This page has been archived and commenting is disabled.
Upside S&P Targets: Where Do You Short?
From Nic Lenoir Of ICAP
Ever since we bypassed 1,087 I stopped being bearish short term, and the breakout in Copper or EURJPY confirmed that risk assets are in a melt up mood. Disclaimer if necessary: I am still VERY bearish for the long term with a 380 target for S&P.
One thing that is of particular interest to me today is the Move Index. Basically we are at levels for Fixed Income volatility that have been the low for every cycle top except twice in history: the first time was when LTCM basically shorted volatility through spread compressors leveraged 40 to 1, and the second was when AIG, German landesbanks, and a lot of other ill-advised fools, sold protection on just about everything that was priced riskless but wasn't. In each case the large sellers of vol below those levels required government bailout! Now that's exciting. It doesn't mean we are going to have a spike in volatility tomorrow morning, but it means we are in the danger zone. Besides, I wonder who now is left to sell risk other than the Fed and Fannie/Freddie still busy insuring every loan on over-valued real estate. Maybe we don't find as low a bottom as those two exceptions this time. The flip side would be to argue that with rates lower than ever, volatility should indeed be lower than ever in basis points and so we still have ways to go. I would not want to be the one left holding the bag though, seller beware!
So obviously with that in mind, I am more focused on finding where to sell this rally than leveraging myself into carry oblivion. In S&P 500 futures there is a cluster of resistance between 1,129 and 1,146. We have the 61.8% retracement, the C=A extension from the lows, overlap with two previous tops and the wave 5 extension of the current rally from 1,050. I think it is fair to say that this zone is were bears should look to start loading up on options, especially if Vix is kind enough to keep dropping.
Gold, for which we had advised to close longs on the rebound at 1,215/1,225 having missed the 1,265 local top, has fallen to the next key support. If this line is bypassed 1,136 is next and the downside potential assuming we remain n a bull trend is 1,044. What is particularly interesting is that Gold has somewhat decorrelated from risk. In theory mr. Bernanke's testimony should have been good news: he pledged to QE at will until necessary! It does not come much better than the implicit guaranty by the Fed Chairman that he will turn your currency into toilet paper if you are a gold holder... at least fundamentally. Technically though I remain bearish for now though we have seen the first significant target. Maybe the Fixed Income market is right to price in deflation, in which case gold will keep falling, and equities will top out soon. Hopefully we get to our sell zone to get a great technical entry level. Watch the global liquidity indicator if it starts dropping to lead global equity markets.
Here is a little bullish reading to get you fired up about next week:
http://seekingalpha.com/instablog/234091-hewitt-heiserman/61457-rare-cardinal-climax-planetary-alignment-this-summer-puts-stocks-at-risk-says-veteran-sky-watcher
Good luck trading,
Nic
»
- 10247 reads
- Printer-friendly version
- Send to friend
- advertisements -
I shorted ES again at 1111 and again at 1115, and feeling real good! Shorted last time at 1112 and covered at 1025. Time to short is now above 1100
Waiting for at least 1140.00
Where do you short? You don't. If your reports are right, you can wait till it gets down to about 700 to confirm that your ass is not getting faded.
I personally think the jobless claims number tomorrow will disappoint. So will the GDP number on Friday (though that one can be juiced with some fairy dust on the estimate levels). PPT will have to take a break for a couple of days. It's gotten a little too brazen...
Same post below, but 2nd that thought;
Lower Australian CPI q/q, weak NZ Business Confidence, with the -0.6 print for Core Durable Gds Ordrs in between the soft RBNZ rate statement..........
If Unemployment Claims start to rise to the 500,000 mark and GDP prints below expectation followed by ISM #s sliding towards 50 and another round of rising Unemplyment Claims into next week 1130 may be looking very rich.......ditto for the 10,550 Dow.
Just mho for what that is worth.
my strategy exactly for the rest of the week.
we'll compare notes on Friday to see if we were indeed on the right side of the trade or if a story about Lindsay Lohan being raped by her female jail mate tops the 550,000 weekly average unemployment and GDP of -1.
we'll compare notes on Friday to see if we were indeed on the right side of the trade or if a story about Lindsay Lohan being raped by her female jail mate tops the 550,000 weekly average unemployment and GDP of -1.
lindsay lohan is in a cell with rosie o'donnell......who'd a thunk it?? i bet 'The Donald' has a live video feed..............!
Put in a call to PPT/PWG and next week's ISM, please and thank you.
I'm looking for lower closes the next few sessions. Today's minor sag is just the prelude for a new push lower in the short-term.
Batten the hatches!
I feel the same way, it starts slow like today, maybe a last ditch faux rally tomorrow, and then stronger selling into tomorrows close.
wait, Short??? This entire site screams about the PPT... the fed can't let this market fall... and yet, recommend a short position? I understand a long horizon short (like a year out) but near term seems futile. No point fighting the might of the fed right now.
Well, you don't want to short right before the first major dead cat bounce cause you'll get your ass handed to you.
Hasta La Vista, Baby
(Reuters) - California Governor Arnold Schwarzenegger declared a state of emergency over the state's finances on Wednesday, raising pressure on lawmakers to negotiate a state budget that closes a $19 billion shortfall.
http://www.reuters.com/article/idUSTRE66R5FE20100728
So how do you say "Greece" with an Austrian accent?
You pronounce Greece as if it has four E's in the middle of it. Then you add emphasis to the last two E's. "Asta La Vista, GreeEEce!"
Some Californians would pronounce it "whatever".
remember that while in most cases "what goes up must come down" that the long term trajectory of all "money" is down--- which means that over the long term, asset prices (in aggregate) are effectively guaranteed to rise. as I like to tell clients in jest--- bury me in the ground for 2000 years end "even" I will be worth more than I am today. as a general rule of thumb, it's a good idea to bet on rising prices related to the "equity" in things, and leave the politics and associated feelings aside. consdier that even in Zimbabwe, with zero economy, zero "consumer demand" you still get rising prices-- because the price of *money* keeps going down. shawn mesaros
Lower Australian CPI q/q, weak NZ Business Confidence, with the -0.6 print for Core Durable Gds Ordrs in between the soft RBNZ rate statement..........
If Unemployment Claims start to rise to the 500,000 mark and GDP prints below expectation followed by ISM #s sliding towards 50 and another round of rising Unemplyment Claims into next week 1130 may be looking very rich.
Just mho for what that is worth.
B.S. Bernutty and da Boyz have come up with some fancy pants way to drive money into USeless treasuries while at the same time keeping the stock indexes levitated. I wonder how long the empty shell can endure before failure...
I have the same hope for the VIX. I doubt it ticks below 20, but in the event it does it's a great way to play a long or short term sell-off. At those levels there's not much downside, especially if you use the VXX. If this market continues to rally higher upside calls will skew out (even more then they already have - that's the nature of vol; grind lower, gap higher), and you can even leg into a buy-write to recoup some premium and lower your cost basis in the interim while your waiting for that imminent sell-off.
8/1/2010 6AM... Need to buy some dry food and drinks now, it's only a couple days away. Perhaps a dozen spy puts also.
You an astrologer?
Does Hewitt think that Betelgeuse is finally going supernova?
Trading r squared, and everything else with it........fits with my theory.....in the end we are just along for the ride so why worry........we are already strapped in.
And what about PPT/PWG or whatever it is called.......PWG prorbably already has Unemployment, GDP and ISM #s.
If I were PWG I would have the #s before the mkt. Do you have the #s CM?.......can you share with me, please?
Nic, what's the "AGGRM2" as in the charted. I looked up at http://www.shadowstats.com/alternate_data/money-supply-charts and it does not show the growth as in your chart. Anyone can help little guy like me to understand the difference?
It looks like a Bloomberg formula chart to me, ie its personalised. I can't see the whole thing, looks basically like a global M2 measure. Anyone know something public and equivalent?
Don't know where to short? Just look at Martket Ticker graph http://market-ticker.org/archives/2525-Fractal-Update,-7262010.html
Then I would follow Hendry's on " I recommend you panic"
"Besides, I wonder who now is left to sell risk other than the Fed and Fannie/Freddie still busy insuring every loan on over-valued real estate."
Esoteria on my part. Indulge me.
Now that FNM/FRE "own" a majority of home mortgages and they (FNM/FRE) are owned/controled by the state & Fed, the money in your monthly mortgage payment is going to the state is it not?.
In other words, American's taxes just went up without them even realizing it as taxes are collected by the state alone.
Went all-in long last week. Dow 36K bitchez!!
WTF?
http://en.wikipedia.org/wiki/Dow_36,000
Last modified July 16th. ;-)
But I get your point...if Krugman say's 36,000 can't happen the shorts are doomed...LOL.
In manipulated markets, why isn't it wise to ignore technical patterns? Anything you or your computers can see or "see", GS and JPM have game-played many times over, n'est ce pas?
It may be important to observe the technical patterns and play their failures which are often times more powerful in the opposite direction.. it's the bearish patterns that you want to flip long on as they begin to fail.
I won't be shorting until the banks show some weakness.
Right now, my WFC, CYN, JPM are showing no signs of distribution whatsoever.
All three of in the thick of it here in California, stuffed to the gills with bad loans.
looks topped to me. check your put/call spread to see how tight the volatilities are on puts. i suspect bid/offers (esp CNY) would be getting tighter so you got some pressure building most prob on the downside.
damn that is a good pic...
Robot with style...........breeding is everything. Nothing else matters.
I agree... IYR will show us the way...
+10
Wow, wow.
@RobotTrader : Ay, ay, ay...Kate needs some attention :=)))
Believe me, she got plenty of attention from me. I haven't been able to get that picture out of my head. She's hot and already in perfect position for my favorite position! And today is a big day, GDP, jobless claims and all I can think about is how amazing she looks in that picture!
Is it any wonder that retail investors are gone? Take a step back and re-read this post (no offense to Nic). Give me a fucking break. I'm not saying it's wrong and it might just be dead nuts right. But, who gives a shit? At this point, you're literally guessing blindly based on guesses of guesses.
If it frustrates the living shit out of me, I can't even imagine what the average Joe who doesn't dive into thinks. Actually, I do, he thinks "this is a fucking sham".
I've 'only' been doing this shit for about 10 years. But, this TA shit makes me nuts. How the hell can anyone think the SPX is fairly valued at sub 400 but be bullish short term? Stocks aren't paying dividends, valuations are ridiculously high already, the economy itself is in shambles, the government is lying like hell, taxes are going up hard and fast and soon, our currency is literally a green piece of paper...
Ah fuck it. What difference does it make? The carnival barkers and snake oil salesmen have been around forever and will continue to be around forever, I suppose.
I do hope RBS is right and this 'equity' culture of dog-shit ends. Frankly, it basically has to. Because aside from the die hards there won't be any 'bigger suckers' around.
Christ...I have to hit the keg-o-rator before I blow a fucking o-ring. This shit is worthless at this point.
+1
wait... this is how you feel before you blow a o-ring? Holy shit dude, I completely understand where you're coming from though - this economy/market/gov't is out of control!
+1
feel better?
Now what are you going to do??
I don't know if I feel better. But, I am on my second pint. So...kinda.
In that case, I suggest you keep away from any TA. Just a suggestion.
The only obvious thing to me from Nic's liquidity chart is the central banks need to pause after a sustained 2 to 3 months of blowing (sorry I should say 'printing'). The higher the absolute level of M2, the more frequent they need to pause. Call it itsalie's theory of blowing.
lol. +1
we will see SPX break out the cluster, sooner than later.
I agree and also have had 1111 as a second target (after 1190) and the third has been in the 1140 area. The 30, 60 and now dailys look quite dire, but what fits for more upside is the weekly chart. Can we have more upside? Why the hell not? They have proven their ability to park the number on a dime if they wish. As I have concluded for quite a while now this market is all they have left between them and anarchy. So the rampability should never be questioned. I submit the weekly chart that has topped each time with SPXA50 above 400 and a divergence in the NYMO. The indicators on the shorter time frames can embed till eternity in these markets. This is one situation that the markets have not been able to ignore. So, I agree with Nic's post above. Remain patient and let the trade come to you. Take a peek at his chart.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3186525&cmd=show[s190369685]&disp=P
Or my past few posts here - http://shankystechblog.blogspot.com/ Nic is spot on.
well i would be shorting all the carry trade crosses. when the Japan FSA shutdown the FX overleveraged plays for retail investors. so we are going to see a ton of long pos sell. aug 2010
This weekend the rally from March 2009 will be 512 days long, which exactly offsets the 512 days of decline from the October 2007 high. In addition, a declining trend line off the April top, running down at one S&P point per one calendar day comes in at 1125 this Friday. Should the S&P run up to the mid 1120's by Friday, then by two measures it will have reached a balance or equilibruim point, from which points markets are normally vulnerable to trend change.
The internals of the rally are losing momentum, headlines are once again starting to get a bit more bullish (it's the recovery, you see!!). Any downturn next week would be as good a shorting point as you are likely to see this year.
you might not have time to get a better short entry point
be brave
The problem with "shorting" anything is that the dollar DEVALUES FASTER, than you earn dollars by shorting something. Better buy METAL gold, ... unless comrades Obama+Axelrod+Bernanke will ban ownership of gold. Actually, they already prepares it - by yet another stupid IRS form on $600+ gold transactions.
What about short covering though? I think this might keep the market in a sideline channel regardless of the economic data or earnings over the next few days. Am I off base to think short covering will have this much of an impact?
I just don't see a move in either direction coming soon because that is what everyone expects. Most traders are shorting the market with tight SL so this makes me think a lot of short covering might be what is helping keep the market afloat. I may be missing something so if anyone has an opinion I'd be interested to hear it.
Around 1350, even if we had a widening range, Benny boy gotta keep reflatulation billowing on.
As we all know uncle Warren Buffet has collected some premium ( roughly $5 billion ) and bought into an investment bank called Goldman Sachs. Variance swap dealing desks are sh1tting their pants, because this mixture of good, old value investing and the most dangerous principal desk out there cries for a brutal punishment of everybody being short - or in other words : don´t mess with 800lb gorillas. Enough said. I have to work on my predatory "buy only" algo. Good luck trading:=)