Posted 2007-06-12 16:04
by Karl Denninger
by Karl Denninger
Now that was a wild ride!
With the close right on the bottom, and incidentially, 0.2 off the 50.
The longer-term view....
Right on the 50!
I daytraded the Q PUTs today, and was debating leaving the position open through the night. At the end, with a minute left, I took 2/3rds of the position off - was looking for that break of the 50, didn't get it, so off came 2/3rds of the position - just in case.
And what caused this? Here 'ya go:
That's absolutely parabolic - and when you look at the technical analysis on the bond rates, there's no freaking way this is over.
The ABX continues to go straight to crap. In fact, we are now in the danger zone for a sharp sell-off in the stock markets given that we are now visiting the warning levels last seen in February just before the blowup!
Guys, somebody is in trouble in the mortgage lending space. You can look at the constituents in those indices to try to figure out who it might be, but you really don't have to. This is a potentially very serious development as all of the players in that index are BIG players in the financial space, and if any of them experience a serious liquidity squeeze the impact on the market is going to be VERY BAD. My best guess is that this same "someone" is probably who shorting the bond, but if the loans default it will not matter as they won't be able to make the coupon payments on the shorted bonds plus they will have a big fat capital loss!
In other news today Lehman came in with good earnings and the money center banks rallied - only to fail towards the end of the day. Of them, Goldman bucked the trend. They were about the only people who did; everyone else was in the ditch. But here's the question - what's their exposure to all this junk paper? Hmmmm....... betcha that won't be pretty.
In addition Countrywide Financial tried to put lipstick on their pig (again) but quietly mentioned that their foreclosure rate doubled. Oh boy, is that good news? Their stock price went up - reading beyond the headlines might be a good idea sheepies...... the guy with the shears is over there in the corner, and if you're not careful, you might find the guy with the long knife instead!
The momentum and indicators internally were absolutely horrible. There's a point at which you may as well not even report them - that's was pretty much today.
Apple was up 19 cents, bucking the trend. You've been warned guys; the IPhone isn't what you think it is. Play here if you want, but this stock is overpriced by 50%. Watch what happens to it if we get a sharp sell-off in the broader markets. Remember 2000?
In the "who do you hate" department has to be Yahoo. These guys look like a good short, and I may put one on. Their board was re-elected, dashing hopes for doing something about a group of guys who have made famous getting six strikes in one at-bat. How's that work, exactly? I know what I'm going to be sniffing around.
Oh, and add to that interest list Amazon - but don't short it directly - play limited risk. I like the bear PUT vertical on the $65/60 for July; will be looking at that one in the morning. At present prices that's about a buck a contract pair but can make 4 (at or under $60); not bad, and limited risk.
My VIX calls for next week skyrocketed today; overall it was an extremely good day with my trading profits on the Qs safely in my bank where they belong. While I can lose my "House Money" I can't lose on the play from today any more, and if we get a strong sell-off tomorrow I'll unload the rest into it - Bulls get fat, Bears get fat, hogs get slaughtered! The toughest thing I did today was adding to that Q Put position TWICE as the Nasdaq rose this morning - I was absolutely convinced we were going to see a reversal with the bond market action and the treasury auction, and nothing was changing in my analysis or premise, but it is VERY DIFFICULT to add to a position that is going the wrong way, knowing that if it continues with only three days left you are dead with a 100% loss! This is where analysis must overcome emotion - it would have sucked bad to bail with a modest loss only to see the whole market reverse!
Speaking of hogs, I guess I ought to think about taking the over $4k in profits on my HOV Puts eh? Its just so tempting to keep that (and the short) open though - the stock is in absolute freefall with no support of any meaningful dimension, with it last trading here in 2003. Wow. Would you be smiling if you shorted this pig at $73.40 back in 2005?! Holy crap! Sadly, my short is more than a bit newer than that. Anyone want to take a bet on this being a potential pink sheeter?
On a more serious note I'm looking for a break of the 50 on the SPX as the indicator for "Short At Will" here. While this action the last few days makes it very tempting to short the market with both hands, this has proven time and time again over the last year to be a very tricky business unless you can daytrade it. But - a close below the 50 will be something that every technical analyst in the market will be all over like flies on horsecrap, and as such any break below the 50 should be reliably followed the next morning with a nice fat follow-through.
Tomorrow we get retail sales numbers and then Thursday and Friday we get PPI and CPI numbers, respectively. Note that a hot number on either of the latter may spark a very serious selloff, as that is likely to induce fear that the Fed will be tightening rates rather than the other way around. A "good" number on the same-store sales numbers may do the same to a lesser degree.
In any event that 5.25 level looks to go down tomorrow. When it falls convincingly, assuming it does, expect a violent and immediate reaction.
Be nimble and have a profitable tomorrow!
With the close right on the bottom, and incidentially, 0.2 off the 50.
The longer-term view....
Right on the 50!
I daytraded the Q PUTs today, and was debating leaving the position open through the night. At the end, with a minute left, I took 2/3rds of the position off - was looking for that break of the 50, didn't get it, so off came 2/3rds of the position - just in case.
And what caused this? Here 'ya go:
That's absolutely parabolic - and when you look at the technical analysis on the bond rates, there's no freaking way this is over.
The ABX continues to go straight to crap. In fact, we are now in the danger zone for a sharp sell-off in the stock markets given that we are now visiting the warning levels last seen in February just before the blowup!
Guys, somebody is in trouble in the mortgage lending space. You can look at the constituents in those indices to try to figure out who it might be, but you really don't have to. This is a potentially very serious development as all of the players in that index are BIG players in the financial space, and if any of them experience a serious liquidity squeeze the impact on the market is going to be VERY BAD. My best guess is that this same "someone" is probably who shorting the bond, but if the loans default it will not matter as they won't be able to make the coupon payments on the shorted bonds plus they will have a big fat capital loss!
In other news today Lehman came in with good earnings and the money center banks rallied - only to fail towards the end of the day. Of them, Goldman bucked the trend. They were about the only people who did; everyone else was in the ditch. But here's the question - what's their exposure to all this junk paper? Hmmmm....... betcha that won't be pretty.
In addition Countrywide Financial tried to put lipstick on their pig (again) but quietly mentioned that their foreclosure rate doubled. Oh boy, is that good news? Their stock price went up - reading beyond the headlines might be a good idea sheepies...... the guy with the shears is over there in the corner, and if you're not careful, you might find the guy with the long knife instead!
The momentum and indicators internally were absolutely horrible. There's a point at which you may as well not even report them - that's was pretty much today.
Apple was up 19 cents, bucking the trend. You've been warned guys; the IPhone isn't what you think it is. Play here if you want, but this stock is overpriced by 50%. Watch what happens to it if we get a sharp sell-off in the broader markets. Remember 2000?
In the "who do you hate" department has to be Yahoo. These guys look like a good short, and I may put one on. Their board was re-elected, dashing hopes for doing something about a group of guys who have made famous getting six strikes in one at-bat. How's that work, exactly? I know what I'm going to be sniffing around.
Oh, and add to that interest list Amazon - but don't short it directly - play limited risk. I like the bear PUT vertical on the $65/60 for July; will be looking at that one in the morning. At present prices that's about a buck a contract pair but can make 4 (at or under $60); not bad, and limited risk.
My VIX calls for next week skyrocketed today; overall it was an extremely good day with my trading profits on the Qs safely in my bank where they belong. While I can lose my "House Money" I can't lose on the play from today any more, and if we get a strong sell-off tomorrow I'll unload the rest into it - Bulls get fat, Bears get fat, hogs get slaughtered! The toughest thing I did today was adding to that Q Put position TWICE as the Nasdaq rose this morning - I was absolutely convinced we were going to see a reversal with the bond market action and the treasury auction, and nothing was changing in my analysis or premise, but it is VERY DIFFICULT to add to a position that is going the wrong way, knowing that if it continues with only three days left you are dead with a 100% loss! This is where analysis must overcome emotion - it would have sucked bad to bail with a modest loss only to see the whole market reverse!
Speaking of hogs, I guess I ought to think about taking the over $4k in profits on my HOV Puts eh? Its just so tempting to keep that (and the short) open though - the stock is in absolute freefall with no support of any meaningful dimension, with it last trading here in 2003. Wow. Would you be smiling if you shorted this pig at $73.40 back in 2005?! Holy crap! Sadly, my short is more than a bit newer than that. Anyone want to take a bet on this being a potential pink sheeter?
On a more serious note I'm looking for a break of the 50 on the SPX as the indicator for "Short At Will" here. While this action the last few days makes it very tempting to short the market with both hands, this has proven time and time again over the last year to be a very tricky business unless you can daytrade it. But - a close below the 50 will be something that every technical analyst in the market will be all over like flies on horsecrap, and as such any break below the 50 should be reliably followed the next morning with a nice fat follow-through.
Tomorrow we get retail sales numbers and then Thursday and Friday we get PPI and CPI numbers, respectively. Note that a hot number on either of the latter may spark a very serious selloff, as that is likely to induce fear that the Fed will be tightening rates rather than the other way around. A "good" number on the same-store sales numbers may do the same to a lesser degree.
In any event that 5.25 level looks to go down tomorrow. When it falls convincingly, assuming it does, expect a violent and immediate reaction.
Be nimble and have a profitable tomorrow!
Discuss this entry (registration required to post)
