FAZ

From the June 1st FAZ post

If you went that route, FAZ has returned 29% in about a month.

You saw the earlier XLF post. Here's a look at the inverse (short financials) FAZ.

 FAZ 1 min 3C struggling a little bit since 2 p.m.-around the same time the Beige book came out.

FAZ 5 min -looks eerily like the inverse of XLF.

 XLF 3C 1 min.

XLF 3C 5 min.

FSIN post on May 3rd was a follow up to the original idea in which we were looking for a dead cat bounce to $7.20.

 Here was the May 3rd follow up post, when we FSIN crossed 47.20-our target area for a short position. Since then, over the last 7 days, FSIN has declined nearly -22%.

However, if you missed the trade, I'd keep an eye out for any bit of strength in FSIN. This is the weekly chart and a massive top. There's a lot more potential downside in this trade so you really didn't miss the bus.

Based on the top pattern and measuring implications, FSIN could be trading near $1

As for our backtested trade system in the miners, it's produced a gain now over the last 3 days of nearly 13%!

Again, you didn't miss the boat. This is a trading system (long/short), there will be other signals.

From The Beige Book

Highlights  from The Beige Book prepared for the June FOMC meeting


"June 21-22 FOMC meeting added to the view that the economy is experiencing a temporary slowing."


Not to be sarcastic, but do thy have a crystal ball?


" Manufacturing activity is still up in ten of twelve Districts but slowing in some areas."


We've all seen the recent manufacturing data, the trajectory is headed for recession with all data series showing a sharp drop which if continued, would put the next round of manufacturing below 50 (decline).


"Inflation remains generally subdued outside of food and energy."


The two things every American uses every day. Beyond that....

Despite a 1 month dip, manufacturers have a long way to go to price stability. Compare this chart with the Fed's extraordinary accommodative economic policies.


" In general, selling prices increased only modestly, except for food and energy prices, which continued to escalate."


As for commentary, the next quote should sum this one up...


"Elevated food and energy prices, as well as unfavorable weather in some parts of the country, were said to be weighing on consumers' propensity to spend. "


Beyond that, the word "Japan" was used 25 times, "inflation" once.


I think we all knew that the tragedy in Japan was going to have downstream effects on manufacturing, it would just take a few months. It's here now and not likely to abate soon.

This is interesting-Financials...

 XLF 3C 1 min

XLF 3C 5 min.

The S&P isn't going anywhere without financials and if the market is going somewhere, it'll need the energy complex as well.

Market Update

 Most of the market has looked like this today, I can't say it's a huge surprise stops were run, the question is "where to now?"

So far the DIA is the only one showing anything positive. The Q's have a slight positive bias to them, the SPY is just in line, so we'll find out shortly if this was a fishing expedition for stops or we are simply consolidating right now for a move down.

The Beige Book came out at 2 p.m., I haven't had a chance to see what it has to say. I'll let you know if any of the averages start to show anything interesting.

USO is consolidating right where it should be, there's some minor improvement in the consolidation, but still a ways off from confirmation.

USO first target

We are more or less at the first USO target, the breakout area from earlier this morning.

 As you can see, 3C hasn't improved at all, it's actually hitting lows on the day.

 As for trade management, this trend channel is pretty tight and would take you out with a profit, it won't allow for consolidation which is likely around this area.

The 10-min trend channel is wider, it should allow for consolidation and still would take you out of the trade at break even.

AND USO JUST BROKE DOWN

If you faded the USO move at the last post, you can probably move your stop to the $40.15 level and have a nearly risk free trade.

Surreal

The Republicans are advocating a short term technical default, at least a fair portion of them, yet the Treasury has no problem selling its 10 year bonds, even in an environment in which the debt ceiling has been breached and there appears to be no resolution in site.

Today's 10 year auction just came in pretty amazingly strong. The yield was just below 3%, but more impressively, the bid to cover (the total number of bids received compared to those accepted) came in at a ratio of 3.23! Indirect Bidders (foreign governments mostly) took over half of the auction, that hasn't happened in 3 months!

What am I missing here? The US isn't sure it can make the interest payments, the only way it does so now is by dipping into government pensions, the debt ceiling is blown through, there's not apparent progress on a resolution to that problem and Republicans are floating a technical default, yet the 10 years are flying off the shelf?

7-10 year bond fund.

USO-Short

I know a lot of you are looking to fade the move in USO or take profits.

We didn't quite test the high, but there's also been no improvement. As for those who want to fade the move, I think the risk at this particular area is pretty minimal as a stop can be set a fraction of a percent higher then today's highs. TSV is also moving down and is now in the negative.

USO Update

 USO 1 min starting a leading negative divergence in the latest conolidation.

I'd really like to see USO test the highs,  that would give a much better picture of the situation, but I'm pretty close to considering a countertrend short.