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Sticking To Our Guns

Tyler Durden's picture




 

From Nic Lenoir of ICAP

Good morning,

I will not waste too much of your time to start the day. I remain bearish equities from 1,126, and would use 1,117.50 as a trailing stop here. The key support below is 1,083, and we can expect a bounce there possibly, but if we don't break 1,100 rapidly I will become more concerned about my view. The fact is if the bearish scenario plays out here we should be in a wave 3 or C lower, which either way is quite impulsive. So indecisive price action would make me question the downside a bit. The one thing that can comfort bears here is the Nasdaq daily chart which has a quite bearish set-up here.

Under a bearish scenario Gold should underperform as well, so I will keep a close eye on the precious metal. This morning it is not validating the further downside indicated by S&P futures, but it has not broken to the upside yet. While I clearly think that yesterday's Fed announcement is a USD negative and should benefit Gold as a store of value against future inflation, I remain convinced that in a debt contraction environment all assets go down and we are to face another wave of contraction Gold should underperform along with stocks. This is why I think the correlation between the two will quite telling as to whether this move is for real or not.

Last but not least, AUDSUD (and the AUD in general) is a good proxy for risk and should also exhibit weakness along with stocks and Gold. We had recommended shorting 0.9185 and would observe a 0.9165 trailing stop. It will not leave much of a profit but on the downside I am playing at the very least a retest of the 0.8875 support and on a break I thnik the potential for this trade could become rather large, so it's worth handling a few speed bumps if we are to last on this ride.

Good luck trading,

Nic

 

 

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Wed, 08/11/2010 - 09:45 | 515008 No Mas
No Mas's picture

If history is a guide, these gaps are just a chance for somebody to run it all back up.

Is this just one more intra-day trading opportunity?

Wed, 08/11/2010 - 10:07 | 515046 Jeff Lebowski
Jeff Lebowski's picture

Well, what does CNBC tell you to do?

Wed, 08/11/2010 - 10:17 | 515072 No Mas
No Mas's picture

No cleavage; no message.

The fat bald guy on in the morning wears a tie, but I'm betting he can cleave with the best of them.

 

Wed, 08/11/2010 - 09:53 | 515013 Young
Young's picture

A lot of stocks won't break to the downside... Can't be good. Some of them must implode when PPT let's go - if it ever happens.

Wed, 08/11/2010 - 10:01 | 515034 lieutenantjohnchard
lieutenantjohnchard's picture

but wait. the very people who told us bears are "always" wrong now are wondering if the 200 point plunge is simply an intra-day buying opportunity.

come on man. step up. leverage up on siv's, cmo's, equities and calls. the bears are "always" wrong as you say. have the courage of your convictions.

use your guide from history - spy was $157. spy now is $110. this is a beautiful buying opportunity for you.

 

Wed, 08/11/2010 - 10:18 | 515078 No Mas
No Mas's picture

Never say never unless you're saying never say never.

Wed, 08/11/2010 - 10:25 | 515100 lieutenantjohnchard
lieutenantjohnchard's picture

i'm agnostic about market direction on any given day. my goal is to be on the right side making money, not laying down absolutes like saying bears are "always" wrong.

Wed, 08/11/2010 - 10:48 | 515164 homersimpson
homersimpson's picture

This coming from the ultimate permabull...

Wed, 08/11/2010 - 10:57 | 515179 lieutenantjohnchard
lieutenantjohnchard's picture

exactly. but today he's "wondering" if the market drop is an intra-day buying opportunity. i was expecting to hear him telling the board emphatically that this was the buying opportunity of a lifetime, and that he was going all in with 200% margin.

Wed, 08/11/2010 - 10:08 | 515052 ShankyS
ShankyS's picture

Nic - Cash left an Island top to 1117. Just an FYI for those who have full faith in pure manipulation.

Wed, 08/11/2010 - 10:09 | 515055 taraxias
taraxias's picture

What about the gold breaking down prediction from yesterday, Nic?

Funny, it's not part of "Sticking to Our Guns" post today.

I wonder why, reading chicken entrails didn't work that time?

Wed, 08/11/2010 - 10:48 | 515160 redarrow
redarrow's picture

The facts are that applying trend analysis to your trading is like driving looking at the rear view mirror. A bane of these people who seem to opine endlessly about the market every day are that they have no clue where the market is headed. In fact many a time they paint both bullish and bearish scenarios with no timeframe supplied for either just so they can look intelligent. 

To reasonably predict the markets you need to follow the data and even then calling tops and bottoms are a fools game.

Wed, 08/11/2010 - 10:10 | 515060 traderjoe
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Gold could go either way - it could come under pressure as margin clerks look for assets to sell. It could also decouple to the upside as people look for a store of some of their value as fiats argue which one will fail first. 

If gold went substantially up - that would be bearish on equities. Especially if physical demand overwhelmed the manipulators. 

Wed, 08/11/2010 - 10:20 | 515087 tmosley
tmosley's picture

In 2008, gold fled from weak hands to strong ones.  It is still in those strong hands, and is unlikely to have another major downward movement.

Of course, if it does, I will welcome the buying opportunity.  I would like to accumulate more prior to the upcoming currency event.

Wed, 08/11/2010 - 10:11 | 515063 Caviar Emptor
Caviar Emptor's picture

Equity downside is limited and sell offs won't be as intense as you think. No more lemmings left to scare, first of all. Secondly in the context of QE with more expected to come, equities will appreciate. EVEN if the economy tanks. That's what I been saying. That's what happens when the world is awash in ridiculous liquidity. The economy is now in total ZOmbie mode (not just for banks anymore, folks): responding to doses of stim then collapsing without it as the US productive sector has been reduced to a nubbin. Feel vulnerable? Don't worry. Our chief weapon ain't nukes anymore. We just exported the Double Whammy Economy to China! (Economy cooling, CPI at 3%!)

Wed, 08/11/2010 - 10:27 | 515107 tmosley
tmosley's picture

You don't think the robots might be super-fast lemmings when the time comes?

I have no idea.  I still want to think that those robots are meant to make money, but by pushing the market ever higher as real people get out, it looks more like they are setting themselves up to be the "greatest fool".  Normally, you want to buy low, then ramp the market up and get the suckers in there.  But they are ramping it, and driving the suckers out.  It's too weird.

Wed, 08/11/2010 - 20:34 | 516895 StychoKiller
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Obi-Wan:  "If droids could think, we'd all be in trouble."

Wed, 08/11/2010 - 11:42 | 515308 ElvisDog
ElvisDog's picture

Oh please, QE2 is a complete non-event. They're only rolling over maturing MBS proceeds into Treasuries. That is about as half-assed a response to deflation as I can imagine. Here's a question for you: If nothing TPTB has tried has worked to date, why will QE2 work as planned?

Wed, 08/11/2010 - 10:12 | 515067 Caviar Emptor
Caviar Emptor's picture

oh , btw, gooooold. 

Wed, 08/11/2010 - 10:21 | 515088 MrTrader
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JP Morgan and Bank of America heavy buyers. Don´t bet against this herd...;=)

Wed, 08/11/2010 - 10:22 | 515091 Adam Selene
Adam Selene's picture

There's an eerie resemblance between the last eight days of trading, and the eight days that preceded the May 6 "Flash Crash".  Just an observation.  Might not hurt to put in a GTD limit buy order for Prudential at $0.01, though....  just a thought, wondering if something like that could actually execute.

Wed, 08/11/2010 - 10:35 | 515127 LMAO
LMAO's picture

Would a trade like that execute...?

 

If your name is GS probably YES!

If your name is Adam Selene definitely NO!

 

LMAO

Wed, 08/11/2010 - 10:38 | 515140 Adam Selene
Adam Selene's picture

Yup. I just spewed coffee on my screen when you said that. Damn funny, and perfectly correct.

Wed, 08/11/2010 - 10:37 | 515128 LMAO
LMAO's picture

DP

erm....not double penetration but post.

LMAO

 

Wed, 08/11/2010 - 12:23 | 515493 Tense INDIAN
Tense INDIAN's picture

offcourse it can get executed if u want......suppose if u do own some shares.....u may try buying and selling at that price urself

Wed, 08/11/2010 - 10:23 | 515095 assumptionblindness
assumptionblindness's picture

LIBOR rates in the U.S. continue to fall...sure, makes perfect sense! 

Wed, 08/11/2010 - 10:33 | 515123 william the bastard
william the bastard's picture

Dow 2000. That's how we roll at Obamanomics.

Wed, 08/11/2010 - 10:36 | 515132 Adam Selene
Adam Selene's picture

Another thought that struck me after yesterday's action at 2:14 P.M.

If it is true, as it appears to be, that a huge fraction of the volume in the market is generated by ALGO robots, then how do we explain what happened yesterday? Were the robots reading the news wires?  Now, I'm a big fan of the posts that show the "crop circle" phenomenon, and it's obvious that some fairly blatant stuff is going on; yet how do we reconcile that with the bigger overall picture where news reports DO move the market?  I would have thought anyone that wasn't a computer was sitting aside just watching; yet the way the market moves seems to put lie to that idea.  Basically, now I'm REALLY sort of confused.

Wed, 08/11/2010 - 10:52 | 515170 Oniram
Oniram's picture

Adam-

The computers have been trained to read press reports, and to pick key words out of them, and then trade based off of that information. So yes the Algos do read the news.

There are many computers that read 10-K's and other company reports and press releases, they can scan them and get a sense of if the news is good or bad based on how many times the words "better than expected" or "worse than forecast" are present, and then hit the bid or lift the offer accordingly. All 100x faster than you could even click on the headline on your Bberg terminal.

 

Wed, 08/11/2010 - 11:00 | 515189 Adam Selene
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If what you say is true, the market is even more dangerous than I had thought.  I must say, the empirical evidence seems to point strongly in favor of your position.

Wed, 08/11/2010 - 11:09 | 515214 onlooker
onlooker's picture

The difficulty with gold is that physical gold is higher in price than paper gold. I do not have any ratios or ratio variations. I don’t think that a paper gold sell off will impact the physical market with the same proportions.  The gold holder is a skeptic and wary of manipulators. I will buy a little with any 20% or so drops in physical price. Although gold may decrease in terms of fiat currencies, will it hold better buying power than the currency basket?

Wed, 08/11/2010 - 11:42 | 515319 Adam Selene
Adam Selene's picture

You're going to want to treat it differently based on whether you're trading gold, or buying disaster insurance.  The way it looks to me right now is that there's enough paper gold being traded that it ( the tail ) is wagging the price of physical ( the dog ); as long as the demand for physical is low enough not to break the futures market, the paper gold will continue to do this. However, major bullion houses, being not stupid, will adjust the premiums they charge, so what is likely to happen ( IMHO ) in a decoupling event is that the "price" of gold could drop hugely, but the premiums for physical would jump. In other words, the price of gold might go to a dollar, but you couldn't afford to buy it at that price.

I see it as disaster insurance, not to be sold during a crisis, but to come out on the other side with the purchasing power relatively intact. I don't see it as a trading vehicle, personally, though I know a lot of people do.

I remember that when all this started, I ordered some physical, and it took just at three months to get it.  When SHTF, you can forget about buying and getting physical, no matter WHAT the price is.

Wed, 08/11/2010 - 11:25 | 515245 gobbly
gobbly's picture

This guy posted a count from an assumed top at 1129.24 last night which looks to be playing out:

http://gi61et.blogspot.com/2010/08/2119-bst-spx-update.html

 

But he does warn that 1010.91 needs to go - there's a bullish count that he has that stands until that level goes -see the above link.

 

So, I can see the importance of the 1010 level mentioned in the article.

Wed, 08/11/2010 - 11:37 | 515285 Gimp
Gimp's picture

Was at a JPM bank yesterday taking care of some business and the new "Financial Adviser" asked me if I was interested in investing in the market. I said, "you mean the big ponzi?" She almost fainted right in the middle of the bank. Then I told her I trade, don't invest.

Wed, 08/11/2010 - 11:46 | 515339 gobbly
gobbly's picture

Lol!

Wed, 08/11/2010 - 12:49 | 515610 hamurobby
hamurobby's picture

Thanks Nic! Keep it coming.

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