already taken my $8mm P+L, so what this means to day is that I’ve just LOST $8mm, and that was from trading well apparently!!

Quite a few people will get surprised by the effects of this today I think.

Oh, and hopefully once all this gets settled no problem, people might start to realise that the CDS market is actually pretty stable and isn’t going to “meltdown” or “blow up” any time soon.

Rgds,
the cds trader”

https://www.blogger.com/comment.g?blogID=34323687&postID=6739816255271008536

Call me contrarian but I think we had an exhaustion gap on the Nas. Today’s activities confirmed Friday’s gap.

Here’s another warning bell that I missed that was mentioned on “Fast Money”: Google dropped $24 today