Here's Another Interesting Chart

The market has two kinds of funds, one for the regular people, the Mutual Funds and one for the sophisticated investor, the Hedge Fund.

To qualify to invest in a Hedge Fund you must be an "Accredited Investor" (click the link for the rules straight from SEC). Here are the bullet points:

-$1,000,000 in net worth
-A single person must have made $200k in income in each of the two most recent years, if you have a spouse it's $300k and an "reasonable " expectation for the same income in the current year or a trustee with assets of at least $5 million dollars.

Here's what you'll pay to be a hedge fund client IF THEY ACCEPT YOU (more on that in a minute).

-Between 1.5% and 3% of your investment under management in fees
-Typically 20% of any gains you might make, but some as high as 50%.

Because the two main kinds of hedge funds are allowed either 99 clients or 499 depending on how the fund was set up, don't expect to be accepted with a $100k investment. They are looking for the big dollars since they have a cap on the number of investors.

So what could you expect to have made this year in the average hedge fund where some managers make over a billion dollars a year to manage said fund? Remember, these guys have access to everything and everyone, especially the "Expert Networks" which are essentially former CEOs, F_E_D officials and other people who have connections you and I couldn't imagine. To be honest, you really should think of Expert Networks as a shady, grey-ish area in which inside information flows from, that's the reality.

So, if you think you are having a rough year (and this is the most difficult market I've ever seen, but more importantly, some people I know (actually a person) who has been working on Wall Street since the 1950's and has created the original money flow indicators that Wall Street paid mucho bucks to lease, agree-THIS IS A HORRIBLE MARKET. However, with inside information and all of the hottest traders, here's what Hedge Funds did this year.



In other words, after fees of hundreds of thousands of dollars, the Hedge Fund industry on average couldn't even beat the S&P, so the clients could have bought a Vanguard S&P proxy fund and saved hundreds of thousands of dollars.

Shorting in to strength-Sector Rotation

That was always the intention of using this bounce since last week, we've seen technology and Financials swap positions back and forth, but if I were looking to add to a short today, it would be in financials., specifically, maybe BAC.

 XLF outperforming Tech today...

 However looks like the underlying trade is distribution. REmember BAC and the break of $5.00 and how it is probably hedge funds biggest holding they would like to erase from their portfolio when the 2012 prospectus goes out.

 XLF 2 min

 XLF 5 min

And BAC. Remember when it broke $5.00 and I said, they'll be looking for any strength to sell BAC before the year end, which for hedge funds is the 27th.

Must See Chart

I couldn't resist posting this, especially as we roll in to 2012, there will be the first trading day or week of 2012 will predict how the market ends the year. By the way, the first day of 2011 saw the S&P up 1.13% and the first week it was down .03%, maybe there's something to it. Thus far the S&P is (even with the relentless QE2/POMO market melt up) down 1.46% for the year, close to the first week's unchanged mark (really I don't believe in that metric). As I was saying, as we enter 2012, there will be a wave of analysts forecasting the market for the year (a stubborn fact of forecasting, just ask a weatherman, is the further out you try to forecast, the less accurate your forecast is).

So this chart shows what some of the major players in the market forecasted for the S&P at the end of 2011. Amazing, considering even a broken watch is right twice a day!

The Hungarian, Birinyi, was the closest at 1333. Hey, these guys invented the Rubik's Cube! Not so surprising, the Squid, Goldman (I've got a bridge to sell you) Sachs came in the worst, the two worst in fact. However, GS isn't dumb, when they say the S&P will be at 1500 and clients start buying, you better believe that GS was most probably doing a lot of selling. What kind of company feeds off its own clients? Or more appropriately, what Wall Street firm doesn't?

THE BS, oops BLS Revision Factor

At WOWS we try to think out of the box, I don't swallow any of the CNBC paid iter-merials (the paid advertising in the form of a CEO interview on CNBC) or the "Cramer is out to help the little people", simply because I don't watch the station and allow any of that sewer seepage to access my frontal lobe.

Do you know how many times I've read about Cramer calling a stock a "Buy,Buy, BUY!!!" and then seen it rise for a week and then plummet?  If memory serves me correct he was carrying water for Lehman about a week before they went under. The point being, he's well connected to Wall Street as a former squid from the Goldman Sachs team and those relationships are important and trump the little people every time.

However, that's just one angle, the other is the nearly criminal lies out of the Treasury, F_E_D and in this case, the BLS. News has an effect on  the market at that moment, it generally doesn't matter a week or a month later if the news or data is revised.

The BLS just completed 2011 with a perfect record, EVERY SINGLE RELEASE from the BLS, like today's beat in Initial Claims has been revised higher at the next report... EVERY SINGLE ONE THIS YEAR! So I take this data with a grain of salt, but more importantly, beyond the BLS, this is pervasive throughout government and Quasi-Government organizations. For example, today's final Q3 GDP revision (the advance forecast, the second revision and the final revision) have all been lowered.

But then again, what else would you expect from the government?

RIMM making another move

Again, RIMM is moving higher on its own as I posted last night.

 Here's XLK (Technology) this is the main industry group for RIMM, thus it is the second most influential entity, note it is flat. This wasn't a broad market move either, which would be the most powerful influence.

 RIMM however, like yesterday, is moving on its own. there's good volume too, although I'm not crazy about the parabolic look of the move, but this is more what short covering looks like.

 RIMM short term accumulation before each move, yes the market makers are stocking up as they see a big order coming.

 The 5 min chart shows accumulation on weakness, exactly what you would expect to see.

 The 15 min chart remains strongly positive leading.

 Now even the 30 min chart which never looked good, is starting to shape up.

 And the 60 min chart shows a huge positive relative divergence. Whatever has been causing these divergences has been going on for a while.

Finally, RIMM has retraced 62% of the gap down from the lows and on decent volume. As I said last night, it seems something is going on with RIMM.

Stops

As ALWAYS, intraday traders just got stopped out by putting stops exactly at intraday support. This s why we don't put stops at obvious levels, remember if you put in a limit order (buy/stop) the market can see it, but intraday lows as support is always an obvious one.

Market Update

The short term 3C charts just got real ugly...

 DIA leading negative

 QQQ leading negative

SPY, maybe the worst, leading negative

Look for some downside coming...

Euro Head Fake now very close to a major test

As mentioned last night and this morning, although my trend lines are horrible, a bear pennant formed in the Euro for the second day, yesterday it had a head fake breakout that failed and today it had the same. Now the Euro is a mere 45 pips from testing the important $1.30 level. Last week when I was looking at the probable breakout in the Euro after it had broken $1.30 on the downside, my thought was that it would bounce so all the long contracts at $1.30 could sell and reposition, so far the Euro has done as expected, broken out, the breakout has been a flop and distribution has been observed. So far so good. I see no reason it won't head to $1.30 and I think it s probable that it breaks $1.30 which has a significant impact on the market as this would be definitely bearish.

Once again, here is the bear pennant in red, the head fake false breakout and the failure which failed when the Euro crossed below the apex of the pennant at the black trendline.

Initial market reaction

Not Happy

The green arrow is the release of all 3 reports at 8:30 EDT

Chicago F_E_D National Activity Index Misses

Released on 12/22/2011 8:30:00 AM For Nov, 2011

Prior Actual Level -0.13  -0.37