This page has been archived and commenting is disabled.
Earnings: The Devil In The Details?
Submitted by Nic Lenoir of ICAP
Most market commentators attribute the sharp reversal of fortunes of the equity markets in the afternoon to a downgrade of WFC by Bove. That definitely is a factor, but what is a bit puzzling is that every bank earnings coming out are usually put under a lot of scrutiny, maybe not on CNBC, but definitely amongst the financial community. Today's late sell-off is more reflective of the paper thin liquidity out there and how trading is become a ping-pong match between high frequency traders.
Now this is interesting, how we handle 1,070 through 1,075 will be key, we tested the area into the close, and the market should in theory range between 1,074 and 1,082 in the early part of the night session. The question is what happens when Europe walks in. The Dax as can be seen on the 30-minute chart is set to retest my key pivot at 5,750. We had a strong bounce after testing it this morning. Should we open there or below in the morning I would be very cautious. There is a gap to fill at 5,650 below and then straight onto the huge medium term support at 5,540. The way we closed I expect we will in the near-term try to nake a run for it, but that all depends about tomorrow's open. As seen on the weekly chart so far we have been capped by the 50% retracement of the entire bear move, and that big medium term resistance combined with heavy divergence of short-term indicators does bodes for lower prices.
Is there also a level at which commidities become a threat to recovery? It seems nothing but a bust will stop the boom in this market. Copper exited a bull flag to the upside and posted a bullish engulfing candlestick. That in theory would mean we will go challenge 330 or even 350, and that's a big buy signal for all the trend followers. There will be a point where demand and price are reconcilied, and the higher the price goes the more the demand goes... the other way. Let's face it, the rise is not really due to a shortage.
The choppy conditions observed in trading and correlations breaking down as we are near the highs of a 60%+ rally have the sweet smell of exhaustion. I would expect more chopping with little advance and finally a break unless we do get the greenlight at the open tomorrow trading through 1,070/1,075 and 5,750 in the Dax (touching or breaking this level has been an automatic 100 points move). Either way this time we will get the move to 1,035 in S&P futures, where the market will decide weather this is a big clearing sale coming up or just a bargain discount before the holiday shopping.
Good luck trading,
Nic
»
- 5599 reads
- Printer-friendly version
- Send to friend
- advertisements -
Fed has been gambling that the slack argument holds down commodities as they flood the market. Oil/Copper is not cooperating. The death scenario for the fed: commodities continue to rise in spite of fundamental oversupply, global central banks break with fed and begin raising campaign, no recovery other than more printing (rinse wash repeat). Something tells me there will be a lot of stories out there about how much excess slack there is and oversupply in commodities etc...juggling knives
Todays last-hour mushroom cloud just felt different than the last few shallow dips.
Wasn't this DX spike about the same time?
http://quotes.ino.com/chart/?s=NYBOT_DX&v=s
My guess is the Treasury will need to divert resources to prop the dollar up. They are close to having a giant problem - $100 Oil will kill what little is left of the US economy.
You're right, I was once on a boat the capsized, and I'm getting the same - shits gonna hit the fan feeling.
"Things that can't go on forever, don't"
Are we there yet?
There were huge 100k lots being sold at the bid with this sell off.
Buy program at the close yesterday, with another this morning. They let the market float along and distributed as many Galleon positions as they could, when the volume wasn't sufficient, they hit the bid and we got a mid-week reversal. Incidentally, this also took place when the democrats announced they're targeting the monopoly being imposed by health insurers.
For once, I do agree with Mr. Lenoir though, the big test is ~1030, but right now I'm thinking a better place to look is in the beginning of November for confirmation either way since most mutual funds won't offset the losses from earlier in the year with gains given all the taxation hoopla.
Thanks ZH and Peace.
Reg HGZ9 and CLZ9 both made new high today on dcnt volumes. Lots of stuff was making new high/low in cmdty, FX, vol land. Again the whole mkt seemed long ahead of the 1100 lvl. Seemed like a now brainer. What surpised me the most is that away from eqty (and perhaps VIX) cmdty, fx, even tsy didn`t come back much. Perhaps it`s b/c the pit had clsd and all those NYMEX/COMEX dudes were having fun...Still given the move/volume in eqty land (20pts all the way thru sunday night`s low on the biggest 1hour ESZ9 in about 1mth) quite a shocker.
The BOVE thing seems like a catalyst...but cmon the guy was long C from 20-1...:-)
Nic, another good review of the various markets reported above. You wrote: Today's late sell-off is more reflective of the paper thin liquidity out there and how trading is become a ping-pong match between high frequency traders. We fully agree as very few market participants truly realize how shallow the markets are these day. Earlier we wrote: There is very little price stability under the market despite what is perceived to be actual bids in today's, abnormally "low vol" environment. Real liquidity is scarce. Folks need to really examine their risk management profiles and make adjustments to protect their portfolios. As always, we appreciate reading your work.
best thing I have heard about today is that key IB numbers where hit in euro/us trade. They are starting a sell off in the stock market to make the dollar go up.
This is how I see it - the Dollar getting trashed, even Cable was up 2 big figures.
The other possibility is maybe linked to the poor Reverse Repo test. Maybe the Fed wanted to put pressure on the dealers to play the game so they decided to reduce some positions to demonstrate what could happen if they are forced to hand back some of the cash?
"Copper exited a bull flag to the upside and posted a bullish engulfing candlestick."
Maybe Nic Lenoir should read the news.
BHP declared a force majeure at Olympic Dam, which produces 181,000 metric tonnes of finished copper a year.
It's the world fourth-biggest copper lode. Offline for one to six months.
Olympic Dam also produced 108,039 ounces of gold. Now I gotta get GS, JPM and da boyz to pound down gold even more. Order more tungsten to make tungsten "gold" bars. And have the Comex issue more paper "gold" backed by, you guessed it, nothing!
BB
Phaesed, maybe you can add to this premise: We here feel that a trade that would hurt the most participants since July, is an orchestrated reversal of the "dollar carry trade" forcing an unwinding. Most asset classes are now comfortably high, while (short term) the dollar (if allowed to fall precipitously lower from here) would cause major dislocations. Thoughts?
Fed has to find some way to sit on the commodities markets.
$100 oil right now would probably be worse than $140 was 15 months ago.
Notice how the Fed has been closing off all the foreign escape hatches for US wealth... wondering if plan 'D' is something radical like issuing domestic "blocked marks", convertible in only one direction, while international trade and settlement is still conducted in $USD?
Absolutely there will be currency controls for US citizens soon.
It definitely smelled like fear. The market hit resistance early and then drifted sideways until the starter pistol went off and everyone went looking for a chair.
Let's check Bove for gun powder residue on his hands. Regardless of whether he caused the stampede or not, I want a head on a pike. Let's start with Dickie Boy.
Maybe before we place his head on the pike we can check his hair for fleas and ticks caught from sleeping with GS and friends. Who's in?
CD / We're in... On a practical side, we've been in this business for 30+ years, and we are all just stunned by market calls like this. Stunned by the fact, that HOW on earth can seemingly well educated, experienced men like Bove (with some standing) outright manipulate markets with bullshit like this. Maybe we should start up a legal slush fund with $50-100K to file fraud lawsuits against analysts like this. Maybe then, con men like Bove will think twice before playing these analyst upgrade/downgrade games with th market's money. We know a dozen class action attorneys our there that for $25K would file suit against guys like Bove and go after his reputation (and their firms).
Bove had nothing to do with it.
The dollar reversal trade is on....do you
expect Europe and Asia to be priced
out of the US consumer market due to
inflated currencies? Not part of Ben's deal with them.
I'm a youngster with only 20 years in the business but I'm astounded with what passes for analysis, or lack there of, these days. I commented under another article about the character of these people.
Psychopath.
n.
A person with an antisocial personality disorder, manifested in aggressive, perverted, criminal, or amoral behavior without empathy or remorse.
At 3:11 pm Bloomberg has a report that senior bank salaries will be reduced byt the government by 90%. The story is later modified to 50%. But coincidentally, the S&P has its break also at 3/11 pm. A coincidence?
TD, just a mention on you calling the market. Don't, you suck at it. Keep doing the expose stuff.
Edit: just realized you didn't write this...my bad, xcuse em wa
Maybe its the hidden gold run on JPM and DB:
http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=8039
Answers why gold can be used as collatoral and stored at speciality shop JPM:
http://www.zerohedge.com/article/cme-allow-gold-margin-requirement-colla...
TD, I just starting reading this blog recently - what are your general sentiments in the next 1-3 months?
Are you also in the hyperinflation or deflation (depression) camp?
If anyone could answer on Tyler's behalf I would appreciate it.
W3
How can anyone believe the numbers reported by the big banks when they use mark to fantancy accounting, sell their large MBS losses to the FED and ignore off balance sheet losses? Banks and financials entities accounted for about 35% of SPX earnings during the 2000-2005 period. Now we know there were no earnings, only massive losses. How can anyone believe the reported numbers???
Sell-offs like this are often attributable to policy decisions/comments out of Washington. The Beige Book did not move stocks it was a nonevent. From 2:30 onward, the following comments were offered up and they definitely scared investors. 1. The Pay Czar is now going to cut the pay of those financial executives that took TARP, TALF or milk money (see below) even if they have repaid the moola, The New York Time broke this story. 2:29. 2.Dairy Farmers get $350 million in new aid or "Cash For Cows" or "Moola". 3:35. 3.At 3:36, Larry Summers talks up the dollar sending it higher and trashing stocks. Strong dollars hurts the U.S. stock market. 4.Dems to attack Anti-trust clause for insurance companies. This was too much for the market to handle. The Great Arthur Laffer taught me over twenty years ago that look to Washington on market reversal days. The inmates are now running the asylum...