{"id":189,"date":"2009-07-20T18:43:12","date_gmt":"2009-07-20T22:43:12","guid":{"rendered":"http:\/\/www.cheapiv.com\/?p=189"},"modified":"2010-09-30T18:46:23","modified_gmt":"2010-09-30T22:46:23","slug":"trade-the-markets-7-20-2009","status":"publish","type":"post","link":"http:\/\/www.cheapiv.com\/?p=189","title":{"rendered":"Trade the Markets 7-20-2009"},"content":{"rendered":"

Last week we focused on Meredith Whitney\u00e2\u20ac\u2122s comments having generated a lot of uncertainty.\u00c2\u00a0 We weren\u00e2\u20ac\u2122t sure ourselves exactly where they would lead the market to in the end.\u00c2\u00a0 We<\/strong> thought that there could be some \u00e2\u20ac\u0153markup\u00e2\u20ac\u009d followed by selling into that but we didn\u00e2\u20ac\u2122t expect it to take a week<\/strong>.\u00c2\u00a0 We were looking for a few days or so of it but the market had other ideas.\u00c2\u00a0 The one thing that we were fairly sure of was VOLATILITY.<\/strong> And that\u00e2\u20ac\u2122s exactly what we saw.\u00c2\u00a0 Most of the major averages closed up about 7% for the week.\u00c2\u00a0 It was very impressive in a manipulative sort of way<\/strong>.\u00c2\u00a0 We\u00e2\u20ac\u2122ve been consistently noting that while there hasn\u00e2\u20ac\u2122t been a clear trend during the summer in terms of direction, there\u00e2\u20ac\u2122s actually been quite a bit of lively movement and thus tradable volatility.<\/strong> What we think happened was that the week before last brought sellers into the market as a result of the 2nd<\/sup> head and shoulders neckline having been penetrated.\u00c2\u00a0 This brought fresh fuel for a short squeeze.\u00c2\u00a0 Then Whitney, a big name at the moment, comes out with the Goldman talk etc. and the manipulation that we typically see around necklines then takes on a new \u00e2\u20ac\u02dcroided up complexion and Viola!\u00c2\u00a0 We have a summer week of significant proportion that actually did deliver on the fireworks that we alluded to at the conclusion of last week\u00e2\u20ac\u2122s comments.<\/p>\n

This week we\u00e2\u20ac\u2122re apparently supposed to bask in the afterglow of last week\u00e2\u20ac\u2122s melt up<\/strong> that started from exactly where it had to technically.\u00c2\u00a0 Given the trend of earnings so far we\u00e2\u20ac\u2122d expect the \u00e2\u20ac\u0153positive surprise\u00e2\u20ac\u009d bias to remain<\/strong> as such but we do have to note that we don\u00e2\u20ac\u2122t believe all of this hype with respect to earnings in the least.\u00c2\u00a0 We\u00e2\u20ac\u2122ve seen this act hundreds if not thousands of times and we\u00e2\u20ac\u2122re not buying that all of a sudden the financials are really, legitimately \u00e2\u20ac\u0153killing it\u00e2\u20ac\u009d despite what is being reported.<\/strong> Some of them were the recipients of reality-cloaking \u00e2\u20ac\u0153one times\u00e2\u20ac\u009d and others appear to have reversed engineered the holy grail of trading systems and are applying it with high leverage to boot.\u00c2\u00a0 None however are making money the old, old, old-fashioned way by acting like simple, greedy bankers and lending.<\/strong> Which speaks to the economy and the markets.\u00c2\u00a0 If they\u00e2\u20ac\u2122re not making it in a way that indicates that the economy is healing properly then what is so great about this news in a big picture sense?\u00c2\u00a0 Exactly.\u00c2\u00a0 However, if they need to make their profits from the markets shouldn\u00e2\u20ac\u2122t we expect the volatility to remain since that\u00e2\u20ac\u2122s the fuel for trading profits?\u00c2\u00a0 Well that plus inside information and the nearly $400 million worth of lobbying that Wall St. funded last year with essentially OUR tax dollars.\u00c2\u00a0 Yet some people still believe that comments like these exaggerate Wall St. law-writing influence!\u00c2\u00a0 Our recollection is that the last 2 weeks of August are typically the preferred choice for Wall St. vacationers.\u00c2\u00a0 To us that means about another month of summertime volatility if at all possible and with several earnings reports remaining, the potential for a healthy retracement of the bounce we\u00e2\u20ac\u2122ve just seen, and with Cap & Tax and Healthscam still on the docket, we don\u00e2\u20ac\u2122t think that there is a shortage of propellant.<\/strong> We\u00e2\u20ac\u2122ll finish here by adding that last week\u00e2\u20ac\u2122s rise may have been partially fueled by reports coming out of DC that suggest that Cap & Tax and Healthscam may not be on the smooth-as-glass trajectory that they once were.\u00c2\u00a0 Knowing that both of these items are effectively taxing programs that will affect all consumers once the \u00e2\u20ac\u0153pass throughs\u00e2\u20ac\u009d are \u00e2\u20ac\u0153passed on\u00e2\u20ac\u009d, we believe that the markets were legitimately hopeful to a degree and that may have aided last week\u00e2\u20ac\u2122s cause.<\/p>\n

We continue to add to the number of major issues\/problems that are mounting these days that the mainstream media refuse to cover as usual.<\/strong> The California and European banking issues that we\u00e2\u20ac\u2122ve touched on in the past are only moving closer to the flash point.\u00c2\u00a0 At some point we\u00e2\u20ac\u2122ll look to publish a comprehensive list of all of the headwinds that are out there but we are fully aware that these will matter little to the Wall St. crowd until they are forced to confront them.\u00c2\u00a0 Therefore we\u00e2\u20ac\u2122re staying in the blowin\u00e2\u20ac\u2122 in the wind camp.\u00c2\u00a0 The prevailing winds have shifted from side to side a lot over the past few months and we expect no change in the short run.<\/p>\n

.<\/p>\n

The Technical Picture:<\/strong><\/p>\n

\"\"<\/p>\n

This chart is labeled and has accompanying commentary within it.\u00c2\u00a0 Our intuition tells us that this was the boys doing what they do best:\u00c2\u00a0 Using the convenient news to rake pattern traders and those expecting a correction over the coals.\u00c2\u00a0 The volume levels suggest less than impressive buying or adding by institutions but this is a wildcard at the moment considering that we\u00e2\u20ac\u2122re near the Heart of the Summer trading at the moment.\u00c2\u00a0 Assuming as we did in our comments above that trading profits are paramount, nothing can be ruled out volatility-wise despite our macro-picture based cynicism.\u00c2\u00a0 Another stage of what would be an epic short squeeze could trigger if the head is blown through and a retracement could easily occur given the slope of last week\u00e2\u20ac\u2122s yeoman\u00e2\u20ac\u2122s work by the boys.\u00c2\u00a0 We\u00e2\u20ac\u2122re trading it that way until we have greater technical conviction.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last week we focused on Meredith Whitney\u00e2\u20ac\u2122s comments having generated a lot of uncertainty.\u00c2\u00a0 We weren\u00e2\u20ac\u2122t sure ourselves exactly where they would lead the market to in the end.\u00c2\u00a0 We thought that there could be some \u00e2\u20ac\u0153markup\u00e2\u20ac\u009d followed by selling into that but we didn\u00e2\u20ac\u2122t expect it to take a week.\u00c2\u00a0 We were looking for […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[96,11,97,50,10,95],"class_list":["post-189","post","type-post","status-publish","format-standard","hentry","category-week-ahead","tag-cao-tax","tag-implied-volatility","tag-short-squeeze","tag-trading","tag-volatility","tag-wall-st"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/189","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=189"}],"version-history":[{"count":0,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/189\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=189"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}