Charting the Crash

[money tree]

Crashy, my treacherous friend. You forget who your friends are.

As stated above, it's not the call, it's how you trade what's in front of you. I don't mind trading against my own sentiment, as detailed throughout this forum.

Calling this fall? Bah! it was bleedin' obvious.

I suppose its not unusual for wayne to see conspiracy in everything.

Sometimes, a "friend" will tell you when you are making an ass of yourself. Especially one who made the same exact error (well kinda.....I was a permabear during a BEAR market, but all my ranting never helped anyone). But if it helps you deal with it, you go right ahead and make me the bad guy.

 

[ducati916]

Well Wall St opened at DJIA -200

 

[ducati916]

S&P500 -22
NAS -45

 

[borat]

feel the correction has a more to come, the slightest hicup bring with it over reaction... I'm still waiting for things to settle before I start snapping up bargains... Yagshemash!

 

[theasxgorilla]

feel the correction has a more to come

No kidding...the S&P500 is off 1.5% already.

 

[wayneL]

I suppose its not unusual for wayne to see conspiracy in everything.

Sometimes, a "friend" will tell you when you are making an ass of yourself. Especially one who made the same exact error (well kinda.....I was a permabear during a BEAR market, but all my ranting never helped anyone). But if it helps you deal with it, you go right ahead and make me the bad guy.

The irony was hilarious Crashy. Was it intentional?

 

[wayneL]

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

http://yahoo.reuters.com/news/artic...tnews&rpc=44&ref=myrealestatemoney.com/RENEWS

NEW YORK, Feb 28 (Reuters) - Rising delinquencies may cause losses within some subprime mortgage bonds rated as high as the "A" rated classes, despite conventional wisdom that only the lowest-rated mortgage securities would be hit, according to UBS Securities data.

Among the 20 subprime asset-backed securities in a benchmark index, the ABX 06-2 index, run by Markit Group Ltd., six will likely sustain losses to "BBB-" classes based on UBS calculations, analysts led by Laurie Goodman said in a research note released on Tuesday.

Projected losses are so deep on two issues that they may exceed levels of protection included with the higher-rated classes, they said.
Reuters Pictures

The losses come as delinquencies continue to soar more than expected on most issuers' 2006 loans as a result of loosened underwriting practices and the abrupt end to the U.S. housing boom last year.

"People think the higher rated stuff will be protected because it's well subordinated" with lower-rated pieces, said Kevin Jackson, a mortgage strategist at RBC Capital Markets in New York. "That's the assumption people are making, but I agree there could be some problems higher up, at the margin."

UBS projected losses of 14.81 percent and 11.53 percent, respectively, on Morgan Stanley's (MS.N: Quote, Profile , Research) MSAC 2006-WMC2 and Lehman Brothers Holding Co.'s (LEH.N: Quote, Profile , Research) SAIL 2006-4. Morgan Stanley's issue is backed by loans of General Electric Co.'s (GE.N: Quote, Profile , Research) WMC Mortgage Corp.

Unique features of the two issues not considered by UBS's model could lower the loss estimate, UBS said. Morgan Stanley's issue includes a high percentage of second-lien mortgages that caused high losses in early months, while 35 percent of Lehman's issue carries private mortgage insurance.

Bonds in the $575 billion subprime asset-backed securities market are backed by loans to borrowers that typically have credit scores below 620 on a scale from 350 to 850. The bonds are broken into about 14 tiers based on ratings from "AAA" to "BBB-" or below, with the lowest ones absorbing losses first.

Delinquencies and hedge fund bets against subprime mortgages have sparked violent selloffs in Markit's indexes.

The "BBB-" class of the ABX 06-2 index has taken the brunt of selling, falling in price to $63.16 on Tuesday from about $95 in December, according to Markit.com. The "A" rated class fell to $90.17 on Tuesday from more than $99 in December.

 

[billhill]

Wayne or duc, I'm interested in how the bond market may signal a crash. I know little about bonds so in plain english are rising or falling bond yeilds an indicator of a stock market crash.

cheers

 

[Kauri]

Meanwhile, the dow futures are struggling early on again

 

[theasxgorilla]

Meanwhile, the dow futures are struggling early on again

I'll be curious to see what tonight (US day) brings...yesterdays price action (bar) on the S&P500 was indicative of market that was not able to find any selling support worth mentioning below the oh so psychological 1400 level.

What is there, besides ongoing sentiment, to drive the market below 1400 tonight? Any news, figures or prior events from other parts of the world that will weigh on the US market?

 

[wayneL]

Yen ticking up
Dow ticking down

YCT

 

[Kauri]

I'll be curious to see what tonight (US day) brings...yesterdays price action (bar) on the S&P500 was indicative of market that was not able to find any selling support worth mentioning below the oh so psychological 1400 level.

What is there, besides ongoing sentiment, to drive the market below 1400 tonight? Any news, figures or prior events from other parts of the world that will weigh on the US market?

1400 might correspond to the support line in the Dow... fundementally I am , as always, completely lost..

 

[theasxgorilla]

Wayne or duc, I'm interested in how the bond market may signal a crash. I know little about bonds so in plain english are rising or falling bond yeilds an indicator of a stock market crash.

cheers

Can someone please respond to this? I have a basic understanding but my explanation would not do the topic justice.

 

[Sean K]

Yen ticking up
Dow ticking down

YCT

YCT? Whats the Avatar Wayne? Looks like the US, but there's some detail I can't see. Must admit, I liked the hammock one the best.

Not sure what all this Yen action is going to do to a couple of my managed funds. I have 3 funds managed by Platinum who are big into Japan and their currency in a way that significantly reflects in their performance. I hope they had it right this time....

 

[theasxgorilla]

1400 might correspond to the support line in the Dow... fundementally I am , as always, completely lost..

I think 1,400 was closer to 12,250...

 

[wayneL]

YCT?

Sorry
YCT = Yen Carry Trade

As mentioned before the yen and the Dow (as proxy for any US indice) has developed quite a strong inverse correlation over the last three months. This week is has been particularly noticable.

So as the yen rises against other currencies, and particularly the USD, the carry trade unwinds forcing a liquidation of USD assets, viz, equities.

Whats the Avatar Wayne? Looks like the US, but there's some detail I can't see. Must admit, I liked the hammock one the best.

It's showing how a bull carcass is carved up

Not sure what all this Yen action is going to do to a couple of my managed funds. I have 3 funds managed by Platinum who are big into Japan and their currency in a way that significantly reflects in their performance. I hope they had it right this time....

I hope they are long yen

Cheers

 

[ducati916]

Wayne or duc, I'm interested in how the bond market may signal a crash. I know little about bonds so in plain english are rising or falling bond yeilds an indicator of a stock market crash.

cheers

Ok;

We are looking for the bond market to signal the equity market, thus we are not principally worried about the net yield, but the yield spread

We would look for an increasing spread between Treasuries and Corporates.
Thus in a flight to safety, the Treasury yield will fall [as they are bought] and Corporate yield will rise [as they are sold]

This will mean that corporate borrowing, or the cost of capital will rise, thus pressuring profit margins, thus reducing net profits.

If, corporations cannot *afford* debt, they must sell Equity.
Increased selling = increased supply = falling prices = increased cost of capital

Therefore, to maintain margins, in an increased cost of capital environment, corporations go to cost cutting;
*labour
*advertising
*R&D
*Dinner parties
*capital goods % investment
*Acquisitions & Mergers
*Others

As profit margins fall, P/E ratio's rise, thus selling via investors triggers momo traders, etc.

Thus we are looking for the flight to safety, away from the riskiest credits, thus an opening spread.

The flight to safety is also a trigger to close the Yen carry trade [on the blog]

jog on
d998

 

[noirua]

U.S. 1987 crash: http://www.lope.ca/markets/1987crash/

 

[ducati916]

Wakey-wakey guy's

The US market has thrown the toy's out of the pram again today.
As I type;

S&P500 [-25.1]
DJIA [-214]
NASDAQ [-45]

Watch out...................

jog on
d998

 

[wayneL]

Wakey-wakey guy's

The US market has thrown the toy's out of the pram again today.
As I type;

S&P500 [-25.1]
DJIA [-214]
NASDAQ [-45]

Watch out...................

jog on
d998

...and the Yen gave the heads up.