Thursday, June 4, 2009

No Time for Charts Today

If this were easy I would be rich and retired - but the simple fact is that when you are investing other people's money, there is always the fear of having their money get blasted on any given day.

I wish that I had played every setup that I saw. But it is not that easy. The potential of a -8% day is very sobering.

Alright, enough of that...
First, look at the volume on UNG (Natural Gas). What the...
I own it for myself. I bought more on the weakness this morning. I figure that it has all the same dynamics as the other commodities - which have gone vertical.

Oil rallied off the low, then pulled back for a few weeks and then went vertical. UNG is now 16 days into the retest of its low. The volume is gigantic - so either somebody is buying a ton of it or it is the day-trading epicenter of the Universe.

The charts are still working. I got to day-trade Amazon for bunch of money - it went from $77.5 to $85 in like 3 hours... $85-ish was the old high, so I bailed. MT and STLD went vertical and I sold them the day before they got crushed...

The Financials are set up for a potential breakout - Visa (V), Bank of America (BAC), Wells Fargo (WFC), the Banking Index (KBE)and General Electic (GE) look like they want to go higher. Will they? I have stops in place if they fail.

Caterpillar (CAT) has the same pattern.

Energy has pulled back into support (XLE).

The way I have tried to balance risk in this market is to sell extended holdings and rotate the money into securities near support or near breaking out.

Watch Netflix (NFLX) and see how it trades off of $40. If they can gap it over the 50-day at $42.77, then they could squeeze that sucker into the recent highs in a nanosecond. I'm not telling you to buy it - I am simply telling you that stocks at support have had this miraculous trait of launching through logical short stops and then going vertical on the following short squeeze.

I continue to have to hold my nose and buy. I would love to see a big pullback, but am forced into new holdings each time the markets work higher.

When the real selling shows up, I will know it and I will tell you. That is the difference - I know when to get the hell out of the way. There will be another Bear. The higher they ramp this new liquidity bubble, the more the next Bear will hurt - but does it start in 2009 or 2010 or 2013?????

Sunday, May 31, 2009

No More High Yielding CDs?

Banks on the brink of going under have been offering excessive CD rates to bring deposits in the door. This practice has cost the FDIC a lot of money as they have to back the CD deposits when these banks ultimately go under.

Well, somebody at the FDIC finally is doing something to protect the taxpayer – they are going to stop insolvent banks from offering excessive CD rate.

I looked at the highest yielding CDs on and saw the following publically traded banks’ CDs listed –

Corus Bank – trading at 29 cents a share
Nexity Financial – trading at 20 cents per share
AIG - ***********
Advanta Bank – trading at 67 cents

The CD rate environment will now change as good banks will no longer be forced to offer high rate to compete with bad banks.

The real issue though, is that in an efficient economy, risky companies would have to pay more in yields to attract capital. However, with the FDIC guaranteeing CD deposits, bad banks can attract capital while offering low interest rates. If all are guaranteed, then one CD is just as good as another.

The problem now is that with all of the backstops put in place by the government on so many different asset classes, money is not being deployed efficiently relative to potential risk and potential rates of return. If the government won’t let anybody fail, then why bother doing your homework – just go out and buy the highest yielding crap being offered. It is the rigged bond rating agency game taken to a sovereign level.

Now the only thing at risk is the US Dollar, the US Treasury and the US Taxpayer. But take solace, because nobody feels our pain more than Timmy Geithner – or was that Bill Clinton…

Painting The Tape

“Painting the Tape” is the illegal practice of moving stock amongst market makers to artificially drive prices higher. This is the game that “Penny Stock” firms play as they trade stock back and forth to give the illusion of buying demand, while the stock in question is simply being manipulated higher.

Did anybody else notice the ridiculous activity into the close on Friday? The S&P 500 went up 1.6% in the last hour, including being up 0.9% from 3:50 to 3:56 (EDT).

Friday was the end of the Month. Do you think maybe the move had something to do with making May statements look better? The practice of juicing stock prices higher into month end to make statements look better used to be illegal, but nothing is illegal these days. When was somebody actually prosecuted on Wall Street lately?

I wrote the following about KBE on Thursday night –

“The market doesn’t seem capable of moving higher or lower without Financials (KBE). KBE has been sitting around for 4 days. It should move quickly very soon. KBE was at $18.10 a few minutes before the close and then ramped to close at $18.30. It is currently at $18.48 in the aftermarket. My stop buy is at $18.35. I will be really pissed if they gap it up at the open tomorrow and then sell it off hard, trapping the stop buys before taking it down. Such is the market I have to live with…”

Here is the chart of how KBE traded on Thursday and Friday. It gapped up to open at $18.70 on Friday (Red Line) and then dove to $18.15 in 3 minutes…
I was not pleased, but got bailed out as KBE bolted from $18.10 to $18.86 in the last hour of trading.

The Anatomy of a Short Squeeze
If you open up a chart book, you will see a chart pattern called a “Head & Shoulders Top”. The chart of Union Pacific (UNP) fits the definition perfectly. The short sale triggered on Thursday with a break below $45.80. UNP rallied on Thursday to get close to the breakdown point, but there were no doubt a lot of shorts in UNP when it closed on Thursday.

On Friday, UNP gapped up above $45.80 and ramped straight up all day long.

Here is the chart of how UNP traded on Thursday and Friday. See how it gapped up to open at $46.40, then sat around for a few mintues and then gapped up from $45.90 to 46.60 in one minute?

UNP and Transports are an important part of the market. If they crack then the “Green Shoots” bs is invalidated. Maybe people are acutally shipping via rail car again, or maybe the button pushers just wanted to keep the casino going just a little bit longer…

IBM was launched into the last hour of trading on Friday. It did so on massive volume. Somebody big was behind this last hour manipulation.

My concern is that prices were moved for the purpose of making May statements look better. That game is now over and we may now get hosed on Monday. The game continues to be rigged and the big guys who cheat continue to get rewarded.

Who Are the Big Guys?
Here is a chart of the 15 Biggest traders at the NYSE. Goldman is the largest.
With all of those ex-Goldman C-Level people running around the Fed and Washington, I consider Goldman to be the tactical policy execution tool for the Washington/Wall Street alliance.

Last week Goldman traded 866.2 million shares. Of those shares, 11% was traded for Goldman clients (Agency) and 87% was traded for the Goldman house trading account (Principal). In my opinion, Goldman is executing trades for the Government and is getting rich in the process.

This manipulation will work until it doesn’t anymore and then the pitchfork gang will show up and hang these SOBs – because the next crash will be the Dollar and the US Treasury Bond (Municipals too) and the pain caused by that crash will be enough to galvanize real public action.