Freaky Friday

What is going on out in the world?

Macro Man notes the silent crash in the dollar as the Euro hits a new all time high against the dollar. However, it is like pulling teeth to have any kind of volatile reaction.

Overnight markets were a sea of red. Asia was down big and EM's are stumbling. A little discussed story was spanish property stocks took a nosedive earlier in the week. It does beg the question is the global real eastate boom finally cooling?

Over the last month markets have seemed to go back to there methodical ways. Yen down, carry trade on. Buy aussie, kiwi dollars. A couple of things to note. Australia's dollar got hit hard earlier in the week on a slower cpi report. There may be some evidence that the global economy is cooling. Anecdotally, Chicago is still building condo's, but I think there are any new projects coming online. Just finishing existing that started a couple of months ago. Which happened to be the top.

Other signs of possible top forming include. Small caps starting to underperform bigs and the mo trade has returned. So who really knows, maybe we head higher in mo phase for a couple of more months.

These are the charts from this morning.

The nasdaq 100 seems to be holding above yesterdays lows which is giving the rest of the market some support. The dow also got some buying around 930.

Attempting to fill the gap after earnings. Squeeze squeeze squeeze.

Huge Squeeze

A massive short squeeze has developed in the US markets. Because there are so many hf's who use shorting as part of there strategy it creates massive squeezes. Check out amazon or SBCF which I was short and took a beating. Its hard to fight the endless amounts of money. The data comes out bad, but when the crowd gets too bearish everyone gets pummeled.

COF has regained a lot of ground that it lost. Interest rates are still too low.

Overnight

news. TXN reported decent news. I guess any good news is good for tech. On the geopolitical front, 9 US soldiers died in Iraq which will only embolden the dems to call for an early pullout.
I could be totally wrong, but I do think global stability becomes increasingly suspect. The US is t the glue that is holding together the current world order.

I suspect range bound trading. A lot of people think this is the final push before summer gets here. I agree. The mo tape will gets tougher and riskier as it gets longer in the tooth.

COF and a lot of the banks do not act well. The mortagage problems are very real and not going away. There are some regional banks that I suspect are going to blowup after the close.

The week has ended

I just went to yahoo to look at a chart of the SMH so I can see where it ended up, but instead of typing in SMH I typed in semi. This is the chart that came up!! ouch. Wish I was short that one.

Anway, the themes of the week are a weak dollar and very strong global equity markets. I get the feeling the US is more or less piggy backing on the ROW momentum. The DOW was the real winnter in the US markets. Small and midcaps are starting to lag. Could this be the begining of the small big cap leadership change? Call me skeptical.

The continued dollar slide does not seem to be of any concern to anyone.

Brad Sester at www.rgemonitor.com has noted that over the last couple of months the US CA deficit is being financed by the official sector. Read- Asia CB's, EM CB's, oil exporters. A lot of the private sector money is being funneled out of the US and into EM's because the the returns are better and who wants treasuries at 4.7 percent when inflation is running close to 3.5 percent a year!!!

Its all about keeping a global "system" in place, that at the moment is still keeping all the actors happy. However, the dems are turning up there rhetoric against China.

Is there a point when CB's realize that they are the only ones involved with US debt and start to head for the exits before everyone else? Who knows? The dollar could fall to 65 before the finally start to crack. I don't think China has a clue what its doing or how it is growing its economy. Communism and capitalism are two very different animals.

Bonds continue to act to be in a catatonic state. Volume is not great and all the alpha is gone from the market. Alpha is the liquidity of the market. No one can make a move as long as Asia sits around with a boatload of laughably overvalued financial obligations.

We'll see what next week brings.

The strength is overwhelming

And why do we refuse to raise interest rates?

Gold + 8.5

Indexes gap up on incredible oversea's strength. The charts which I think are important are posted.

COF reported last night and the results were not good. Anyone who thinks that the housing market is not affecting the economy is just wrong. There are problems with consumers and in CDO's MBS. These are not going to simply fade into the night.

The semi's are trying another breakout and 36 SMH is key for tech in general.

I guess the world has come to the conclusion that rates will never go higher. The ROW has no interest in selling bonds.

Slowdown

About an hour everything came to halt and some selling kicked in. However, nothing really extreme.
The semi's are of interest for a lot of people because the SMH has stalled at 36 a number of times. I haven't seen any kind of money flows going into semi conductors, although Dr. Brett has noted that intel is getting some love.

What are my thoughts on tech? In a weak dollar environment I think tech is a joke. It still has too much capacity and a weak dollar is going to attract weak dollar plays. oil, gas, gold, silver etc. If small caps, which are more speculative by nature, start falling out of play why would chips suddenly be the place to be? They are even more speculative. Nevertheless, if they rally I will respect the price action.

NO FEAR!

Remember those tee shirts. I think thats what best describes market participants attitudes. I really believe that market players are becoming more comfortable with the fact that NOTHING will slow down global economic growth. Wars, terrorist attacks, high oil etc. Everything just bounces back and thats when it is time to be more cautious. Everything I read from Dr. Brett and jason at sentiment trader says that we should have bought the dip and they were correct, but is a V shaped recovery what we want to see? I would prefer a long slow base and then move higher. Sell in May and go away! Maybe.

Stocks gapped down this morning, but dip buyer immeadiately came in to scoop up bargains.

The yen had a decent move overnight and I was long 5 futures, but covered because it just never seems to get legs.

So the banks are possibly putting in a double bottom from earlier in the month. As Dr. Brett noted on Monday, a huge momentum day developed and momentum always wanes before price, thus its not surprising that we are having continued, but slowing follow through. The smalls and mids did not look good at all today. I don't believe that large caps will all of a sudden lead. They could after another correction, but they wont just magically start charging forward.

Global markets seem to be stuck in a perpertual cycle. Foreigners by US debt or IOU's with there savings and recycle it back which keeps rates low. This has created a housing bubble that went out of control and is now only starting to cause any real pain. Now because rates are still low, PE is coming out gangbusters and the risk profile is getting higher. see SLM.

The bottom line is cheap credit continues to drive everything and is causing inflation to rise. The ROW, especially China, doesn't care or understand the amount of risk they are forcing the private sector to take in order to get some kind of a return. If rates dont rise, and they could if the dollar becomes an issue shortly, then MA and PE will almost without a doubt wind up in a blowoff housing top. Stock buybacks continue to rise because debt is still so cheap to add. The US and a lot of corporations and consumers are getting the ability to refinance. That will not change the long term outlook of too much debt, it just puts it off longer and adds more leverage until there is an accident.

Semi's

Maxim is leading the semi's higher. I also noticed on my watchlist that nsm is gaining six percent. Thats what happens when price get so constricted. Nevertheless, semi's havent really gone anywhere. Its almost impossible to short anything because wall street will defend it and global markets are strong. The strong price action the last couple of days make me real worried that we are going to have another leg down or crash sometime in the next month or so. The banks are getting bid up on subprime is overblown. The markets move so much faster than the real world, thats why the builders and banks are still ok. Are housing or consumer credit getting better? No, but its easy to gone stuff higher. Its kind of like day trade the economy mentality.

Also of note is the small caps and mids seem to be lagging the big caps and em is weak and seems to be stalling.

The yen has probably bottomed. I just dont see how it can continue to fall.

End of the day

Volume seemed to trail off as we got further into the day. A couple things that bear watching are in the following charts.

The sox is going to do something soon. Higher or lower and the yen may have found a bottom again.

Index momentum

seems to be keeping things going, but underlying price action is a little slower than yesterday. Strong momentum has returned which makes me wonder if we go another two months and run this thing up 50 more points or sometime soon we have a real crash that makes last month look like a walk in the park.

I think participants are becoming more and more convinced that the system is impervious to any shock because everything comes back.

Whats going on?

1. The dollar continues to be underpressure against the ccountries who don't manipulate the crap out of there currencies. The yen and RMB are a total joke. Although there is some talk again of japan raising rates because core inflation is rising in japan jsut like everu where else.

2. Bonds are up and getting a decent bid. Only thought is that we could be due for another feb event. The mo mo player are back again and when they return in mass its time to be defensive.

Now thats some buying. Momentum always preceeds price.

The bulls arent resting

I was wrong with my earlier trades. The tick trade didnt work, buyers immeadiately stepped up to the plate.

Global markets look unstoppable and the longer this system goes on the more scary it becomes.

I fully expect inflation to continue roaring ahead. food, water, and gas are going to force the US to come to grips with the fact that no one wants to stop money printing.

Short term overbought

According to sentiment traders models we are now overbought. Does it mean that we are goiong straight down? No. What it does mean is that we are at risk and this isnt the best time to buy.

Added 10 NQ and 10 ES. What am I thinking? After 1030 the strong tick bounces started to end and just a couple of minutes ago we had two -700 ticks. Our trend day is now in trouble.

Horrible tragedy strikes VA Tech

Stocks are roaring around the world, but the country is going to be different after this incident. I remember I was sitting in my dorm room during columbine.

I need to become disgusted when losing money

Read a great trader feed article from Dr. Brett this weekend. It was about recording your trades and becoming disgusted when losing money. I need to more of that

YTD. I've been up more than 100k, but I'm now up only have that amount. Really disappointing.

I think it is time to rfram my thinking.

1. short 3 russells at 83180. Reason for trade. Russell began to struggle and is having hard a hard time making new all time highs

2. short ten nasdaqs. Overbought according to sentiment trader.

Range Bound

Markets still cant break above that all important 1450 level in the sp. As close as we are to the highs of feb, a lot of stocks do not act well. GS is still 13 dollars below its peak. According to sentiment trader the Nasdaq 100 is overbought, so its probably worth faind strength.

Apple gapped down last night and I could covered a short and should have. Its above the overnight low, however I suspect its going to test those lows later today.

Bonds continue to tread water. Reading Brad Sesters Weblog at ww.rgemonitor.com I have come to realize that CB's dominate the currency and bond markets. I dont think the world has ever seen as much official participation. How long the official ballooning of fx dollar reserves is anyones guess. I do think in the long run its a dangerous game and China has no idea what its doing and flat out doesnt care.

AD line is split
Gold is strong.

I'm just too bearish

I don't understand whats going on out in the world of finance and there is no use getting chopped to pieces fighting a HF community and Wall Street crowd who has every intention of keeping this whole system going as long as possible. At this point the financial system is convulated and opaque that no one can tell what is going on. Derivatives? Ways to hide losses. Just as Enron. Someday something very big will happen, but I am loathe to predict when. The dips get shorter, the leverage gets larger, and the imbalances go to the moon. Only God is going to cause this system to fail and it will, but I have to survive in order to see it.

A couple of good quotes I've read lately

1. No liquidity without responsibility

2. You can't privatize profits and socialize the risks.

At least I had a good day today. Size sellers showed up in the spoos in second hour of trading.

Finally a little action

Markets finally broke. Not on huge volume, but a decent move. Range bound at the moment waiting until the feds minutes comeout.

The fed seems like its a difficult position. The housing market is in a recession even though we still haven't seen all the inventory come onto the market. That is certainly going to pressure consumers who are overleveraged. However, there is still tons of cheap money around the world reducing risk premiums to almost zero. Jim Cramer noted this morning how there really isnt a ryhme or reason for anything. Good companies, bad companies, it doesnt matter.

The bond market has lost any ability to self regulate credit and that should be really unnerving to people, but everyone is too busy trying to get rich in easiest credit ever available. How does this end? No one knows. In fact the whole system has balloned to the point that no one knows who is on the hook for anything if it does. Twenty years of declining rates and moral hazard has unleashed global credit systems and if you ask anyone they dont have the bad credit or its hedged away. right. right.

Worthy of everyone's attention

http://calculatedrisk.blogspot.com/2007/04/bagholder-bondholder-liability-cant.html

For once politicians are asking the right questions and understand the issues. The sub prime issue has bigger ramfications for finance and wall street in general. Securitization has been a gold mine for wall street and HFs for years and now we have the first shot across the bow. Who really is on the hook for all this crappy debt that keeps building in the financial system? Subprime isnt the only area. The junk bond market, cdo's, PE etc. When shit hits the fan who is responsible? Its the ability to securitize coupled with CA recycling that contributing to the biggest debt orgy on the planet and now there is no going back. Its boom until we bust and yes this the first shot across the bow because it is a threat to the wall street securitization fee orgy.

Complete joke

Why do institutions keep doing the exact samething? Yen trade back on. check. EEM rally check. Sell any volatility check.

I'm going to put a pic of bernake above my desk so i can through it at him. Seriously, we have an inflation problem what the fuck is wrong you? There is more money then ever before still outthere and you refuse to do anything. You run the fed like a college professor runs a faculty meeting. A lot talking, maybe form a couple of commitee's, talk to the provost. blah blah.

On the other hand how much more panic are global markets going to get without an accident or an act of God.

And Larry Birhead is the father. awesome.

A couple of thoughts

1. Is the world going to decouple from the US?

2. Housing is not near bottoming. Its going to take much longer than anyone thinks to figure out housing and yes, it is regional. Peak inventory has not even taken place yet. The fed made a huge mistake last may when they stopped raising interest rates. It led to a blow off top in housing.

3. How does China fit into the picture?

4. The entire global financial system has gone bonkers. No one wants to acknowledge the extreme excess that has gone from housing straight to MA and PE.

5. When this period of gross credit excess ends will it lead to a World War?

6. The fed and the rest of CB's are a total joke. At some point the world is going to have to come up with a better monetary system than the one we have now.

7. Why is the volume on the US so awful? The nasdaq might as well be turned off.

8. How much is the street going to spin earnings? And why is there a leverage buyout for everything. Wall Street keeps thinking that the homebuilders are undervalued and could be LBO'd. This is where common sense has left the building.

Unbelievably shitty day. The US stock market is in a forced rally. How does apple trade 12 million shares and average is 34 million? All I can say is that asia and the brics are driving everything while the US gets supported because no one knows what stupid deal private equity is going to next.

More China talk is starting to pop up around blogs. There is no doubt that there is going to be an economic crash in china. I dont know how representative the stock market is of the whole economy, but China isnt going to grow at 10 percent forever and is on a collusion course. Its distinctly possible that it happens sometime in the next few weeks. What will be the ramfications? I dont know.

Why is the sp mini absolutely dead. 575,00o contracts! nuts. There is zero volume behind any of these moves. I was surprised the bonds didnt rally today. Higher yields are coming and in a world of silly leverage and yield chasing 5 bps is a big deal. It wont take much to blow out spreads.

BOJ is meeting. My least favorite CB. The yen carry trade and swissy trade keep coming back. The fed shouldnt have to bare all the tightening responsbility. And in case Asia doesnt get it, all they are doing at this point is stimulationg more consumer price inflation. Housing is done. Good luck selling Toyotas to Americans who cant extract any more equity from there homes and are straddled with inflation in gas, food, healthcare. We have a global inflation problem that no one wants to deal with.

Blah

What is going outthere in stock land? The market is in the tighest range with lowest volume I have seen in a while.

Every morning we wake up to some new PE deal that is more whacked than the next. The only justification is for the deals is that money has to be spent, so it goes after companies that really shouldnt be LBO'd.

A poster on the prudent bear refers it to as the Age of Infinite Fiat. I couldnt agree more. I am at a total loss for what could derial this system, but something will happen.

NDP day!

As the Barry Ritholtz blog would say. 180,00 jobs and some revisions to the prior month. Boring!! Boring!! Its pretty hard to say that job growth is robust in the US. In fact I would say its tepid at best. Previous expansions produced far more jobs and with the population increasing job growth could be described as downright bad.

A lot of energy has been spent debating outsourcing and I think a lot of those arguments have some merit. However, capital spending has not returned because of the late 90's. And I dont think it has anything to do with CEOs not wanting to spend for the future. The real driver is HF's and people like Carl Icahn who has no interest in the long term. Its about the next 10 minutes. Our financial markets have become so speculative and lucrative that they have made any kind of longterm planning almost impossible and that hurts the other 99 percent of americans. Instead they get stuck with high gas prices, housing, and taxes which all but wipe out any kind of wage gains. 2008 is going to be a tricky year. Populism is going to rise. If the US wants to be the same envy of the world for the next one hundred years we are going to have to balance the short term with the longterm. I dont think there is a lot of appreciation for the extrodinary financial conditions. In fact a very strong case can be made that credit can't get any easier to obtain. PE is going through a bubble right were housing left off. Part of the problem with the constant CA recycling is its forcing lenders to take unheard of risks. How long this can go on is beyond anyones grasp.

As for the markets. The same trades get put right back on. Sell the yen. The fed is tight at 5.25 percent, but asia is refusing to let any kind of currency appreciation. Now its feeding into a light stagflation scenario.

Thank God its over!

Another piss poor day in equities. Once again the markets are just willed higher. I get the impression that the real action is still located in the EM's around the world with the US as kind of an afterthought. I don't know if this rapid snap back is something that should spell trouble or not. One thing I do know is that the longer this goes on the more bulletproof participants think this "system" is.

Where did everyone go?

Seriously. This has to be the slowest day of the year. I don't know whether that is bullish or bearish. Probably neither.

The dollar seems to be coming under increasing pressure especially against the euro. The manipulated yen just does nothing. I suppose if US data continues to be soft and the euro goes higher the political rhetoric will be turned up against japan to move on interest rates. Japan is operating a neo mercantalist economy will little regard for anyone else. Nothing wrong with that, but if 200 million americans begin to feel a pinch I would not want to be short yen. Its only a matter of time before the Barney Franks of the world begin to go after japan too. Quite frankly I dont blame them.

AD line in nasdaq is split and slightly more advancers than decliners in the NYSE. It seems like the market is being willed higher on nothing more than "all dips are rewarded mentality". Only Gods knows what will change that attitude, but my guess it is an event that questions global economic security. For all the talk about the winnners in globalization there are plenty of losers. Just as anyone working for a wage in the devloped world.

A couple of thoughts

1. Volume stinks. Trading is about erratic as it gets. I dont udnerstand why its so thin. Do that many people really take the week before Easter off? No. My guess is liquidity is evaporating. Funs are selling straight into any kind of rally.

2. The data out of the US looks tepid at best. It doesn't seem like any acceleration is on tap.

3. What is the rest of the world's plan if things get really bad? It seems pretty clear that consumers are really leveraged. So much income is already being used to service existing debt

4. What is the deal with Japan? How can the yen be so tightly correlated to the almost all the equity markets. Why does the rest of the world have to adjust there interest policy to try and stem inflation when the BOJ just hands out free money. CB's and governments should be all over them. They are the second largest economy in the world.

Good morning.

Stocks look to open lower on the heels of best buy and mediocre intial claims. Fallond D had an interesting point last night on his blog last night. Its true the indexes are acting much better than a couple of weeks ago and that is tough to ignore. Everynight I look at sentimenttraders list for bullish and bearish lists. The contrarian in me says that we should buy stocks and look for higher prices in month or so, but this is when the market tanked last year .

End of the day

Markets ended up big today. The yen is the most obvious reason why. Everything was pretty much up on light volume and seasonality issues. Don't know if we are going to continue to rally or not, but the bulls are making it look like business as usual.

Read an interesting article on the prudentbear.com by Ed McCarthy. I think he is right when he talks about the inability of policy makers to slow down the economy. The HF community/private equity crowds ability to create massive amounts of credit outside the banking system is truly amazing and it keeps growing. It just moves from one sector to the next. The notion that any regulatory body or PPT is going to be able to save this system when something really unexpected comes around is laughable. Over the last 10 or so years through Greenspan, the system has become deregulated to the point that no one can stop it and wall street is convinced that the system is indestructable.

As for trading. It was a trend day on shit volume.

More light volume

Markets gapped up on overnight in europe. The sp is up 14. The bulls just don't go away and I think it is typical of wall street to keep this scheme going as long as possible. Yen weakness is showing up again as everyone just puts the same trades they had going on last month back on. Seriously is there any imagination outthere?

Barry Ritholtz is noting a massive head and shoulders pattern in the euro which is likely to lead to further dollar weakness. Is there a level where people began to reduce bond holdings because there is too much currency risk? I think US shares are going to underperform again this year and if interest rates rise they are really going to underperform.

Sentimenttrader models in the nasdaq 100 our getting overbought. The curve continues to do nothing, but in a slow steepening trend.

I'm with Itulip. Nothing is going to change in this system until a massive fraud is revealed which I have doubt there are many. A fraud would really wreck the cds market and question all payments and counterparties.

More light volume

Markets gapped up on overnight in europe. The sp is up 14. The bulls just don't go away and I think it is typical of wall street to keep this scheme going as long as possible. Yen weakness is showing up again as everyone just puts the same trades they had going on last month back on. Seriously is there any imagination outthere?

Barry Ritholtz is noting a massive head and shoulders pattern in the euro which is likely to lead to further dollar weakness. Is there a level where people began to reduce bond holdings because there is too much currency risk? I think US shares are going to underperform again this year and if interest rates rise they are really going to underperform.

Sentimenttrader models in the nasdaq 100 our getting overbought. The curve continues to do nothing, but in a slow steepening trend.

I'm with Itulip. Nothing is going to change in this system until a massive fraud is revealed which I have doubt there are many. A fraud would really wreck the cds market and question all payments and counterparties.

Frustration creeping in

I am definitely frustrated this afternoon as the market turned into complete mush. I guess we can blame opening day or the holiday short week, but its still Monday. Bulls are relentless in there defending of the market. Any kind of seasonal bias will be used to prop and put lipstick on a pig of a market. Seriously, its a finance based economy based on lending. If the banks aren't doing well then you can kiss everything good by. They are the ones who lend to the shit box junk bond market where defaults are several deviations away from normal.

Go cubs!

Its opening day for most teams and I'm excited to get baseball started and watch my fantasy team thrive. As for the markets, it was pretty quiet overnight. No one seems to want to make a move either way. There are seasonal bias in the first two weeks of april, but I am still struck by the fact that wall street works for the end of the year bonus. Sell in may and drive up in the fall for the year end bonus. Corn was limit down on friday and there China iran news doesnt seem to have gotten any better over the weekend.

Not alot going on thus far. It looks like the ISM is being watched closely.