Charting the Crash

[ducati916]

The bid/ask arb is still there on GG but liquidity is drying up

 

[Magdoran]

The bid/ask arb is still there on GG but liquidity is drying up

What’s your timeframe – are you day trading these???

 

[ducati916]

Yup..........
I do a bit of everything

 

[wayneL]

What Wayne,


You the great bear, aren’t you short too???


Mag

Not as short as I'd like to be. Suspect the cavalry may show up. But short enough to matter

 

[Magdoran]

Yup..........
I do a bit of everything

Best of luck then, I'll leave you to it so you can focus on the trade!

 

[ducati916]

the arb is gone now

 

[Magdoran]

Not as short as I'd like to be. Suspect the cavalry may show up. But short enough to matter

Indeed Wayne,


Trying to top pick is a dangerous business… hence shorting on the lower high may offer a better probability, and that cavalry is always annoying if you're short...

However if this is an “ABC” style of correction, I’d take profits a bit before the obvious support (say half) then hopefully let the winner run if it’s impulsive… That’s the plan, anyway.

Mag

 

[Dr Doom]

Is it open ended Duc or can you see a bounce happening?.

 

[ducati916]

DD

Not sure I understand your question, but there will be a bounce in my opinion as the bears have been burned for quite some time, and they'll take profits quite quickly...thus the bounce on covering

But, it may frighten the bulls into getting out while the goings good, so I think we'll see another May style sell off

jog on
d998

 

[Dr Doom]

Ducati, open ended as in is this the start of a major correction or just a relief pullback. So you think it could go further?. I'm thinking that for it to be of crash proportions there must be a point where derivitives covering turns into a domino effect, but not sure when that point will be, or what the pain threshold is for those exposed. I expect to hear more Red Kite type stories emerge after these sorts of routes. Excess liquidity mixed with derivitives makes for an explosive mixture.

 

[ducati916]

DD

I'd say this will be a correction along the May type last year.
If the correction places enough pressure on counter-parties we may see something serious.

However, if it is the start of something big, you won't see it in the stockmarket first...............it'll be in the Bond market.

The sub-prime sector in the US is a massive problem.
Not just the rubbish lenders...but the big boys as well.
JPM has huge exposure as does a few others....they were reaching for yield

If the Bond market goes, the financial sector won't be far behind, and then the stockmarket may well follow.

jog on
d998

 

[ducati916]

DD

The Yield curve has been signalling a recession.
Look's like it's on it's way.

jog on
d998

 

[Dr Doom]

The conventional thinking is that it (a recession) is usually 3 or 4 qtrs after the inversion, but that may be sooner due to the 'velocity' of electronic money these days, the cronic problems in the US eg housing crash, sub-prime depression etc etc.

As discussed earlier on the commodities thread I think, China is increasingly looking like a house of cards too.

I think a correction of May proportions is hoping for the best case outcome?.

I think things happen a lot faster than they used too due to the ease of electronic money shuffling these days. Everybody gets on the train at various stops on the journey, but everyone wants to get off at the same time I think.

 

[ducati916]

DD

The Yield curve has already been inverted, or very close too it for at least that long. The key, is if it has been maintained.........and it has.

This destroys the banking business model.
When the credit cycle turns, which it is, then watch out.

The question is, will the FED lower the discount rate to stave off the recession?

Who knows, but the Politicians hate unemployment etc.
The pressure will therefore be on an *easing* policy.

If the FED eases, the Bond market will turn bullish in a hurry.
As will the stockmarket in all likelihood

jog on
d998

 

[wayneL]

DD

The Yield curve has already been inverted, or very close too it for at least that long. The key, is if it has been maintained.........and it has.

This destroys the banking business model.
When the credit cycle turns, which it is, then watch out.

The question is, will the FED lower the discount rate to stave off the recession?

Who knows, but the Politicians hate unemployment etc.
The pressure will therefore be on an *easing* policy.

If the FED eases, the Bond market will turn bullish in a hurry.
As will the stockmarket in all likelihood

jog on
d998

That could take the chains off the inflation monster, in which case they will have to raise again. I reckon we'll see some funny moves to stave off recession, but can't see the ultimate result being any different, only worse.

 

[Dr Doom]

DD

The question is, will the FED lower the discount rate to stave off the recession?

If there was a case study on what was going to happen we could have a look at Japan. Isn't this the classic stagflation scenario wherby no amount of lowering interest rates provided enough stimulis to the economy, to the point of zero interest. Japan is the end game poster boy for this current economic cycle with the US facing the same problem eg raise rates to combat (real) inflation while watching the real estate market (and consequently the general economy) get trashed. Or, lower rates but not have any stimulatory effect because the damage has been done?.

 

[ducati916]

Agreed,

They need a recession to work off all the excesses that have built into the system.

The Japanese example is slightly different in that the Japanese never went to a forced debt liquidation.

The US is much better in that way, if you need to go bankrupt [in most cases] you do.

The Japanese due to their cultural differences kept a lot of zombie corporations [even to this day]

jog on
d998

 

[wavepicker]

What Wayne,


You the great bear, aren’t you short too???


Mag

Great stuff Mag, you are the only guy on this forum who called a potential price and time high.

Starting to feel good about getting set up in a short position yesterday.
Too early to tell yet, but ot could be that the bears have come out of hibernation and those bulls might get their horns chopped!!

 

[Dr Doom]

Great stuff Mag, you are the only guy on this forum who called a potential price and time high.
QUOTE]

Close?
https://www.aussiestockforums.com/forums/showpost.php?p=127153&postcount=142

 

[wayneL]

I'm seeing a few posts around the traps like this one on an English forum:

What the hell's going on - just had a tearful relative on the phone who has just lost loads on mining shares. Mind you, they're a risky option at the best of times. What kicked all this off? Been tracking this all day through the newswires. Starting to really concern me. Glad I've sold most of my shares, etc.

SPI is down 3% on SYCOM