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Citi Doubles Down Goldman Sell Call, Says Market "Heading Lower... Liquidity Support Around 1285"

Tyler Durden's picture




 

Even though it was one of the first to call for a coordinated market crash (remember XO going over 1000 bps?) last month before a coordinated policy response can come into play, today Citi's Mohammed Apabhai has doubled down on yesterday's market moving Goldman call, once again making it quite clear that only a collapse can bring the much needed policy "salvation." The bogey? 12% down according to Citi, before the "liquidity put" comes in play and 1285 could "indicate liquidity support." In other words: in order to go up, first the market must go down.

From Apabhai

*** WHERE WE ARE IN MARKETS ***

  •  Markets correct back, unclear now whether bulls or bears are in charge
  •  Inflexion point seen within 1% of current levels for bulls or bears to assert
  •  Move lower to encourage bears to press home their advantage, put on new shorts
  •  Move up will encourage bulls but liquidity will need to be provided
  • Large divergence - economy/bond/credit/commodities/ oil & money/equity mkts
  • Central Bank liquidity pumped in pre-Moody's downgrades to avoid disruption
  • Fear of month end disruption like 2010 Reg 2a-7 shift, which led to QE2

Watch out for the occasional liquidation:

  • View remains unchanged - break below previous lows will trigger liquidation
  • Would lead to significant change in vol, credit, market dynamics
  • Central banks, bulls need to re-assert their authority around current levels
  • Seen eventually being answered by liquidity put 12% lower, more in Asia

Bull vs Bear

  •  BULL
  • Central Banks liquidity near highs
  • Market supported by QE3, policy hope
  • Money markets relaxed, flashing amber
  • Pressure on Europe to do something
  • Valuations starting to look attractive
  • Positions lighter, inflow sensitive
  • Quarter end approaching, inflows
  • Potential for China Jul credit crunch
  • Potential for ECB rate cut in July
  • EM inflation slowing, policy easing

    BEAR

  • Economic activity slowing down sharply
  • Relaxation not going to come here
  • Bond, credit, commodity, bonds bearish
  • No resolution of European situation
  • Not sure if E or BV is true
  • Long funds still seen very long
  • Funds have lost money, may sell stock
  • Potential for China rate, RRR cut
  • Irrelevance, policy paralysis
  • Potential stagflation, esp on QE3

The kicker: 12% more to drop before intervention:

  • Liquidity put seen 12% below current levels, up liquidity drive seen up 12%
  • QE3, liquidity action only unleashed if markets move lower, negative for Asia

  • If markets want liquidity action, need to move lower and trigger the put

And there it is: the market should stop frontrunning its own QE salvation as it will never come above 1300.

In summary:

  • *** GUT FEEL? ***
    Heading lower, Central Banks may defend with liquidity but economic weakness indicated by bonds, credit and commodities is a reality. Failure to break below previous lows would indicate that Central Banks are continuing to win the Battle of 1285 and would indicate liquidity support. Keyrate above 35 increases probability of break below previous lows to over 50%.

And some trade recos:

  • Bears should be buying gamma at this level, will start working on break down
  • Nifty Sep 12 90% puts offered at 1.24%,
  • Kospi200 Sep 12 90% puts offered 1.23%,
  • HSI Sep 12 90% puts offered at 1.8%.
  • Sell puts on gold on fall below 1500 - increased likelihood of QE expected
  • Time for the market jury to consider its verdict, judgement likely out soon
 

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Fri, 06/22/2012 - 07:21 | 2550202 disabledvet
disabledvet's picture

"When in doubt just start arresting people."

Fri, 06/22/2012 - 07:23 | 2550204 Squishi
Squishi's picture

when hungry start attacking people! 

Fri, 06/22/2012 - 07:28 | 2550213 slackrabbit
slackrabbit's picture

zombie time

Fri, 06/22/2012 - 07:38 | 2550227 vast-dom
vast-dom's picture

 

 

 

 7:29a

BREAKING

 

Morgan Stanley shares rise 4% in preopen trade

 

 

insanity!

 

Fri, 06/22/2012 - 08:28 | 2550327 CPL
CPL's picture

If you want to watch it sped up X3  FAS/FAZ.  Entire banking shithole wrapped up in a bow then leveraged.  So very dangerous and tempting, but...don't dare touch them though.  When the coordination shit happens, everyone gets cocky and stupid.  Keep your hard earned cash in your pocket or help yourself to the silver and gold while it's on sale.

Wait for the signs of printing in Oil and Beef, then you've got around two days to buy it on sale.

Fri, 06/22/2012 - 08:46 | 2550394 Soul Train
Soul Train's picture

oh they are so smart. </sarc>

all those fart asses on Wall Street with their 200 dma analysis, like horse racing charts.

it doesn't take much brains to stare at a computer screen and play ping pong off the various moving averages, thinking that you are so superior minded.

The Fed is the crony's monkey. The Fed with all their cryptic messages, covering each word with "concise ambiquity."

Buy gold and silver, and join the Fight Club if you haven't already.

Stay out of the insanity of the manipulated equity markets.

Fri, 06/22/2012 - 07:32 | 2550217 ITrustMyGut
ITrustMyGut's picture

I can only LOL in RL.. when going to MSM Finance pages.. and see green this AM..

 

Chaos? BUY! Downgrades? BUY BUY BUY!

 

the boldness of the LIES, the incessant drum beat, we must slog through in this world today...  it truely is soul eating if I dont mitigate somehow... pass the chronic...

Man, google and watched "Centruy of Self" PT1 "Happiness Machines" again...  this shit cant be more blatant...

Fri, 06/22/2012 - 09:16 | 2550489 slaughterer
slaughterer's picture

Citi forgot one thing: 1318 is the new 1285. 

Fri, 06/22/2012 - 07:23 | 2550205 fonzannoon
fonzannoon's picture

what's this about? FRom marketwatch no less...

HONG KONG (MarketWatch) — China and Brazil have agreed a currency-swap arrangement that enables each country to access up to $30 billion as part of efforts to build a financial buffer to help guard against a freeze up in global markets, according to reports.

Fri, 06/22/2012 - 07:25 | 2550209 hugovanderbubble
hugovanderbubble's picture

Brazil is a sell

Fri, 06/22/2012 - 07:32 | 2550218 hugovanderbubble
hugovanderbubble's picture

Brazil is a sell

Fri, 06/22/2012 - 11:23 | 2551177 rosiescenario
rosiescenario's picture

Obviously the trend here shows that we will have 5 to 10 reserve currencies...just think of the expanded opportunity for WS here for betting on these....

Fri, 06/22/2012 - 07:25 | 2550207 hugovanderbubble
hugovanderbubble's picture

Citi is nailing it...

Good work

Agreed with SP 1150-1220, then QE3

Fri, 06/22/2012 - 07:28 | 2550210 Dr. Engali
Dr. Engali's picture

The fact that they are recommending that Goldman is makes me suspect a bear trap.

Fri, 06/22/2012 - 07:34 | 2550224 ITrustMyGut
ITrustMyGut's picture

yes.. concur.. the fact they are now announcing ...  makes  all of it suspect.. imho..

BULLISH!

Fri, 06/22/2012 - 07:27 | 2550212 slackrabbit
slackrabbit's picture

Dear God

Thanks for pullemling gold and silver - BTFD -  off to the shop

 

regards Slack

 

Keep stacking

Fri, 06/22/2012 - 07:33 | 2550221 Dagny Taggart
Dagny Taggart's picture

+26.95

 

Fri, 06/22/2012 - 07:30 | 2550214 FLUSA.com
FLUSA.com's picture

Keep picking on these banks and Im going to post a fundraising site to send these poor bankers on a vacation

Fri, 06/22/2012 - 07:34 | 2550220 TrainWreck1
TrainWreck1's picture

Artists unite! BankAid. USA for CitiCorp. We are the Fed, we are the chilluns.

Fri, 06/22/2012 - 07:45 | 2550219 Its_the_economy...
Its_the_economy_stupid's picture

As the banks continue to be downgraded, putting pressure on earnings, expect more egregious banking behavior in attempts to salvage bonuses.

Fri, 06/22/2012 - 07:33 | 2550222 Sean7k
Sean7k's picture

You mean people are still playing?

Fri, 06/22/2012 - 07:34 | 2550223 aus_punter
aus_punter's picture

Unlike some of the wing nut strategists and outright thieves reverse broking their own positions, this guy has some pretty useful indicators and has been right more than he has been wrong

 

credit where credit is due

Fri, 06/22/2012 - 07:36 | 2550225 Racer
Racer's picture

Time to put everything you own on a long ES if both those bunch of crooks say sell..

Fri, 06/22/2012 - 07:38 | 2550232 blueridgeviews
blueridgeviews's picture

I like your thinking.

Fri, 06/22/2012 - 07:38 | 2550228 blueridgeviews
blueridgeviews's picture

I rememberr when the markets were mostly moved by business/economic conditions NOT Fed decisions.

You have to love how Wall Street makes money and Main Street suffers.

How much did I make on my savings last year? Oh that's right, 3% less than inflation. Good times for sure.

Fri, 06/22/2012 - 07:38 | 2550231 scatterbrains
scatterbrains's picture

If the TBTF's are all calling for a very shallow 12% then Benny is probably setting up a 20%+  this way printing will be extra special necessary pinky swear promise we had to do it.

Fri, 06/22/2012 - 07:41 | 2550234 JackT
JackT's picture

I guess 1/2 up from down bottom is still up.

Fri, 06/22/2012 - 07:41 | 2550235 Rip van Wrinkle
Rip van Wrinkle's picture

So I'm presuming Citi is confirming the central banks are fixing the market to suit. So the markets are rigged and I can take that to the bank. Many thanks.

Fri, 06/22/2012 - 07:54 | 2550253 Catullus
Catullus's picture

If you don't have liquidity at 1350, you don't have it at 1285 either. 

These guys are looking for knife catchers.

Fri, 06/22/2012 - 08:23 | 2550304 hedgehog9999
hedgehog9999's picture

That is my assessment!. Looking for knife catchers to arrest this drop and unload as much as possible between now and 1285 and the hopeful bounce at that point, then unload some more on the bounce while buying puts like a madman at that point to hedge as much as they can....... these guys just want to do the next fleecing on this go around...............

 

Fri, 06/22/2012 - 08:54 | 2550424 covert
covert's picture

too many people are looking for suckers (muppets) instead of customers.

http://covert.ias3.com/expose/

Fri, 06/22/2012 - 08:30 | 2550330 adr
adr's picture

In this full retard+ market, going to 1285 in one or two weeks means it is free to go to 1500 the next.

I'm sure macro-economic conditions change 180 week to week in the real world, right?

Fri, 06/22/2012 - 08:43 | 2550381 mrktwtch2
mrktwtch2's picture

looks like the big boys want to make sure bam bam loses and what better way then by tanking the market 20% in the next few months??

Fri, 06/22/2012 - 08:47 | 2550396 Mr_Wonderful
Mr_Wonderful's picture

They want money from stocks to bonds. I´m not sure that JPM would survive S&P 500 at 1500 points and the corresponding fall in bond prices. Other biggies are shaky as well.

Fri, 06/22/2012 - 08:59 | 2550434 monopoly
monopoly's picture

This is so absurd. When will we get free markets? when will the cancer be cut out.

Fri, 06/22/2012 - 09:01 | 2550440 spanish inquisition
spanish inquisition's picture

Programming the algo to run down the beach and toe dipping into 1285 before running back up isn't going to bring the QE party barge. It would have to stay there a while, bankers would have to control themselves and stay semihard before the QE arrival circle jerk around the fire begins. Premature loads of liquidity should start hitting the ground under 1295, with bankers looking confused and ashamed at 1290 as the move stalls.

At this point, the idea and expectations of a glorious QE3 that will save the banking universe, can never live up to the reality of the experience. It would have to be so large (Krugmanesque) as to actually scare the faithful and make them concerned enough about inflation as to position for unforseen consequences. Could that happen? Unlikely, as that would be outside of the realm of central planning control.

Fri, 06/22/2012 - 09:02 | 2550450 Cupid Stunt
Cupid Stunt's picture

Got a feeling 1285 might be a little early to pull the trigger.

Fri, 06/22/2012 - 09:26 | 2550550 Mr_Wonderful
Mr_Wonderful's picture

Where exactly is that QE going to come from? The FED is leveraged 50-1 against its own capital and about to run out of short paper to sell for long. When you´re this heavily leveraged it doesn´t take that much to wipe out your capital.

No, what they´re crapping themselves about is UST price and the piles of swaps associated with that.

Fri, 06/22/2012 - 09:44 | 2550610 HarryM
HarryM's picture

It is a paradox isn't it - The more bad news, the higher it goes, the higher it goes, the less chance of QE

 

It's like asking people to form a line for an orderly exit in a burning theatre

ROTFL!!

Fri, 06/22/2012 - 10:19 | 2550799 Boilermaker
Boilermaker's picture

Not today baby!

Up, up, and up.  It's oversold...today...tomorrow not so much.

I hope equities aren't being gamed.

Fri, 06/22/2012 - 11:27 | 2551199 rosiescenario
rosiescenario's picture

Citi's pronouncement is all well and good and might be correct if we lived in a vacuum. If something really blows up in Europe, China, the ME, or whatever, we may suddenly see the plunge protction team spring into action and the second shift expanded to a third at the Fed's printing house.....

 

Since everyone appears to think the PM's are headed lower near term, probably the ooposite will happen due to the above.

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