International Index Trading

[wayneL]

We are getting some volatility back into the market... in summertime an' all. This could be another sign of unrest amongst the bulls. It is slowly being acknowledged that the Sup-Prime apocalypse is not over and that is IS having an effect on the economy (doh!) and only the most unreasonably steadfast bulls are refusing to consider the negative economic fundamentals.

Double Top? hmmmmmmm maybe the bell just rang.

 

[reece55]

We are getting some volatility back into the market... in summertime an' all. This could be another sign of unrest amongst the bulls. It is slowly being acknowledged that the Sup-Prime apocalypse is not over and that is IS having an effect on the economy (doh!) and only the most unreasonably steadfast bulls are refusing to consider the negative economic fundamentals.

Double Top? hmmmmmmm maybe the bell just rang.

Certainly rising volatility, but I can't see that a crash is imminent. Thats not to say i'm not prepared if there is one.

The US appears to be sidewards IMO - it's a stock pickers environment where selection is important. I like the look of the semiconductors however, looking really nice. Had a play at CY (Cyprus Semiconductor Corp), real nice long.....

However, I am still new in this game, so willing to take criticism here...
Cheers

 

[Kauri]

Double Top? hmmmmmmm maybe the bell just rang.

Just went out to see my Budgies and the smartest one amongst them is furiously ringing the little bell at thetop of their cage for all he is worth... maybe I should spread some lettuce around to distract him...

 

[wayneL]

Certainly rising volatility, but I can't see that a crash is imminent. Thats not to say i'm not prepared if there is one.

The US appears to be sidewards IMO - it's a stock pickers environment where selection is important. I like the look of the semiconductors however, looking really nice. Had a play at CY (Cyprus Semiconductor Corp), real nice long.....

However, I am still new in this game, so willing to take criticism here...
Cheers

Crash? No I don't think so either.

My favoured bear scenario is an extended 70's style bear where it just drifts downward for years... like Japan.

But if playing individual names, there will always be something in a bull market, particularly in the small/mid caps.

But in the big end of town, correlation is very strong and it will be interest rates that accentuate the other negatives. And note how the market is now starting to do the job that the CB's refuse to do properly... raise interest rates. Take a look around the world treasury markets; they're tanking. And there there is a multitude balanced on the razors edge as far as interest expenses are concerned, both corporate and private. Even Bear Sterns, of all companies, has come a cropper based on the the small interest rate raises so far.

Suddenly, instead of all negative news being ignored, all positive news will be ignored as sentiment shifts.

The valuations aren't frothy enough in the US for a crash... but they are elsewhere, most notably, China.

And Guess what will happen too? Stock to borrow to sell short will be in short supply, so it will be harder to play the downside with stock. Option IV's will sky rocket making pure put buys very expensive in terms of theta/vega risk.

This will happen sometime. Whether this is the start, who knows? The market will probably rise just to make me look like a tin hatter LOL. You may be prepared, but be prepared for surprises as well.

Extreme volatility (if that is what happens)is difficult to trade. But the US market is the best place to be in terms of flexibility. The ways in which you can profit from the bear is unparalleled.

Jeez this just started out as a short two line post and now i'm waffling

Enough

 

[Edwood]

Hang Seng looking interesting right now - definitely worth keeping an eye on imo

 

[Uncle Festivus]

I'm thinking now that it's not going to take much for this to come undone, maybe even starting in the EU. Look at the plausibles - EU markets at records, & interest rates have not really spooked them yet for a decent correction.
Nervousness in the US from all angles eg housing bust, bond market shenanigans, Bear Sterns & some others finally brave enough to mark to market their mortgage books, at the same time as finding it difficult for anyone to re-finance them.
Private equity losing it's access to cheap finance.
Things just seem to be aligning for a derivatives led whitewash; see who blinks first?
As Rod Stewart sang 'Tonights the night', remains to be seen if it will be alright.

 

[reece55]

Wayne
LOL about your description of a bear market - man, that sounds like a very hard market to trade in. Maybe bearish credit spreads would be the game and try for a passive income strategy?????

UF, I agree that it wouldn't take much to tip the balance right now. We only need a big PE firm to go down because they can't service the debt they have taken on with their excessively expensive acquisitions. Int rates need to be a little high yet though, but it's not going in the right direction. Watch the good ole carry trades..... A liquidity squeeze is more my worry...

Cheers

 

[wayneL]

Wayne
LOL about your description of a bear market - man, that sounds like a very hard market to trade in. Maybe bearish credit spreads would be the game and try for a passive income strategy?????

That's certainly one way (and a good way) to play high volatility situations. Don't neglect the synthetically equivalent debit spread though, depending on skew/bid ask spread, they can work out better.

 

[Uncle Festivus]

Wayne
UF, I agree that it wouldn't take much to tip the balance right now. We only need a big PE firm to go down because they can't service the debt they have taken on with their excessively expensive acquisitions. Int rates need to be a little high yet though, but it's not going in the right direction. Watch the good ole carry trades..... A liquidity squeeze is more my worry...

Cheers

Howdy Reece,
Thats the one - a liquidity squeeze. EU markets are off a bit tonight, more talk of interest rates. EU has never much fazed the US markets so it will be interesting to see how uncle Sam goes tonight, bounce or burn?

TOKYO, June 21 (Reuters) - Japanese exports grew more than expected in May, a boon for Japan's export-led economic growth that strengthened expectations of a Bank of Japan rate hike some time in the July-September quarter, most likely in August...

 

[Edwood]

Wayne
LOL about your description of a bear market - man, that sounds like a very hard market to trade in. Maybe bearish credit spreads would be the game and try for a passive income strategy?????

alright fellahs you're gonna have to explain that one to me... what ever happened to just going short the index?

 

[wayneL]

alright fellahs you're gonna have to explain that one to me... what ever happened to just going short the index?

Also a great way. No worrying about getting stock to borrow either.

A bear credit spread is when you buy calls and sell calls at a lower strike giving a payoff diagram something like this:

This one is constructed the bought leg higher than the current price, and the sold leg lower. It's called a credit spread because you receive more premium through the sold leg than you pay for with the bought one. Though I think Reece was meaning when both bought and sold leg are higher than the current price and looks like this:

 

[Arturius]

Looking at the charts now, I'm thinking a quick long scalp is the way to play it in the start of the day. The movement very much over extended, and I don't think we'll see a huge sell off at the start of day. At the end, its anyones guess, but if I was entering this market I'd go long and look to take quick profits.

We'll see how we go.

 

[Arturius]

Well, I was wrong about my predictions, but thats why hunched never make you profits, waiting for confirmation does

I'm waiting for a good place to go short at this stage for a quick scalp, waiting to see what volume develops.

 

[Arturius]

Scratch that, order didnt go through

 

[caleb2003]

Probably for the best looking at it now, wild swings in seconds

 

[Edwood]

cheers Wayne got the principle now thanks, but not sure I'd know how to spot one setting up!

lots of wild swings alright, took few points out of Dax last evening but on reduced position size, easy to get spanked when its like this

 

[professor_frink]

cheers Wayne got the principle now thanks, but not sure I'd know how to spot one setting up!

lots of wild swings alright, took few points out of Dax last evening but on reduced position size, easy to get spanked when its like this

How are you finding the Dax Edwood? I've heard good things, but never really looked at it.

 

[>Apocalypto<]

WayneL and Reece,

you both make very good points,

I am also now in a little more defensive state with the increased volatility.

I dose seem to be moving sideways on both the dow and the xjo.

Minor support does seem to be found on the dow so far on its 38% retrace point but it's early days there is also a assending triangle in the mix until it breaks though the Gann line.

there now two 45 degree ponits of seller harmony to beat which are minor.

very strong resistance at 13 700, yes it dose look weak but a open mind is needed in times like this so you don't lean to far to one side of the fence.

I am 50/50 till the confirmation move occurs.

I am yet to be conviced to close positions but stops are getting tighter.

Great payoff diagram Wayne.

 

[>Apocalypto<]

Just went out to see my Budgies and the smartest one amongst them is furiously ringing the little bell at thetop of their cage for all he is worth... maybe I should spread some lettuce around to distract him...

That's it I am closing out the budgie has spoken!

 

[Edwood]

How are you finding the Dax Edwood? I've heard good things, but never really looked at it.

hey Prof, Dax is good generally, lots of nice long moves - easier than FTSE which tends to be choppier. check Dax out on 1min with 510MA - trading the MA crosses is a pretty simple method for it really. only bummer is the hours but should be better for you guys in Aus