TED spread at 38.33 @ 6:52 EST. Positioned to remain high, but it has been on an exponential tear lately, as banks re-evaluate their counter-continent risks. This says US bank lending is "safer" relative to European bank lending.
CSFB made a new low to 20.73 on a market move to the low 1060s. The comfort/consolidation zone has been increasing. The last time CSFB made a lower spike on a lower move was 1106 and 1070. The /ESM0 depth is shrinking versus CSFB depth, implying a controlled downside is expected. If we break a new high on CSFB, another 'uncomfortable' uptrend might occur.
Longer term, ideally, the bulls want protective spreads to shrink, with the market moving higher, solidifying the uptrend. A study of the logarithmic values of CSFB versus the logarithmic SPX value may identify if this index is influenced by large numbers.
Fun+Dumb+Entrails (aka Fundamentals):
As fear of a PIGS banking fallout looms, the ticker reads that Spain is backing their banks (bullish); Q1 GDP is almost on-mark, but lower at 3.0% (bullish); Q1 GDP Deflator is up fractionally (bearish); Initial and continuing claims are up slightly (bearish). The consensus was for slightly decreasing claims.
Thursday, May 27, 2010
Today's Magic Numbers
Good for the /ESM0 (e-mini S&P500 futures). Given the high volatility, many of these numbers are fulfilled. Directionally, they often lay or become stronger Fibonacci retrace levels.
Gathered & past: 1087.25, 1085.25.
Targets listed in nearest order. Gathered at 7:35 CST.
1081.50, 1085.00, 1089.25, (maybe 1091.25)..
1095 ends a momentum up-leg from 5/25 5:30 thru 5/25 17:30.
1136 ends a H&S pattern using the overnight ES data. (1117, if the bulls fail.)
5min ES gives the illusion of a cup or bull H&S forming a right shoulder.
1077.50 (if a triangle forms)
1074.25 to pause a downtrend move.
1070.50 to pause a panic down.
1060.75 may slow any panic down.
----
Higher confidence levels: 1074.25, 1085.00, 1117.00
Crazy overnighter's confidence (protective put spreads are more comfortable down here): 1061.00
Gathered & past: 1087.25, 1085.25.
Targets listed in nearest order. Gathered at 7:35 CST.
1081.50, 1085.00, 1089.25, (maybe 1091.25)..
1095 ends a momentum up-leg from 5/25 5:30 thru 5/25 17:30.
1136 ends a H&S pattern using the overnight ES data. (1117, if the bulls fail.)
5min ES gives the illusion of a cup or bull H&S forming a right shoulder.
1077.50 (if a triangle forms)
1074.25 to pause a downtrend move.
1070.50 to pause a panic down.
1060.75 may slow any panic down.
----
Higher confidence levels: 1074.25, 1085.00, 1117.00
Crazy overnighter's confidence (protective put spreads are more comfortable down here): 1061.00
Friday, May 7, 2010
Perspective from Monday, April 19
My perspective was: "But, what will it take to scare away investors to stay in treasuries long enough to keep the rates down? Just watch the charts, and be aware of the paths it offers."
Yesterday's market crash (large -8%+ intraday low) may be the new direction for the PPT: Make an unbelievable panic day, to create uncertainty and a rush to Treasuries. Well, it worked. This morning, mortgage rates are again below the magic 5%, while the US Dollar has broken a new high.
This is a win-win scenario. The Euro/Greece crisis made the US Dollar a great place to park cash. The market crash moved significant interest into treasuries. Oops? Did someone forget about the bond market's reaction?
Regarding money flows:
SPY topped buying on weakness, large inflow of money on a falling price.
AGG (iShares Barclays Aggregate Bond ETF) topped Selling on Strength, for large outflows of money on a rise in price.
Yesterday's market crash (large -8%+ intraday low) may be the new direction for the PPT: Make an unbelievable panic day, to create uncertainty and a rush to Treasuries. Well, it worked. This morning, mortgage rates are again below the magic 5%, while the US Dollar has broken a new high.
This is a win-win scenario. The Euro/Greece crisis made the US Dollar a great place to park cash. The market crash moved significant interest into treasuries. Oops? Did someone forget about the bond market's reaction?
Regarding money flows:
SPY topped buying on weakness, large inflow of money on a falling price.
AGG (iShares Barclays Aggregate Bond ETF) topped Selling on Strength, for large outflows of money on a rise in price.
Indicators Still Point to Range/Downtrend
Unfortunately, the range created by yesterday's exploits provides for possibly further 2% swings in the market. This is already apparent in the overnight ES-mini futures 10 to 11 point price gyrations between 1022 and 1034.
If acceptance kicks in while we are down-trending, expect a test of the recent low. If acceptance arrives when it shows life of an uptrend, then yesterday's low will be a significant resistance point.
My TED Spread commentary holds: "If the other shoe to drop coincides with a break down of the TED spread, expect that climax-sell day's low may become a support point." My context was for the market to 'climax' over the next couple of weeks, not that same day.
My comment from yesterday regarding the Fear Barometer holds: "A break in the Fear Barometer's pattern may indicate a reversal to long or start of a short term ranged market forming."
On 5/6/2010, the fear barometer went lower from 22.62 to 20.85, touching the lower support of the fear channel. The longer term pattern shows an elliptical increase in the cost to protect a position with an option collar, if yesterday's close of the fear barometer holds. So, it may become unfashionable to hold Puts, in case a volatility crush occurs. I would expect this if the fear barometer breaks yesterday's low of 20.85 significantly. This would say the option writers are comfortable with the short term market activity.
If acceptance kicks in while we are down-trending, expect a test of the recent low. If acceptance arrives when it shows life of an uptrend, then yesterday's low will be a significant resistance point.
My TED Spread commentary holds: "If the other shoe to drop coincides with a break down of the TED spread, expect that climax-sell day's low may become a support point." My context was for the market to 'climax' over the next couple of weeks, not that same day.
My comment from yesterday regarding the Fear Barometer holds: "A break in the Fear Barometer's pattern may indicate a reversal to long or start of a short term ranged market forming."
On 5/6/2010, the fear barometer went lower from 22.62 to 20.85, touching the lower support of the fear channel. The longer term pattern shows an elliptical increase in the cost to protect a position with an option collar, if yesterday's close of the fear barometer holds. So, it may become unfashionable to hold Puts, in case a volatility crush occurs. I would expect this if the fear barometer breaks yesterday's low of 20.85 significantly. This would say the option writers are comfortable with the short term market activity.
Rumors from the News
The blame game (confusion) continues for yesterdays epic collapse of the DOW/SPY/QQQQ:
A) European banks stopped lending. The rumor spread like wildfire. This rumor was quickly proven to be false, but that fact circulated the net very slowly.
B) A Citigroup trader 'fat fingered' a 16M(illion) trade as 16B(illion). Citigroup of course came out overnight saying they was "no evidence" of "erroneous trades," which is neither confirmation or rejection of their potential selloff activities.
C) Sell programs kicked in to knock out the supports of major index stocks. This is possible, but probably more accidental, given those programs are probably triggered live by unusual market activity.
D) The NYSE breakers started to kick in, but exchanges outside NYSE continued trading without the breakers.
So, once the SEC/media dispels all those rumors, does this market have the bulls to go higher?
A) European banks stopped lending. The rumor spread like wildfire. This rumor was quickly proven to be false, but that fact circulated the net very slowly.
B) A Citigroup trader 'fat fingered' a 16M(illion) trade as 16B(illion). Citigroup of course came out overnight saying they was "no evidence" of "erroneous trades," which is neither confirmation or rejection of their potential selloff activities.
C) Sell programs kicked in to knock out the supports of major index stocks. This is possible, but probably more accidental, given those programs are probably triggered live by unusual market activity.
D) The NYSE breakers started to kick in, but exchanges outside NYSE continued trading without the breakers.
So, once the SEC/media dispels all those rumors, does this market have the bulls to go higher?
Tales from the Pit
Option spreads were horribly wide. Last tick 5.72; Bid 4.40; Ask 5.85. That spread is a deal breaker for exiting a position. Volatility was high, because there were no buyers AND no put sellers (except me apparently). This was obvious when I placed my limit order at 5.70 and it sat there, then at 5.20, and it sat there. Before the close, the spreads were getting better.. Bid 4.90; Ask 5.60. I took that opportunity to exit unfavorably, but at least lower my Put exposure.
Another interesting note. On the IWM Puts, there were 4732 contracts floating at bid AND ask limits. Each time I moved my limit, Mr Market Maker or HFTs came in right in front of my limit order, so I effectively was fighting to get out of a position with the market maker, because my puny position was eclipsed by the 4732 contracts floating at the same limit. Great liquidity, huh?
ThinkOrSwim (TOS) posted a message @13:45:39 "Intraday Futures Requirements have been raised to 50% due to market volatility."
In the futures, with supposed "high liquidity" offered bid/ask spreads that were tight, but jumped 3-5 points within seconds! No sooner had I grabbed a long ESM0 at 1093.25 @13:48:46, and it plunged to 1084.50 @13:49:48. At 13:51:10, the market was showing signs of stabilizing, and printed 1097.25 and at 13:54:52 it printed 1109.25.
Hitting buy/sell in the TOS trader took 3-8 seconds to complete. This showed the system was overstressed. The orders once received by TOS had a less than 1 second transaction time, but the network delay was horrible.
It's possible that as everyone "tuned in" to their trading platforms or websites, the performance degraded greatly.
E*Trade was the most responsive and allowed me to do realtime quotes (although horrible bid/ask was present).
Fidelity was horrible. Log in took over 2 minutes. Refreshing a position page took over 3 minutes. Submitting an order took over 2 minutes and for the three times I could get to an order page after 3pm EST and hit "Submit" on my order, NOT ONE of the three orders transacted.
Fidelity gets my "Epic Fail" award as a broker. Let me fight the spreads, not your unresponsive website and order processing weakness.
This goes to say that the broker giant Fidelity CANNOT handle the traffic.
Attempting to call Fidelity during "panic" will park you in line behind the thousands of others also calling.
Another interesting note. On the IWM Puts, there were 4732 contracts floating at bid AND ask limits. Each time I moved my limit, Mr Market Maker or HFTs came in right in front of my limit order, so I effectively was fighting to get out of a position with the market maker, because my puny position was eclipsed by the 4732 contracts floating at the same limit. Great liquidity, huh?
ThinkOrSwim (TOS) posted a message @13:45:39 "Intraday Futures Requirements have been raised to 50% due to market volatility."
In the futures, with supposed "high liquidity" offered bid/ask spreads that were tight, but jumped 3-5 points within seconds! No sooner had I grabbed a long ESM0 at 1093.25 @13:48:46, and it plunged to 1084.50 @13:49:48. At 13:51:10, the market was showing signs of stabilizing, and printed 1097.25 and at 13:54:52 it printed 1109.25.
Hitting buy/sell in the TOS trader took 3-8 seconds to complete. This showed the system was overstressed. The orders once received by TOS had a less than 1 second transaction time, but the network delay was horrible.
It's possible that as everyone "tuned in" to their trading platforms or websites, the performance degraded greatly.
E*Trade was the most responsive and allowed me to do realtime quotes (although horrible bid/ask was present).
Fidelity was horrible. Log in took over 2 minutes. Refreshing a position page took over 3 minutes. Submitting an order took over 2 minutes and for the three times I could get to an order page after 3pm EST and hit "Submit" on my order, NOT ONE of the three orders transacted.
Fidelity gets my "Epic Fail" award as a broker. Let me fight the spreads, not your unresponsive website and order processing weakness.
This goes to say that the broker giant Fidelity CANNOT handle the traffic.
Attempting to call Fidelity during "panic" will park you in line behind the thousands of others also calling.
Thursday, May 6, 2010
TED Spread Going Higher; Fear Barometer Leveling Out
The Euro/US bank lending rate (TED Spread) increased above 23.67 this morning, and has created a short term uptrend. Risk implied by European banks (bailing out Greece, riots in Greece, and "Who's next?") is raising fear. A break above 25 implies further bank/lending stress. It is likely Portugal's dirty laundry will be aired soon. If the other shoe to drop coincides with a break down of the TED spread, expect that climax-sell day's low may become a support point.
The Fear Barometer for the past three market days (4/30-5/4) has held around 23.02-23.09. During those market days we have seen one of the largest intraday up days and a complete reversal, leaving the Q's 5% behind. A break in the Fear Barometer's pattern may indicate a reversal to long or start of a short term ranged market forming.
The Fear Barometer for the past three market days (4/30-5/4) has held around 23.02-23.09. During those market days we have seen one of the largest intraday up days and a complete reversal, leaving the Q's 5% behind. A break in the Fear Barometer's pattern may indicate a reversal to long or start of a short term ranged market forming.
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