10:53pm
Chinese stocks are getting pummeled. The Shanghai composite is down -4.62%
10:22pm
NYT: Federal aid for automakers appears more likely
9:26pm
WSJ reports that some Citic officials are unaware of talks with MS
8:40pm
Complete SEC statement: New rules on disclosure of short positions
Washington, D.C., Sept. 17, 2008 - Securities and Exchange Commission Chairman Christopher Cox and SEC Enforcement Division Director Linda Chatman Thomsen issued the following statements today concerning ongoing and forthcoming Commission actions to investigate fraud and manipulation in the nation’s securities markets:
“Millions of investors entrust their savings to our securities markets because they can be confident that our markets are orderly, liquid, efficient, and rational,” said Chairman Cox. “The turmoil in today’s markets, particularly in the financial sector, is challenging that assumption for ordinary Americans. Markets are the best tool a free society has to price and allocate assets across a complex economy, but as is well known from experience, sometimes the wisdom of crowds is supplanted by crowd behavior. We need well-functioning markets to help us draw the line between reasonable miscalculation and error or something worse involving the failure of due diligence, self-dealing, and conflicts of interest. It is thus vitally important that the market mechanism continue to inspire investor confidence.
“In order to ensure that hidden manipulation, illegal naked short selling, or illegitimate trading tactics do not drive market behavior and undermine confidence, the SEC today took several actions to address short selling abuses,” Chairman Cox continued. “In addition to these initiatives, which will take effect at 12:01 a.m. ET on Thursday, I am asking the Commission to consider on an emergency basis a new disclosure rule that will require hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Division of Investment Management and the Division of Corporation Finance, the new rule will be designed to ensure transparency in short selling. Managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC.”
Chairman Cox continued, “Director Thomsen and the Division of Enforcement will also expand their ongoing investigations by undertaking a series of additional enforcement measures against market manipulation. The Enforcement Division will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities.
Those institutions will also be required immediately to secure all of their communication records in anticipation of subpoenas for these records.”
SEC Director of Enforcement Linda Chatman Thomsen said, “The Enforcement Division has been investigating and will continue to investigate any suggestion of manipulative trading. We are committed to using every weapon in our arsenal to combat market manipulation that threatens investors and capital markets.”
The Commission is actively considering additional actions as appropriate
8:28pm
Gold has spiked higher to $893.
7:35pm
CNBC’s Gasparino reports that there will not be a MS/Citic deal tonight. He is doubtful about WB doing a deal with MS.
7:31pm
CNBC’s Faber reporting that Morgan Stanly (MS) is in talks with China’s Citic.
~ Faber notes that the Fed has been active and encouraging the Chinese to acquire US financials institutions
~ Citic owns China’s largest brokerage
~ MS is also in talks with HSBC
6:56pm
SENATORS CLINTON AND SCHUMER ASK FOR SEC TO HALT SHORT SELLING OF BANK STOCKS
~ Calls the ban temporary and important
6:50pm
MS and WB talks are only preliminary and no deal is imminent. Meanwhile, Wells Fargo (WFC) chairman says he sees a lot more mergers in the financial industry, adding that some companies just don’t have a choice. He declined to comment on whether he was bidding for WM or WB.
~ Conditions make him “feel like a kid in a candy store”
5:59pm
Reports suggest that MS is considering several banks for a possible merger
4:40pm
CNBC: Calsters pension fund to withdraw shares it owns from GS and MS to no longer make them available for shorting
~ So… this is what desperation looks like?
4:35pm
NYT: Morgan Stanley (MS) CEO reported has a phone call from Wachovia Bank (WB) surrounding potential interest
4:27pm
NYT: WM has begun an auction process to sell itself.
~ Bidders may include WFC, JPM, and HSBC
4:00pm
Ugly close! The S&P fell hard in the final 10 minutes of trading, closing at the lows near 1156, down 4.7%.
3:51pm
ES approaching session lows.
3:47pm
CNBC’s Gasparino: SEC currently meeting to discuss further measures surrounding improper short selling
~ Keep blaming the short sellers for this crisis. Stocks go to zero because they belong at zero. If you think the stock price is too low, buy it, but please stop blaming the short sellers.
3:32pm
Just got long SSO for another day trade. My stop is the 20MA (1177.50).
[ 3:35pm: and I'm out ]
3:22pm
NY Post: Washington Mutual (WM) is close to hiring Goldman Sachs to explore strategic alternatives, including a sale.
~ Reminder: Overnight, the NY Post reported that Federal Regulators were actively shopping WaMu
3:12pm
ES has moved above the 50MA, climbing towards the 200MA (1200.50) which should serve as solid resistance.
2:45pm
Let’s see if Cramer calls another bottom…
(He didn’t. I guess he learned his lesson. But he did tell people to buy MS)
2:41pm
I took profits on my SSO (L) trade. Too scary to be long this market. But the volume picked up on the bounce. Looks like a rally may be sustainable. If the ES rallies above the 50MA (1187.75), the next resistance is the 200MA at 1200. I’ll use any rally above ~1215 to start building a short position. I’m not interested in playing the rally from the long side, especially not overnight! I’d rather wait eagerly for the market to come to me. The stock market tends to reward patience.
2:30pm
Crude oil continues its march higher, now above $97. Natural gas is also having a great day. The ES has broken the seal (20MA) and looks poised to test its 50MA (1188.50).
2:22pm
ES attempting to break above its 20MA, which it has been unable to do all day.
2:02pm
When the ES made a new low, treasuries yields did not.
~ The reason may be that investors are turning to gold as a safe haven, instead of treasuries
~ Remember, the S&P came out today and affirmed the AAA US sovereign debt rating, but the mere fact that this affirmation was required is troubling
1:52pm
The VIX has spiked to 35.55, forming a double top with the Bear Stearn’s spike.
1:42pm
The US dollar index has fallen sharply over the past few minutes. Gold is higher by $80 above $860.
1:33pm
I’m not saying the market can’t fall apart this afternoon, but be careful on the short side and use tight stops. This is options ex and there are big players that want the market to move higher. Wednesday of options expiration week is known for its wild swings. A short-squeeze higher would not surprise me, especially given that the new short-selling rules go into effect at midnight.
1:29pm
S&P: Banks worldwide will face further writedowns in the second half of 2008
1:23pm
Gold continuing its rally, now above $850.
Oil has rallied in the past hour, up about $3 to 94.25
1:14pm
ES consolidating under its 20MA (1179). If it can get above it, it may test the 50MA (1194). Otherwise, we will likely retest the lows.
1:06pm
The rate that headlines are coming in are impossible to keep up with while I’m trying to trade. A lot of firms are announcing their exposure to LEH/AIG/WM and estimated losses. GE says their AAA rating is secure and has no material exposure to LEH. Their AIG exposure is resolved due to US Gov’t rescue.
~ The fact that companies are reporting their exposure to WM cannot be a good sign. However, WM has been in trouble for weeks, yet it has managed to outlast BSC, FNM, FRE, LEH, and AIG. Not sure if that means anything.
12:42pm
ES approaching 20MA (1181.85).
12:38pm
May see a little rally here. SPY 1-minute ended pattern of lower highs and lower lows.
MS back over $20. GS back over $100.
12:36pm
TED spread has widened to 303 basis points, the most since 1984.
~ TED spread is the difference in yields between inter-bank and U.S. Government loans.
12:31pm
VIX spiking to a new high, 34.95
GS trading under $100
12:19pm
CNBC’s Gasparino reiterates that his sources tell him MS is not presently in any deal talks but will act quickly to avoid a situation like Lehman.
12:06pm
Markets making fresh session lows. Treasury yields at session lows. The VIX has spiked back up to 34.72. Natural gas is rallying. Gold is at $840.
12:00pm
HSBC rumored as a potential acquirer of MS
11:54am
The 1168.25 low may serve as the intraday low if our rally theory materializes. The Wednesday of options expiration is known for its wild swings…
11:51am
S&P affirms United States AAA rating
~ It is a surreal moment that this announcement even needs to be made. The times are a changin’.
11:46am
ES bouncing off the lows, moving towards its 20MA (1187.75).
11:42am
Crude continues to selloff, now trading under $91.50
On the selloff, the VIX spiked as high as 34.72
11:36am
Despite the selloff, the 10-year treasury yield barely made a session low. I wonder if the appetite for US treasuries is already starting to wane… That explains the surge in gold prices. It is being perceived as the only safe haven left.
11:34am
That was a puking of stocks. GS printed under $102!
~ MS down 33%, WB down 21%, GS down 21%, C down 12%
11:28am
VIX moving above yesterday’s high as the selling accelerates.
11:27am
MS now down 33%, under $20.
11:20am
Oil falling to session lows, under 92.50
11:13am
White House: We are concerned about other companies. We have a “very mixed picture” of the US economy
~ says the US economy is strong enough to withstand shocks
11:00am
S&P’s Chambers: says pressure is building on the AAA US sovereign rating
~ says the AIG bailout weakens the US fiscal profile
~ notes the ratings remain stable
~ the AAA rating is not a “god-given gift”, the AAA rating must be earned, it is not guaranteed
This is EXTREMELY BEARISH commentary.
10:52am
Although the ES is trading at a session low, the 10-year treasury is not trading at a session high. This may indicate an upcoming rally. Just got long for a day trade with a very tight stop.
10:40am
I am not chasing this move lower. This is options expiration week and there are more outstanding puts than calls. Generally, that will produce an options ex rally so that put writer minimize pay outs. Also, the change in short-selling rules take effect tomorrow. This could trigger a short squeeze as naked shorts cover. The S&P could rally as high as 1260 without violating wave 3(3). I am patiently waiting on the sidelines and hoping the rally materializes. I will be building a short position on the way up, starting somewhere around 1215. If the bounce never comes, I will be disappointed, but I cannot lose money on the sidelines.
10:36am
Not seeing much of a reaction in crude prices. Refiners are selling off on the unexpected build in gasoline inventories. Gold now above $830.
10:35am
Crude -6.3M v -4Me | Gasoline +3.3M v -4Me | Distillate -835K v -2Me | Utilization 77.4% v 77.3%e
10:16am
Russian equity exchange will not reopen today
~ Was expected to resume for the last hour of trading today
~ Gold now trading near $820
10:10am
Oil inventory data due out at 10:35am
Expectations: Crude -4Me | Gasoline -4Me | Distillate -2Me | Utilization 77.3%e
10:08am
Gold now trading above $810.
~ Interesting to see the dollar holding up well given gold’s rise
10:04am
ES finding some resistance at its 20MA (1200.50). If it can get above that, the descending 50MA (1207.25) will serve as resistance.
10:01am
MER is down 5%, BAC is down 1%.
~ I thought they were supposed to trade with each other. The market is having doubts that the deal is going to get done.
10:00am
US Treasury to issue debt to extend the Fed’s balance sheet at the Fed’s request
~ Treasury says it will provide advanced notice on sales
9:51am
Rise in gold being attributed to lack of confidence in paper assets. The halting of trading in Russia is adding to concerns. Some speculate that the Russian market may not reopen today.
9:48am
SEC takes action to protect against naked short selling, effective as og 12:01am, Sept. 18 for the entire US equity market
~ Eliminates Reg SHO option market-maker exception
~ Adopts short-sale anti-fraud rule
~ Requires all short sellers to deliver stock on the settlement date
9:45am
Gold rallying above $800.
9:41am
The ES has reversed and is moving higher, now above 1196.
9:36am
Fed Fund Futures fully pricing in a 25 basis point cut at the next meeting. ES struggling to find traction, near session lows under 1190.
9:24am
There has been a trend lately of the market gapping lower and then filling the gap with a move higher. Let’s see if that trend continues.
9:16am
ES continues to slide, now trading 1190. I am not chasing this move. Be patient. The day is young. Let the market come to you.
9:00am
Some pre-market quotes: XLF 19.70 - 4% | AIG 2.15 -42% | MS 24.55 -14.5% | WB 10.30 -10.5% | MER 20.70 -6.7% | GS 123.65 -7% | C 14.97 -5%
S&P E-Mini Futures (ES) trading near session lows at 1194.
8:56am
Fox Business News: The SEC to announce naked short selling restrictions today, as had been rumored
8:30am
August Housing Starts: 895K v 950Ke (965k prior)
Current Account Balance: -$183.1B v -$180.0Be
8:16am
OK, so how to trade it…
Contrary to what I said in yesterday’s video, I do not believe wave 3(3) is over. That means that any bounce should be sold. The question is, how high will the bounce be? Options expiration week complicates the picture. Usually, options writers manipulate the market to minimize their payouts. Under normal circumstances, a rally would occur this week because there are a lot more outstanding puts than calls, but will the powers at be have the liquidity to move the markets higher? It’s a good question. I’ll be watching the market and share my thoughts as the charts play out.
Previously, I have been using 1121 as a price target for wave 3(5). I am revising my view lower. I now think that wave 3(3) may not bottom under we are under 1000. I have never been more bearish, but I am trusting the charts.
8:09am
There were reports earlier that Morgan Stanley was is in merger talks, but CNBC’s Gasparino reports that MS is not in any deals talks but are looking at the situation.
~ If I were them, I would find a deal before their equity disappears
8:01am
Good morning! I wish I could re-do my video from yesterday because my view has changed somewhat after doing some more chart work and analysis on the ongoing financial crisis. The more I think about what has happened to Lehman Brothers and AIG, the more apparent it becomes that the worst-case played out for both companies. The most important observation to make is that there was no private money available. That is a new characteristic our this credit crisis that changes things for the worse.
Consider this analysis by TradeTheNews.com:
It is important to note that the private sector could not save AIG. Initial thought on the AIG bailout, which is soon to be announced: Why couldn’t the private sector sort out the mess? There are some similarities here to Lehman’s demise…
We have seen round 1 of the credit crisis, with about $500B in writedowns already announced. According to some estimates, most notably the IMF, we could end up writing down as much as $1T to get through the junk. Now that we have entered round 2 of the credit crisis, with another $500B writedowns to get through, we have to acknowledge an important change.
Round 1 was associated with robust global growth - foreign banks and sovereign wealth funds could prop up Wall Street while the rest of the world “decoupled” from America’s slowdown. Now that the theory of “decoupling” has been taken to the cleaners, the rest of the world is slowing down.
Round 2 might be associated with slowing global growth - as a result, foreign banks and sovereign wealth funds may be unable to come to Wall Street’s rescue. Due to a global economic slowdown, the next $500B in writedowns will be harder to get through than the first $500B.
In a way, Lehman’s demise represented this shifting landscape. A few months ago, state-owned Korea Development Bank might have bought into the broker, but political authorities have now halted negotiations. Admittedly it is an unlikely scenario, but the Koreans have a potential currency crisis on their hands, and now is not the time for imperialistic adventures. According to reports, Lehman also had talks with Japan’s Nomura, but the Land of the Rising Sun’s economic outlook is murky. The U.K.’s Barclays also walked away over the weekend.
Lehman’s inability to raise capital from foreign investors is perhaps the most important development in the credit crisis. Foreigners have been burned badly by round 1 of the credit crisis, and they may stay away during round 2…
Despite AIG’s enormous importance to the global market, no one in the private sector had the resources to save the company today. This underlines the idea that there is not enough capital out there to cope with the upcoming writedowns. And one last comment on moral hazard: Why should AIG be rewarded with taxpayer money for walking away from private equity offers over the weekend? Management may be kicked out, but is it enough?
A few questions that still need to be resolved, which may stunt any stock market rebound:
1. Is WaMu next to fail?
2. Will the Bank of America / Merrill deal actually happen, or was that just a bluff?
3. Is the broker-dealer business model broken?
4. S&P500 still looks expensive on a trailing P/E basis
5. When will U.S. housing stabilize?
6. Can the U.S. government afford these bailouts? etc.
To me, question 6 is the most interesting question. At what point do foreign investors lose their appetite for US treasury debt?
September 17th, 2008 at 9:01 am
Hi Greg,
I am new to your site but would like to thank you for all the hard work. You are doing an outstanding job. I am a novice as far as TA is concerned, but I think I learned a lot from you over the course of few weeks. Looks like you also build a great community.
I would like to ask you a question on the sds? Is it a good time to jump in sds today? I was thinking about waiting out till the OE but looks like the bearish news are just overwhelming. And if you entered into sds where would you put your stop loss?
Thank you very much and good luck to you.
[Reply]
September 17th, 2008 at 9:11 am
Tom, I’m asking myself the same question. I am wondering if there will be a small rally today. I would like to buy SDS with the S&P above 1220 or so.
Another important question about a stop loss… I would probably cut my losses only if the S&P rallied above 1260. I would just love a rally towards 1260 to build a short position. So keep some powder dry in case of an options ex rally.
Will the rally happen? Not sure. Let’s watch the charts and try to get a read.
[Reply]
September 17th, 2008 at 9:55 am
Craig, thank you for your detailed answer.
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September 17th, 2008 at 9:10 am
Good morning Greg.
CNBC just said the Russian merket has again been closed - this time for more than an hour.
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September 17th, 2008 at 9:16 am
I heard that! If we think we have problems…
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September 17th, 2008 at 9:12 am
Craig are you changing your views just because of news?
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September 17th, 2008 at 9:15 am
No, I am changing my views based on the charts. The recent developments in the credit markets have opened my eyes to what the charts might be saying. I always trust the charts, but I do not always interpret them correctly. Wave 3(3) is usually the strongest move of the 5 Wave bear market, but until yesterday, I could not imagine the S&P moving that low. Well, now I can. The charts have been saying this, but I just missed it until now. Hope that makes sense.
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September 17th, 2008 at 9:20 am
that does… I’m just seeing capitulation measures already upvtjere plus major intrayear support. I think odds favor a rally for a few days in order to break, but I could be wrong!
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September 17th, 2008 at 9:28 am
That it what I thought as well, but then I studied the Elliot Wave analysis. If wave 3(3) has ended and wave 3(4) has begun, then wave 3(1) and 3(5) would overlap, a violation of EWT. Therefore, any bounce would have to be contained with wave 3(3), which still could move the S&P up towards 1260 or so.
[Reply]
September 17th, 2008 at 9:26 am
Here is an interesting statistic to help draw a perspective to number of retail banks at risk and how often they requre FDIC bailous.
“There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn’t disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.”
http://biz.yahoo.com/ap/080916/bank_deposits_safety.html
[Reply]
September 17th, 2008 at 9:34 am
Hi Craig, I agree with you.
I also see a possible support area near 1070. It could be possible. Keep a lookout. Another thing that is somehow not fitting in my picture is the dollar is going to weaken over the next few weeks. This is ideal for the commodities which are due for a bounce. I don’t know how the SPX is going to go down to 1070. The picture is still not right in my head.
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September 17th, 2008 at 9:37 am
On your question of who is next to fail — look out for morgan stanley
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September 17th, 2008 at 9:40 am
Also look out for BNI, seems to have just broken out of the wedge, could be a great short here.
This is shanky’s call right? Nice one mate
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September 17th, 2008 at 10:37 am
Thanks. It is very hard to take a negative outlook. It is not in our nature. It has taken some time for me to get a grip on just how bad this is GLOBALLY. The chips keep falling. This BOARD has not capitualted yet. We apparently have some wise traders on the board and a great leader. Pay attention to OUR attitudes here. The way we act combined with the charts will call the bottom. I believe when we capitulate so will the market. Craig follows the charts, I like to include the people. Emotions are a driving force.
[Reply]
September 17th, 2008 at 9:46 am
I’ll take a quick and dirty whack at the questions from your article above. I’ll skip question 1.
2. Will the Bank of America / Merrill deal actually happen, or was that just a bluff?
- Yes. BAC stole Countrywide, and they just expanded their presence into MER’s world. Good companies make acquisitions at the bottom of the cycle. BCS just did this with a selected portion of LEH. That’s exactly what BAC did, twice, and as I mentioned before had this been any other time, people would have screamed Anti-Trust. They didn’t because these acquisitions (bail outs) needed to happen, and it was better that a private deal was concluded rather than a public moneys used to fix the troubled firms.
3. Is the broker-dealer business model broken?
- I keep highlighting that the problem with all these failures were caused by improper management of Leverage. Bear Stearns 32:1 , FNM/FRE over 66:1 . This is preposterous. They knew that they would be held to mark to market accounting but they took on this risk anyway, thinking it wouldn’t happen to them. If the greed model is allowed to run unchecked, companies will put themselves in these situations and there shouldn’t be tax payer bailouts for them.
4. S&P500 still looks expensive on a trailing P/E basis.
- At the bottom , the ‘E’ in earnings equation drops significantly. You end up with an exponential increase in the PE. When a regular company has trough earnings, and they lose money, the PE goes negative. The PE should Never be an indcator to time the trough of the earnings cycle. The argument could be made that stocks right now, are extremely cheap.
5. When will U.S. housing stabilize?
- That’s the million dollar question. When inventories of homes for sale peak, the reversal will come quickly. Interest rates have fallen since the FME/FRE take over, and they are at the lowest in 40 years excluding 2003. Banks will have to lend their way out of this downturn in order to avoid delinquencies turning into defaults. If that happens, they will have to sell repossesed properties at distressed prices. This is what needs to be avoided. Smart banks will lend their way out of this problem and do their utmost to keep existing homeowners in their homes.
6. Can the U.S. government afford these bailouts? etc.
- They will print their way out int eh end. The real question is what does this do the dollar, and to what degree? The U.S. needs the dollar to continue to appreciate on a relative basis vs. other currencies. That’s one of the keys to recovery. No weak dollar, and no threat of a return to hard assets (oil, metals, commodities.).
[Reply]
September 17th, 2008 at 10:35 am
Generally agree; however, I think you are wrong on #4, with the P/E.
Refer to this article (http://www.frontlinethoughts.com/pdf/mwo080808.pdf), beginning on p. 3.
I also think there’s a large likelihood that ML/BAC is a bluff. The market isn’t too happy with it right now, and I’m sure the shareholders feel the same. If they hadn’t already taken on Countrywide, I think it might be a different story.
[Reply]
September 17th, 2008 at 10:05 am
Craig BAC is up 5%
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September 17th, 2008 at 10:07 am
now 3.5
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September 17th, 2008 at 10:07 am
If you are a gold bug, I think the trigger was here yesterday. Go miners!
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September 17th, 2008 at 10:11 am
SEC enforces naked shorting tomorrow. How does this play out? Does the market bounce on short covering? Options week ex manipulation? This appears to be pointing out to a sucker rally. Although the market yawned at the SEC news…they have until tonight to cover. Could be a gap up tomorrow?
[Reply]
September 17th, 2008 at 10:19 am
5 and 10 year treasury yields going up while the market waffles.
I also bought DIG at the XLE low this morning for a 2B bounce, hopefully to XLE 200 MA.
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September 17th, 2008 at 10:44 am
Man stockcharts must have delayed data on TNX and FVX… they are dropping, but it wasn’t being shown
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September 17th, 2008 at 10:21 am
Craig,
At this point, are you looking to get long or short at a certain level today ?
Long : around 1180 ?
Short : around 1220 ?
Thanks.
[Reply]
September 17th, 2008 at 10:25 am
Bob,
I want to get short, but I’m waiting for a rally. I’d love to get short at 1220 if the market gets that high. I’m still watching the charts to see how high the market can go. We could get as high as 1260 without violating wave 3(3), so it might pay to keep some powder dry, especially given that this is options ex and the new short-selling rules taking effect tomorrow. I’m not interested in trading this market from the long side.
[Reply]
September 17th, 2008 at 10:30 am
Of course, its possible the market breaks down from here and I miss my short opportunity, and that would be very sad. But I will not chase the move. If I get short under 1185, I can almost guarantee the market would bounce higher and I’d be stuck with a lousy cost basis.
[Reply]
September 17th, 2008 at 10:38 am
I think it is too risky to chase a short under 1185. There is a strong support at 1170, we might be getting there for a double bottom to set up a brief rally.
[Reply]
September 17th, 2008 at 10:30 am
SEC takes action to protect against naked short selling.
I’ve been waiting for this for a while (half a year). I want to read what is being changed before I comment. The problem, at least the way I see it, is that rules existed already, but there was no enforcement. There was a failure to deliver list already, which some companies sat on for over a year. I don’t believe that the removal of the uptick rule in July 2007 and the lack of enforcement of the failure to deliver list is a ‘co-incidence or accident’ in this market when compared to what has happened to many of the financial stocks over the past year.
Reminder - that there are still historic numbers of shorts on the NYSE. These people will eventually have to cover. Keep this in mind. Removal of the uptick rule, and naked shorting of shares without timely delivery, where traditionally there might be a short squeeze, allows short traders to Short More against any any attempt at a rally. How many shares out there are naked? - I don’t know, but delivery of shares by settlement date (trade date plus 3) should be mandatory in All cases, No exceptions, No extensions, and No other nonsense that has allowed firms and clearinghouse failures to wreck small (and not so small) companies by inflating the number of outstanding shares.
[Reply]
September 17th, 2008 at 10:33 am
To anyone…Is it too late to get into gold at this point? I’m thinking of going with AUY.
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September 17th, 2008 at 10:57 am
If the market has a ST rally before the next leg down, this may not be an entry point. Let today play out a little and get a feel. Like Craig stated, head fake down early with a rally late is posible. I am in GLD for the long haul believeing that, given time, it is a good place to be over the next few months if not years for a small portion of your protfolio.
[Reply]
September 17th, 2008 at 10:39 am
Financials getting hammered , commodities taking off. Yohoo!!
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September 17th, 2008 at 10:40 am
I am in GG from 25 yesterday. GDX still has a long way to go, get in mate on any pullbacks. Look at the gap fill on GDX.
SLV my target is around 14. Dollar has to drop to complete wave 4.
[Reply]
September 17th, 2008 at 11:01 am
OMG - dude you are like a large cup ‘o java double caff. thanks for the eye opener here. Nice trade on GG. Saweet!
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September 17th, 2008 at 10:41 am
actually long USO/DXO also looks attractive here
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September 17th, 2008 at 10:50 am
My GLD call last week is coming to fruition. Bought at 65 a year ago. Sold at 92. got back in last week 74.25 and added yesterday 76.75. I hill hold these positions for months if warranted.
I have TWM, SKS and SDS and will hold them for some time. I believe over the next few weeks (till hopefully EW (5) happens) all short positions will pay off. Like Michael, I am LT trader and rarely do anything on a day basis.
Another call I made that may have been overlooked is SO and some other high yielding power cos that will be flocked to for safety and YIELD. These should be (and have been) climbing.
For those of you that don’t know - I worked as a financial advisor for ML till about 2 years ago.
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September 17th, 2008 at 10:53 am
That VIX is soaring into territory not seen in years. Trouble is brewing.
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September 17th, 2008 at 10:55 am
Nice shanky, loaded up energy/commodities the likes day on friday and shorted insurers. When do you think short BNI is attractive?
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September 17th, 2008 at 11:48 am
Hell, I made the short RR call a week or two ago as well. Thanks for the shout out on that one.
All RR getting pummeled this week. CSX down over 6% today. Tough question to answer. I’d say pick two or three to follow and pay attention to sup and res levels of charts. I do not see how their earnings could meet the lofty estimates that were generated a year ago. Will have to be est revisions that should aid in driving down.
I’d guess that if BNI breaks $92 it may go to $80. So start there. If CSX breaks $50 it may go to $40. I have not researched the RR’s in depth. Have not had time. Let’s keep an eye on things.
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September 17th, 2008 at 11:58 am
Nice call on the railroads, they took off (in late 2006? if I remember correctly), and they were priced to perfection topped off with the crude run up that made them an even more viable form of transport.
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September 17th, 2008 at 11:03 am
XLF looks like it can’t move higher…I would be careful being long here.
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September 17th, 2008 at 11:07 am
Craig,
This is a different type of technical question. If someone is doing frequent weekly trading. Where would you keep a core account in. Cash money market? Also the statement by chambers regarding AAA rating for US , does this possibly effect treasury money market funds. Where is money safe.
Thanks
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September 17th, 2008 at 11:19 am
hi
Cash and money market are normally two different options. In your trading account there should be a straight cash option. If they defaulted you into a money market option that sweeps all your unused money at days end into a money market fund to earn an extra bit of return, you should be able to opt out of that and request your money is in cash when not deployed.
Historically, a money market fund which fails to have a Net Asset Value at $1.00 is an extremely rare event. Everyone has to guage their own risk, however.
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September 17th, 2008 at 11:09 am
Hey Craig. Apologies for calling you Greg in my earlier email…I am new to your fine website.
Hopefully I am better trading than I am with remembering names!
Days like this I fall back on TDW. Likes to fall first thing in the AM and often shakes off the dirt and begins to climb.
Cheers.
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September 17th, 2008 at 11:14 am
Craig - I found this article on SKF, XLF and call options on them - Pelase look at and digest. to me this is a new angle that I’m not digesting well. Maybe around 1:30 tonight you can get to this. LOL.
http://www.schaeffersresearch.com/commentary/observations.aspx?ID=87704
Quote from source -The second chart shows how call open interest has soared since mid-July. The big question is whether this is speculative buying or whether these calls are being used to hedge shorts in SKF (in other words, to hedge bullish positions on the financials). My guess is that shorting a double inverse ETF is not a common activity, but I could be wrong.
This is some really screwy stuff that may be affecting us.
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September 17th, 2008 at 11:25 am
wow GS is getting creamed
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September 17th, 2008 at 11:27 am
and there goes MS
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September 17th, 2008 at 11:31 am
let it fall…
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September 17th, 2008 at 11:35 am
picked up a block of sso at 1169. (I’m an investor not a day trader)
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September 17th, 2008 at 11:39 am
(joking…) Anyone want to wager a wooden nickel on what reaches $150 first? Goldman Sachs or a barrel of crude (that was their famous call in early July when they wanted to dump crude at the height of the panic on retail investors wasn’t it?). Might be a while before either bet pays of!
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September 17th, 2008 at 11:48 am
craig… do you mean the ten year yeild hasn’t made a session LOW??
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September 17th, 2008 at 11:50 am
Yes, thanks Idan. Corrected error.
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September 17th, 2008 at 11:54 am
Gold commodity making new highs, miners not so. This only means things are going to get much worse. Watch out!
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September 17th, 2008 at 12:08 pm
Now what? SPY lower than 1168…any next support level?
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September 17th, 2008 at 12:08 pm
Craig,
Unbelievably, the so called strong support at 1169 is broken for now. I wonder if it is a head fake. Can it get any more confusing ?
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September 17th, 2008 at 12:10 pm
ES did not break 1169 on 10-minute chart.
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September 17th, 2008 at 12:11 pm
TLT toppy?
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September 17th, 2008 at 12:14 pm
ES seems to be hodling 1163, might of hit new lows, but just barely and with extremely low volume.. are you holding to your long? Is this a buying opportunity in your opnion?
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September 17th, 2008 at 12:17 pm
I am not still holding the long from 1 hour ago. But I did start a new long position on this last wave down. Possible double bottom. High risk day trade. Tight stop.
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September 17th, 2008 at 12:27 pm
I always wonder about who is selling at levels we are at today? If you haven’t sold yet…why would you now?
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September 17th, 2008 at 12:30 pm
This sell off continues to be orderly and steady…Not looking good for a reversal…but I’m an amateur.
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September 17th, 2008 at 12:49 pm
Thai, look at all the “professional” traders that are closing their hedge funds and getting their heads handed to them. One thing I’ve learned is that the words “professional” and “amateur” don’t mean much.
There are disciplined traders that make money and non-disciplined traders that lose money.
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September 17th, 2008 at 12:59 pm
well said…
On a week like this with money bleeding everywhere - the most important thing to re-emphasize is proper money managemnt of your bank roll. How you lay your bets down using properly sized denominations. Adhering to your entry and exit points. How you manage your leverage. The management of your bank roll is more important than anything else including what you decide to trade. If you know and respect your self imposed boundaries of what you can and can’t do, you can do extremely well.
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September 17th, 2008 at 12:34 pm
GS just cracked below a hundred
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September 17th, 2008 at 12:51 pm
With the SEC anti-naked short selling rules going into effect tomorrow, *maybe* this is the last wash out for a tradable bottom.
. We’ve also had a double bottom at ~1170 with the second touch slightly lower than the first. In between we had a 50 point bounce during the daily trading session, plus another 10 points after hours.
. SP500 is down over 26+% from its high.
. Triple Witching Options Expiration this Friday the 19th.
. The VIX is the highest since the morning of Jan 22, when the 0.75 emergency rate cut was announced.
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September 17th, 2008 at 12:55 pm
Michael, as always, appreciate the thoughtful commentary. I agree that the table is set for an options expiration rally.
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September 17th, 2008 at 1:00 pm
The financials continue to be weak however during this rally off the lows…can a sustained, meaningful rally occur without the financials…GS looks to be going under 100 again.
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September 17th, 2008 at 1:59 pm
I’m thinking huge bounce.
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September 17th, 2008 at 2:00 pm
tomorrow
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September 17th, 2008 at 1:00 pm
Watch out on the dollar. I wonder what news the media will paint for this dollar story. Yesterday, it was financials spooked the markets and dollar rallies, today it is the exact opposite?
I don’t think I am calling on a bottom on anything. The volumes are so high and so drastic. Who knows what lies out there? GLD is the key to this market, even base metals and soft commodities and industrials are not able to hold up here. This definitely feels like wave 3 of 3. Craig, I am more convinced after today’s action that is (3) of (3) as I had pointed out yesterday on your video blog.
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September 17th, 2008 at 1:30 pm
Double upping my shorts!!!
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September 17th, 2008 at 1:30 pm
traders back from lunch and sell off resumes?
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September 17th, 2008 at 1:35 pm
GS support 94-95? Or does anyone see lower?
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September 17th, 2008 at 1:37 pm
Gold is nearing my first target of 850$. Watch for any pullbacks here. This rise has been too giddy. Booked profits. Trailing stop on the rest. Switched to uso and silver stocks on pullbacks. Silver target is 14$.
The market strategy seems to be short at sight?
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September 17th, 2008 at 1:36 pm
It feels like there will be another wave lower and we are right at the egdge…if it happens maybe VIX spike to 40…
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September 17th, 2008 at 1:38 pm
XLF hit 16.99 on 7/15/08…with the latest developments in financials it seems like a safe bet we get there again…not saying today…but some point…
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September 17th, 2008 at 1:40 pm
Looks like the gold miners made a new high. Things are getting worse
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September 17th, 2008 at 1:41 pm
I think they will close the nasdaq this week sometime at this rate. It is just bleeding non stop.
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September 17th, 2008 at 1:46 pm
Looks like the sell-off continues slow and orderly…I am heeding to Craig’s comments but I don’t see any signs of a reversal to this market bleeding yet…
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September 17th, 2008 at 1:53 pm
Ofcourse, this is the mother of all waves in all degrees. This wave is 3 of 3 of 3 (in the super degree too). I was unsettled when Craig said in the video 4 is beginning. This is the crux of the bear market. It cannot be so small. I think the VIX can even hit 50s, I don’t know if it will be now, but will soon, in the next week or so.
Look for the dollar index to drop to 77.4 at least, that is my wave 4 target on the dollar. After that even commodities will stop helping this market. It can become truly bloody out there. As I have said in a previous post, look for the nasdaq/transports to really bear the brunt and the bears drag the money out of the tech stock and transports where they have hid.
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September 17th, 2008 at 1:46 pm
We may have just hit a double bottom at SPY 116.70.
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September 17th, 2008 at 2:03 pm
SKF hitting resistance at 140 as well. QQQ test as well.
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September 17th, 2008 at 1:56 pm
My respects to anyone trading this market. I’m sitting here like a deer in the headlights. It’s just too fast for me to trade. Gold up $80, huh…does this have anything to do with the short selliing regulations coming into effect??
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September 17th, 2008 at 1:56 pm
If it closes today below the long time support around 1168, there is a chance that we may not be done with the sell-off and that we may make new lows. The market does not give any indication that we have hit the intermediate bottom in a sense that we are not seeing the solid bounce off the lows like we saw previously in January, March and July. What are your thoughts ?
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September 17th, 2008 at 2:00 pm
Bob, I think you are right on. The selling is not over. We may see a small bounce, but this is not a bottom. That is a scary thought for the market. If a VIX spike above 35 does not signal a bottom, what will? We might need to see the VIX approach 50 before this leg down finds bottom.
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September 17th, 2008 at 2:02 pm
Go SSRI!!
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September 17th, 2008 at 2:05 pm
Covered some shorts and took profits on some gold trades here
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September 17th, 2008 at 2:15 pm
Craig! UNG is doing bloody well today, unloaded some. By the way the formation on UNG is very bullish Any retest of that support is a buying opp.
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September 17th, 2008 at 2:27 pm
Closed skf at 139.25. Solid resistance at 140 today and in the past (july and april) leads me to believe a pause will occur here. I do believe it will at least test 171 it hit in july eventually. Still in SDS and TWM. No intentions on selling GLD anytime soon. May add to it on weakness.
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September 17th, 2008 at 2:34 pm
On any bounce, looking to add energy names
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September 17th, 2008 at 2:38 pm