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Posted by Martin October 12, 2011
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Stock advance on Europe hopes

Stock advance on Europe hopes

Source CNN Money

Dow

A broad rally lost steam during the final minutes of trading, but stocks still ended sharply higher Wednesday as investors welcomed the latest plan to recapitalize European banks.

“We’re continuing to see a shift in investor sentiment,” said Art Hogan, managing director at Lazard Capital Markets. “Last week, it seemed like the sky was falling and there was no end in sight. Now, there’s a perception that Europe will come up with a TARP-like backstop for European banks.”

European Commission president Jose Manuel Barroso said Wednesday that policymakers need to act immediately to resolve the long-running crisis. Barroso also said that banks that do not satisfy capital requirements should be barred from paying out dividends and bonuses.

“We still don’t have a concrete plan, but it seems like officials have more of a sense of urgency and are talking about credible solutions, which is exactly what the market needs,” said Hogan.

Stocks have been climbing since the start of the month as hopes for a solution to Europe’s debt crisis continue to grow.

Wednesday’s advance was the sixth out of the last seven days for the S&P 500 and Nasdaq, and fifth for the Dow. The three major indexes are up between 8% and 11% since Oct. 3, when stocks hit their lowest levels in more than a year.

Every development overseas is getting investors’ front-and-center attention. More than 80% of the experts surveyed by CNNMoney agree that debt problems overseas are the most challenging hurdle for the market.
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Posted by Martin October 11, 2011
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Will the market skyrocket or dive?


We have had an impressive re-bound these days, but is this rally sustainable? The market is already showing a sign of weakness. Today’s trading is forming a shooting star candle (we are not done yet, so by the end of the session all can be different). The volume is rising and we seem to be exhausted. However, a couple of next days will show.

What’s happening today? Well, the European debt crisis hasn’t been solved and so far we have seen a bunch of promises and hopes out there. I still think that European leaders are preparing Greece for default, so it won’t hurt too much. It will hurt, but not big banks, but tax payers who will pay for it. And thus we are still heading into another decline.

But I am not speaking about decline in this short term, which will be a correction of this rally. Well, the question would be how deep we will go. Since this rally is quite extended it may not be a deep decline. And if the decline will not be that deep, then yes, we may be seeing a trend reversal. But if the European crisis shows up back in its natural and naked version (so not “breaded” in the Sarkozy and Merkel’s crap) we may see a huge drop although technicals are now somewhat positive.

The US growth is nothing extraordinary too, so as earnings kick in, we may see some surprises out there. I wish to be wrong, so let’s wait for the next.

Happy Trading!




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Posted by Martin October 10, 2011
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Is the market rebounding?


Today’s trading, although based on hopes, could be read as a reversal approach. We broke significantly above 50 day MA. The volume was a bit weak, but still, the rally can count as a breakout. The question is whether it will mark a rally attempt and we are ending the bearish trend or this would be just a bull trap.

This rally is now overextended and we will see a pull back. The question is, how deep such pull back will be. We can start sliding back down, or we can be witnessing a slow reversal in trend back to bullish trend.

Although I believe, that the market rallied on phantom data we have been hearing for months and no solution at sight. Greece will default although not yet, but it will happen and that will affect the US as well, so we have a big pressure in front of us.

Thus today I closed some positions for profit (some for a small loss) and now I will be waiting for the next move. I might play the pullback as well.

Happy Trading!




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Posted by Martin October 10, 2011
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Here we go again, hopes, pledges and promises


Market is growing again. On hopes, promises and pledges. A big bang is close, when those idiots in the market realize, that these are just plain promises which cannot be accomplished without hard and merciless changes or cuts.

While talk of a strategy is encouraging, the lack of details is keeping investors and markets on edge.

“There is still a healthy bill of skepticism because we’ve been here before — many times before,”said Michael Hewson, analyst at CMC Markets in London. “All Merkel and Sarkozy have done is reiterated their statements from earlier and kicked the can down to Cannes.” Investors have been quick to react to headlines concerning Europe’s debt crisis.

“Dexia passed the stress test earlier this summer with flying colors, yet here we are now, three months later, and it needs a bailout,” said Hewson. “I think that begs the question as to whether Dexia is a special case or if it’s one in a long line of other bailouts.

Well, I closed my puts on SPY and now, let’s wait for this bubble to burst.

Happy Trading!




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Posted by Martin October 07, 2011
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Unbelievable movement of the market


I am surprised what moves the market today. When you look at all data coming out of Europe and the US, one cannot believe this market is rising. Well, it is happening (maybe today I should say it was happening, since I think we are at reversal). I swallowed my pride, sold my SPY puts with a loss and move on. Since I believe the market is pointing down I replaced the puts with new SPY put holdings with higher strike price.

Next time, I have to respond quicker then I did this time and didn’t exit fast enough.

Happy Trading!




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Posted by Martin October 05, 2011
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Stocks rise on hopes for European banks


In the article on Yahoo.com “Stocks rise on hopes for European banks” I have found a following comment from a user named Kristen:

Last night, John Moulton, in an interview on the news said that the EU has no real plan to shore up the debt crisis & in essence, US traders will believe what they want. Also on the hiring side for the service sector hiring is increasing in some areas to get ready for the holidays – by January they will be right back in line like everyone else. Short term fixes in hiring & throwing good money to fix problems for the short term will only leave us like John Mouton said worse off later on. Somewhere, there is going to be a fall.

Well, what else to say? 100% true.
From the technical perspective, the market (SPY) was oversold and needed a correction, however, it still is a bearish correction on the way down.

Happy Trading!




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Posted by Martin October 05, 2011
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SPY rised almost 2% on hopes for rescue of European banks


The market (SPY) rised on hopes and wishful thinking today on mediocre volume. Nothing exciting today.

“The market is trading on sentiment right now, not fundamentals,” said Rob Stein, head of Astor Asset Management. “People are hoping that the bounce yesterday means that we’ve hit a bottom, but the problems that were in the economy Monday haven’t changed since then.”

The US economy isn’t any stronger today and Europe hasn’t solved their problems at all. They are melting it a bit, so when it hits with full strength, it won’t be that hard. At least they hope for it.

So what is the outcome? If you bought higher, sell now before the market falls again. Mr. Market is offering you a way out.

Happy Trading!




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Posted by Martin October 04, 2011
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Stock market in rollercoaster


Wow, today’s trading was really crazy! I must admit I suffered some big hits today. Well, overall I am still up and making money, but some $500 day loss. Little bit less than that, actually.

What’s crazier here is the reason for such irrational move of rallying up in the last 30 minutes of trading. The whole day S&P 500 (SPX or SPY) was trading almost 200 points down and last 30 minutes a huge reversal. On a quite high volume. But what was behind it? Just a report of the European Central Bank that they are working on re-capitalizing European banks with new capital. But where do they want to take the money from? The whole Europe is sinking in debt and they want to put more money into banks. Where from?

I have read an opinion somewhere on the Internet, that all this is just a smoke and mirror cover to hide the reality – spreading the Greek debt among more banks or investment institutions so those over-exposed banks (mostly French and German) will not get hit when Greece finally defaults.

I must admit, that I do not see any other reason for this madness.

To support this take a look at French-Belgian bank Dexia. The bank is overly exposed to Greek bonds, mostly heavily undervalued or better devalued. Another impulse to this market move was that the Belgian and French Government agreed to help. However, the crisis inside the bank is so deep, that this bank may become the first victim of the debt crisis. At this point the bank has liquidity problems and is seeking to increase her capital reserves. But stock holders do not want the bank to borrow more money and they would rather see selling portions of the bank. That would mean splitting the bank into two units and selling one unit to increase reserves.

Well, no matter what will happen in Europe I do not think, this solves the problem and thus I expect October to be more sluggish. We may see drops in the value and more downside move. However, thanks to the elevated volatility (VIX.X) these swings will be more wild and vicious.

Today’s rally just stopped at the (previous support) now resistance and I do not see much of an impulse pushing this market higher (back thru its new resistance). Therefore we may see a reversal tomorrow or the following day declining towards 100 – 105 level. If that happens, I will not only recover all today’s losses, but make nice profits. If it won’t happen, I will have to swallow my pride, get out of the bearish position and move on.

Happy Trading!




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Posted by Martin October 04, 2011
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Fed is going to help faltering economy, said Ben Bernanke


(Reuters) – The Federal Reserve is prepared to take further steps to help an economic recovery that is “close to faltering”, Fed Chairman Ben Bernanke said on Tuesday.

Great! And investors got crazy about this proclamation and started buying. Good move if you want to lose money. Are these idiots out there blind? O.k. I am asking Mr. Bernanke:

 

HOW?

 

“The (Fed’s policy-setting Open Market) Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability,” Bernanke told the Joint Economic Committee of Congress.

If this statement made someone exited, then that guy should stop trading or investing. He or she is ruining his investments.

How can FED help?

Printing more money? They’ve been doing it since the crisis started on a fast pace than ever before. And how that helped so far?

Lowering the interest rate? It’s been lowered to zero already and how did it help so far? Are they going to pay borrowers for borrowing money? Something like backward-interest rate?

More “Operation twist” action? What will that do? Moving one debt from one pocket to another?

Please, can someone explain me how Mr. Bernanke wants to help the economy and bad situation in Europe? I ma reconsider my bearish view.




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Posted by Martin October 04, 2011
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S&P 500 enters a bear territory


Experienced traders and investors analyzing markets on daily basis knew this in the beginning of August 2011. The market started this process of reversal in February 2011. we went sideways and we were creating a head and shoulders pattern (see my previous posts speaking about it during June and July, when this was becoming more and more apparent). SPY then broke the neck line in August (August 2, and following days) and then we went deeply down. Some called this as a new mini crash. Later on we entered into a bear consolidation and created bearish pennant. Some saw a triangle. Yesterday we broke the pennant too which was more then expected.

However, media started talking about it today and some even yesterday. That may be a sign of bottoming. We may see some more downward movement, but when we will see capitulation (a hysteria in the market), that would be the time to reverse my bearish trades. As far as now, I am still bearish, but cautious.

Happy Trading!




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