Stop Trading, Seriously!
July 15, 2008
This market is a difficult one to navigate. If you are new to trading, STOP. Professionals are finding this market one of the most difficult markets they have EVER seen! Stop trying to be a hero by picking bottoms and start preserving your capital. The all time greats would be on vacation or at the very least 75% cash. Gil Morales, William O’Neil’s long time apprentice is most certainly not playing with even half his chips. We have not seen our ultimate lows, we’ll continue lower and with the greats on the sidelines why aren’t you?
There are some short term trades to be had here in this market. We can, using history and our charts pick some winners in a down market. If you study Joshua’s past big winners you’ll notice that we can grab some hefty gains during a bear market. However, to get these gains you have to become a subscriber of Big Wave Trading.
Do your homework, reread all our recommend books!
Market Speculator
Naked Shorted Stocks
July 15, 2008
Hickey and Walters (Bespoke) submit:
With all this talk today about limiting "naked short selling" for FNM, FRE, and primary dealers (dismiss the fact that it is already illegal to do for all stocks, making it ironic that the SEC is only now going to focus on a few), below we highlight S&P 1500 stocks that have been on the "Threshold Securities" list for the most consecutive days.
These stocks have ongoing failure to deliver problems, meaning short sellers are most likely not officially borrowing (naked shorting) them before going short. As shown, Chipotle (CMG) has been on the list the most consecutive days at 457. CMG is followed by Corus Bankshares (CORS), Cree (CREE), La-Z-Boy (LZB) and and Meritage Homes (MTH).
A U.S./China Comparison
July 15, 2008
Richard Kang submits:
That’s a broad title that can lead in so many directions.
The world today looks like we’re heading towards another two super-power situation. Consider economic and political influence, voting on the UN security council, acquisition of oil, the space race, and even the medal count at the coming Olympics … There are a lot of themes that demonstrate the power of China, even relative to the US, and perhaps that’s one of several reasons why China is attracting plenty of foreign investment.
Bill Ackman’s Plan to Save Fannie and Freddie
July 15, 2008
Bill Ackman’s Pershing Square Capital Management, L.P. released the following proposal today for the restructuring of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Note that Pershing Square is short FNM and FRE.
Bill Ackman’s Plan to Save Fannie and Freddie
15 Jul 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
July 15, 2008
| Intraday Unusual Volume - Top 5 Up |
| Symbol | Volume % Change |
Price % Change |
News | |
| ISYS | 579% |  44.18% |
news | |
| MMSI | 352% | 18.95% |
news | |
| EHTH | 347% | 14.85% |
news | |
| CSGS | 340% | 15.44% |
news | |
| CRME | 310% | 10.90% |
news | |
|
||||
15 Jul 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
Volatility and Sentiment: Today Doesn’t Matter
July 15, 2008
Bill Luby submits:
Some semi-random thoughts inspired by today’s market action:
- The VIX:VXV ratio spiked up to 1.12 at 1:12 p.m. EDT (I’m not superstitious, but that’s an interesting bullish signal)
- The underappreciated VXN (volatility index for the NDX or NASDAQ-100) spiked over 34 on Friday and made it as high as 33.76 earlier today. That’s not enough to satisfy the “VIX must spike over 30!” purists, but it is an interesting data point, particularly because the VXN and NDX excludes financials
- My VIX algebra says that two medium to large VIX spikes on Friday and today do not equal one large capitulation-friendly VIX spike
- The CBOE equity put to call ratio – an excellent market timing indicator – is looking bullish
When all is said and done, I don’t think we can have a serious market rally until the tone of the news flow changes, regardless of market technicals and sentiment data. There must be several bullish macroeconomic and/or fundamental data points which collectively give the bulls a reason not to be so skittish. At a minimum, the markets need to navigate the PPI, CPI, industrial production and capacity utilization data due out tomorrow and Wednesday, then weather the flood of earnings reports (with strong representation from some key financial institutions) on Thursday. Even then, there is the Citigroup (C) earnings story on Friday morning.
Volatility and Sentiment: Today Doesn’t Matter
The SEC Panics
July 15, 2008
Felix Salmon submits:
I think it was about the time that the SEC started trying to curtail short selling that I finally decided that we’re in panic mode. The market’s actually flat, as I write this, although Fannie (FNM) and Freddie (FRE) are down 20%, maybe because the Ackman plan actually makes quite a lot of sense.
Ackman’s idea is to wipe out the current shareholders, and then create new equity by taking each dollar of senior unsecured debt, and replacing it with 90 cents of new debt and 10 cents of new equity — a much more sensible leverage ratio than what we’ve got right now. The government would put a floor under the value of the equity, so the debt holders would retain at least face value, even if they lose some coupon income on the 10% of their debt which becomes equity. If I were the US government I’d go a little bit further and guarantee the next three years’ coupons too, maybe give existing shareholders a small stake as well, but that’s really a niggle.
The Ongoing Challenge of Inflation Momentum
July 15, 2008
James Picerno submits:
Blood is definitely running in the streets these days. The troubles at Fannie Mae and Freddie Mac and the run on IndyMac Bank are only the latest examples of the various ills afflicting the markets and the economy. Discouraging as all this is, the ongoing challenge of upward inflation momentum won’t help.
Today’s update on wholesale inflation for June suggests that inflation may get worse before it gets better. The annual pace of producer prices was an astonishing 9.1% through last month–the highest since 1981. And there’s no salvation in focusing on core wholesale prices, which rose by 3.1% for the year as of June–the highest since 1991.
The Ongoing Challenge of Inflation Momentum
Little To Fear But Fear Itself
July 15, 2008
Ockham Research submits:
The third quarter of 2008 will go down in history as one when real fear manifested itself in market behavior. Typically, such periods of outright despondency (capitulation) signal the end rather than early stages of a bear market. While there are ample underlying reasons for disquiet in the financial sector, the market is beginning to behave as if every bank in the country is on the brink of collapse. This is far from the case and the carnage of the past month clearly represents an over-reaction to a bad situation.
There is no doubt that the domestic real estate crisis is continuing to batter U.S. financials, the dollar and the global economy. Despite the carnage in markets like California, Florida, Las Vegas, Washington, D.C., Atlanta, etc., real estate values continue to decline largely because of a lingering supply imbalance. The vast over-supply of homes in these markets will take years to work down. However, many regions around the nation do not have this gross over-abundance of property for sale. Furthermore, while defaulted and non-performing loans (mortgages, HELOCs and unsecured) are rising nationwide, the vast majority of debt is being paid in a timely manner.
Little To Fear But Fear Itself
Tuesday Options Outlook: WB, F, AIG, DFS, EMC, INTC, VIX
July 15, 2008
Rebecca Engmann Darst co-authored this article.
Wachovia (WB) – Meanwhile, the “Grand Guignol” to
which we alluded earlier continues apace in the financial space today. Implied
volatility in Wachovia options rose 21% earlier today after Oppenheimer analyst
Meredith Whitney cut her rating on the stock, calling the outlook for the bank
“bleak,” and telling Bloomberg News in no uncertain terms:
“(Financial) stocks won’t be taken seriously by investors until
they revalue dramatically – and Wachovia is the outlier.” Though
implied volatility has since come off its blistering highs amid a 2.5% recovery
for shares to $10.10, earlier today option traders wasted no time in selling
July 10-strike calls for 20-cent premiums, while buying heavily into July 7.50
puts (which expire on Friday) for 25 cents. The premium on this position
denotes a 10% likelihood of Wachovia shares breaching the $7.50 by that time.
Interest in low-strike puts extended into the August contract at the 7.50
strike.
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