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Once Again The Battle For SPX 1120 Is Raging

Submitted by Tyler Durden on 10/03/2011 10:28 -0400

The bulls are all pointing out that we are near the bottom of the trading range, that 1,120 has held multiple times and the economic data isn't so horrible. The bears on the other hand can point to a myriad of problems that have the combination of not having been resolved, but too many investors hoping they will be. The market has priced in too rosy of a situation. The bears also point out that the data is marginally better, but still pretty awful. Finally, from a technical standpoint, if 1,120 does get broken, 1080 or so seems to be the next stop.

We were sitting here last week, and got saved by a few positive tape-bombs. Will we see that again? I don't think so. The ISM news isn't good enough to take us much higher. There are too many investors who are long largely because of the "support" at 1,120 that it will take a significant beat to have much of an impact.

HYG has resumed it's sell-off. High Yield might be getting cheap, and HY17 is starting to offer a lot of value, but HYG seems rich. I continue to believe it has some significant catch-up and it looks more and more like the portfolio is getting filled up with failed flip trades from hedge funds. The bulk of the increase in the portfolio is from new issues done in the past 2 months. It is beginning to look like dealers, who get caught supporting their new issue, are the ones who buy HYG and JNK so that they can exchange their overpriced, illiquid bonds, with something they can leak out into the market. We are doing more work on this, but I think the "strength" of HY ETF fund flows may be very misleading.

More and more I like leveraged loans. With LIBOR so low, most have very low coupons (though LIBOR floors help that), but the price is getting low enough there is some potential upside from here, and if the market gets worse, the senior secured nature should help. Unlike 2008, there is far less leverage in the leveraged loan market (Total Return Swaps and Market Value CLO's are a much much much smaller part of the market), so the benefit of seniority should kick in a lot sooner than 2008, when the legendary long LCDX short HY in massive size roiled the market for weeks on end. It did create incredible value for anyone was willing to play it at the time and wait for some normalcy to return.

I have to stop writing now as my mom is calling to see if I bought 1,120 because even she knows the market ALWAYS bounces off 1,120. Hmmmm......I think I will actually add to my short since I don't think we hold this.

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Mon, 10/03/2011 - 10:30 | 1733005 TradingJoe

Good One!

Mon, 10/03/2011 - 10:31 | 1733011 The Axe

market is confused...me too

Mon, 10/03/2011 - 10:39 | 1733041 Don Birnam

Eleven-twenty. No-Man's Land. This inflexion level "du jour" will be a source of back-and-forth [ algo/AI ] combat, but all campaigns do and will end. This one, in not a very sanguine fashion for those of the bullish inclination.

http://symonsez.files.wordpress.com/2010/09/wwinomansland.jpg

Mon, 10/03/2011 - 10:50 | 1733079 DeadFred

So how many times does support act as support before it is no longer support. This question beats out 'To be or not to be"

Mon, 10/03/2011 - 11:01 | 1733099 Jay Gould Esq.

Right said, Fred. Support then becomes "resistance"...

Mon, 10/03/2011 - 11:20 | 1733147 slaughterer

First commandment of post-QE2 trading: ES doth bounce at 1120....

Mon, 10/03/2011 - 12:55 | 1733590 ZippyDooDah

....'Til it doesn't.

Mon, 10/03/2011 - 16:48 | 1734541 CPL

S&P 765...nothing is holding up the fat man's pants right now. Algos are tripping over each other.

Mon, 10/03/2011 - 10:32 | 1733012 X.inf.capt

question...

are the bull traders trying to attract retail investors back into the markets to shear them again?

Mon, 10/03/2011 - 11:55 | 1733301 slewie the pi-rat

no, too passe'? L0L!

there are only gamblers and playaz, and their "advisors" like the author who has a rational play in his hegde of shorting the riskier (& junk) bond ETFs while enjoying the "benefits of seniority"

but maybe this isn't 2008 and the liquidity is gonna be supplied by ww.fiatFirehoses\CB.con

selectively? who knows? it is very difficult to expand credit while the underlying economic activity is taking a break and/or "consolidating" and even the banksters are starting to see the dangers of forcing ever-expanding credit schemes over zombified "legal entities" which are at best disposable legal fictions and possibly the ponzi-makers' worst nightmare, ever!

so i would tend to think the "bull traders" are just trying to keep the "tax-deferred sheeple with freaking jobs" involved thru their retirement accounts, which are "legal entities" too , aren't they?

next time, before throwing another of your "innocent questions" out, please check to make sure it isn't just another projection of a comforting but false dichotomy, ok? thxz in advance, 0 ranking X-infantry officer!

Mon, 10/03/2011 - 12:35 | 1733484 X.inf.capt

dear mr. rat

i thought it was a ligitimate question...

OCT . has always, for the most part been bad for markets...

i was wondering if traders, i.e. institutions were trying to cut down exposure to the markets.

wanted an oppinion from the vet ZH'ers...

i appreciate your opinion and candor

thank you...

Mon, 10/03/2011 - 10:33 | 1733014 SwingForce

1010, 1040, 1101, 1120 hmmmm..., as rates are declining, the floor under stocks is rising. I wonder, what could explain this?

Mon, 10/03/2011 - 11:15 | 1733127 CrashisOptimistic

Those aren't the numbers.

The key number, oddly, is 1115. That was Dec 31, 2009's close. We've lost all of 2010. At 1115 we start undoing the March 2009 rally.

Mon, 10/03/2011 - 11:21 | 1733150 clones2

I would argue that 1100 is more important as it was the intraday low a month and a half ago...

Mon, 10/03/2011 - 12:46 | 1733196 SwingForce

1010 July 2010

1040 Aug 2010 Jackson's Hole

1101 8/9/2011 (Incidently DOW made a lower low on 9/22/2011)

1120 today

S&P 500 Index trivia:

392 stocks pay dividends
average 2.82%
335 stocks pay more after-tax than 10 yr. Treasury of 1.84% (2/3 of 500)
It wasn't like this a year ago.

Here's a shocker: IYR yields 4.42% (That's 6.72% after-tax equiv.)

Mon, 10/03/2011 - 10:32 | 1733015 GeneMarchbanks

Are you suggesting you're letting your own Mother near this market? Shameful.

Mon, 10/03/2011 - 10:33 | 1733017 slaughterer

All the usual indicators say we close above 1140 today.

Mon, 10/03/2011 - 11:38 | 1733206 d00daa

lmfao what the fuck?? "usual indicators," momotard is much more entertaining, try again.

Mon, 10/03/2011 - 10:33 | 1733019 RobotTrader

Nobody believes it is going to hold.

That's why any and all dips in VXX are being bought.

And CDS spreads continue to blow out.

Mon, 10/03/2011 - 10:36 | 1733030 SwingForce

Its the banksterz inflating their unmarkable opaque assets again.

Mon, 10/03/2011 - 11:14 | 1733117 kengland

Nobody believes it is going to hold.

This is precisley why it will. A watched pot never boils.

Mon, 10/03/2011 - 12:30 | 1733467 oddjob

A watched pot never boils.

Place a transparent lid on it.

Mon, 10/03/2011 - 10:34 | 1733022 slaughterer

Fading his own mom, the guy is ripe for a seat at an abandoned GS prop desk.

Mon, 10/03/2011 - 10:41 | 1733052 oogs66

but his mom might be robotrader?

Mon, 10/03/2011 - 10:47 | 1733070 slaughterer

Today Mother Knows Best. Watch the close as ES shorts get eaten up and spit out.

Mon, 10/03/2011 - 10:37 | 1733028 RobotTrader

Clamoring for Uncle Gorilla Paper continues in earnst.

30-yr. yield at 2.85%, as no price is high enough for U.S. government scrip.

http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

Pretty soon Tom Keene will be exclaiming: "The 30-yr. bond is now the 2-yr. bond!"

Mon, 10/03/2011 - 10:40 | 1733046 X.inf.capt

true, but thier selling short term paper,

they must see the buying opportunity that we did...

phyiscal PM's....

that where the profits will be....

Mon, 10/03/2011 - 10:53 | 1733082 hedgeless_horseman

If the company that is buying the THC MOBs waits just a little longer, maybe they could get DIP financing and pricing?

THC at $3.88, down 5.6% so far today.

Mon, 10/03/2011 - 10:37 | 1733032 buzzsaw99

a trader who admits to living in his mother's basement? oh, calling. i must have been thinking of robo. lulz

Mon, 10/03/2011 - 10:40 | 1733048 Blorf

BAC closing in on a 5.xx price.

Mon, 10/03/2011 - 10:53 | 1733084 Blorf

Healthy tape here... 6.03

Mon, 10/03/2011 - 10:41 | 1733051 Cognitive Dissonance

Not tape bombs. Tape worms.

Mon, 10/03/2011 - 10:41 | 1733054 junkyardjack

The real question is has the financial news finally gotten enough citizens long so that the professionals can remove their support and take every penny on the downside.

Mon, 10/03/2011 - 10:46 | 1733059 RazorForex

So far the correlations between gold and the sp500 and Oil have held up well. Most of the rise in gold, oil and just about everything else is due to cheap money from the FED. Once the free money is over, everything implodes together. Gold is signaling a possible reversal on the monthly charts and that has some pretty strong implications for the other asset classes and the SP500 in particular.

http://razorsforex.blogspot.com/2011/10/gold-price-to-moon-maybe-not.html

Mon, 10/03/2011 - 11:35 | 1733164 Mr Lennon Hendrix

The rise in oil and gold is more complicated than you paint it, but is not too complex of a correlation. The rise in oil and gold have something to do with the fall of the fiat ponzi, yes, but in equal amounts the rise in prices of these goods has to do with the supply/demand of the said goods.

Oil production peaked, and gold production peaked a decade ago. Demand is staying high for both, as gold is what makes finance go around, and oil is the lifeblood of the economy.

As far as equities, gold leads equities, not the other way around. If the President's Working Group on Financial Markets (aka the PPT) wants to come in and support the equity of corporations, their first measure (and really only measure) is to lease their gold (the gold on loan from the Treasurie to the Federal Reserve). They then will use fractional reserve lending to spin the cash like a nest of hairy spiders and then flood the world with its web.

Mon, 10/03/2011 - 10:49 | 1733075 TheArmageddonTrader

If you trade S&P odd hours everybody does these days, you know it's been well down through 1120 multiple times already, including last night. Still hasn't broken 1100. Very zigzaggy market today. A lot will depend on what gets said after this Eurogroup meeting. None of it will be final, but I would expect the French to at least attempt to make it sound like they're going to do something big, and the Germans to pour cold water on it.

Mon, 10/03/2011 - 10:49 | 1733077 traditionalfunds

She get

She get high

Mon, 10/03/2011 - 10:58 | 1733093 oa92000

ZERO,

you cannot win everytime...be careful!!

Mon, 10/03/2011 - 10:59 | 1733095 oa92000

if US slides into recession prior to elction, what is the chance that Republicans get the blame? Might republican road blocks back fire?

Mon, 10/03/2011 - 11:10 | 1733116 stirners_ghost

Fear not; whoever succeeds them, you'll still be in the caring embrace of the power structure.

The liquid aristocracy has your back.

Saddled.

Mon, 10/03/2011 - 11:02 | 1733100 Thought criminal

Someone push that SPX over the cliff already...

Mon, 10/03/2011 - 11:24 | 1733162 clones2

Looks like, and I'm guessing we go sideways at the bottom here for a couple days perhaps? I don't think we're getting another 5 - 7% bounce from lows this time.

Mon, 10/03/2011 - 11:07 | 1733110 Randall Cabot

VIX over 42

Mon, 10/03/2011 - 11:07 | 1733112 Randall Cabot

VIX over 42

Mon, 10/03/2011 - 11:10 | 1733114 slewie the pi-rat

you mean your mom yelled down the basement stairs at you?

Mon, 10/03/2011 - 11:12 | 1733120 slaughterer

Abandon all hope SPY/ES shorts: Getco HFTs set on bear gun stun. Fed cannot let the first day of OT2 go red.

Mon, 10/03/2011 - 11:34 | 1733194 oa92000

good one.. bear cave is right here

Mon, 10/03/2011 - 11:25 | 1733146 virgilcaine

Were going to'be at the March 09 lows much sooner than most realize..I would say within the 1st qtr of 2012.

Once the banks start dropping one by one.. Dexia looks to be first up.

Mon, 10/03/2011 - 11:22 | 1733153 slaughterer

Have you factored in irrational hope and greed as well as HFT into that prediction?

Mon, 10/03/2011 - 12:02 | 1733214 Monedas

I'm more at home with the Coves of Baja than the Canyons of Wall Street; however, "I'm no way, no how" (Hillary) waiting for the return of "Normalcy" ! Don't get distracted ! Keep on hoardin' ! Monedas 2011 Baja....the poor man's Italy, complete with boot and heel and leghorn and the added bonus of a broken kneecap, fat thighs and scattered body parts (i.e. islands) !

Mon, 10/03/2011 - 11:54 | 1733300 Monedas

A romantic poem by Monedas : If you really love someone and she wants to fly away... let her go ! When she runs out of money she'll come home to rooster, she'll let you fxxx her in the axx and you'll forgive her !

Mon, 10/03/2011 - 12:35 | 1733488 Cpl Hicks

lol...very fractured.

Mon, 10/03/2011 - 11:57 | 1733311 adr

I love the algo tower we got at 10:00 this morning which decided to repeat itself on a bit smaller scale at 11:00. There was a pickup in manufacturing, at least that is what the media says. I think it was a whole bunch of factories making product nobody will buy other than Obama. There are far more orange cones out there than I have ever seen at the end of September.

Oil shot up a little over $2 in the minutes after the ISM data. You could say a manufacturing increase in the USA would be bullish for oil but a .0001% decrease in Chinese manufacturing would outdo a 200% increase in American manufacturing.

Algo jumping BS is all there is.

Mon, 10/03/2011 - 12:01 | 1733324 slaughterer

"Dear Peter, sorry to see your trading account lose capital today. You can do your wash in my basement tonight, as planned. Love. Mom. PS. I just made $125,000 on my ES long position which I initiated at 1120. I will buy you a pizza tonight if you bring me Dirty Dancing from Red Box on your way back from Wal-mart"

Mon, 10/03/2011 - 12:14 | 1733385 Monedas

Well done ! The minus one was due to my alcoholic jitters ! Monedas 2011

Mon, 10/03/2011 - 12:47 | 1733549 SwingForce

What time POMO today, tomw, & Weds ?

Mon, 10/03/2011 - 16:01 | 1733574 fuu