Despite the allure and mainstreams fascination and love affair with the idea of emerging market long positions, WOWS has been on the bearish side of Emerging markets. I have argued that they will aggressively fight back against the hot money flows that raise inflation in their economies, which now creates the following calculus (hot money flows to emerging markets=inflation=protests and food riots=regime change).
I have said in the last week or so that China will raise rates in February and they did. While China is not what I would consider an emerging market per se, it is reflective of the actions that will be taken in emerging markets.
Besides raising rates three times in little over a month, China has now hiked their banks reserve ratio requirements meaning the are draining liquidity out of the system and fighting the Fed fire with fire.
This could emerge to be a thematic conflict through 2011 and America will soon feel the pain from Fed actions in another form.
Don't forget our China 25 bear trade, FXP it's been performing well.
Thursday, February 10, 2011
Mubarak Pulls a Fast One...
And perhaps a very dangerous one. All indications from the intel sites I've gathered have shown that Mubarak's failure to step down was a surprise to everyone from Washington right to the Egyptian Military regime itself which is now faced with some very difficult choices as dawn in Egypt approaches.
The military has few options, none very appealing. The military regime that has been in place since Nasser is now in a very dangerous position. Should the crowd of protesters coalesce behind a leader of the movement, the military regime will have huge problems especially as they are now in question among the protesters as to where their loyalties lie, that has not been in question yet as the protesters have identified with the military and seen them as part of Mubarak's removal.
You can be sure the military is now redeploying to contain protests and taking positions around the presidential palace.
First the military could stand back and let events develop while trying to maintain some semblance of order and hope that a universal figure head of the anti-Mubarak protests does not emerge. Second they could support Mubarak until September and perhaps be drawn into conflict with protesters. Third and in my opinion most likely, they could remove Mubarak by force or a coupe. What is apparent is that a decision will have to be made within days if not hours.
Considering events in Saudi Arabia where the king is said to be dead, the extremist must view this as the will of God. Suddenly the world just got a lot more dangerous. Expect the market to discount this uncertainty and we will see how committed the FOMC Jedi council is to levitating the market in the most uncertain of circumstances in the most volatile region of the world. Their credibility is at stake n more ways then one now.
The military has few options, none very appealing. The military regime that has been in place since Nasser is now in a very dangerous position. Should the crowd of protesters coalesce behind a leader of the movement, the military regime will have huge problems especially as they are now in question among the protesters as to where their loyalties lie, that has not been in question yet as the protesters have identified with the military and seen them as part of Mubarak's removal.
You can be sure the military is now redeploying to contain protests and taking positions around the presidential palace.
First the military could stand back and let events develop while trying to maintain some semblance of order and hope that a universal figure head of the anti-Mubarak protests does not emerge. Second they could support Mubarak until September and perhaps be drawn into conflict with protesters. Third and in my opinion most likely, they could remove Mubarak by force or a coupe. What is apparent is that a decision will have to be made within days if not hours.
Considering events in Saudi Arabia where the king is said to be dead, the extremist must view this as the will of God. Suddenly the world just got a lot more dangerous. Expect the market to discount this uncertainty and we will see how committed the FOMC Jedi council is to levitating the market in the most uncertain of circumstances in the most volatile region of the world. Their credibility is at stake n more ways then one now.
EEE getting ready to make another move higher
If possible, I'd try to even pick up some shares in after hours if available at a decent spread.
Looks like manipulation
If there's one thing that spooks the market, it's uncertainty-as you can see by the downside volume as it became apparent Mubarak wasn't leaving, the market didn't like the uncertainty. Who in their right mind buys that uncertainty? The Fed.
Ever hear the saying, "When the missiles fly, it's time to buy"? It's not because of war time profits, it's because the uncertainty of war has been lifted and the market can start properly dicounting events without the uncertainty of whether it will or will not happen. This is just another example of PPT/FED manipulation in my opinion, the same kind of garbage that is putting this market in a situation of increasing risk. They don't want the "buy the dip" crowd to lose confidence in the Fed's Jedi market powers quite yet as the end game is still being mapped out.
Sorry if I sound a little emotional, but I find this disgusting.
Here's the opening for the Muslim Brotherhood and perhaps more radical factions. I'm going to look for the high beta/weighted stocks they manipulated the market with.
He's trying to create Nationalism
He keeps talking about Egypt and how it won't be dictated to, how it will decide it's own fate, apparently with him leading the way. Who is the enemy he seeks to turn the people against?
He also has given a testimony to himself.
He "will not separate from the soil until he is buried underneath"
Oh boy, talk about a spark-this was a firecracker in the gas tank. He's not leaving.
Why the SPY just caught a bid, IDK?
Trouble, meet Egypt.
He also has given a testimony to himself.
He "will not separate from the soil until he is buried underneath"
Oh boy, talk about a spark-this was a firecracker in the gas tank. He's not leaving.
Why the SPY just caught a bid, IDK?
Trouble, meet Egypt.
Market Reacts
I have to wonder if this was pre-recorded, I have to wonder if there was a run up-with obvious volume (not the way institutional money accumulates) to set up shorts as they may have had information as to what was to be said.
Remember I wondered why the Suez was being guarded by the Egyptian military and why the US was sending landing attack ships.
USO is tentatively moving up.
Remember I wondered why the Suez was being guarded by the Egyptian military and why the US was sending landing attack ships.
USO is tentatively moving up.
I wish I had 10 more set of eyes
Don't be surprised to hear about SEC investigations into CSCO insider trading probes in the months ahead as 3C shows institutional money bailing out of CSCO before earnings.
And more
Egyptian military forces have secured the Suez and ar escorting transiting ships, meanwhile a US marine attack ship is on the way. If Mubarak is to step down, why the increased concern over the Suez?
Just a week or so ago, armed thugs (suspected to be police/internal security forces in plain clothes) started a lot of trouble in the area, taking out police stations, etc.
Just a week or so ago, armed thugs (suspected to be police/internal security forces in plain clothes) started a lot of trouble in the area, taking out police stations, etc.
More Confussion
Stratfor says there are reports Mubarak has already left the country and the speech is pre-recorder????
Minister of Information in Egypt
just said Mubarak is not going to step dow in his televised speech due to begin in minutes. I just heard this on Al Jazeera. Oil could get very volatile.
Market Update
Odd action today...
DIA 1 looking a bit negative on the 1 min chart-you can see the early morning accumulation that I mentioned in all the averages below as well.
DIA 5 min. This chart is roughly in line. Mubarak i scheduled to speak in about 20 mins, so we'll see what effect that has on the market but the negative divergence in the 1 min chart hasn't been too strong as it's not present on the 5 min chart. THIS IS SHORT TERM ACTION WE ARE LOOKING AT-not macro trends.
IWM 1 min, seems to be in confirmation for the most part, not to much in the way of intraday distribution
IWM 5 The 5 min is marginally negative, but that's a carry over from Tuesday.
QQQQ 1the Q's showing one of the worst 1 min negative divergences.
QQQQ 5 and it has carried over to the 5 min chart. Keep an eye on tech stocks.
SPY 1 min showing a recent possible negative divergence-possible because it has not yet turned down to complete the divergence.
SPY 5 the 5 min again showing some carry over negativity from tuesday, the question is whether 3C turns down forming a negative divergence.
This is an update for our short term traders and not as of yet having anything to do with longer term trends.
This is an update for our short term traders and not as of yet having anything to do with longer term trends.
Buy the Dip
I just talked with a subscriber who wants to buy a dip in UCO-my answer was that something would probably need to happen in oil to get that and Mubarak stepping down may be that catalyst.
Remember, think longer term-not the daily gyrations and use risk management. A dip in oil may be a great buy.
Remember, think longer term-not the daily gyrations and use risk management. A dip in oil may be a great buy.
Egypt-
It looks like for the time being the regime in Egypt has pulled a fast one and survived through a military ouster of Mubarak. Understand that the regime in Egypt since Nasser has always been a military regime, they choose the leaders from their own ranks and are held in high esteem by the people.
As we talked about, the longer Mubarak stayed, the longer the protests would continue and threaten the regime should the protesters, whose only weakness is unification behind a strong opposition leader, find that leader that embodies the movement. It was only a matter of time before the military dispatched of Mubarak one way or another.
The likelihood of a successful transition of power, at least in the short run, looks pretty good. The question now remains, did the Muslim Brotherhood make any significant in-roads during the protests and if so, whose their traveling companions as we know that armed Hamas crossed the border and joined up with the brotherhood.
Several scenarios could play out, the Brotherhood could have made enough of an impact to become players at the table or the more dangerous one, for them-the military may seek to wipe them out and leave them in a worse position then before the protests. The people of Egypt still haven't put 1+1 together to understand that the regime is the military, Mubarak has nothing without their support as we see today.
The situation on the ground in real terms of quality of life is likely going to remain little changed which is why I say the regime won out, at least in the short term. Many of the radical islamists came from Egypt and I don't believe for a second that after years of living in the mountains hiding out from Predators, they are going to let this opportunity slip through their fingers. Clearly anti-Western rhetoric has risen in Egypt-our main strategic ally in the region, so what face does the regime paint for public consumption and what are the realities?
Saudi Arabia may become the focal point for extremists now, something to keep a close eye on in the coming days. This is not an ideal time for transitions of power in the region and any perceived vacuum is an opportunity. Despite what Iran may say, they certainly don't want to see their base eroded by a competing islamic state.
To me, this looks more like the start of turbulent times then the conclusion of them. It won't take long for popular opinion among the public to realize that whoever takes control of Egypt is still a puppet of US foreign policy so long as the military regime puts that leader in place, thus the dangers that they may have to turn to a more radical face then the US would like to see.
On another note, in last night's video and the 2 preceding videos I talked about the crumbling liquidity structure of out equity markets and showed a chart of traders leveraging up on margin as the VIX touched intraday lows not seen in 5 years. So in that spirit, here's a chart a reader sent in that makes it easy to understand the cycle of human emotion -which is all a price chart represents when you think about it, and how and at what stages it effects the market.
I think we are pretty much at the Euphoria stage as the "buy the dip" crowd feels the Fed will continue their Jedi market tricks. The margin rates-(leveraged debt in a collapsing liquidity structure) show traders have very little fear, as does the VIX. DANGER Will Robinson!
As we talked about, the longer Mubarak stayed, the longer the protests would continue and threaten the regime should the protesters, whose only weakness is unification behind a strong opposition leader, find that leader that embodies the movement. It was only a matter of time before the military dispatched of Mubarak one way or another.
The likelihood of a successful transition of power, at least in the short run, looks pretty good. The question now remains, did the Muslim Brotherhood make any significant in-roads during the protests and if so, whose their traveling companions as we know that armed Hamas crossed the border and joined up with the brotherhood.
Several scenarios could play out, the Brotherhood could have made enough of an impact to become players at the table or the more dangerous one, for them-the military may seek to wipe them out and leave them in a worse position then before the protests. The people of Egypt still haven't put 1+1 together to understand that the regime is the military, Mubarak has nothing without their support as we see today.
The situation on the ground in real terms of quality of life is likely going to remain little changed which is why I say the regime won out, at least in the short term. Many of the radical islamists came from Egypt and I don't believe for a second that after years of living in the mountains hiding out from Predators, they are going to let this opportunity slip through their fingers. Clearly anti-Western rhetoric has risen in Egypt-our main strategic ally in the region, so what face does the regime paint for public consumption and what are the realities?
Saudi Arabia may become the focal point for extremists now, something to keep a close eye on in the coming days. This is not an ideal time for transitions of power in the region and any perceived vacuum is an opportunity. Despite what Iran may say, they certainly don't want to see their base eroded by a competing islamic state.
To me, this looks more like the start of turbulent times then the conclusion of them. It won't take long for popular opinion among the public to realize that whoever takes control of Egypt is still a puppet of US foreign policy so long as the military regime puts that leader in place, thus the dangers that they may have to turn to a more radical face then the US would like to see.
On another note, in last night's video and the 2 preceding videos I talked about the crumbling liquidity structure of out equity markets and showed a chart of traders leveraging up on margin as the VIX touched intraday lows not seen in 5 years. So in that spirit, here's a chart a reader sent in that makes it easy to understand the cycle of human emotion -which is all a price chart represents when you think about it, and how and at what stages it effects the market.
KFT TRADE SHORT
This is more of a gut trade although there are some 3C divergences, these larger component stocks can be tricky as they are traded to equalize EFTs which has little to do with institutional investment. It's the set up that I like.
weekly chart-MACD and volume look bad. Without putting a channel on price, you can see it is rolling over. KFT is one of the stocks I mentioned in the videos that is simply underperforming the market.
60-min chart showing a recent bear-flag. I'd probably wait for the breakdown, although you could phase into the trade, the breakdown has a higher probability. So say under $30.60 or so. From there, you could put a stop right above $31 and have very little risk per share.
MRK TRADE (Short)
I like this one here and now based on a good r:r setup.
weekly chart showing a false breakout of the triangle-(to be expected as usual) and now a downside breakout on huge volume. Triangles this big typically are tops.
Here's the set-up, I personally like the entry here as momentum has shifted down from the correction. You can use many stops, the two I prefer are at the red trendlines ($33.35 and $33.85) I think the risk:reward ratio is pretty good and this looks like a decent setup here and now. You could probably establish a decent size position with 1% portfolio risk (excluding unpredictable gaps-no position should be more then 15% of the equity of portfolio-see risk management link at the top right side of the site.)
USO Update
USO has seen some of that volatility we talked about yesterday coming out of the intraday triangle, 3C is looking positive, f there's a breakdown dip, I might be inclined to buy it with reasonable risk management and then add on a breakout above the triangle-especially if volume increases.
MARKET UPDATE
NOW THE GAP IS LARGELY FILLED, THERE ARE 1 MIN NEGATIVES FORMING IN THE SPY, THE DIA TO A LESSER EXTENT, THE Q'S TO A LARGER EXTENT AND THE IWM TO A LESSER EXTENT, BUT STILL THERE.
WFC Trade (Short?)
The Wells Fargo CFO just abruptly quit, I'm not sure of the backstory but he was making a nice living and just walked away from it without announcing any other plans. Something may be brewing at WFC. Technically it's not in a bad position to consider a short sale any way.
WFC weekly chart coming into a resistance zone, note recent candlestick momentum has been weak.
Looking at the Heiken-Ashi price chart, we've seen some recent bearish indecision candles, but more strikingly is volume at price in the white box. Also note the bollinger bands and recent volatility tightening up.
Here's a normal candlestick chart, again volume at price is a little disturbing. ADX has turned down from 45 which signals a fading trend/reversal and the vortex indicator is looking a bit bearishly biased compared to the past and narrowed considerably.
The daily 3C chart (red=negative divergence/distribution, white=positive divergence/accumulation) we see that typical accumulation base around summer of last year. Currently as price tests the resistance zone, 3C is showing a negative divergence meaning the amount of institutional support this time is not as much as last time at the same price area.
Remember, we just had some recent, out of the blue news, the 60 min chart is showing a negative divergence and price has slipped since.
The 30 min chart is confirming this as well.
And here the 10-min chart almost looks like there was a push toward resistance perhaps to set some short positions on 2/7-2/8
The hourly Linear Regression channel is close to a break down and certainly has not been trading strongly in the upper half of the channel..
I'll list this trade, but I might wait for a break of $32.30 before I got my feet really wet. Remember to widen the stop on these initial breakdowns as the HFTs will be looking to shake the tree to knock out new shorts on a breakdown.
I'd prefer a stop above the recent highs of $34.25, but depending on your position sizing and intent on the trade, obviously that could be adjusted tighter.
I'll list this trade, but I might wait for a break of $32.30 before I got my feet really wet. Remember to widen the stop on these initial breakdowns as the HFTs will be looking to shake the tree to knock out new shorts on a breakdown.
I'd prefer a stop above the recent highs of $34.25, but depending on your position sizing and intent on the trade, obviously that could be adjusted tighter.
Another Cog in the Fear Cycle
As you may know, North Korea walked out on mid-level talks to set up higher level talks between the two Koreas stating the following,
“We no longer feel the need to deal with the traitor group, which has no interest in improving relations,” North Korea’s delegation to this week’s military talks said today in a statement carried by the official Korean Central News Agency. “It is our tradition to respond to dialogue with dialogue and confrontation with confrontation.”
The question in my mind is, "was this just another useless ploy by the North to escalate tensions?" Kim is also going through a similar process that was playing out in Egypt as he tries to hand power off to his son, and much like Egypt, the military regime holds enormous sway over any possible transition. This is why in my opinion Kim and his son were both at the base that shelled the south just hours before the shelling began, as Kim tries to gin up support of high level military officials in an eventual transition of power.
The walk out seems like more drama and I doubt there were any sincere efforts by the North toward high level talks. This is about the internal politics of the North. So, don't be surprised to see another round of escalating tensions in the region. If inflation and food are problems in more developed countries, how much worse is the situation in an isolated North Korea? Attention from that reality will have to be deflected and what better way the to focus the people in a renewed push of nationalism by confronting the South in hostile engagements once again? Kim may be isolated, but he's also extremely paranoid and the events unfolding in Egypt and Tunisia are surely keeping him awake at night planning his next move to deflect criticism of his regime. After all, the long time oppressive leaders in poverty stricken countries are lining up to fall like dominos.
“We no longer feel the need to deal with the traitor group, which has no interest in improving relations,” North Korea’s delegation to this week’s military talks said today in a statement carried by the official Korean Central News Agency. “It is our tradition to respond to dialogue with dialogue and confrontation with confrontation.”
The question in my mind is, "was this just another useless ploy by the North to escalate tensions?" Kim is also going through a similar process that was playing out in Egypt as he tries to hand power off to his son, and much like Egypt, the military regime holds enormous sway over any possible transition. This is why in my opinion Kim and his son were both at the base that shelled the south just hours before the shelling began, as Kim tries to gin up support of high level military officials in an eventual transition of power.
The walk out seems like more drama and I doubt there were any sincere efforts by the North toward high level talks. This is about the internal politics of the North. So, don't be surprised to see another round of escalating tensions in the region. If inflation and food are problems in more developed countries, how much worse is the situation in an isolated North Korea? Attention from that reality will have to be deflected and what better way the to focus the people in a renewed push of nationalism by confronting the South in hostile engagements once again? Kim may be isolated, but he's also extremely paranoid and the events unfolding in Egypt and Tunisia are surely keeping him awake at night planning his next move to deflect criticism of his regime. After all, the long time oppressive leaders in poverty stricken countries are lining up to fall like dominos.
Obama Gave the Saudi King a Heart Attack?
And many Americans I suspect. Any way, the rumor mill is in full motion this a.m. Obviously the King of Saudi Arabia dying after a heated exchange with Obama would be a hugely destabilizing event in the middle east-like I've said the extremists are thanking Allah right now as chaos and opportunity have been handed to them. Another rumor, Hosni Mubarak will step dow tonight...????
We'll see if the military regime can maintain it's iron grip on the government over the last 4-5 decades, I doubt Suleiman will stand given his advanced age as well and his real and perceived connections to the regime.
The one thing the extremist haven't so far provided is a powerful figure of the movement, one will emerge just Ayatollah Khomeini did in Iran, Egypt just hasn't reached that point. However with events as they are and the suffering of people throughout the region, any likely leaders that fill the power vacuum are likely to be extremist in their views. People aren't thinking Democracy, they are angry and that anger is easy to turn into nationalism or extremism as they are looking for a figure head to coalesce around who will vent their rage outwardly toward the west, just as in Iran, and similar to Hitler's Nazi party. The problems are so structurally deep that someone like Mohamed Elbaradei have little chance in succeeding at a power grab to promote Democracy-he simply can't fix the problems of runaway price inflation and hunger, which means that the military regime in Egypt will have trouble holding on to power. If you can't fix the problems, you need to be able to vent the people's rage in a direction that they are naturally inclined to in the first place. Both events if true, will be major destabilizing events in the middle East (thus U.S.Warships heading for the region) and it's likely that the list of countries I rattled off in the first pair of videos the other night, will start to fall like dominos. Effectively, Middle East policy has collapsed and whether Bernanke understands it or not, the speculative boom his policies have driven are partly to blame.
Thus oil's ascent today, but that's not news to us. We've just been waiting for that position to be accumulated and they'll try to hold it back until they do get a sufficient position size, then watch out as institutions ride the wave of higher oil that's been handed to them as a gift mush like the extremists have been handed the gift of a destabilized Middle East, especially in Saudi Arabia-that's been the crown jewel of their desires.
We may want to keep a closer eye on alternative energy stocks as a revolution throughout the Middle East will likely displace OPEC.
I'll follow up later with more analysis on the situation, but things are coming to a head very quickly in a number of way and places.
We'll see if the military regime can maintain it's iron grip on the government over the last 4-5 decades, I doubt Suleiman will stand given his advanced age as well and his real and perceived connections to the regime.
The one thing the extremist haven't so far provided is a powerful figure of the movement, one will emerge just Ayatollah Khomeini did in Iran, Egypt just hasn't reached that point. However with events as they are and the suffering of people throughout the region, any likely leaders that fill the power vacuum are likely to be extremist in their views. People aren't thinking Democracy, they are angry and that anger is easy to turn into nationalism or extremism as they are looking for a figure head to coalesce around who will vent their rage outwardly toward the west, just as in Iran, and similar to Hitler's Nazi party. The problems are so structurally deep that someone like Mohamed Elbaradei have little chance in succeeding at a power grab to promote Democracy-he simply can't fix the problems of runaway price inflation and hunger, which means that the military regime in Egypt will have trouble holding on to power. If you can't fix the problems, you need to be able to vent the people's rage in a direction that they are naturally inclined to in the first place. Both events if true, will be major destabilizing events in the middle East (thus U.S.Warships heading for the region) and it's likely that the list of countries I rattled off in the first pair of videos the other night, will start to fall like dominos. Effectively, Middle East policy has collapsed and whether Bernanke understands it or not, the speculative boom his policies have driven are partly to blame.
Thus oil's ascent today, but that's not news to us. We've just been waiting for that position to be accumulated and they'll try to hold it back until they do get a sufficient position size, then watch out as institutions ride the wave of higher oil that's been handed to them as a gift mush like the extremists have been handed the gift of a destabilized Middle East, especially in Saudi Arabia-that's been the crown jewel of their desires.
We may want to keep a closer eye on alternative energy stocks as a revolution throughout the Middle East will likely displace OPEC.
I'll follow up later with more analysis on the situation, but things are coming to a head very quickly in a number of way and places.
ECB Buying?
Last night I mentioned Portugal's abysmal auction, rumors are the ECB is buying their bonds, we'll see soon enough but as I mentioned, the Euro should see a hit
As you know, I've remained bullish on the Dollar pullback or the dollar index as the fear cycle hits Europe again this week, here's why...
First of all, there was nothing technically wrong with the pullback, you can't focus on one day's action, especially not in this market.
The 15 min 3C chart into the pullback with a positive divergence
As you know, I've remained bullish on the Dollar pullback or the dollar index as the fear cycle hits Europe again this week, here's why...
The 15 min 3C chart into the pullback with a positive divergence
Example
There's obviously something not right with the market
Late last night the fact there was the ramp into the afternoon with no accumulation and open volume spikes tells me someone was trying to fight the market, this morning the market is back to where we expected from Tuesday's macro-intermediate view of the market.
They say don't fight the Fed, there is however one entity that does fight the Fed and consistently wins and that's the market. I'll let you know about any developments ASAP.
There are 1 min minor positive divergences off the 10:00 retest, but this is early morning activity and if the market expected the volume and cash pumped into the market to hold it up, then there's institutional positions at a loss on the gap and they'll try to fill it.
They say don't fight the Fed, there is however one entity that does fight the Fed and consistently wins and that's the market. I'll let you know about any developments ASAP.
There are 1 min minor positive divergences off the 10:00 retest, but this is early morning activity and if the market expected the volume and cash pumped into the market to hold it up, then there's institutional positions at a loss on the gap and they'll try to fill it.
SQNM Update
This was a trade idea brought by a member , who has done very well with the C&D trades, from late last year.
Here are updated charts this a.m. Take a look at the trade as it's a perfect Cat and Dogs setup and for 3C users, when you see charts like the ones below, you know something big is coming.
3C 5 min showing the accumulators picking up last minute shares before the move.
Same thing on the 1 mn chart. Right now 3C is following price so we have confirmation.
Here are updated charts this a.m. Take a look at the trade as it's a perfect Cat and Dogs setup and for 3C users, when you see charts like the ones below, you know something big is coming.
By the way
Regarding the Plunge Protection Team's efforts late today, I have some proof for you. By now anyone who has been here a few weeks knows what an accumulation/distribution cycle looks like whether it's intraday or a swing move. There's accumulation which is usually a quiet event volume wise. Take a look at these charts.
DIA 1
SPY 1
QQQQ 1
What you should notice on the minute chart is NO positive divergences whatsoever, no accumulation, however there was right in your face volume and we know that's not how the locals buy-they don't show their hand with a volume surge which most traders are scanning for all day as they still don't get it.
So some form of the PPT was at work today to lift equities, it wasn't the norm at all.
What you should notice on the minute chart is NO positive divergences whatsoever, no accumulation, however there was right in your face volume and we know that's not how the locals buy-they don't show their hand with a volume surge which most traders are scanning for all day as they still don't get it.
So some form of the PPT was at work today to lift equities, it wasn't the norm at all.
Call it Gut
I rarely make videos anymore, it's just too time consuming, but I have had a bad feeling for several days and you probably have noticed it in the subjects I've been covering as well as the longer term 3C outlook published Tuesday about a reversal today. We pretty much got the reversal except for a Fed angel stepping in around the afternoon, better known as the Plunge Protection Team.
The bond market is acting exceptionally strange and Bernanke's testimony today contained little bits and pieces that didn't make a huge impression, but each one made me think, "hmmm".
There's no doubt liquidity is dry, the HFT's have destroyed the traditional buyer/seller of last resort market structure and the game is all about volume/volume rebates as these HFTs just pass shares back and forth, we see it in the intraday chart action in which the market effectively goes nowhere, a .25% gain is hardly worth mentioning-except it happens 8 days in a row, some of the bigger percentage moves have been to the downside-liquidity exacerbating the situation.
Imagine that we do get a sell-off on a black swan event, circuit breakers be damned, they'll only serve to panic the public more and all the traders who are in the market now on the "buy the dip" trade are doing so on huge leverage, like we haven't seen in years-this always a red flag-GREED. When liquidity dries up and a market falls, it falls fast and hard, margin calls come in or positions are liquidated by the brokerage for you with or without your consent. Traders just don't see it or care about it. Even the VIX yesterday showed multi-year intraday lows=complacency=sell-offs (traditionally, and I have no reason to believe it's any different this time, no matter what the talking heads say).
As I also mentioned in the videos and here through numerous breadth analysis posts, you can see that bellwethers are sinking, the cats and dogs are rallying-not a good scenario for the bull move. If the recovery is here, where are the jobs? Why are the transports falling apart? After all they bring you the goods.
I showed in the first two videos the CRB index (commodities) , ISM reports also consistiently show what we already know, input costs are rising so they either get passed along to the consumer (inflation) or to try to maintain their margins, they have to lay-off more people (worse unemployment)-it's here now, this isn't Fed fantasy land.
Unless the Fed is a lot smarter then their past actions would imply, they have a HUGE problem brewing. There's no way they can effectively say that they are politically independent from the government, they are -at least until today's 10-year auction, acting as the buyer of only resort as the government's deficit is spiraling out of control and the debt ceiling once again will likely be raised. You'd think they'd look at the micro problem of leveraged debt that got us here on an individual basis and think about the macro scheme of things and cut spending, initiate austerity measures and the like, but corporations run Capital Hill and these politicians can't see any further then the next election. Most people think about themselves first-after all, everyone else in Congress is doing it.
If the Fed discontinues buying up our debt (as the largest holder now-and when questioned today about that regarding China-a member of Congress actually schooled Bernanke who didn't have the answer as to how much China holds!)) as they will have to eventually do as rising inflation is evident in all forms of input costs, who will be the buyer? Or do we default on the debt? Maybe they are following the micro example?
In any case, $1.7 trillion didn't do much in QE 1, $600 billion of QE2 does what? Do you believe the unemployment data as they have adjusted it for everything and then revise it to the worse in following months-(GDP too)?
It all comes back to what I said in my 2007 5-part video series on bubbles, the only way we move toward normalcy is to bite the bullet and let some of the "too big to fails" -fail. We are simply kicking the can down the road and whistling past the graveyard and the problem gets bigger every day. From real estate, to MBS, to pensions and municipal defaults, we are in no better shape in practical terms $2+trillion dollars later. However the insider who have been selling as a fast clip certainly are. The truth is probably that 1 in 5 Americans are not making what they need to if they have a job at all and that is after the consumer has de-leveraged debt.
Our family Cafe sees a lot. We see businesses come and go in the plaza in 6 months. We see people who made $65,000 a year work for $7.25 an hour and part time at that! We see the rising costs of food and we have to go outside of the US and buy in bulk to get any kind of a normal price on dry goods. We get applicants every single day-and we aren't looking for them. We people transition from coming in 5-days a week for their lunch break to 1-day a week as the brown bag it the other 4 days. We see the rising and ridiculous city, county and state fees rising as well as the rent through all kinds of surcharges. And as far as employment goes, we streamlined and went from 5 people during a lunch rush to 3, we've managed to increase productivity and do more for less because even at minimum wage, there's a number of other costs that make a $7.25 an hour employee a $10 $11 an hour employee an I'm not just talking about taxes-there's so many ways in which they cost money and that's with no benefits.
I've reached out to many friends in the last month and I can't find one that is saying, "we're okay"; they are pursuing bankruptcy, home loan modifications, aren't paying their mortgages, and aren't answering the phone when an unidentified phone number shows up and I live in an affluent city, one of the most affluent cities in the U.S.
One friend owned one of the biggest road paving/underground utility construction firms in the U.S. They went from bidding 30 jobs a year to 1 (that was signed) in the last 3.5 years. He's had to shit down, liquidate, lay-off hundreds of employees and is facing lawsuits from every direction and this guy lives about as modestly as do I. Luckily for him, one of the banks that is going after them ISN'T LICENSED TO DO BUSINESS IN THE STATE OF FLORIDA!!! They even have offices here, how that happened? IDK.
Small businesses everywhere are shutting down after a few months or so, but the credit card apps are starting to come in the mail. Are banks understanding that their trading desks soon will no longer drive profits and looking to return to a more traditional banking business model? I don't know, but small businesses aren't getting the capital they need and they aren't getting payment on even net 90 day accounts.
Something big is going down and the wheels of it are in motion, it's a matter of finding where the opportunity in this scheme is and there is always opportunity. Just be prepared to take highly unconventional steps when the opportunity presents itself and above all, fine tune your risk management as I believe this market is about to entered rough, unchartered waters sooner then most people can imagine.
Feel free to email me your comments, stories and thoughts. The more minds we have looking at this, the better. And educate the people around you, you'll find one of the best ways to learn is to share and teach others.
The bond market is acting exceptionally strange and Bernanke's testimony today contained little bits and pieces that didn't make a huge impression, but each one made me think, "hmmm".
There's no doubt liquidity is dry, the HFT's have destroyed the traditional buyer/seller of last resort market structure and the game is all about volume/volume rebates as these HFTs just pass shares back and forth, we see it in the intraday chart action in which the market effectively goes nowhere, a .25% gain is hardly worth mentioning-except it happens 8 days in a row, some of the bigger percentage moves have been to the downside-liquidity exacerbating the situation.
Imagine that we do get a sell-off on a black swan event, circuit breakers be damned, they'll only serve to panic the public more and all the traders who are in the market now on the "buy the dip" trade are doing so on huge leverage, like we haven't seen in years-this always a red flag-GREED. When liquidity dries up and a market falls, it falls fast and hard, margin calls come in or positions are liquidated by the brokerage for you with or without your consent. Traders just don't see it or care about it. Even the VIX yesterday showed multi-year intraday lows=complacency=sell-offs (traditionally, and I have no reason to believe it's any different this time, no matter what the talking heads say).
As I also mentioned in the videos and here through numerous breadth analysis posts, you can see that bellwethers are sinking, the cats and dogs are rallying-not a good scenario for the bull move. If the recovery is here, where are the jobs? Why are the transports falling apart? After all they bring you the goods.
I showed in the first two videos the CRB index (commodities) , ISM reports also consistiently show what we already know, input costs are rising so they either get passed along to the consumer (inflation) or to try to maintain their margins, they have to lay-off more people (worse unemployment)-it's here now, this isn't Fed fantasy land.
Unless the Fed is a lot smarter then their past actions would imply, they have a HUGE problem brewing. There's no way they can effectively say that they are politically independent from the government, they are -at least until today's 10-year auction, acting as the buyer of only resort as the government's deficit is spiraling out of control and the debt ceiling once again will likely be raised. You'd think they'd look at the micro problem of leveraged debt that got us here on an individual basis and think about the macro scheme of things and cut spending, initiate austerity measures and the like, but corporations run Capital Hill and these politicians can't see any further then the next election. Most people think about themselves first-after all, everyone else in Congress is doing it.
If the Fed discontinues buying up our debt (as the largest holder now-and when questioned today about that regarding China-a member of Congress actually schooled Bernanke who didn't have the answer as to how much China holds!)) as they will have to eventually do as rising inflation is evident in all forms of input costs, who will be the buyer? Or do we default on the debt? Maybe they are following the micro example?
In any case, $1.7 trillion didn't do much in QE 1, $600 billion of QE2 does what? Do you believe the unemployment data as they have adjusted it for everything and then revise it to the worse in following months-(GDP too)?
It all comes back to what I said in my 2007 5-part video series on bubbles, the only way we move toward normalcy is to bite the bullet and let some of the "too big to fails" -fail. We are simply kicking the can down the road and whistling past the graveyard and the problem gets bigger every day. From real estate, to MBS, to pensions and municipal defaults, we are in no better shape in practical terms $2+trillion dollars later. However the insider who have been selling as a fast clip certainly are. The truth is probably that 1 in 5 Americans are not making what they need to if they have a job at all and that is after the consumer has de-leveraged debt.
Our family Cafe sees a lot. We see businesses come and go in the plaza in 6 months. We see people who made $65,000 a year work for $7.25 an hour and part time at that! We see the rising costs of food and we have to go outside of the US and buy in bulk to get any kind of a normal price on dry goods. We get applicants every single day-and we aren't looking for them. We people transition from coming in 5-days a week for their lunch break to 1-day a week as the brown bag it the other 4 days. We see the rising and ridiculous city, county and state fees rising as well as the rent through all kinds of surcharges. And as far as employment goes, we streamlined and went from 5 people during a lunch rush to 3, we've managed to increase productivity and do more for less because even at minimum wage, there's a number of other costs that make a $7.25 an hour employee a $10 $11 an hour employee an I'm not just talking about taxes-there's so many ways in which they cost money and that's with no benefits.
I've reached out to many friends in the last month and I can't find one that is saying, "we're okay"; they are pursuing bankruptcy, home loan modifications, aren't paying their mortgages, and aren't answering the phone when an unidentified phone number shows up and I live in an affluent city, one of the most affluent cities in the U.S.
One friend owned one of the biggest road paving/underground utility construction firms in the U.S. They went from bidding 30 jobs a year to 1 (that was signed) in the last 3.5 years. He's had to shit down, liquidate, lay-off hundreds of employees and is facing lawsuits from every direction and this guy lives about as modestly as do I. Luckily for him, one of the banks that is going after them ISN'T LICENSED TO DO BUSINESS IN THE STATE OF FLORIDA!!! They even have offices here, how that happened? IDK.
Small businesses everywhere are shutting down after a few months or so, but the credit card apps are starting to come in the mail. Are banks understanding that their trading desks soon will no longer drive profits and looking to return to a more traditional banking business model? I don't know, but small businesses aren't getting the capital they need and they aren't getting payment on even net 90 day accounts.
Something big is going down and the wheels of it are in motion, it's a matter of finding where the opportunity in this scheme is and there is always opportunity. Just be prepared to take highly unconventional steps when the opportunity presents itself and above all, fine tune your risk management as I believe this market is about to entered rough, unchartered waters sooner then most people can imagine.
Feel free to email me your comments, stories and thoughts. The more minds we have looking at this, the better. And educate the people around you, you'll find one of the best ways to learn is to share and teach others.
