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Risk Could Seriously Blow Up Here

Submitted by Tyler Durden on 05/20/2010 07:57 -0400

From Nic Lenoir of ICAP

The S&P just broke the 200-dma which held as support yesterday and on May 6/7. AUDJPY broke through 76 which was the key support we had bounced off of as well. Put your helmets on if you are long risk here. Unless we have a massive reversal on the day and we close above the key levels mentioned here above: this could open the flood gates for a lot more de-risking. A lot of stops have been triggered when the S&P future crossed 1,100 and anybody still long will probably have to bail out and head for cover.

On a side note apparently funding markets in USD remain very difficult to access for most foreign players, and we are going to get to a point where outright FX buying of USD and selling USD denominated assets will be the primary source of funding. This can get very nasty very quickly, especially since corporate flows in FX seem to indicate that corporates are still short USD and keep pushing the amrekt as they try to cover. This is a theme we discussed at length back in the days when the USD was roaring in the fall of 2008 and reports of companies on the brink of bankruptcy in Brazil of Mexico was making headlines. Similarly governments in Venezuela and Nigeria who thought it was a good idea to issue debt in USD better have their FX hedges already on.

I thought that yesterday's price action would give us a bounce to resell higher in a few days but it seems that the market is not taking any prisoners, and from here on we are going to get to the area where real money is driven out which is when the huge moves start happening.

Good luck trading,

Nic

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Thu, 05/20/2010 - 08:15 | 362613 jdrose1985

Brazil of Mexico

"Brazil or Mexico"

Thu, 05/20/2010 - 08:31 | 362661 jdrose1985

I'd do it for free if I got to be the 1st one to see the articles haha

It's Nic's editing slip anyways, prime financial analysis tho

Thu, 05/20/2010 - 08:46 | 362708 snowball777

Tyler short-hand for Venezuela or Argentina?

Brazil is to USA as ? is to Mexico.

Thu, 05/20/2010 - 08:23 | 362639 Duuude

It's not a real market anymore.

I like Amrekt, sounds better, convoluted and distorted.

Thu, 05/20/2010 - 08:39 | 362688 LeBalance

Am wrecked !!! Perfucto!

Thu, 05/20/2010 - 08:46 | 362707 Shylockracy

It's Amalek !

http://en.wikipedia.org/wiki/Amalek

Thu, 05/20/2010 - 09:27 | 362807 Hulk

Amrekt is actually perfect. I vote we change market to amrekt...

Thu, 05/20/2010 - 08:00 | 362590 Sudden Debt

A lot of people are getting out and are counting on a drop to make nice money when it goes back up.

Everybody is counting on a drop on the DOW to 8000.

Thu, 05/20/2010 - 08:11 | 362609 jdrose1985

"no bid" equity market, long Trasheries hand over fist here

Thu, 05/20/2010 - 09:02 | 362746 Lord Flasheart

Trasheries..... now that's a keeper!!

Thu, 05/20/2010 - 08:04 | 362596 silvertrain

dollar yen unwinding, jap housewives at it...

we might can sneak through fin reg bill today if we play our cards right...

Thu, 05/20/2010 - 08:09 | 362606 bobby02

Anecdotally, I've heard a lot of stuff like that too, but the numbers don't seem to back it up. I mean LOIS has widened out to 25 bp, but that's not so much and nothing compared to 2007-8. Meanwhile, I don't see demand for the Fed's swaps.

(at least for now)

Thu, 05/20/2010 - 08:17 | 362622 Debtless

once again - just like last time - we see the metal prices unwinding...in addition to downward manipulation for the expiries next week. thank goodness for ZSL.

Thu, 05/20/2010 - 08:18 | 362626 Tense INDIAN

if this kind of VOLATILITY continues ...i will be many times richer even before the 'CRASH' is completed .....forget about the bounce back...

Thu, 05/20/2010 - 08:35 | 362675 augmister

Short the pig! Take profits and buy gold.

Thu, 05/20/2010 - 08:41 | 362690 Kina

I wanna buy more gold, but the AUD$ has dropped further than gold, it is more expensive.

(hmm at 5.01 Western Standard Time Aust that is)

Thu, 05/20/2010 - 09:07 | 362756 Stormdancer

Boy do I feel your pain. Yen carry unwind is eating us alive. I've got enough salted away for a few hundred ounces of silver and wish I'd pulled the trigger ten days ago when the "it might be time" thought first crossed my mind....grrrrrr

Edit: AUD/JPY struggling to hold onto 75 now...

Thu, 05/20/2010 - 09:08 | 362767 Kina

However, the gold and silver I have I bought when the AUD was strong. So the fall in gold and silver has left me basically untouched. Now for a rally in PM to ice the cake some.

Thu, 05/20/2010 - 08:51 | 362723 AR

Thanks NIC. We always value your input around here. Good work...

Thu, 05/20/2010 - 08:54 | 362729 MrTrader

Now that we have sucked in every EUR short the globe has ever seen, I expect a rebound to 1,2623. Why ? Because my model tells me so. S&P 1132 here we come.

Thu, 05/20/2010 - 09:29 | 362811 Mitchman