Friday, September 19, 2008

Short Squeeze

A short squeeze is under way with the Dow up +400 points. This is primarily a result of the new SEC rules regarding the short sale of securities. Once the shorts are covered, the buying will dry up and another slide should start. I find it doubtful that this rally will hold more than a few days, but it will give hope, to some, over the weekend.

The U.S. Treasury, Federal Reserve and Securities and Exchange Commission said Friday that they were taking action to stem the loss of investor confidence in financial markets.

To shore up the mortgage market, Treasury is also expanding its mortgage backed securities purchase program. Mortgage finance giants Fannie Mae and Freddie Mac will also increase their purchases of the debt.

The Treasury Department said it's going to insure any publicly offered money-market fund, both retail and institutional, that pays a fee. "Concerns about the net asset value of money-market funds falling below $1 have exacerbated global financial-market turmoil and caused severe liquidity strains in world markets," said Treasury.

Thursday, September 18, 2008

Trailing Stops Work

Trailing Stop saves the day - captured about 1/2 the Profits from my P/L high. Got busy and missed the breakout higher but today getting in late still pays with exaggerated and strong directional momentum moves higher. I will continue to have a short bias and and use rallies to re-establish positions. Tighter stops on long positions and wider stop on shorts

A strategy I use when covering an open position is to cover by more then a 1:1 (short 1000/sh buy 1500, or long 1000/sh sell 1500 to effectively reverse your position) it could be costly in a sideways market, but lately the intra-day reversals have had great momentum.

US Dollar rallies and Gold $847 down $3.00 after being up $40, well off the highs of the day

Happy Trading

Markets Fading

Markets fading after a weak rally attempt, today. GOLD 874.60 +25.10.
Nyse 7494, Dow 10665, S&P 1157

I will be selling IWM, and keeping a eye on the SPYs and QQQQs, looking for a drift lower over lunch. As always I maintain a trailing stop on any position. No motivation for serious money to come back into the markets, no confidence. Just waiting for the next breaking news story.

Gold should be retesting $1000 level shortly, any move over $900 and a close above, would set that up nicely.

Lots of talk on the "street" regarding Money Market funds, are they in danger?

Another 40-50 billion might be needed to bailout (or what ever term they are using now)
the Auto industry, of interest here is that Michigan is a "battleground State" in this election,
so some type of support seems inevitable. GM approaching $10.00/shr

Wednesday, September 17, 2008

US Markets imploding

Day trading is the best way to trade these markets. Into cash overnight every night and ready for action every morning. Smaller positions with wider stops intra-day, to take into account the greater volatility. The SMA's cross get on board and ride the move.
With over 20+ years of trading these markets(equity and currency), this is the greatest
combination of negative factors resulting in the collapse of the US financial markets.

I am anticipating a one day, 2000+ pt loss on DOW in a final capitulation of the US capital markets combined with a $100+ dollar spike in GOLD.

ETFs are a great way to take advantage of trading an entire sector without specific stock risk.
XLF, XRT, GLD, SPY, QQQQ, and IWM are some of my favorites.

Happy Trading in these historic times and be careful out there

'by the people for the Corporation..."

Equity and currency traders love this market volatility. I wish I could train more people to trade. This is the biggest redistribution of wealth in our generation. But as the Financial Sector fat rats run for cover and point fingers at each other it's the American taxpayer who will ultimately be left paying/taking the hit.

"by the people FOR the people ...." is a joke as it has been all about the Corporation in America. Most economic systems stand up well when times are good . It is in times of trouble and turmoil that it's clearly spelled out: American Capitalism is FLAWED and Failing, apparently it works only when there is a market to exploit, ie. foreign labour, natural resources etc. and no real oversight, as has been the case for the last 150 years. Now it all comes Home to roost, unfortunately the US will drag many other countries into the quagmire.

"We're essentially continuing a system where profits are privatized and...losses socialized," said Nouriel Roubini, a professor at New York University's Stern School of Business, adding that auto makers, airlines and other struggling businesses would no doubt be asking for government help too.

Between the $29 billion the Fed pledged to swing the Bear Stearns sale to JPMorgan in March, $100 billion apiece to rescue mortgage finance firms Fannie Mae and Freddie Mac, up to $300 billion for the Federal Housing Authority, Tuesday's $85 billion loan to insurer AIG and various other rescue deals and loans, taxpayers are potentially on the hook for more than $900 billion.

Where does the average Joe Taxpayer go to get bailed out.?

Tuesday, September 16, 2008

Federal Open Market Committee Rates - Unchanged

Release Date: September 16, 2008

For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

Monday, September 15, 2008

Benefits of ETFs

What are the benefits of exchange traded funds trading as stocks?
The unique “exchange traded” structure offers several advantages to ETF investors:
1) buy and sell a basket of stocks at any time during the trading day
2) instantly get exposure to a portfolio of stocks or bonds
3) buy on margin
4) sell short, even on a downtick
5) no sales loads, although brokerage commissions will apply
6) lower fees
7) tax efficiencies

SeniorTrader -

Exchange Traded Funds

Investors can capitalize on the convenience and flexibility of ETFs to pursue a wide variety of investment strategies.

Core investment- Investors can use ETFs as a core investment for their Portfolio.
The purchase of shares in a single ETF can provide broad market exposure of a
portfolio of stocks or bonds for long-term holding that is easy to establish,
easy to track, inexpensive, and tax efficient.

Portfolio diversification- ETFs cover virtually every segment of the equity markets
and several segments of the U.S. bond market, providing an easy and convenient
way to adjust the investment mix of a core portfolio.

Hedging- Exchange traded funds can be purchased on margin and sold short (even on a
downtick), which has opened up risk management strategies for individual
investors that were once available only to large institutions. For example,
ETFs can be sold short to hedge a core stock portfolio or interest rate
fluctuations. This allows investors to keep their portfolio intact while
protecting it from market losses. In a declining stock market or rising
interest rate environment, profits from a short position can offset some of
the losses in a portfolio. (Investors are required to make arrangements to
borrow securities before selling short.) Listed options, available on some ETF
products, also offer opportunities for additional hedging or to increase
income. Investors should contact their broker regarding initial and
maintenance margin requirements.

Cash management- ETFs have often been used to “equitize” cash, providing a way for
investors to put cash to work in the market or maintain allocation targets
while determining where to invest for the longer term.

Rebalancing- Investors can adjust ETF positions at any time throughout the trading
day, without redemption fees or short-term restrictions. Again, usual
brokerage commissions will apply.

Tax loss strategy- An investor can sell a security that is underperforming and claim
a tax loss but retain exposure to its sector by investing in an ETF. Consult a
tax advisor about a tax loss strategy.

Lehman - Done & Merrill - Sold

12:05 pm : Stocks are sharply lower after Lehman Brothers (LEH 0.16, -3.49) filed for bankruptcy, Merrill Lynch (MER 20.71, +3.66) agreed to sell itself to Bank of America (BAC 28.33, -16.03) and reports indicate that AIG (AIG 4.32, -7.82) is desperate for capital.

At midday stocks are approaching opening lows, although they are not down as much as feared. Weakness is broad-based, with all ten economic sectors posting a loss.

Lehman Brothers filed Chapter 11 bankruptcy protection after no buyers were willing to save the troubled 158-year-old firm due to a lack of a government backstop. None of Lehman's broker-dealer subsidiaries will be included in the bankruptcy and will continue to operate. Lehman listed $613 billion in debt, which is the largest bankruptcy on record according to reports.

Merrill Lynch agreed to be sold to Bank of America in an all-stock deal for $29 per share, or $50 billion, a 70.6% premium to Friday's closing level. BofA said it was willing to pay the premium because the benefits were appealing and it still believes it is a compelling price, noting there was the possibility that others were interested. According to the Wall Street Journal, the move came after federal officials "strongly encouraged" the sale due to concern that the firm was approaching failure. Fed officials may have encouraged the deal, although BofA CEO Lewis said there was no “pressure” from regulators.
Finance.Yahoo 9/15/08 9:14am

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