August 12, 2009
"THE EYE OF THE STORM"
Just like a hurricane, it first hits with maximum fury, then there is an eerie calm before the next wave hits.
That is where we are in the economy and stock market.
Just like in 1929, few could imagine what was ahead in the thirties. Just because some rich bankers jumped from their windows because of their 90% leveraged accounts were wiped out in a single day (on a 10% drop in the market), how could that affect the masses. (We know now). That was merely the first crack in the dam.
We have experienced the first crack in the dam and are now in the "eye of the storm."
Irrational exuberance abounds. (look at the action in FRE [Freddie Mac] this week). Money is flowing to garbage stocks such as that and AIG. Penny stock promoters are back in full force and advertising on the radio. The government is spending money exponentially faster than Bernie Madoff and the public is believing the whole political bag job.
All I can say is "SELL, SELL, SELL."
A quote I have heard more than once is "I'm just waiting to get my investment back before I sell." Meaning the Dow must go above 14,000. Oh, OK...waiting until 2025? Now in all seriousness, it might break 14,000 before 2020, but that's a bit far out to see.
On the short term, we are much more likely to break 667 than 14,000. As a matter of fact, I believe we will at least revisit, if not break 667 before the end of 2010, without crossing 14,000 first. So if you are waiting to sell at 14,000 you might have a long time to wait.
While our sell signal at 956 was quite timely, we obviously did not call the top. Our short sales were stopped out at 912. The biggest mistake we made was not to reverse and go long at that level.
The risk of the upcoming decline is far greater that any advance forthcoming.
The biggest question now is from what price point will the drop start?
Some say we have already topped at 1018.
Our research and analysis could agree but believe we have one more recovery high due this week or next which could push the market up to as high as the 1040 - 1050 level. This is the point to aggressively short. With such a small advance ahead, all shorts or put positions can be purchased here and held through the decline. August options are all closed except for very short term trading accounts.
In the mean time, our spreads are working fine.
Stay tuned and good luck trading or let us manage your account for you.
July 22, 2009
The market continues to climb defying the laws of gravity. It is in the most overbought condition in 2 years. Our shorts sales were stopped out at 912. We are now above 956 where we sold. While it is possible for the market to do an ABC (up - down -up) pattern to over 1000 on the S & P 500, I currently favor the double top scenario keeping under resistance at 960. Short term should correct by Friday this week and next week at which time an assessment can be made as to the continuing gravitation defiance.
Current trade is back on the short side, also selling August and Sept SPY call spreads.
Either way, by this fall/next spring, the market will be at a much lower level.
The market continues to climb defying the laws of gravity. It is in the most overbought condition in 2 years. Our shorts sales were stopped out at 912. We are now above 956 where we sold. While it is possible for the market to do an ABC (up - down -up) pattern to over 1000 on the S & P 500, I currently favor the double top scenario keeping under resistance at 960. Short term should correct by Friday this week and next week at which time an assessment can be made as to the continuing gravitation defiance.
Current trade is back on the short side, also selling August and Sept SPY call spreads.
Either way, by this fall/next spring, the market will be at a much lower level.
Deflation
July 06, 2009
Recession Special: Wine Cheaper Than Water!
Published: Monday, 6 Jul 2009 2:52 PM ET
Text Size
By: Cindy PermanWriter
A lot of people are trading down on their meals, cooking at home and eating fast food, amid the recession.
Fill me up, Johnny—Just doing my part to help the economy!
But your culinary luck is about to change: Things are now so bad that you can eat and drink like a king at pauper’s prices!
Remember, we told you that the recession has hit the seafood industry so hard, you can now get lobster at lunch-meat prices on Cape Cod.
Well, pour yourself a glass of vino to go with that lobster tail tonight because wine prices have fallen so much, winemakers in Australia are complaining that wine is now cheaper than some bottled water.
WATER!
Dan Murphy, a major wine-retail chain in Australia, is currently selling cleanskins, bottles of wine without a label that are usually sold in a case, for 1.99 Australian dollars, or about $1.60, the Sunday Mail reports.
That’s less than half of what wine cost 10 years ago, the New York Times reported.
“Australia can’t even bottle air and make money selling at that price,” Jeremy Oliver, an Australian winemaker and critic, is quoted as saying in the Times. “The industry is in crisis.”
It’s so bad that some growers aren’t even picking all of their grapes. And Foster’s, the biggest winemaker in Australia, has already sold about 31 vineyards.
This is a rallying cry, people!
Forget the tea parties, raise your goblet high and say it with me: "We will drink until the last drop of recession has been swallowed!"
As Napolean once said, "In victory, you deserve champagne. In defeat, you need it."
I'll drink to that.
* CLINK! *
Beware of Deflation. Oil plunged today over $2.50 per barrell. While ultimately, the printing of trillions of U.S. dollars will lead to inflation, we first will have to deal with a devastating bout of deflation.
With all that has happened, gold has still not surpassed it's peak reached in February. A lower price below $750 an ounce would make a great entry. We look to that level in the near future.
Recession Special: Wine Cheaper Than Water!
Published: Monday, 6 Jul 2009 2:52 PM ET
Text Size
By: Cindy PermanWriter
A lot of people are trading down on their meals, cooking at home and eating fast food, amid the recession.
Fill me up, Johnny—Just doing my part to help the economy!
But your culinary luck is about to change: Things are now so bad that you can eat and drink like a king at pauper’s prices!
Remember, we told you that the recession has hit the seafood industry so hard, you can now get lobster at lunch-meat prices on Cape Cod.
Well, pour yourself a glass of vino to go with that lobster tail tonight because wine prices have fallen so much, winemakers in Australia are complaining that wine is now cheaper than some bottled water.
WATER!
Dan Murphy, a major wine-retail chain in Australia, is currently selling cleanskins, bottles of wine without a label that are usually sold in a case, for 1.99 Australian dollars, or about $1.60, the Sunday Mail reports.
That’s less than half of what wine cost 10 years ago, the New York Times reported.
“Australia can’t even bottle air and make money selling at that price,” Jeremy Oliver, an Australian winemaker and critic, is quoted as saying in the Times. “The industry is in crisis.”
It’s so bad that some growers aren’t even picking all of their grapes. And Foster’s, the biggest winemaker in Australia, has already sold about 31 vineyards.
This is a rallying cry, people!
Forget the tea parties, raise your goblet high and say it with me: "We will drink until the last drop of recession has been swallowed!"
As Napolean once said, "In victory, you deserve champagne. In defeat, you need it."
I'll drink to that.
* CLINK! *
Beware of Deflation. Oil plunged today over $2.50 per barrell. While ultimately, the printing of trillions of U.S. dollars will lead to inflation, we first will have to deal with a devastating bout of deflation.
With all that has happened, gold has still not surpassed it's peak reached in February. A lower price below $750 an ounce would make a great entry. We look to that level in the near future.
July 2, 2009
...California tumbles into the sea
That'll be the day I go
Back to Annandale...1973
Looks like the Steely Dan guys will be going "back to their old school."
IOU
The revenue shortfalls that will be experienced by States and Municipalities will be one of the factors for further economic deterioration. This "new world order" can only pull us out of the debt binge by economic expansion. Growing government is not the way to economic expansion.
Our update on June 10, 2009 turned out to be quite timely. The final exit of the stock market has pinned the exact high. Our short sales have done nicely.
Today's sell off has reached a very short-term oversold position. Shorts were closed today around 3:30 p.m. The market should keep heading lower in July but perhaps next week either a sideways or counter-trend bounce will relieve this oversold condition. At such point the market will be reassessed and we will re-enter positions.
Remember the meaning of the 4th of July! Let freedom ring!
That'll be the day I go
Back to Annandale...1973
Looks like the Steely Dan guys will be going "back to their old school."
IOU
The revenue shortfalls that will be experienced by States and Municipalities will be one of the factors for further economic deterioration. This "new world order" can only pull us out of the debt binge by economic expansion. Growing government is not the way to economic expansion.
Our update on June 10, 2009 turned out to be quite timely. The final exit of the stock market has pinned the exact high. Our short sales have done nicely.
Today's sell off has reached a very short-term oversold position. Shorts were closed today around 3:30 p.m. The market should keep heading lower in July but perhaps next week either a sideways or counter-trend bounce will relieve this oversold condition. At such point the market will be reassessed and we will re-enter positions.
Remember the meaning of the 4th of July! Let freedom ring!
June 18, 2009
The Treasury announced Thursday a record $104 billion worth of bond auctions for next week, part of its herculean efforts to finance a rescue of the world's largest economy.
Oh...it's too late, we can't.
U.S. Stock markets rallied today pushing toward the 927 - 935 level in the S & P 500 relieving the oversold condition brought on by the first wave of selling since posting a top at 956.
Option expiration day is tomorrow. If not already short, any rally above 923 should be shorted aggressively, add to positions at 930 with a stop at 938. A push to the 935 level could be reached but the reward side of this short position is great at this time.
Gold has broken down as well. Although gold is very attractive long term, the deflationary influence in this market will take down gold along with the commodities which have already started to decline. Gold could move below $700 per ounce at which time we will be aggressive buyers.
The Treasury announced Thursday a record $104 billion worth of bond auctions for next week, part of its herculean efforts to finance a rescue of the world's largest economy.
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The sales will exceed the previous record of $101 billion set in auctions that took place in the last week of April and consist of two-year, five-year and seven-year securities. That record was matched by another $101 billion week in May.
Though next week's total was broadly in line with expectations, worries about supply have weighed on the U.S. government bond market, which will see a mammoth $2 trillion worth of new debt issued this year.
Stop the madness!!!!Oh...it's too late, we can't.
U.S. Stock markets rallied today pushing toward the 927 - 935 level in the S & P 500 relieving the oversold condition brought on by the first wave of selling since posting a top at 956.
Option expiration day is tomorrow. If not already short, any rally above 923 should be shorted aggressively, add to positions at 930 with a stop at 938. A push to the 935 level could be reached but the reward side of this short position is great at this time.
Gold has broken down as well. Although gold is very attractive long term, the deflationary influence in this market will take down gold along with the commodities which have already started to decline. Gold could move below $700 per ounce at which time we will be aggressive buyers.
6/17/2009
The market has sold off as expected. Currently in a bounce but should soon resume lower piercing the spx 900 level. Options expiration week can bring hard to read surprises.
Quote of the day, courtesy of Karl ‘No Slave To Fashion’ Denninger:
Government, despite their so-called “new proposal” has refused to take the steps that are necessary to resolve this crisis and return us to a stable economic base.
The reason for this is simple: Government is both beholden to and stuffed to the gills with those who made the bad decisions, and forcing those people to eat their bad investments is considered politically unacceptable.
We therefore will do this “the hard way”, just like we did in the 1930s.
Buckle up - this road might get “a little rough.”
Unfortunately, the ones who made the decisions which are at the root of our financial problems are still in charge. While the markets ran off the Lehmans and Bear Stearns they were merely players in the game not the rule makers. Losses will correct bad behavior, unfortunately we don't have such remedies in government.
The market has sold off as expected. Currently in a bounce but should soon resume lower piercing the spx 900 level. Options expiration week can bring hard to read surprises.
Quote of the day, courtesy of Karl ‘No Slave To Fashion’ Denninger:
Government, despite their so-called “new proposal” has refused to take the steps that are necessary to resolve this crisis and return us to a stable economic base.
The reason for this is simple: Government is both beholden to and stuffed to the gills with those who made the bad decisions, and forcing those people to eat their bad investments is considered politically unacceptable.
We therefore will do this “the hard way”, just like we did in the 1930s.
Buckle up - this road might get “a little rough.”
Unfortunately, the ones who made the decisions which are at the root of our financial problems are still in charge. While the markets ran off the Lehmans and Bear Stearns they were merely players in the game not the rule makers. Losses will correct bad behavior, unfortunately we don't have such remedies in government.
6/10/2009
What is wrong with this picture.....??
"Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report issued Wednesday.
Mary Altaffer / AP
Federal Reserve Bank Chairman Ben Bernanke
The loss on the holdings, which include mortgage-backed securities, reflected a decline in their value as the recession carried over into the first three months of this year. The cumulative loss on the Bear and AIG holdings come to $16.46 billion since they were taken over last year."
Did JP Morgan Chase lose money on their Bear Stearns investment??? I don't think so. WTF!!!!
If you haven't sold all your stock holdings yet, the market is going to give you one more chance Thursday, Friday or perhaps next week.
Sell all holdings and for those who are agressive, go short!
What is wrong with this picture.....??
"Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report issued Wednesday.
Mary Altaffer / AP
Federal Reserve Bank Chairman Ben Bernanke
The loss on the holdings, which include mortgage-backed securities, reflected a decline in their value as the recession carried over into the first three months of this year. The cumulative loss on the Bear and AIG holdings come to $16.46 billion since they were taken over last year."
Did JP Morgan Chase lose money on their Bear Stearns investment??? I don't think so. WTF!!!!
If you haven't sold all your stock holdings yet, the market is going to give you one more chance Thursday, Friday or perhaps next week.
Sell all holdings and for those who are agressive, go short!
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