Key reversal

Quote from Nine_Ender:

I was just observing disparities between different markets and whether SPX is easier to trade; obviously any money making trade is good and you are into riskier leveraged plays ( and more profitable ) then I am at this time.

I had a theory a couple of years ago that Gold might be a bubble and recent market action suggests this might be in play now. There may be no buyers for a while.
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I guess we think alike.

Thread: Buying frenzy. China bought a huge 10% of world gold output in 10 days.

06-20-13 06:44 PM

Metals were so bubbled up the balloon has a long way to deflate. Commodities are deflating as the world is in a recession. We are deflating the largest credit bubble ever. Metals are a good SHORT until the bubble deflates and then sure up we go again. When? I'd think right around the time Japan resets in a couple of years.
 
Quote from Lojanica:


A rush for the exits followed by forced liquidations due to fund covenants which feed on themselves.
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From FT

"Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits. One Citi trader emailed other market participants to say: “We are unable to take any more redemptions today . . . a very rare occurrence due to capital requirements we are maxed out on the amount of collateral we have out.”

State Street said it would stop accepting cash redemption orders for municipal bond products from dealers. Tim Coyne, global head of ETF capital markets at State Street, said his company had contacted participants “to say we were not going to do any cash redemptions today”. But he added that redemptions “in kind” were still taking place.

"The falls violated risk tolerance levels for many investors and if they were leveraged at all they are likely facing capital calls." [/QUOTE]


But as mentioned I do not expect follow through today and in fact think a bracketed market will hold between 1580 and 1680 at least for a short stretch.

You see this all depends on the OMO and Ben is NOT pulling the plug. In fact he may INCREASE buying to smoke the sellers thereby confusing them into not selling so quickly the next time. So it is gonna be a bit tricky as the balloon is deflating. I'd look for opportunities either long or short that have a good risk profile and trade a narrow time frame.......forget buy and hold
 
Quote from Lojanica:

From FT

"Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits. One Citi trader emailed other market participants to say: “We are unable to take any more redemptions today . . . a very rare occurrence due to capital requirements we are maxed out on the amount of collateral we have out.”

State Street said it would stop accepting cash redemption orders for municipal bond products from dealers. Tim Coyne, global head of ETF capital markets at State Street, said his company had contacted participants “to say we were not going to do any cash redemptions today”. But he added that redemptions “in kind” were still taking place.

"The falls violated risk tolerance levels for many investors and if they were leveraged at all they are likely facing capital calls."

But as mentioned I do not expect follow through today and in fact think a bracketed market will hold between 1580 and 1680 at least for a short stretch.

You see this all depends on the OMO and Ben is NOT pulling the plug. In fact he may INCREASE buying to smoke the sellers thereby confusing them into not selling so quickly the next time. So it is gonna be a bit tricky as the balloon is deflating. I'd look for opportunities either long or short that have a good risk profile and trade a narrow time frame.......forget buy and hold
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exactly. Its tough to read his poker face at the moment. Given Bens stance he's got no fear of printing excess. I too was short but didnt have the balls to hold past a doubler on my puts. But im happier with something in the piggy bank rather than a swift kick in the teeth. I just cant get over how much premium was built into these things. Wasnt a cheap trade.
 
No edge holding over the weekend. In fact too risky. Wait for some action Sunday night and into the am session on Monday. Could go either way as we could drop a lot further before the FED would need to step in. Remember we are still 140 pts above the open and low for 2013 and volatility has been INCREASING.

As mentioned premium is expensive and its easier to follow the elephants than get stomped by them.

That is to say institutional money and the FED are moving the markets. HFT just greases the moves. When you see a BIG move like the key reversal followed by the move over the last 3 days you know that there has been a fundamental shift in portfolios. Deleveraging and rebalancing. But for Monday I see no edge on Friday afternoon for any positions unless you are a masochist.

I would expect sharp moves in both direction on Monday's trading with 15 minute to 30 minute moves followed by reversals most likely as the rebalancing continues juiced up by the bots.


I'm FLAT and in CASH going into the weekend. If I decide to short again I'll reload, same for any longs.
 
In my experience, the most obvious the signal is, the better it will be. That key reversal certainly held up enough to result in a big drop. Whether that is the top of this bull move will not be known for a long time, but it was the sign of A top, and that is all that matters.
 
The larger the dislocation in the least amount of time brings the greatest ability to arbitrage the most money.

Once one understands this condition the rest is execution.

Fact: 1. Market was extended.

Fact: 2. A fundamental change in market temperament occurred.

Fact: 3. Different time frames participants allow arbitrage opportunities to exist.

Fact: 4. Echoes reverberate and can increase in amplitude.


Apply that to the sequence of events over the last month and it makes a bit of sense. The complexity is that overlap between participants, timeframes and markets make it appear random and it is on face value. But as HFT illustrates it is not random at least under the microscope of each timeframe.

Bullshit or useful palaver you decide.

Thanks for the kudos.
 
Enough palaver.

DEFLATION

I'll say it again DEFLATION. BB scratched his head and said his inflation targets are far from being hit at 2%. See here http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp

All the CB's have expanded their balance sheet to unprecedented levels in an effort to stop deflation and yet here we are on the cusp. The economy was teetering on slumping back toward deflation then on May 21st interest rates began their biggest climb ever in 50 years, equities and metals sold off hard and the real estate freshly mending its horrendous beating went thud.

A liquidity trap has materialized. With interest rates rising investors will shun bonds. In a deflationary environment prices fall so money flows to cash. The strong dollar results in fewer exports as the cost for importers increase.

If we simply have disinflation and the FED can tip toe out of their QE and avoid a liquidity trap then equities will do well but the possibility of another round of deflation is real.

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From ECRI
Jun 21 2013
Assessing Deflation Risks for the U.S. Economy

Despite multiple rounds of quantitative easing (QE), the U.S. inflation rate has been plunging, with growth in the headline PCE deflator having dropped to a reading never seen outside a recessionary context. It is now at just 0.7%, well below the Fed's official 2% target announced in January 2012. Earlier, the Fed's unofficial focus was on core PCE inflation, which has now dropped to the lowest reading on record.

Meanwhile, inflation expectations have also declined, falling back to levels last seen well before the launch of “QEternity.” Even though Fed Chairman Bernanke suggested “tapering” could begin by year-end, for now QE is continuing unabated. What does this mean for U.S. inflation?

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One would think that BB and the FED understand the dilemma so my bet is unchanged 1450-1470 on the SP500 for the low and sans a deflationary rout which I doubt due to CB meddling and a constrained economy a sideways market bracketed by the low for the year and 1715 on the high side.
 
i think trading is about your money your decision but i don't see what risk you see in being short over the weekend. if you made me pick i would rather be short than long since Wednesday. i will say cash is king always though.

Quote from Lojanica:




I'm FLAT and in CASH going into the weekend. If I decide to short again I'll reload, same for any longs.
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True. But big movements like we had often retrace a considerable amount and I would rather reload at a higher level. I'm waiting for the next catalyst for another leg down. The last week of June and 1st week of July is frequently a short term bottom for the markets though so we could see more weakness this week for sure.
 
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