Recovery or Dead Cat Bounce?

[MRC & Co]

Its called

THE VIBE

MRC & Co.

THE VIBE.

gg

lol, unfortunately, I don't get that either GG..............?

 

[JeSSica WaBBit]

THE VIBE - reference to the lawyer in 'The Castle'........

 

[Grinder]

you will look for any weakness or a retracement to add some bearish weight? What do you mean by that last part?

I speak my own language & only trade options... so in a nutshell, a correction will have me adding puts as we approach high 3800s (bearish weight) to see a corrrection get us down to 3500s where I will try & get my deltas neutral again.

 

[Uncle Festivus]

Keep you head up Uncle Festivus!

I enjoy reading your posts.

As long as there not to Bearish

ASX 200-4200 by Friday yeha!!!

Best

G

Although it may not appear that way, I try to stay objective and impartial (often to my own trading detriment ), although I have obvious bias towards some directions based on my interpretation of data & supposedly facts. If that get's the label of 'bear' then no matter, who cares?

The way I see it there's currently 2 types of charts going around, depending on which market you look at - the ascending wedge & the rollover top. In the old bull phase we would get a fresh round upwards after the pause, but with trigger fingers on the sell button it's a different ball game now?

So, with the "bazooka's" having been fired in anger, interest rates zero bound, quantitive easing still to show it's hand, and the bastions of money shuffling having just played the "earnings surprise" trump through creative and complicit accounting, what have they got left in the tank to keep this going above and beyond the already record bounce from the perceived lows?

The old "weight of money on the sidelines" paradigm? I don't know - anyone like to put forward a compelling bulls case? If I were looking at my job security, and watching 700k of my countrymen loosing theirs (every month!), and had some cash in the bank, taking a punt on the stock market wouldn't be high on my list of priorities.

On the mark to market rules, all it changes is when the assets get to be valued, not if, delaying to such a time to be more favourable? Still sitting on trillions of as yet not recorded losses?

There is talk of having a non binding auction with these toxic assets such that the winner is not bound to the price and in fact can cancel the deal, but the winning price would stand as the accepted market price of the assets. Not much room for manipulation there eh? Fun & games indeed

Do a search on "quant deleveraging" for some scary info indeed.

 

[Beej]

Inside Business on the ABC just stated this morning that the DOW rally (which is up over 6 weeks now) is the most sustained rally for 2 years and the best since 1938.

I really think that you can't label this a dead cat bounce - that arguments done.

What we should be discussing now is have we seen the bottom? Or does the inevitable retracement after such a good rally have a significant chance of making a new low, and therefore consigning this to be an overly optimistic bear market rally? Or will higher lows continue to be made and therefore show that this was the first stage of a longer term market recovery?

I don't know the answer to that question - and probably nobody does! However, what I do know is that either option is a POSSIBILITY, and therefore think the market needs to be traded accordingly, with an objective eye on either scenario.

Cheers,

Beej

 

[MS+Tradesim]

However, what I do know is that either option is a POSSIBILITY, and therefore think the market needs to be traded accordingly, with an objective eye on either scenario.

Yep, it is good to be open to all possibilities, not just the ones we believe most likely. Otherwise we end up preferring our beliefs about what we think should happen, over trading what is happening. And discounting long shots is why we are here now...analysts didn't believe the worst would happen, so they over played risk and leverage.

I still think we have at least one more leg down but really, no-one knows. If we really believe anything can happen, then we can stay flexible - up, down or otherwise.

 

[moXJO]

I don't think there is any surprise of where the AUS market is now (I think someone called it roughly, on the first page). If it can be sustained is the big question. While the US fudges figures in the books we may be in a better position.

Wouldn’t mind some peoples thoughts on this.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
China is stock pilling metals.

The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).

While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.

We are well positioned in Asia. And Ruddy doesn’t mind really licking boot when it comes to the Chinese. And with a massive Infrastructure program underway in China. It may keep resources alive and well. Position yourself on drops I suppose.

 

[MRC & Co]

Ah, gottcha Grinder!

On the rest of the posts after, reckon you should stay open to possibilities, but ultimately, you still need to have a bias, or you should be spread trading.

 

[GumbyLearner]

Although it may not appear that way, I try to stay objective and impartial (often to my own trading detriment ), although I have obvious bias towards some directions based on my interpretation of data & supposedly facts. If that get's the label of 'bear' then no matter, who cares?

The way I see it there's currently 2 types of charts going around, depending on which market you look at - the ascending wedge & the rollover top. In the old bull phase we would get a fresh round upwards after the pause, but with trigger fingers on the sell button it's a different ball game now?

So, with the "bazooka's" having been fired in anger, interest rates zero bound, quantitive easing still to show it's hand, and the bastions of money shuffling having just played the "earnings surprise" trump through creative and complicit accounting, what have they got left in the tank to keep this going above and beyond the already record bounce from the perceived lows?

The old "weight of money on the sidelines" paradigm? I don't know - anyone like to put forward a compelling bulls case? If I were looking at my job security, and watching 700k of my countrymen loosing theirs (every month!), and had some cash in the bank, taking a punt on the stock market wouldn't be high on my list of priorities.

On the mark to market rules, all it changes is when the assets get to be valued, not if, delaying to such a time to be more favourable? Still sitting on trillions of as yet not recorded losses?

There is talk of having a non binding auction with these toxic assets such that the winner is not bound to the price and in fact can cancel the deal, but the winning price would stand as the accepted market price of the assets. Not much room for manipulation there eh? Fun & games indeed

Do a search on "quant deleveraging" for some scary info indeed.

I'm of the same mind as Unc.

It is difficult to remain unbiased and impartial in a once in a lifetime pile-up
like this this one. The manipulative media don't help either.

I think the housing problem in the States has more legs and I think the roots of the systemic failure in the US remain unresolved.

This is from an article by Jim Willie from the Golden Jackass Newsletter

http://financialsense.com/fsu/editorials/willie/2009/0416.html

The two root causes of the deep historically unprecedented US bank losses from bond assets and credit portfolios are housing price declines and home foreclosures. For to claim the banks have stabilized without the home prices or forced foreclosures is absurd on its face. What has changed would please US Federal Reserve Chairman Ben Bernanke, market psychology. He favors inflation expectations for USTreasury Bonds over monetary growth, as the USDollar is debauched into oblivion. He favors consumer sentiment for the USEconomy over retail store shutdowns and shopping mall vacancies. The Wall Street maestros sold the investment community a bill of phony goods that will be evident by summer. They engineered a bank sector rally based on falsified earnings reports, orders by the USFed to keep the Bank Stress Tests secret until May, a return of the uptick short stock rule, and a return to valuing bank assets by creative methods based upon valuation models. Those hidden proprietary models contain a scad of silly assumptions like a 7.0% jobless rate. The March data already gave us 8.5% on that meter, but the reality-based Shadow Govt Statistics claim the jobless rate (when people without jobs are counted) is 17.0% actually.

Here's a preview lecture from by University of Massachusetts Professor

www.capitalismhitsthefan.com:fan

 

[Grinder]

Ah, gottcha Grinder!

On the rest of the posts after, reckon you should stay open to possibilities, but ultimately, you still need to have a bias, or you should be spread trading.

Always spread trading, always hedged. Have a slight bias when I believe something is about to happen, as to either benefit from a big move or as protection from a big move. Nevertheless, like to remain neutral as possible as I'm a firm believer that the profits will take care of themselves if I manage the risk.

Possible capital loss is alot worse than potential profit loss in my IMO.

 

[Aussiest]

Okay, i am going to weigh in on this one. I don't have any fancy technical analyses to support my view apart from common sense, dwindling volume and a reduction in sentiment, but the "vibe" tells me this rally is going to downturn shortly, within the next few trading days.

I do believe we have hit the bottom, but i think we will retrace to the 3,300 - 3,400 mark. Why?

Because it is all smoke and mirrors in the US - we have not yet resolved the systemic problems that lead to this crisis.

 

[pilots]

Okay, i am going to weigh in on this one. I don't have any fancy technical analyses to support my view apart from common sense, dwindling volume and a reduction in sentiment, but the "vibe" tells me this rally is going to downturn shortly, within the next few trading days.

I do believe we have hit the bottom, but i think we will retrace to the 3,300 - 3,400 mark. Why?

Because it is all smoke and mirrors in the US - we have not yet resolved the systemic problems that lead to this crisis.

HOW TRUE, you can only print money for so long, what we have had to date is only 4play, the big bang is yet to come.

 

[Aussiest]

HOW TRUE, you can only print money for so long, what we have had to date is only 4play, the big bang is yet to come.

I am no expert on this stuff, but my common sense tells me if there is not enough $$$ to go around, then something has to give.

An example is the possible downfall of GM. The Govt has given it 3 weeks (don't quote me, just an estimate) to drastically change it's operations. How can it be done in 3 weeks? Restructure, downsize staff. And then, is demand suddenly going to rise enough to support whatever staff they have left? I could be wrong, but it seems a fundamental flaw to expect a solid turnaround in such a short amount of time.

And, as a friend of mine so poignantly points out, have we seen the "true" figures yet? Are we still going off last years profit reports? Have we seen the new conditions reflected in the most recent financial reports (has the debt been "realised" yet)?

And, she reckons there will be more job losses, which will result in mortgage defaults and more toxic debt. Also, more businesses will go broke, which will result in toxic debt to other businesses and lenders.

 

[sammy84]

An example is the possible downfall of GM. The Govt has given it 3 weeks (don't quote me, just an estimate) to drastically change it's operations. How can it be done in 3 weeks?

I think what is expected there is a change of deal with its bondholders and the workers unions. This can be done in that time and save them a lot of money.

Well this week will be fun. Bearish divergence is present, but who knows what will come out of the US to throw my such divergence out the window.

 

[RayG]

Do a search on "quant deleveraging" for some scary info indeed.

Interesting, observations, the program traders using quantitative analysis are mostly (Only 1 out of 80 made money) losing money during this rally.

I would be interested to know why their computer models are failing, it might provide some insight to understanding exactly what forces are at play in the market.

His arguments about high speed liquidity went pretty much over my head I'm afraid, money is money as far I can tell, but then my knowledge of this sort of quant trading is very limited. Maybe someone with more experience can help out here.

Thanks for pointing that out Uncle F, interesting times indeed.

 

[ivant]

a little cat tells me that institutional buying has seized a while ago in the pits of the NYSE and that sells are starting to come through. that would explain the exhaustion. whether its a long term move or not we will see

 

[UPKA]

Interesting, observations, the program traders using quantitative analysis are mostly (Only 1 out of 80 made money) losing money during this rally.

I would be interested to know why their computer models are failing, it might provide some insight to understanding exactly what forces are at play in the market.

His arguments about high speed liquidity went pretty much over my head I'm afraid, money is money as far I can tell, but then my knowledge of this sort of quant trading is very limited. Maybe someone with more experience can help out here.

Thanks for pointing that out Uncle F, interesting times indeed.

from wat I observbed, that isn't the case. I work for a software firm that provides these market makers etrading solutions, such mass quoting and auto responding functions using inbuild or custom pricing and vol models for pricing etc. the demand for the product has never been higher, especially in the APAC region. just to name a few... Tibra, IMC and Optiver are recruiting more quant traders than ever, right now 80% of all quant jobs on the market are coming from these firms. If liquidity is reducing, and worse is to come, I'm sure these guys will notice it first.

 

[helicart]

another global bear here.

I might be wrong but I still think the US consumer is THE leading indicator of global trade. They are 20-25% of global gdp.

Even when US banks start to loosen domestic credit, I can't see consumers clammering to get back to previous levels of debt fueled consumption, which will dampen business investment.

China gdp is less than a 1/3 of the US, and 12% of US/EEC.

That's a lot of consumption China need to pick up to cover the global slow down.

They say the markets lead the economy. I say :bs: they didn't lead sub prime.

Let's see how US earnings reports and unemployment unfold over the rest of the year. My view is they are going lower and staying there for a few years yet.

Meredith Whitney is an excellent US finance analyst.
Hugh Hendry was one of the most successful hedge fundies last year.
They are both bearish for the long term.

One things for certain....there's going to be a lot more USDs printed yet.

 

[RayG]

from wat I observbed, that isn't the case. I work for a software firm that provides these market makers etrading solutions, such mass quoting and auto responding functions using inbuild or custom pricing and vol models for pricing etc. the demand for the product has never been higher, especially in the APAC region. just to name a few... Tibra, IMC and Optiver are recruiting more quant traders than ever, right now 80% of all quant jobs on the market are coming from these firms. If liquidity is reducing, and worse is to come, I'm sure these guys will notice it first.

Hi UKPA,

Thanks for that, I am pretty much totally ignorant about quant trading and how it works, but the information I was referring to is available here while I am always pretty skeptical about most of the doom and gloom blogs, the comment attributed to Merrill's Mary Ann Bartels and the sharp pull back late March seems significant.

Then...

What happens if only the computers are left doing the trading against each other?

Regards

Whoops forgot the Barclay Capital Quote.. extracted from here

The recent market rally that started on March 10th has been dramatic, unexpected, and actually quite painful for the vast majority of quantitative equity managers. Based on our conversations with numerous managers in recent weeks, we believe that most quantitative managers’ portfolios were not positioned in expectation of a rally. Of the nearly 80 managers we have talked to, only one manager said they were up since March 9th and the clear majority admitted to being notably down or stopped out on their positions. These managers were both long-only and long-short quant managers using market neutral and non-market neutral strategies, sector neutral and non-sector neutral strategies, longer term and intermediate term holding periods. It is fair to say that just about everyone is bewildered and trying to understand when this rally will end.

 

[matty2.0]

another global bear here.

I might be wrong but I still think the US consumer is THE leading indicator of global trade. They are 20-25% of global gdp.

Even when US banks start to loosen domestic credit, I can't see consumers clammering to get back to previous levels of debt fueled consumption, which will dampen business investment.

China gdp is less than a 1/3 of the US, and 12% of US/EEC.

That's a lot of consumption China need to pick up to cover the global slow down.

They say the markets lead the economy. I say :bs: they didn't lead sub prime.

Let's see how US earnings reports and unemployment unfold over the rest of the year. My view is they are going lower and staying there for a few years yet.

Meredith Whitney is an excellent US finance analyst.
Hugh Hendry was one of the most successful hedge fundies last year.
They are both bearish for the long term.

One things for certain....there's going to be a lot more USDs printed yet.

Helicart, you make some great points here. Especially the one about markets being behind the 8-ball re; sub-prime back in 07/08.

Yet, I think there's a difference between being oversold vs. being forward looking. I think the recent rally is a slight recovery from the former.

Nonetheless, history has shown that it's less costly to be late than too early.