Archive - May 2010 - Story

The first constatation looking at the EW count is that the downside moves are not complete. We finished this morning pre-open wave 3 for the S&P future and the Dax and subsequently bounced. I had given intraday sell level at 1,080/1,088 in the S&P, for the now this has held or close enough. It seems there could be a possibility to make an excess up to 1,093 on Monday but the top of this bounce could well be in already. People who sold the rebound should target 1,013/1,017 on the downside. This would coincide with both the wave 5 downside extension and the C = A if we assume that since the tops we are simply doing an ABC correction before resuming the bull trend. It is not my view, but I do think we wil bounce once we get to 1,013/1,017, possibly to retest the 200-dma. For now we focus on staying short with a stop on a daily close above the 200-dma. We see a similar price action for the Dax. We may rally a little bit more up to 5,880 but after that we should go test 5,600/5,510 at the minimum. - Nic Lenoir

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 21/05/10

Once again, we get to see just how broken our stock market is, one which takes no prisoners, and will trample over everyone and everything as the Primary Dealers use your own money against you to shake every single person out. A 130 point move in the Dow in the matter of minutes on no volume is about all you need to know to lose all confidence in stocks, and call up TD Ameritrade and close your account (you won't be allowed to trade when the market is crashing anyway). Good thing we had a fake rumor in the morning to prevent an all out rout into Friday with the Dow looking to open well into 9000. Additionally, with credit not moving, and obviously not buying this move, there is nobody left who can claim the market is anything even remotely resembling orderly, efficient or fair. SkyNet is again rising.

As everyone is focusing on Europe's impoverished white swans begging for the Fed's FX swans in some Brussels gutter, the grey one is preparing to let rip. Eyjafjallajokull's far bigger cousin, which has always erupted whenever Eyjafjallajokull went active, and whose seismic readings many have been keeping an eye on, has now recorded 5 earthquakes in the past 5 days, with 2 in a 3 hour span today alone. Should Katla blow, Jim O'Neill will be forced to seriously reevaluate the risk factors section in his recent upcoming report: "Why only idiots bet on red in Europe. And oh yes, BRIC, BRIC, BRIC."

There is a lot of “noise” being tossed out by the politicos and their preferred pundits about how the U.S. economy is on the mend. Thus it is important to try and separate fact from fiction about where things really stand.

"I was advised that rejecting [Bernanke's] nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. " - Senator Barbara Mikulski

I have long written that the European Monetary Union (EMU) constitution and Euro currency should be viewed in the context of a risky bet versus a sound regional monetary strategy. The odds of the EMU’s survival are presently reflected in a plunging Euro, despite a historic and unprecedented intervention. This indicates that the EMU’s existence in its current form is now a bad bet.

An interesting chart depicting European monthly yoy change in electricity consumption comes to you via Goldman. Now that Europe's true fiscal problems are being exposed, look for such datapoints, which Goldman is of course using as a pitch to just how great Europe's condition is (for a real indication how "good" things are, check the EUR Libor, or the TED spread posted earlier, but let's not forget Jim O'Neill fluff piece about How Good The World Is, issued about 50 S&P handles higher - tells you all you need to know about bias), another, and more objective way to read the data, is to expect European electric output to decline materially. What that may mean for nattie and spent uranium rods, one can decide on their own.

In the words of Bullet Tooth Tony, "Bonjour"

The rumor that pushed the Dow up 200 points from the lows, was, as we expected, completely false and just a pretext to ramp the market into Opex. Of course, the SEC will never investigate into who actually leaked the rumor as the SEC's very existence is contingent on the continuation of that particular ponzi.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 21/05/10

The biggest beta chaser in existence, Bill Miller, who does great when the market is up, and blows up spectacularly when the market plunges, may soon be leaving Legg Mason. Reuters reports that Legg Mason has picked the "eventual successor" to "famed" stock picker Bill Miller, according to the Value Fund. Presumably, this is news.

With bid buckets dry, so far the morning portion of today's melt up has been due to offer chasing across the board as smart money sells to momos and algos. However, a particularly large offer at 1089 in ES is so far keeping the market range bound. Not surprisingly, S&P futures got as high as 1,088.75 before retracing. For now that will be the resistance point, although with today's hyperbolic market action, in which the first 10 handles off a sub 10,000 bottom were due to a false rumor, our advice is, as it always has been, to stay out of this now completely busted "market." And with Opex action compounding ridiculous volatility, only masochists and those trading with Other People's Money would be willing participants to this torture device.

What Caused The May 6th Flash Crash? – It was not a “fat thumb”. It was not human error. It was simply mindless order routing by computers who appeared to send orders to “favorite spots” that had no liquidity in a crisis. SEC Chair, May Shapiro, revealed yesterday that error trades (traders 60%, or more, away from their prices at 2:40) took place in 326 securities. A stunning 21,000 trades were canceled, all on the all-electronic exchanges. There were no cancelations of any trades done on the NYSE floor system. The vast majority of the cancelations came in ETFs. No ETFs trade on the NYSE floor and, thus, there are no protective speed bumps. It was all just computers, pre-programmed to route orders to a favorite exchange that lost all its liquidity when pressure hit. They could just as well have sent those orders to a cigar store in Paterson, New Jersey. Heck, they might have even got a better bid.

Earlier we disclosed market rumors that BofA/ML has raised PB margins. Bank of America has hit our tip box providing the following denial that PB margins have increased. We are happy that BofA/ML has seen it as sufficiently important to its business to refute rumors posted on a blog.

In response to earlier chatter this morning, please post the company statement below.  Please confirm receipt and call with any questions.
Thanks.

“Bank of America Merrill Lynch has not raised its prime brokerage margins in any product including equity, credit, rates, FX, etc.”