When ETF’s don’t work ($VXX, $VIX)
We are all caught up in the new bubble that I would like to call the Great "Enron Task Force" (ETF).
Basically ETF's are usually set up to mimic indices that we cannot directly buy. That is a great way to stay invested and diversified if you believe the stock market in general will do good or bad. The number of Enron Task Forces is now reaching the gazillions and "investors" are so drawn into them that they are getting bigger and bigger and bigger (can you guess already?).
Here is SPY ETF compared to the index that it tries to replicate. (Click To Enlarge)
As you can see the mirroring effect is almost so perfect that by owning SPY shares you will make nearly the same percentage as how the S&P 500 has performed. Thats GREAT! It takes pain away from doing individual stock research. Of course if you still want to invest in specific stocks with minimal effort and AMAZING returns I would recommend Bear Sterns. After you have made millions in Bear Sterns get your attention back to this useless post.
Hey I have an Idea! I believe Volatility will increase and VIX index will keep going higher again. Hmm "Google Google on the wall whats the best ETF of them All?" Google: VXX for the win! So there you have it, if you want volatility there is an ETF for that. Alright time to cut to the chase because its nearing midnight. Click Below to Enlarge the Comparison between VIX and VXX.
Notice a Difference between the SPY comparison and the the VXX comparison? Gosh I hope so or get the FREAK out of here! They don't mirror each other AT ALL. They Barely did before last august and from then on its a whole different story. Speaking of stories... Thanks Dan for the heads up in the comments about the "VXX Reverse Split 1:4" story.
For those that are new to stock splits a quick search can yield a lot of information but I will spare that for you by explaining in my own words what will happen here.
When VXX reverse splits in the first week of November (lets assume its at $13 on that day) it will start showing up as a $52 instead. How can they just change the price? Well If you owned 4 shares of VXX now you will own just 1 later thats how.
Ok finally getting to the finish. A reverse split is bad because instead of increasing the amount of shares outstanding, the company is making this move to make the stock look like it has more value when in fact is the same crappy thing. I will not be playing VXX but seeing the "oh so perfect" mirroring effect it has done so far I congratulate those who will keep shorting it via whatever method works for them and reaping profits until VXX slashes in half once again.
Thats it for now and I hope that helped clear your question Dan. Volatility will not get a spark just because Barclays "Enron Task Force" will have a "higher price". If you're still confused or stumble upon other interesting things that you would like to share, the boxes are right below the post most of the time.
Happy Trading all and to all a good night!
-K
The Perfectly Timed Vacation
It's been six weeks and the stockless and unwired vacation has wound down. To my surprise I see that BP bottomed right when I covered my July puts at a profit and since its nearly 39% up. Euro went from 1.22's to 1.33's and so on. Its time for me to find the reigns and take control of the market once more.
It will be a week or two until I get my trading groove on but for now i've updated the Current Pick's page on top.
here are the main indices.
Market Indices
| Symbol | Description | Buy Date | Sell Date |
|---|---|---|---|
|
$SPX
|
S&P 500 INDEX
|
7-7-2010
|
|
|
SPY
|
SPDR S&P 500 ETF
|
7-7-2010
|
|
|
$INDU
|
Dow Jones Industrial Average
|
7-7-2010
|
|
|
$COMPX
|
NASDAQ Composite
|
7-8-2010
|
|
|
QQQQ
|
PowerShares QQQ (ETF)
|
7-8-2010
|
|
|
IWM
|
iShares Russell 2000 Index (ETF)
|
8-6-2010
|
Hope its been a profitable 100 point market move for my fellow readers and here's to more fun swings to come.
-K
Germany Tries to save the day AGAIN -2008 Part 2 Begins-
So today Germany's Merkel decided to pull a good trick over the nekkid shorts.
There is much surprise that the German government has declared a ban on naked short selling, including CDS, as of midnight tonight, with no prior notice or the niceties demanded by the banks when government chooses to act. This action seems to have perturbed some and confused many.
Germany is claiming that this move will stop the Speculators
The ban will also apply to naked short selling in shares of 10 banks and insurers that will last until March 31, 2011, German financial regulator BaFin said today in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, the regulator said.
HMMM Where oh Where Have I heard this story before... Oh Yeahh.. September 20, 2008 German regulator bans short-selling in financial stocks
Germany on Saturday halted short-selling in financial shares, when investors borrow company stock to sell it, following the example of Britain and the United States. The ban affects 11 shares including those of AAreal Bank, Allianz, AMB Generali, Commerzbank, Deutsche Bank, Deutsche Boerse, Deutsche Postbank, Hannover Re, Hypo Real Estate, MLP and Munich Re. BaFin, said short sales were banned with immediate effect until the end of the year, underscoring that they could lead to huge losses in the current global financial turmoil.
Roll Back to May 18, 2010....
Allianz SE, Deutsche Bank AG, Commerzbank AG, Deutsche Boerse AG, Deutsche Postbank AG, Muenchener Rueckversicherungs AG, Hannover Rueckversicherungs AG, Generali Deutschland Holding AG, MLP AG and Aareal Bank AG are covered by the short-selling ban. “Massive” short-selling was leading to excessive price movements which “could endanger the stability of the entire financial system,” BaFin said in the statement.
I wonder what happened last time they tried protecting the banks? Well I will examine it below but what's that I hear you say? This Time is Different? It sure is!!
During the last Crisis we had Lehman go bankrupt and Bear Stearns collapse. Two years later we don't have any financial institutions going down. We Have Countries that are crumbling and their "shareholders" (taxpayers and citizens) revolting. Greece is Bear Stearns because of the trillion dollar bailout and Portugal might as well become Lehman because unless Europe is willing to print a trillion for every country they bail (which I know they can if they want) and euro dropping to parity and beyond with the dollar.... someone will have to hold the bankruptcy stick.
Anyways Lets look at how the last short selling ban affected the financial institutions they tried to protect.
I'm using Dow Jones Germany Index for a Benchmark as to compare returns.
| Company | Sept to Dec 2008 | May 2010 – March 2011 |
| Dow Jones Germany Index (USD) DEDOWD | -23% | TO |
| Allianz SE AVL | -30% | BE |
| Aareal Bank AG ARL | -64% | FILLED |
| Commerzbank AG CBK | -61% | OUT |
| Deutsche Bank AG DBK | -50% | ON |
| Deutsche Boerse AG DB1 | -15% | APRIL |
| Deutsche Postbank AG DPB | -65% | 2011 |
| Hannover Rueckversicherung AG HNR1 | -18% | WHEN |
| MLP AG MLP | -26% | BAN |
| Muenchener Rueckversicherungs-Ges. AG MUV2 | +7% | ENDS |
Oh myyyyyy Germany Saved the day as speculators were on the sidelines watching and missing out on 18 to 65% gains (its what you do when you short and if you're not familiar just Google "selling stocks short")
The Previous ban was 3 months and the protected stocks crashed an average of 46%. The New Ban will be around 11 months and will crash how much? It will crash aplenty so I will not make an exact percentage call on this one. But I will be doing one thing this time around though. I'm putting German Financials on a Bank Watch List that I will check back on April 1st 2011.
Make plenty of money these next few weeks even if my blogging is sporiadic at best. (Offline life always comes first)
-K
Current Stock Signals 5-15-2010
Due to my time constraints in the next two weeks I will be posting more sporadically. Here are the current signals for symbols I follow.
You can also find this at the top on Current Picks Page.. I hadn't updated it in two weeks but as you can see the major signals are from late April so nothing was missed.
My System caught onto the downdraft about a week before the "fat finger" occured and from what I just observed going through these charts is that the "fat finger" was very skinny and precise... nuff said because I need to keep this one a secret. Enjoy
Market Indices and other important Quotes
(Note: I understand you can’t purchase an index so bear with me these are just signals)
| Symbol | Buy Date | Sell Date |
| $SPX | 4-27-2010 | |
| $INDU | 4-30-2010 | |
| $COMPX | 4-30-2010 | |
| QQQQ | 4-30-2010 | |
| IWM | 5-12-2010 | |
| SPY | 4-27-2010 |
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Rest of the Symbols (More will be added per request)
| Symbol | Buy Date | Sell Date |
| IYR | 5-14-2010 | |
| AAPL | 5-4-2010 | |
| DRYS | 4-19-2010 | |
| SDS | 4-30-2010 | |
| SRS | 5-14-2010 | |
| SSO | 5-14-2010 | |
| SKF | 4-30-2010 | |
| JNK | 5-14-2010 | |
| HYG | 5-14-2010 | |
| REW | 4-27-2010 | |
| QID | 4-30-2010 | |
| QLD | 4-30-2010 | |
| XLF | 4-26-2010 | |
| DIG | 4-28-2010 | |
| DUG | 5-14-2010 | |
| SMN | 4-30-2010 | |
| VXX | 4-27-2010 | |
| BBT | 5-10-2010 | |
| BID | 5-11-2010 |
Make Some Money... Ok A Lot of Money!
-K
Special Edition: Here comes the red ink, correction begins.
It was a busy day today and when I finally had time to check on the market a big grin came to my face. A lot went on today and news blamed Greece and Portugal downgrades for the sharp drop. Nobody ever talks about the technical analysis because it is beyond the mind of Joe the Plumber.
Let's start off with the Eur/Usd which I have closely followed since December when it broke a long term trendline. I hadn't looked back at it since and I was shocked. Here is the first in a series of Special charts.
Next on the list is $TED which stands for the Treasury - EuroDollar Spread. You can read more about what Ted is on this November post if you are not familiar with it.
WHile the spread of 0.2 is still fairly low and below the average of 0.5 the fact that it is increasing and the moving averages are making their first crossup since before the October 2008 crisis strikes me as interesting especially given the current economic situation.
While on the subject of Europe lets check out the Greek Index $GRDOW which I wrote about on April 11 and that turned out to be the opposite of what I expected. From a low of 124.17 on March of 2009 the Greek index went through the roof at 267.40 and as of close today it stands at 138.11. Go Greece!!!
Now lets take a look domestically at BID - Sotherby's which as I mentioned on March 14th's post is Part of my indicators arsenal. BID fell from 37.75 to 34.93 today which broke a short term trendline but also another big move would put it below the 32 mark that is the next strong support. Since the March 2009 lows of 5.85 BID is up 666% to as high as 39! That's nearly 47% a month. A move below 32 (20% drop from 39) would tell me to wipe the dust off my ammunition and a move under 22 (40+% drop) would just signal that Chaos is back and since this is a Leading indicator to me it would highly influence my positions.
Lastly I will leave you off with the Investing Freak Special SPX chart that I last posted on April 14th. We hit a top, retreated a bit below the blue moving average then made a higher high at 1219 but this time it was different as the retreat didn't land on solid ground and we fell through.
Class Dismissed.
-K
Mother Nature Shorts the Market: Volcano errupts, Cramer Says the Recovery is Real
Mother nature is fed up with the mountainous stock market climb and the Icelandic Volcano has finally put a top to it.
There have been many canceled flights across Europe and airliners will be feeling the effects of the volcano for at least a quarter if not more. This is one of those news items that is still not priced into the market (at least wasn't as of 4pm closing bell) so shorting an international Airliner should yield results (British Airways or AirFrance perhaps).
This is not just a minor news article as many airports have yet to close but will have to as the ash travels farther from its origin. According to BBC "Such a large eruption... would have the potential to severely affect air travel at high northern latitudes for six months or more. "In relation to the current eruption, it is worth noting that the last eruption of Eyjafjallajoekull lasted more than 12 months."
This could be a major win for global warming activists because it might cool us down according to an article in the Guardian that states "The dust can also help reduce global warming. The effect of the Iceland ash cloud will be small but larger eruptions help to cool the planet as they reflect sunlight back into space. The 1815 eruption of Mt Tambora in Indonesia produced so much volcanic ash that it triggered the "year without a summer" that brought widespread failure of harvests across Europe, famine and economic collapse."
Now that we established Mother nature's attempt to stagnate or destroy the economy lets turn our heads to the lovely Jim Cramer who tells us that the Recovery Is Real!
"Maybe this time, the recovery is better, Maybe it's healthier and more sustaining. Maybe this time we've got it right, not wrong, and Maybe the recovery will be responsible and Maybe fueled by a longer-term health in the consumer, and Maybe it will not be turbocharged bad lending." Now I added a few more maybes on my own to emphasize that Maybe the recovery is real and Maybe Cramer is a genius.
We know mother nature is short and Cramer is long. Lets take a look at some economic data domestically and around the world.
US Economy:
March Foreclosure Activity Highest on Record (Calculated Risk)
7 million households are behind on their mortgages. Now that the worst of the financial crisis appears to be over, banks are finally stepping up the foreclosure process again. Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.
Weekly Initial Unemployment Claims Increase to 484,000 (The Big Picture)
Today’s Unemployment Insurance claims “unexpectedly” spiked to 484k vs. a 440k consensus, and were 24k higher than last week. Lets get to the excuses as to why the weekly claims for unemployment insurance are not dropping as quickly as everyone would like. "A Labor Department economist said this latest rise can be pegged to lag effects from the spring holidays, including Easter and Cesar Chavez Day, which is celebrated in worker-heavy California." If that puts a dent in employment then here are the Holidays: Thanksgiving, Christmas, MLK Jr. Day, snow storms, Easter, Cesar Chavez. Upcoming next week are Administrative Professionals Day and Take Your Children to Work Day, so fear not when UI claims breach 500k again.
Empire Manufacturing Index Soars (Econompic)
A gauge of manufacturing in New York State rose to a six-month high in April as new orders advanced and employment continued to improve, the New York Federal Reserve said in a report on Thursday. The New York Fed's "Empire State" general business conditions index rose to 31.86 in April, the highest since October and up from 22.86 in March. Economists polled by Reuters had expected a figure of 24.
World Economy:
Greece On Verge Of Activating Rescue Package (Zero Hedge)
A senior Greek Finance Ministry official told Market News that With the call for a meeting today, Greece is seeking to iron out “immediately” exactly what the details of the joint EMU-IMF plan will be, and what fiscal, macroeconomic and other conditions will be imposed on Greece in exchange for the aid. Last weekend Greece issued $2.1 billion in Bills, which auction by the way bankingnews.gr recently reported was a scam, with half the bids being fake!
Israel accuses Syria of arming Hezbollah(AFP)
Israeli President Shimon Peres on Tuesday accused Syria of supplying Scud missiles to the Lebanese militant group Hezbollah while publicly talking peace.
"Syria claims it wants peace while at the same time it delivers Scuds to Hezbollah whose only goal is to threaten the state of Israel," Peres told public radio.
Have a good night.
-K
Key Catalysts for the week
Earnings season for Q1 will kick off w/AA coming Mon after the close. PKX (S Korean steel company) will hit overnight on Mon w/a call on Tues morning. There will be a bunch of tech results. For the semis, watch for INTC and LLTC on Tues, ASML on Wed, and AMD, FCS on Thurs. In the internets, GOOG kicks things off Thurs night. JPM is the first financial earnings of the season (Wed morning) and will be followed by PBCT(Thurs night) and BAC, FHN (Fri morning). GE reports Fri morning also.
· Credit card companies will release their mastertrust #s on Thurs and the latest short interest stats hit on Mon after the bell.
· Congress comes back into session on Mon, w/the focus being on Dodd’s financial regulatory reform bill.
· China’s president is traveling to the US on Mon for a nuclear summit in Washington (a meeting w/Obama is scheduled for Mon). There could be more headlines on Iranian sanctions coming out of this Washington summit. For the rest read Business Insider.
NBER: "Premature" to Call end of Recession
The Business Cycle Dating Committee of the National Bureau of Economic Research met at the organization’s headquarters in Cambridge, Massachusetts, on April 8, 2010. The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. Read More at Calculated Risk
VIX plumbs new low as other indicators edge closer to extremes
The volatility index ($VIX) dropped to another new low on its series of waves down since late 2008/early 2009, meaning that investors shed yet more fear to place yet less value on premium protecting against volatility. This places it at risk of a snapback along with a stock market pullback. At the same time, other indicators (shown lower down) also tell the story of the market at the edge of cresting. For Charts go to ChartLines
Feature: Check out our new Live Chat.
We have added another tab to the top of the page and for now it includes a chat where even guests can join and have discussions. Chat will have at least a few people during market hours and the more the merrier as it catches on. Lets have some lively conversations and stock sharing through it. Check out our Live Chat.
Have a good night,
-K
Are Greek stocks ready for a comeback?
With all the recent bailout talks for Greece it might seem like a good time to short Greek assets right? No!
The risk rewards at this point have been cut in half. I will display a chart below of the Dow Jones Greece Stock Index $GRDOW.
Here is a 3 year chart with no comments. (Click to Enlarge)
Here is the 1.5Year chart showing a different story.
You see... Greece did hit bottom at the same time as the entire market did as well back in March of 2009 BUT Greece topped out in October of 2009 and started its next leg down.
From March-October 2009 the index rose from 124.17 to 267.40!
Thats 143.23 point gain or 115% Gain in 8 months... and here we are complaining that our market has gone up 75% and is overdue for a correction.
Now as we can see from the chart below Greece then took a turn from 267.40 to 150.84 in February of 2010 (and it might be making a lower low coming up if the bailout saga isn't fully discounted yet) the 116.56 point drop from the October 2009 peak to the temporary February 2010 bottom is a 43.5% correction!
Back to my original question... now do you see why I said no to shorting the Greeks? 44% Correction has already occurred and even if there is another 150 points to the downside (another 50% or so) the risk reward is no longer there. I might be looking to buy up some Greek Gyros or Banks soon to play. One such play is National Bank of Greece (NBG)
Here is the chart for NBG to compare to the entire index. Also Notice the Recent Volume (Click to Enlarge)
Thats all for tonight folks. Have a good night and a good trading day tomorrow.
-K
Nightly Recap 3-30-2010
Market Summary:
DOW +11.56 (10,907.42)
S&P -0.05 (1,173.27)
Nasdaq +6.33 (2,410.69)
____________
Disclaimer:
Open Positions: SRS at 5.97
___________
Nightly News Links
US Economy:
Downtown New York Office Vacancy Rate Spikes To 9/11 Levels (Zero Hedge)
Bloomberg TV reports that the office vacancy rate in downtown NY has dropped to September 11th levels, and is about to pass 14%.
SPX Struggling at 1180 (The Art Of Trading)
"The SPX has attempted several times to crack thru 1180 and seems to be having trouble. I think it's best to sit in cash or be very nimble if you wanna play the short side. 1150 is very strong support for the SPX and pullbacks there would likely see some solid bounce i imagine. If i had it my way, i'd love to see the indexes pullback for another few more days. As i type this, i am noticing lots of stocks turning deeper into the red yet the indexes are only down slightly. I think CASH IS KING and look to buy stocks on dips!"
Interesting Links:
22 Storms in NE: Winter 2009-2010 Radar Loop (AccuWeather)
Today what could be the last Nor'easter of the season is affecting the Northeastern U.S. It's interesting if you compare the heavy rain area for today's storm with the heavy snow area from this winter, they are very similar. Major storms are continuing to move up the East Coast as they have all season, it's just warmer now so we're seeing rain instead of snow.* These winter storms have dropped 30-40 inches of rain (and liquid snow) in the I-95 corridor, which would normally only receive 20-25 inches over the winter.
That is all for tonight, very boring night link-wise, weather wise and market wise.
Have a Good Night and here's to a more exciting Wednesday.
-K
Nightly Recap 3-25-2010
Market Summary:
DOW +5.06 (10,841.21)
S&P -1.99 (1,165.73)
Nasdaq -1.35 (2,397.41)
Nightly News Links
US Economy:
The Social Security Tipping Point (Econompic)
The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.
This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office. The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.
The Recession Ans Recovery In Perspective (Minneapolis Fed)
The 2007-2009 recession is widely thought to have ended sometime last summer. How bad was this recession, and how quickly is the economy recovering? How does this recession and recovery compare to previous cycles? Check the Link for interactive Charts.
Ambac to File Bankruptcy ( The Big Picture)
Bond insurer Ambac Financial Group said again that it may seek bankruptcy protection after state regulators took control of some of its most troubled assets.
The news Thursday sent the company’s already devalued stock into a tailspin.
World Economy:
Dell Leaving China In Search Of "Safer Environments" In India (TFTS)
India’s Prime Minister, Manmohan Singh, told the Indian press that Dell chairman Michael Dell assured him that Dell was moving $25 billion in factories from China to India. Original motives were cited for environmental concerns. But later details come up as to dell wanting a ’safer environment conductive to enterprise.’”
China Official: "Will not adjust exchange rate" (Calculated Risk)
After meeting with officials at the Treasury and Commerce Departments on Wednesday, China’s deputy commerce minister, Zhong Shan, told reporters, “The Chinese government will not succumb to foreign pressures to adjust our exchange rate."
“It is wrong for the United States to jump to the conclusion that China is manipulating currency from the sheer fact that China is enjoying a trade surplus,” Mr. Zhong told reporters in a meeting at the Chinese Embassy. “Besides, it’s wrong for the United States to press for the appreciation of the renminbi and threaten to impose punitive tariffs on Chinese experts. This is unacceptable to China.”
This is more posturing before the Treasury releases the worldwide currencies report on April 15th that might name China a "currency manipulator".
All Hell To Break Loose: April 15th (Reuters)
U.S. senators have introduced new legislation that threatens China with punitive duties if it fails to lift the value of its currency, boosting pressure on the Obama administration to take action under existing law.
The bipartisan measure, which merges earlier efforts to change the currency law, aims to end what the lawmakers said was Beijing's deliberate efforts to keep the yuan cheap to subsidize exports and tax imports.
Have a Good Night
-K